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GUIDE TO THE INVESTMENT REGIMES OF THE APEC MEMBER ECONOMIES - SIXTH EDITION

Guide to the Investment Regimes
of the APEC Member Economies

Sixth Edition

August 2007

ASIA-PACIFIC ECONOMIC COOPERATION
APEC INVESTMENT EXPERTS GROUP

Published by the APEC Secretariat
35 Heng Mui Keng Terrace
Singapore 119616

Tel: (65) 6775-6012
Fax: (65) 6775-6013
Email: info@apec.org
Website: www.apec.org

© 2007 APEC Secretariat

ISBN: 978-981-05-8987-5

APEC#207-CT-03.2

Printed by Pirion Pty Ltd

CONTENTS

• Foreword
• Introduction
• Investment Trends in the APEC Region
• Investment Agreements in the APEC Region
• Australia
• Brunei Darussalam
• Canada
• Chile
• People's Republic of China
• Hong Kong, China
• Indonesia
• Japan
• Republic of Korea
• Malaysia
• Mexico
• New Zealand
• Papua New Guinea
• Peru
• The Republic of the Philippines
• Russian Federation
• Singapore
• Chinese Taipei
• Thailand
• United States of America
• Viet Nam
• Annex 1 - Survey Questionnaire
• Annex 2 - APEC Non-Binding Investment Principles
• Annex 3 - Excerpt from The Osaka Action Agenda
• Annex 4 - Menu of Options
• Annex 5 - Excerpt from Leaders' Statement to Implement APEC Transparency Standards
• General Acronyms

FOREWORD

On behalf of ABAC, I am delighted to recognize the valuable work undertaken by IEG in preparing the sixth triennial edition of the Investment Guidebook.

The Guidebook aims to provide clear, concise and relevant information to potential investors in the APEC region. Equally, its audience includes the policy makers who frame and influence the investment regimes.

Investment growth is fundamental to strong economic growth, job creation and prosperity, so ABAC is particularly pleased to have been able to cooperate with the IEG in preparing this edition of the Guidebook. As business representatives of APEC we strongly endorse the objective of improving transparency of investment policies and regulations in the region.

Information in the Guidebook is presented primarily at the level of individual economies. In this form it should be most useful to all private sector investors – foreign and domestic. This presentation also allows the development of comparative frameworks, which should be valuable to policy makers in evaluating the quality of policies and in identifying improvements to attract broader and deeper capital flows.

Investors and policy makers will also see further benefits and challenges as bilateral trade and investment agreements increase across the region. The Guidebook provides useful analysis of these growing issues and on investment trends in the region.

ABAC has contributed to the region’s investment environment by developing several check-lists. One deals with goals and best practices for economies to use in assessing the quality of financial and other service offering in the WTO Doha negotiations. Another proposes policies to remove barriers and impediments to FDI in APEC economies. We greatly value IEG’s support for this work.

ABAC intends to continue this close cooperation with IEG. Improving the investment climate in the region will continue to be an ABAC priority, and we see the work of the IEG as critical to this effort.

Yours sincerely

Mark Johnson

Chairman, ABAC

INTRODUCTION

The chief purpose of this the 6^th triennial edition of the Guide to the Investment Regimes of the APEC Member Economies (hereafter known as the Investment Guidebook), is to improve transparency on investment issues concerning APEC’s Member Economies and, thus, promote safer and more efficient capital markets. It will provide business people and investors with up-to-date information so that they have a better understanding of the regulations and procedures involved in investing and doing business in APEC’s Member Economies. Also, it will promote the exchange of information between government officials on each other’s investment regimes.

The format of the APEC Investment Guidebook Survey Questionnaire (the ‘Questionnaire’) has been altered by APEC’s Investment Experts Group, following consultation with APEC’s Business Advisory Council (ABAC), in recognition of two factors:

• that globalization and the proliferation of bilateral agreements — which focus solely on investment or include an investment chapter — has increased the importance of accessible, accurate information (or of reliable conduits to that information); and
• that APEC needs to provide such information in a more business-friendly manner to facilitate investment decisions.

All 21 APEC Member Economies have completed the ‘Questionnaire’, the main vehicle through which information is collected for inclusion in the Investment Guidebook, and have provided further information upon request to Australia, the editor.

Each response provides information (to the extent it is available) on the following major topics covered in the ‘Questionnaire’:

1. Introduction to the Investment Regime

2. Screening of Foreign Investment

3. Sector-Specific Laws and Policies

4. Investment Protection

5. Investment and Development

6. Investment Promotion and Incentives

7. Mobility of Capital and Technology

8. Labor, Movement of People, and Senior Management and Boards of Directors

9. Government Procurement (Optional Question)

10. Competition Policy

Annex I contains a copy of the Questionnaire. Subsequent annexes contain copies of the “Non-binding Investment Principles” agreed by APEC Leaders in November 1994, the investment components of the Osaka Action Agenda, “Options for Investment Liberalisation and Business Facilitation to Strengthen the APEC Economies — For Voluntary Inclusion in Action Plan” (commonly referred to as the “Menu of Options”), and the APEC Transparency Standards. At the end of the document is a list of commonly used acronyms in the investment field.

Australia and the other APEC Member Economies can take no responsibility for the accuracy of the information contained in the Investment Guidebook. This publication is merely intended to put readers on the correct track to information suitable to their purposes; it is not a substitute for full range of laws and attendant regulations governing the investment regimes of APEC’s Member Economies. To this end, weblinks and contact details have been provided wherever feasible to provide direct means of access to the latest information and the capacity to communicate direct with the relevant decision-makers.

It is to be hoped that the Investment Guidebook will assist investors in making sound investment decisions and policymakers in producing consistent and coherent policy decisions.

Australia welcomes feedback on any issues that may contribute to the improvement of the Investment Guidebook. Please contact:

Dr. Paul Kennelly (Editor)
Foreign Investment and Trade Policy Division
Department of Treasury
Parkes ACT 2600
AUSTRALIA
Tel: (63) 2 6263-3764
Fax: (63) 2 6263-2940
paul.kennelly@treasury.gov.au

INVESTMENT TRENDS IN THE APEC REGION

Investment levels in APEC economies are high, particularly for lower income economies that are ‘catching up’ to developed economies (chart 1). For these economies, gross fixed capital formation peaked at 40 per cent of GDP in 2004 before declining to around 30 per cent in 2005.

The vast majority of investment is domestic investment (chart 2). This is particularly the case for lower income APEC economies in which domestic investment comprised 89 per cent of gross fixed capital formation over the period 2002 to 2005. Lower income economies receive a greater share of their investment from FDI, although they receive less foreign investment overall due to smaller portfolio flows.

FDI has made up only a small share of investment in APEC economies over the past few years. FDI inflows, which measure the change in the holdings of direct investments by foreigners, were only 5 per cent of total investment in APEC economies in 2005. It has been a more important source of financing for both APEC and the rest of the world in previous years (chart 3). FDI inflows have started to rise again, since the trough in 2003. This is reflective of global trends in FDI and capital movement. World capital movements have doubled as a per cent of world GDP since 1997 (Battellino 2006).

Aggregate FDI inflows and outflows are set out in Annexes 1 and 2, respectively. They provide data for 1992-2005 (almost the whole life of APEC) and detail the performance of each APEC member economy, APEC as a whole and that of APEC’s low income economies.

Note: APEC lower income economies are those classified as low income or lower-middle income by the World Bank (China, Indonesia, Papua New Guinea, Peru, Philippines, Thailand and Vietnam). The UNCTAD data is averaged over 2003-05 and the IMF data over 2002-04 but the margin of error is minimal.

Data source: UNCTAD (2006), IMF (2005) and CIE calculations.

FDI flows have not been uniform across APEC economies. The largest flows from 2002 to 2005 were to the United States and China, due to the large size of their economies (chart 4).[1]The United States, Japan and Canada are the largest sources of FDI, of the APEC economies.

FDI inflows and outflows were highest as a share of GDP in Singapore and Hong Kong. This is a data issue related to the status of these economies as financial centres. The transfer of investment through these economies leads to substantial over-statement of FDI flows. Chile, Australia and China all attract significant FDI inflows relative to the size of their economies.

Chile is the largest net importer of FDI relative to the size of its economy, with FDI inflows less FDI inflows surpassing 4 per cent of GDP (chart 5). In dollar terms, China is the greatest net FDI importer and the US the greatest net source of FDI.

In 2004, the APEC region as a whole was a net FDI donor with more FDI flowing out of the region than was coming into the region (chart 6). However, this trend reversed in 2005. Within APEC, FDI flows typically move from developed economies to developing economies (chart 6). This is what economic theory would suggest, with lower-income economies potentially having many more profitable investment opportunities and a higher expected marginal product of capital.

However, across all types of capital flows (including portfolio investment), investment is actually moving out of developing APEC economies and into developed APEC economies, particularly the US. This is reflected in capital account surpluses of many developing APEC economies and capital account deficits for rich economies such as the US, Australia and New Zealand. Many APEC developing economies are saving more than they invest domestically. The driver of capital movement to rich economies is government and central bank buying of US securities.

Ideally, FDI data would allow us to measure bilateral relationships with precision and determine the sectors into which FDI is flowing. Such data do exist for some economies but not all. Data issues, which also exist for overall FDI data, become more of a constraint at this disaggregated level (see UNCTAD 2006a).

The FDI data that does exist by source/destination and industry suggests that the about 40 per cent of inflows into APEC economies are from other APEC economies. More than 50 per cent of FDI is in services sectors and about 40 per cent in manufacturing. Only a small share of FDI is in primary industries. Note that these estimates only cover a selection of APEC economies for which data is available.

References

Battellino, R. (2006), Regional Capital Flows, Talk to 6^th APEC Future Economic Leaders Think Tank, 28 June.

IMF (2006), Coordinated Portfolio Investment Survey, IMF website.

UNCTAD (2006), World Investment Report 2006: Statistical Annex Tables, New York and Geneva. UNCTAD (2006a), ‘Better Data Needed to Assess FDI Impact’, UNCTAD Investment Brief, No. 2, 2006.

INVESTMENT AGREEMENTS IN THE APEC REGION

Systemic Issues in International Investment Agreements (IIAs)

International investment agreements (IIAs) have proliferated at the bilateral, regional and interregional levels over the past decade. By the end of 2005, the total number of IIAs exceeded 5,200.[2] The evolving system of international investment rules contributes further to the enabling framework for FDI. At the same time, the increasingly complex multilayered and multifaceted universe of IIAs is becoming more demanding, particularly in order to keep it coherent, to ensure its effective functioning and to make it conducive for national development objectives.

International investment rules are increasingly being adopted as part of bilateral, regional, interregional and plurilateral agreements which address and seek to facilitate trade and investment transactions. These agreements cover a range of trade liberalization and promotion provisions, and also contain commitments to liberalize, protect and/or promote investment flows between the parties. They also often address investment-related issues such as IPR, competition, services and the movement of labour. The proliferation of IIAs in recent years is one of the key developments in international economic relations which have arisen in response to the increasing global competition facing national economies as they seek resources and markets.

As a result of these developments, foreign investors and countries have to operate within an increasingly complicated framework of multi-layered and multi-faceted investment rules, which may contain overlapping or even inconsistent provisions. While the number of BITs continues to expand, albeit at a slower pace than previous years, the momentum is shifting to Preferential Trade and Investment Agreements (PTIAs). These are sometimes called regional trade agreements (RTAs) or free trade agreements (FTAs). PTIAs feature a structure and approach to investment issues not found in earlier agreements. Even similar types of agreements may exhibit important differences. PTIAs increasingly encompass a broader range of issues, and their investment provisions tend to be increasingly sophisticated.

Bilateral Investment Treaties (BITs)

During 2005, 70 new BITs were concluded, bringing the total number of BITs to a new peak of 2,495 (Figure 1). At the same time, the slowdown in the number of BITs concluded annually continued for the fourth consecutive year. Forty-five of the 70 BITs involved developed countries.

The participation of developing countries in the network of BITs continued to increase, as they were involved in 60 of the 70 new agreements. Twenty of these BITs were concluded between developing countries. Annex 1 lists the number of BITs concluded by APEC economies, and the number concluded between APEC economies at end 2005.

The largest number of BITs continues to be concluded between developed and developing countries. While earlier agreements almost exclusively fell into this category, a growing number of BITs now involve two developing countries. In the last five years, the share of such agreements almost doubled (from 14% to 27%). The overwhelming majority of BITs continues to be those that establish binding obligations for the contracting parties only in respect of the post-establishment phase.

Of the 2,495 BITs concluded until the end of 2005, 1,891 (i.e. 75.8 %) had entered into force. As BITs aim to provide foreign investors with enforceable rights in their host countries, the distinction between the conclusion of an agreement and its entry into force is important. This is most obvious with regard to the legal rights and obligations deriving from it.

The Investment Protection section of each of the APEC Member Economies’ contributions to the Investment Guidebook aims to address issues that are likely to be covered by BITs. These include conversion, repatriation and transfers (including any balance of payments safeguards); expropriation and compensation; IPR; and dispute settlement.

Preferential Trade and Investment Agreements (PTIAs)

The proliferation of PTIAs continued in 2005.[3] The increase in PTIAs partly reflects the political will of a growing number of countries for closer economic cooperation. They may therefore prefer a comprehensive treaty covering trade and investment (and potentially also other areas) simultaneously. From the perspective of investment promotion, potential host countries might also see the protection provisions within a broader legal framework as a way to increase their attractiveness to potential investors.

During 2005, fourteen new PTIAs were concluded involving 28 countries, bringing the total number of these agreements to 232 as of end 2005 (Figure 2). Among the developing regions, Asian countries were the most active with 38% of the total PTIAs concluded at the end of 2005, followed by Latin America with 26%. Altogether, developing countries were parties to 79% of the PTIA network, while developed countries were involved in 54% of the agreements. South-South PTIAs have also increased to reach 86 agreements at the end of 2005. While the total number of PTIAs is still small compared to the number of BITs (less than 10%), they almost doubled during the past five years. In addition, as of 1 July 2006, at least 67 agreements were under negotiation involving 106 countries. This suggests an even more pronounced increase in such treaties in the near future. Annexes 2 and 3 list, respectively, the intra-APEC PTIAs concluded, and those either announced or where negotiations have commenced by end 2006.

Besides trade and investment, PTIAs may also cover services, intellectual property, competition, labour, environment, government procurement, the temporary entry for business persons, and transparency issues, amongst others. This broad coverage demonstrates a trend towards an integrated approach in dealing with interrelated issues in international investment rulemaking.

The ‘Screening of Foreign Investment’ and ‘Sector-specific Laws and Policies’ sections of each of the APEC Member Economies’ contributions to the Investment Guidebook aim to address issues that are likely to be covered by PTIAs. These include pre- or post-establishment screening/review/notification mechanisms (including a description of their transparency and a summary of relevant laws/regulations and policies pertaining to investment); and the more specific laws/regulations and policies that affect the establishment, expansion or operation of foreign investment.

Some Implications

The greater number and diversity of IIAs in terms of their scope, structure and content reflects the flexibility that countries would like to have in choosing the partners to enter into an agreement, and to tailor individual agreements to their specific situations, development objectives and public concerns. Furthermore, more elaborate rules may enhance legal clarity on the rights and obligations. Multiple coverage under more than one IIA may also contribute effect and filling possible gaps in the overall treatment of foreign investment.

On the other hand, the growing diversity of the IIA universe poses new challenges for keeping it coherent. One potential risk in this respect is the emergence of BITs with more detailed provisions on certain protection clauses. Although these clauses are only meant to clarify the content of the treaties and do not therefore intend to introduce substantive amendments, they nevertheless may have a decisive impact on the interpretation of these provisions by arbitration tribunals. As a result, courts might arrive at different conclusions with regard to basically the same legal issues, depending on whether the BIT contains an interpretative statement or not. The risk of incoherence is especially high for developing countries that lack expertise and bargaining power in investment rulemaking. They may have to conduct negotiations on the basis of divergent model agreements of their negotiating partners.

Coherence may also be at stake between the more protection-oriented BITs, on the one hand, and the more liberalization-oriented PTIAs, on the other hand. While both types of agreements ideally complement each other, they often overlap, resulting in the risk of inconsistencies. There is also the broader question of how the relationship between BITs and PTIAs will develop in the long-run.

References

United Nations Conference on Trade and Development (UNCTAD) (2006). “Developments in international investment agreements in 2005”, IIA Monitor No. 2 (http://www.unctad.org/en/docs/webiteiia20067_en.pdf).

__ (2006). “The entry into force of bilateral investment treaties (BITs)”, IIA Monitor

No. 3 (http://www.unctad.org/en/docs/webiteiia20069_en.pdf)

__ (2006). “Systemic issues in international investment agreements”, IIA Monitor

No. 1 (http://www.unctad.org/en/docs/webiteiia20062_en.pdf)

Annex 1. Number of BITs concluded by APEC economies, end 2005

(Excluding FTAs with investment chapters. At this juncture, 2006 statistics are not available.)

Annex 2. Intra-APEC[4] PTIAs concluded by end 2006

Australia-New Zealand

Australia-Singapore

Australia-Thailand

Australia-United States

Canada-Chile

China-Chile

China-Hong Kong

Japan-Malaysia

Japan-Mexico

Japan-Philippines

Japan-Singapore

Korea-Chile

Korea-Singapore

Mexico-Chile

North American FTA (NAFTA)

New Zealand-Singapore

New Zealand-Thailand

Peru-Chile

Peru-Mexico

Peru-United States

Papua New Guinea-Australia

Trans-Pacific Strategic Economic Partnership Agreement

United States-Singapore

United States-Chile

Annex 3. Intra-APEC PTIAs either announced or where negotiations have commenced by end 2006

Australia-Malaysia

Chile-Australia

Chile-Thailand

China-Australia

China-New Zealand

Japan-Australia

Japan-Brunei

Japan-Chile

Japan-Indonesia

Japan-Viet Nam

Korea-Canada

Korea-Japan

Korea-Mexico

Peru-Mexico

Singapore-Canada

Singapore-Mexico

Singapore-Peru

Thailand-Japan

United States-Indonesia

United States-Korea

United States-Malaysia

United States-Thailand

AUSTRALIA

Acronyms

INTRODUCTION

The Australian Government’s approach to foreign investment policy is to encourage foreign investment consistent with community interests. In recognition of the contribution that foreign investment has made and continues to make to the development of Australia, the general stance of policy is to welcome foreign investment. Foreign investment provides scope for higher rates of economic activity and employment than could be achieved from domestic levels of savings. Foreign direct investment also provides access to new technology, management skills and overseas markets.

Australia recognises community concerns about foreign ownership of Australian assets. One of the objectives of the Government’s foreign investment policy (the policy) is to balance these concerns against the strong economic benefits to Australia that arise from foreign investment.

The policy provides the framework for Australian Government scrutiny of proposed foreign purchases of Australian businesses and real estate. The Government has the power under the Foreign Acquisitions and Takeovers Act 1975 (the FATA) to block those proposals subject to the FATA which would result in a foreign person acquiring control of an Australian corporation or business or an interest in real estate where this is determined to be contrary to the national interest. The FATA and the Foreign Acquisitions and Takeovers Regulations 1989 provide monetary thresholds below which the relevant FATA provisions do not apply, and separate thresholds for acquisitions by US investors.[5] For a summary of all monetary thresholds see http://www.firb.gov.au/content/monetary_thresholds.asp The FATA also provides a legislative mechanism for ensuring compliance with the policy.

In the majority of industry sectors, smaller proposals are exempt from the FATA or notification under the policy and larger proposals are approved unless determined to be contrary to the national interest. The screening process undertaken by the Foreign Investment Review Board (the Board) enables comments to be obtained from relevant parties and other Government agencies in considering whether larger or more sensitive foreign investment proposals are contrary to the national interest.

The Government determines what is ‘contrary to the national interest’ by having regard to the widely held community concerns of Australians. Reflecting community concerns, specific restrictions on foreign investment are in force in more sensitive sectors such as the media and developed residential real estate. The screening process provides a clear and simple mechanism for reviewing the operations of foreign investors in Australia whenever they seek to establish or acquire new business interests or purchase real estate. In this way the Government is able to encourage foreign investors to operate in Australia as good corporate citizens if they wish to extend their activities in Australia.

By far the largest number of foreign investment proposals involves the purchase of real estate. The Government seeks to ensure that foreign investment in residential real estate increases the supply of dwellings and is not speculative in nature. The policy seeks to channel foreign investment in the housing sector into activity that directly increases the supply of new housing (that is, new developments such as house and land, home units and townhouses) and brings benefits to the local building industry and its suppliers.

The effect of the more restrictive policy measures on developed residential real estate is twofold. Firstly, it helps reduce the possibility of excess demand building up in the existing housing market. Secondly, it aims to encourage the supply of new dwellings, many of which would become available to Australian residents, either for purchase or rent. The cumulative effect should be to maintain greater stability of house prices and the affordability of housing for the benefit of Australian residents.

A detailed chronology of liberalisation of Australia’s foreign investment restrictions is at http://www.firb.gov.au/content/Publications/AnnualReports/2003-2004/AppendixC.asp

Changes since 1995 also appear in Australia’s Individual Action Plans at http://www.apec- iap.org/default.asp?pid=/search/fuzzy_search

SCREENING OF FOREIGN INVESTMENT

(i) What is screened?

Australia maintains a pre-establishment foreign investment screening process to ensure that foreign investments in Australia are not contrary to the national interest. Responsibility for Australia’s foreign investment policy rests with the Australian Government. Australia’s foreign investment policy is comprised of the FATA, regulations made under this Act, Ministerial policy statements, and sector or company specific legislation.

An advisory body, the Foreign Investment Review Board (FIRB) examines proposals by foreign interests to undertake direct investment in Australia and makes recommendations to the Australian Government on whether those proposals are suitable for approval. Under Australia’s foreign investment policy, the types of investment proposals by foreign interests that require prior notification and approval from the Australian Government are as follows[6]:

• acquisitions of substantial interests in an Australian business where the value of its gross assets, or the proposal values it above, $100 million.[7]For US investors[8]different exemption thresholds apply:[9]$100 million[10]for investments in prescribed sensitive sectors[11]or by an entity controlled by a US government, or $871 million[12]in any other case;
• proposals to establish new businesses involving a total investment of $10 million or more require prior approval. Proposals by US investors, except an entity controlled by a US government, do not require notification but remain subject to other relevant policy requirements;
• portfolio investments in the media of 5 per cent or more and all non-portfolio investments irrespective of size;
• takeovers of offshore companies whose Australian subsidiaries or gross assets exceed $200 million[13]and represent less than 50 per cent of global assets. For US investors the $871 million threshold applies, except for offshore takeovers involving prescribed sensitive sectors or an entity controlled by a US government, where a $200 million threshold applies;
• direct investments by foreign governments and their agencies irrespective of size;
• acquisitions of interests in Australian urban land[14](including interests that arise via leases, financing and profit sharing arrangements) that involve:
  • developed non-residential commercial real estate, where the property is subject to heritage listing, valued at $5 million or more and the acquirer is not a US investor;
  • developed non-residential commercial real estate, where the property is not subject to heritage listing, valued at $50 million or more, or $871 million for US investors;
  • accommodation facilities irrespective of value;
  • vacant real estate irrespective of value;
  • residential real estate irrespective of value; or
  • shares or units in Australian urban land corporations or trust estates, irrespective of value.
• proposals where any doubt exists as to whether they are notifiable. (Funding arrangements that include debt instruments having quasi-equity characteristics will be treated as direct foreign investment.)

A substantial interest occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of a corporation, business or trust.

A ‘US investor’ is a national or permanent resident of the United States of America; a US enterprise;[15]or a branch of an entity located in the United States of America and carrying on business activities there. [16]

Australia’s foreign investment policy operates under the presumption that foreign investment proposals are generally in the national interest and should go ahead. However, where the Treasurer considers the matter is ‘contrary to the national interest’, he may reject applications to control an Australian business or acquire an interest in urban land under the provisions of the FATA. The Act also provides legislative backing for ensuring compliance with policy.

(ii) Transparency of the screening process

The Government seeks to ensure that proposals are dealt with quickly and efficiently. The time taken from the filing of a proposal to a decision varies, depending on the nature of the proposal and the contents of the submission. However, the majority of proposals are considered and a decision reached by the Government within 30 days of lodgement. While the legislation provides for a period of 30 days by which time a decision must be taken by the Treasurer, many proposals are completed before the expiry of 30 days.

In 2005-06, 92 per cent of proposals were decided within 30 days. Most real estate cases, representing the majority of proposals received, were decided within two weeks. For those proposals that took more than 30 days to decide, this generally reflected delays in receiving sufficient information from the parties or because the application involved significant complexity or sensitivity.

In 2005-06, 5,781 applications for foreign investment approval were considered, comprising 5,186 approved, 37 rejected and 373 withdrawn by the parties with the remaining 185 determined as exempt or not subject to the policy or the FATA. This compares with 4,360 the previous year, representing an increase of 19 per cent. The majority of this increase occurred in the real estate sector, with 4,755 approvals (20 per cent higher than the 3,949 approvals in 2004-05). There were 431 proposals approved in other sectors in 2005-06 compared with 411 in 2004-05, an increase of 5 per cent.

In 2005-06, 25 proposals were rejected by the way of a Final Order, compared with 55 in 2004-05. Five Divestiture Orders (six in 2004-05) required foreign persons to dispose of their interests. All Final and Divestiture Orders related to proposals involving residential real estate. There were 61 Interim Orders (65 in 2004-05), extending the 30-day statutory decision-making period by up to a further 90 days.

Approvals in 2005-06 involved proposed investment of $85.8 billion. This represented a 28 per cent decrease on the previous year’s approvals of $119.5 billion (60 per cent of this decrease was attributable to the 2004-05 figures including two large proposals for a single target company).

The services sector was the largest industry sector by value, with investment approvals in 2005-06 of $27.1 billion (compared with $30.5 billion in 2004-05). The other major sectors were: mineral exploration and development, with investment approvals of $19.7 billion ($33.5 billion in 2004-05); real estate, with approved investment proposals valued at $16.2 billion ($20.9 billion in 2004-05); and manufacturing, with approvals of $13.7 billion ($22.1 billion in 2004-05).

The United States of America was again the largest source country for foreign investment in 2005-06, involving proposed investment of $23.4 billion representing 27 per cent of total approved proposals. Switzerland, China, the United Kingdom and Germany were the other major sources of proposed investment approved during 2005-06, accounting for 17 per cent, 8 per cent, 8 per cent and 5 per cent, respectively.

The application forms to lodge proposed investments are available on the Internet http://www.firb.gov.au/content/application_form.asp?NavID=46 and investors are able to meet with government officials to discuss foreign investment policy and its application to specific proposals. Contact information is also on the website http://www.firb.gov.au/content/contact.asp?NavID=16

(iii) Who should apply?

The policy applies to such acquisitions by foreign persons. A foreign person is defined as:

• a natural person not ordinarily resident in Australia;
• a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest;
• a corporation in which two or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest;
• the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
• the trustee of a trust estate in which two or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.

For further information see http://www.firb.gov.au

(iv) AUSFTA

For US investors subject to the AUSFTA, the prescribed sensitive sectors are:

• • media;
• telecommunications;
• transport (including airports, port facilities, rail infrastructure, international and domestic aviation and shipping services provided within, or to and from, Australia);
• the supply of training or human resources, or the manufacture or supply of military goods or equipment or technology, to the Australian Defence Force or other defence forces;
• the manufacture or supply of goods, equipment or technology able to be used for a military purpose;
• the development, manufacture or supply of, or the provision of services relating to, encryption and security technologies and communications systems; and
• the extraction of (or the holding of rights to extract) uranium or plutonium or the operation of nuclear facilities.

Acquisitions in these sectors are subject to different thresholds under the FATA.

For further information see:

Australia’s foreign investment policy summaries http://www.firb.gov.au/content/policy.asp?NavID=1

Foreign Acquisitions and Takeovers Act 1975

http://www.comlaw.gov.au/ComLaw/Management.nsf/current/bytitle/BB037DB35BC3396CCA256F710006F1D7?OpenDocument&mostrecent=1

Foreign Acquisitions and Takeovers Regulations 1989

http://www.comlaw.gov.au/ComLaw/Management.nsf/current/bytitle/6650A5A69073BDF8CA256F710006B363?OpenDocument&mostrecent=1

SECTOR-SPECIFIC LAWS AND POLICIES

(A) FEDERAL GOVERNMENT MEASURES

(i) Banking

Foreign investment in the banking sector needs to be consistent with the Banking Act 1959, the Financial Sector (Shareholdings) Act 1998 (FSSA) and banking policy, including prudential requirements. Any proposed foreign takeover or acquisition of an Australian bank will be

The Government will permit the issue of new banking authorities to foreign owned banks where the Australian Prudential Regulation Authority (APRA) is satisfied the bank and its home supervisor are of sufficient standing, and where the bank agrees to comply with APRA’s prudential supervision arrangements.

Further information is at www.apra.gov.au

(ii) Civil Aviation

Domestic Services

Foreign persons (including foreign airlines) can generally expect approval to acquire up to 100 per cent of the equity in an Australian domestic airline (other than Qantas), unless this is contrary to the national interest.

International Services

Foreign persons (including foreign airlines) can generally expect approval to acquire up to 49 per cent of the equity in an Australian international carrier (other than Qantas) individually or in aggregate provided the proposal is not contrary to the national interest. In the case of Qantas, total foreign ownership is restricted to a maximum of 49 per cent in aggregate, with individual holdings limited to 25 per cent and aggregate ownership by foreign airlines limited to 35 per cent. In addition, a number of national interest criteria must be satisfied, relating to the nationality of Board members and operational location of the enterprise.

(iii) Airports

Foreign investment proposals for acquisitions of interests in Australian airports are subject to case-by-case examination in accordance with the standard notification requirements. In relation to the airports leased by the Commonwealth, the Airports Act 1996 stipulates a 49% foreign ownership limit, a 5% airline ownership limit and a 15% limit on the cross ownership of Sydney (Kingsford Smith) / Melbourne, Sydney (Kingsford Smith) / Brisbane and Sydney (Kingsford Smith) / Perth airports. Moreover the owners of Sydney (Kingsford Smith) Airport are precluded by their share sale agreement (entered into in June 2002) from acquiring more than a 15% stake in the airport operator companies for the other Sydney Basin Airports (Bankstown, Hoxton Park and Camden) for a period of five years. From June 2007, the owners of Sydney (Kingsford Smith) Airport are precluded by their share sale agreement from acquiring more than a 15% stake in the airport operator companies for the other Sydney Basin Airports (Bankstown, Hoxton Park and Camden) without prior notification to the Australian Competition and Consumer Commission.

(iv) Shipping

The Shipping Registration Act 1981 requires that, for a ship to be registered in Australia, it must be majority Australian-owned (that is, owned by an Australian citizen, a body corporate established by or under law of the Commonwealth or of a State or Territory of Australia), unless the ship is designated as chartered by an Australian operator.

(v) Media

The requirements that previously applied to broadcasting and newspapers were removed following proclamation of the Broadcasting Services Amendment (Media Ownership) Act 2006 which came into effect on 4 April 2007.

(vi) Telecommunications

Around 83 per cent of Telstra Corporation Limited (Telstra) is owned by institutional and individual investors, with the remaining approximately 17 per cent to be transferred by the Government to the Future Fund, a fund established by the Government to fund its public service superannuation liabilities. Shares transferred to the Future Fund will be held in escrow for a two year period.

Under the Telstra Corporation Act 1991 Telstra is subject to ownership restrictions that limit foreign groups to 35 per cent of Telstra’s listed capital and a maximum holding of 5 per cent for individual foreign entities.

The Act also contains provisions that require Telstra’s head office, its base of operations and place of incorporation, to remain in Australia and the Chairperson and the majority of directors to be Australian citizens.

Prior approval is required for foreign involvement in the establishment of new entrants to the telecommunications sector or investment in existing businesses in the telecommunications sector. Proposals above the notification thresholds will be dealt with on a case-by-case basis and will be normally approved unless judged contrary to the national interest. Further information is available through the Foreign Investment Review Board, whose website is at www.firb.gov.au.

Telecommunications-specific licensing, consumer protection and competition legislation also applies, both to foreign and domestic entities, on a non-discriminatory basis. The licensing regulation is contained in the Telecommunications Act 1997. The agency responsible for licensing is the Australian Communications and Media Authority (ACMA), whose website is at www.acma.gov.au.

In addition to being subject to the general competition and consumer protection laws which apply to business generally, carriers and carriage service providers are subject to the following industry-specific legislation:

• Telecommunications consumer protection legislation contained in the Telecommunications (Consumer Protection and Service Standards) Act 1999, administered by the ACMA.
• Telecommunications competition regulatory regime contained in Parts XIB and XIC of the Trade Practices Act 1974. This legislation augments the general competition law (outlined later), and creates an industry specific access regime. The access regime is administered by the Australian Competition and Consumer Commission, whose website is at www.accc.gov.au.

(vii) Real Estate

The Australian Government seeks to ensure that foreign investment in residential real estate increases the housing stock. Australia, therefore, seeks to channel foreign investment into activity that directly increases the supply of new housing (that is, new developments — house and land packages, home units, townhouses, etc) and brings benefits to the local building industry and their suppliers.

Proposed acquisitions of residential real estate are exempt from examination in the case of:

• Australian citizens living abroad purchasing either in their own name or through an Australian corporation or a trust;
• foreign nationals who are the holders of permanent resident visas or are holders, or are entitled to hold, a ‘special category visa’ purchasing either in their own name or through an Australian corporation or a trust; and
• foreign nationals purchasing, as joint tenants, with their Australian citizen spouse.

Proposed acquisitions of real estate for development (generally vacant land) are normally approved subject to specific conditions requiring continuous substantial construction to commence within 12 months. Once construction is complete, the parties are required to provide advice of the completion date and actual development expenditure.

Foreign persons are normally given approval to buy:

• vacant land for residential or commercial development, including house and land packages where construction has not commenced, subject to a condition imposed under the FATA that continuous construction commences within 12 months; and
• new dwellings such as house and land packages, home units and townhouses purchased ‘off-the-plan’ that is under construction or newly constructed, but never occupied or previously sold. ‘Off-the-plan’ sales to foreigners are only permitted for new development projects or extensively refurbished commercial structures, which have been converted to residential, on condition that no more than half the dwellings in a development are sold to foreign persons.

Certain categories of foreign nationals, who hold a visa that permits them to reside in Australia continuously for at least the next 12 months, may be given approval to purchase developed residential real estate (that is, second hand dwellings) for use as their principal place of residence (that is, not for rental purposes) while in Australia. A condition of such purchases is that the dwelling must be sold when the foreign nationals’ temporary resident visas expire, they leave Australia, or the property is no longer used as their principal place of residence.

Foreign companies, with an established substantial business in Australia, buying for named senior executives resident in Australia for periods longer than 12 months, may be eligible for approval provided the accommodation is sold when no longer required for this purpose. Whether a company is eligible, and the number of properties that may be acquired, will depend upon the extent of the foreign company’s operations and assets in Australia. Unless there are special circumstances, foreign companies normally will not be permitted to buy more than two houses under this category. Foreign companies would not be eligible under this category where the property would represent a significant proportion of its assets in Australia.

Proposals by foreign persons to acquire developed residential real estate that do not fall within the above categories are subject to the FATA but are not normally approved.

Proposed acquisitions of developed non-residential commercial real estate are normally approved unless they are determined to be contrary to the national interest.

Proposed acquisitions of residential property (both vacant land and existing dwellings) which are within the bounds of a resort that the Treasurer had designated as an ‘Integrated Tourism Resort’ (ITR) prior to September 1999 are exempt from examination. For resorts designated as ITRs from September 1999, the exemption only applies to developed residential property, which is subject to a long term (10 years or more) lease to the resort/hotel operator, making it available for tourist accommodation when not occupied by the owner. All other property, including vacant land for development, within the ITR would be subject to the normal foreign investment restrictions. Strict conditions must be fully met to qualify for ITR status.

Proposed acquisitions of hotels and motels operating under one title are normally approved (unless considered contrary to the national interest) under the tourism sector policy. Proposed acquisitions of strata titled hotel accommodation may be approved in certain designated hotels. Full details of the requirements for designated hotels are contained in the Foreign Investment Policy Urban Land (Real Estate). Other accommodation facilities such as guesthouses, hostels, holiday flats and undesignated strata titled hotels or motels are examined under policy applying to the residential real estate sector.

All contracts by foreign persons to acquire interests in Australian urban land should be made conditional upon foreign investment approval, unless approval was obtained prior to entering into the contract. Contracts should allow a minimum of 40 days from date of lodgement for such a decision. Foreign investors are in breach of the FATA if they enter an unconditional contract to acquire property before approval is granted and may be subject to significant penalties.

Exempt acquisitions include:

• acquisitions by Australian citizens living abroad purchasing either in their own name or through an Australian corporation or a trust resident abroad;
• acquisitions of property zoned residential by foreign nationals who hold permanent resident visas or hold, or who are eligible to hold, a ‘special category visa’ (for example, a New Zealand citizen); and
• acquisitions of property zoned residential by foreign nationals purchasing, as joint tenants, with their Australian citizen spouse.

Where to find more information see:

Urban Land

http://www.firb.gov.au/content/_downloads/Urban_Land_Policy_2007.pdf

Off the Plan Pre-approval for Developers’ Policy

http://www.firb.gov.au/content/_downloads/OTP_policy.rtf

Integrated Tourism Resorts and Strata Titled Hotels

http://www.firb.gov.au/content/_downloads/ITR_policy_2007.rtf

(B) SUB-FEDERAL MEASURES

As Australia has a federal system of government, there are some sector specific sub-federal measures that can impact on foreign ownership or control

New South Wales

The New South Wales Government through its agency The Department of State and Regional Development pro-actively seeks to attract foreign investment to the State. The Department offers a range of programs to assist investors. Further information is available at the Department’s website: www.business.nsw.gov.au The New South Wales Government does not screen foreign investment.

There are no sector specific laws in New South Wales that relate specifically to foreign investors. There are no limitations on foreign purchase of real property in New South Wales apart from those which apply under the Commonwealth legislation.

The State of New South Wales does not restrict the inflow of foreign investment in any way. Inwards foreign investment is encouraged into metropolitan and regional areas of the State.

Northern Territory

Restrictions, and any associated performance requirements, are generally the same for urban land in the Northern Territory as in other states. However, a number of unique restrictions do exist that apply to all potential investors. These are:

• No pastoral landholder, either alone or together with associates, can own more than 13,000 sq. kms without the consent of the Minister for Planning and Lands. For consent to be granted a proposal must be shown to be in the Territory’s interest. This requirement is set out in Section 34 of the Pastoral Lands Act.
  See http://www.austlii.edu.au/au/legis/nt/consol_act/pla142/s34.html )
• More than 50 per cent of the Terrirtory is either held by Land Trusts pursuant to the Aboriginal Land Rights (Northern Terrirtory) Act 1976 of the Commonwealth Government or is subject to an application under the Act. Special provisions apply and the various Land Councils established under the Act have a statutory role to assist the traditional Aboriginal owners.

Queensland

The Queensland Government’s approach to examinable foreign investment proposals on an industry sector basis is outlined below.

Urban Real Estate

The Queensland Government supports the existing Commonwealth policy regarding the acquisition of or investment in urban real estate by foreign investors. The Queensland Government would expect that urban real estate proposals (other than those explicitly exempted from examination under Commonwealth guidelines) would generally add value or other tangible economic benefits to attract Queensland Government support.

The Queensland Government would oppose proposals which it believed indicated an intention to participate in “land banking”. Broadly, land banking is defined as the acquisition of undeveloped real estate without identifiable plans to commence an approved form of development within a reasonable period (normally defined as 12 months).

Although joint ventures involving Australian-owned interests are preferred, the Queensland Government would be prepared to accept up to 100% foreign ownership of manufacturing concerns provided that tangible economic benefits will result.

In assessing economic benefit to the State, the Queensland Government notes that some of the benefits of foreign investments in manufacturing include:

• introduction of new manufacturing technology;
• increased access to export markets;
• import replacement;
• employment generation or maintenance; and
• establishment of new industry.

Mining and Resource Industries

For examinable proposals involving a new mining business, the Queensland Government has a preference for a minimum of 50% Australian equity and control. In assessing the proposals for a new mining business with a level of foreign ownership exceeding 50%, the Queensland

Government will pay regard to:

• economic benefit to Queensland as a result of the project;
• the extent to which the unavailability of sufficient Australian equity capital on reasonable terms and conditions would unduly delay development;
• the possibility of Australian equity participation during the course of the project; and
• whether the foreign proponent has been actively engaged in the exploration phase of the project.

The Queensland Government would not normally object to proposals for the acquisition of an interest in an existing mine where economic benefits are considered sufficient to offset any reduction in Australian ownership and control, or where the foreign interest making the acquisition is Australian controlled.

The Queensland Government particularly encourages foreign investment in the area of downstream mineral processing.

Rural Sector

In considering potential implications of primary industry sector proposals on the State’s economy, the Queensland Government will generally require that an industry impact assessment be undertaken for proposed foreign investments in the form of establishing new businesses or the acquisition of existing businesses. These assessments will be undertaken by Invest Queensland after prior consultation with the foreign investor and the FIRB.

Invest Queensland will also monitor the impact of foreign investment in more sensitive sectors of the rural economy, particularly where the level of foreign ownership and control is high.

In addition, the Queensland Government opposes freehold acquisition by foreign investors of dedicated prime agricultural land for purposes other than primary production, unless it is demonstrated that foreign ownership will provide signific ant net offsetting benefits to the Queensland economy.

Tourism

The Queensland Government encourages foreign investment in the tourism industry but would prefer joint venture projects between Australian and foreign companies.

However, in assessing foreign investment proposals in the tourism sector, the Queensland Government will also pay regard to:

• the impact of development on the local and regional communities;
• the potential of the foreign investor to make a positive contribution to the local tourism industry; and
• the level of foreign ownership and control within the local tourism industry.

In considering foreign investment proposals involving offshore islands, the Queensland Government will apply the following approach:

• Australian ownership should be maintained at a minimum of 50% unless otherwise approved by the relevant State Ministers;
• tenure to be on long-term leasehold land; and
• management to be in accordance with approved Commonwealth and Queensland Government island environmental management plans and other lawful requirements of Queensland’s Environmental Protection Agency .

Queensland’s foreign investment policy, as it relates to offshore islands, remains current whilst under review.

Contact details for the Queensland Government’s Invest Queensland follow.

The Manager Commercial Assessment
Department of State Development & Trade
Level 20, 111 George Street
Brisbane QLD 4000
Australia.

or

The Manager
Commercial Assessment
Department of State Development & Trade
PO Box 15168
City East QLD 4002
Australia.

Tel: (61-7) 3405-6504
Fax: (61-7) 3210-0739
Web: www.sd.qld.gov.au

South Australia

The South Australian Government welcomes foreign investment that contributes to the long-term economic growth and development of the State. The combination of cost-competitiveness, innovation, time zone, quality of life and government investment generates significant opportunities for international companies across a wide range of sectors including:

• Resources
• Defence
• Manufacturing
• Aerospace and Aviation
• Automotive
• Agribusiness
• Bioscience
• Information and Communications Technology

The Department of Trade and Economic Development is the South Australian Government’s lead agency promoting economic development in the State.

Working closely with the State’s Economic Development Board and in collaboration and partnership with business, other government agencies and the community the Department’s strategic directions are closely aligned with the key economic development targets outlined in South Australia’s Strategic Plan. See http://www.stateplan.sa.gov.au/

At the State level there are no formal processes or legislation in place governing the screening of potential foreign investment in South Australia.

South Australian Government policy encourages investment across all industry sectors, however, there is a current strategic focus on the following strategic industry sectors within both metropolitan and regional South Australia.

• Resources
• Defence
• Services
• ICT/Electronics/Creative Industries

At the State level restrictions to ownership of real property may apply in relation to the occupation of aboriginal lands.

Victoria

There are no sector-specific laws and policies which apply to foreign investment in Victoria. The Victorian Government is focused on promoting and attracting international business investment. The Department of Innovation, Industry and Regional Development is the primary Victorian Government Department responsible for investment attraction and facilitation activities, both foreign and domestic. Its aim is to position Victoria as an attractive destination for investment that stimulates growth and development across the State.

Invest Victoria (http://invest.vic.gov.au) acts as the single entry point into the Victorian Government for potential investors and is responsible for:

• attracting FDI by positioning Victoria in the global market as a world class investment location,
• facilitating potential and existing foreign investors by providing a high level of service and advice, and;
• providing Government and investors with coordinated intelligence on local and global FDI trends and their impact on Victoria.

The Victorian Government generally does not impose any restrictions on foreign investments. Foreign investors that approach the Victorian government for assistance are assessed based on the level of strategic value and contribution that the company will potentially make to the Victorian economy. Investments that are facilitated into the state with a grant component are subject to performance requirements. In these cases, companies are expected to reach contracted milestones and outcomes in order to be paid in accordance with the grant agreement.

Western Australia

Western Australia (WA) has a thriving economy providing a diverse range of investment opportunities, demonstrated by the 17.5 per cent average yearly increase in business investment since 2001. Investments that enhance the value of WA’s rich endowment of natural resources and knowledge based industries are keenly sought.

WA is one of the world’s largest producers of diamonds, alumina, seaborne-traded iron ore, salt, tantalum, ilmenite, rutile, zircon, gold, nickel and lithium. It is also the location for the majority of petroleum exploration and production in Australia. The State also produces 11 per cent of the

world’s liquefied natural gas (LNG) and two-thirds of Australia’s oil and gas production. This figure is set to significantly increase with planned LNG projects in WA. The future continues to look promising with more than $81 billion worth of resource projects either underway or planned for the State over the next few years.

The State’s remarkable economic growth has also been boosted by the development and adoption of advanced technologies. WA’s science and innovation industries are incredibly rich with potential.

WA has one of the leading technology parks in Australia and a marine services precinct that is world class in terms providing infrastructure to support industries servicing marine, defence, mining and petroleum industries. The State is aiming mostly to develop industries in the ICT, biotechnology, marine and defence, renewable energy and biofuels sectors.

WA companies and individuals compete successfully on the world stage everyday. Intelligent management of the natural resources and a spirit of innovation and hard work have increased recognition for WA’s emerging knowledge based industries.

WA has a population of nearly two million people represented through a diversity of cultures with 12 per cent speaking a language other than English at home. The population enjoys a clean and healthy lifestyle characterised by blue skies, warm climate and white sandy beaches. More than 450,000 students are catered for in WA’s education system, which is made up of five universities, a state-wide technical and further education system and public and private schools.

WA provides easy access and a similar time zone to countries in the Indian Ocean Rim and Asia Pacific region, a region that is home to over one-third of the world’s population and the fastest growing economies of the world. WA has well-established trading relationships in the region as result of an outwardly focused business culture. This is exemplified by the State’s oil and gas sector which is becoming recognised as a global hub for supplying LNG, undertaking research and providing services to the region.

The State’s world-class infrastructure, highly skilled workforce, low sovereign risk and pro-development policies are all strong reasons for local and international investors to consider WA as a long-term investment destination. The Government of WA welcomes your investment and is committed to promoting and developing innovation, science, technology and research to secure a vibrant future for the State.

Useful websites include the following.

Investment Infrastructure

General infrastructure information

www.doir.wa.gov.au/investment/29F01DFD4E314C379132DC84F6EAC7B9.asp

Australian Marine Complex

http://www.landcorp.com.au/portal/page?_pageid=331,210268&_dad=portal&_schema=PORTAL

Technology Park

www.techparkwa.org.au

Kwinana Industrial Estate — Kwinana Industries Council www.kic.org.au

Kemerton Industrial Park

www.kemerton.com.au

State Government land development agency — Landcorp

www.landcorp.com.au

Western Australia Government

Department of Industry and Resources www.doir.wa.gov.au

Business Migration

www.sbdc.wa.gov.au

Economic Information

www.dtf.wa.gov.au

Government of Western Australia

www.wa.gov.au

Chamber of Industry and Resources Western Australia

www.cciwa.com.au

Chamber of Minerals and Energy Western Australia

www.cmewa.com.au

INVESTMENT PROTECTION

(i) Conversion, Repatriation and Transfers (including any Balance of Payments safeguards)

The Australian dollar is a convertible currency.

The Australian Government does not maintain currency controls or limit remittance, loan and lease payments. Such payments are processed through standard commercial channels, without governmental interference or delay.

Exchange rates are determined on the basis of demand and supply conditions in the exchange market, but the Reserve Bank of Australia retains discretionary power to intervene in the foreign exchange market. There is no official exchange rate for the Australian dollar. There are no taxes or subsidies on purchases or sales of foreign exchange. Authorised foreign exchange dealers may deal among themselves, with their customers, and with overseas counterparties at mutually negotiated rates in any currency.

(ii) Expropriation and Compensation

Private property can be expropriated for public purposes in accordance with established principles of international law. Due process rights are established and respected, and prompt, adequate and effective compensation (under just terms) is paid under the Constitution.

Over the last three years, there have not been any cases of expropriation involving foreign investors under domestic law.

(iii) IPR

Australian law protects patents, trademarks, designs, copyrights and integrated circuit layout rights.

Australia is a member of the WIPO, the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention, the Geneva Phonogram Convention, the Rome Convention for the Protection of Performers, Producers of Phonograms, and Broadcasting Organizations, and the Patent Cooperation Treaty. The U.S. Free Trade Implementation Bill 2004 included amendments that allow Australia to accede to the WIPO Copyright Treaty 1996 (WCT) and the WIPO Performances and Phonograms Treaty 1996 (WPPT).

A number of Commonwealth laws give effect to the international obligations. These include the Copyright Act 1968, the Circuit Layouts Act 1989, the Patents Act 1990, the Plant Breeder’s Rights Act 1994, the Trade Marks Act 1995 and the Designs Act 2003.

IP Australia is the Australian government agency responsible for registrations of patents, trademarks and designs. Contact details for IP Australia are: Tel: 61-2 6283-2999; Fax: 61-2 6283 7999; or (http://www.ipaustralia.gov.au/).

For copyright matters contact:

Commonwealth Copyright Administration
Copyright Law Branch
Attorney-General's Department
Robert Garran Offices National Circuit BARTON ACT 2600
Australia
Tel: 61-2-6250-6666
Website: http://www.ag.gov.au/cca

(iv) Dispute Settlement

In general, for settlement of disputes associated with their investment in Australia, foreign investors would have access to the same courts and tribunals as domestic investors, provided that jurisdiction over the dispute could be established. These include State and Territory Supreme Courts, and the Federal Court of Australia

In addition, they would have access to a range of alternative dispute resolution mechanisms, such as arbitration, mediation and conciliation. There are a number of private sector organisations providing alternative dispute resolution services and facilities across Australia for both international and domestic dispute resolution. Further information on the facilities available can be obtained from Chambers of Commerce and Industry, and Law Societies in each State and Territory. Contact details for the Australian Chamber of Commerce and Industry follows.

Australian Chamber of Commerce and Industry
Commerce House
PO Box 6005
KINGSTON ACT 2604
Australia
Tel: 61 2 6273 2311
Fax: 61 2 6273 3286
Email: info@acci.asn.au
Website: http://www.acci.asn.au/

Links to the Law Societies in each State and Territory are available on the Law Council of Australia website http://www.lawcouncil.asn.au/links.html

Australia signed the ICSID Convention on 24 March 1975 and ratified it on 2 May 1991. The Convention entered into force for Australia on 1 June 1991 and is given effect under the International Arbitration Act 1974 (Cth). It is standard practice for Australia to include a clause in its bilateral investment protection agreements enabling disputes between a Contracting Party to the agreement and a national of the other party to be referred to ICSID for conciliation and arbitration under the ICSID Convention provided both Parties to the agreement are Contracting States under the ICSID Convention. Over the last three years, there has been no disputes involving Australia as a party brought to resolution by ICSID

INVESTMENT AND DEVELOPMENT

(i) Performance Requirements

Federal Government

There are no performance requirements imposing limits on trade and investment or any TRIMS in Australia.

Sub-federal

South Australia

The State’s Industry Participation Policy seeks to maximise local participation in major infrastructure and construction projects.

The South Australian Government recognises that local industry participation in infrastructure and major construction projects provides benefits to both the South Australian economy and to the project proponent through greater local value adding and project cost savings. There is an expectation that project proponents would support the achievement of these benefits.

Whilst recognising that investment decisions are made in a competitive global market, it is desirable to achieve the maximum level of local content in goods, services and labour where these are competitive as to price, quality, and delivery requirements.

The Commercial Division within the Department of Trade and Economic Development, the South Australian Government’s key agency for economic and industry development policy, works in partnership with business and other government agencies to facilitate international business activities for South Australia.

Victoria

Approvals for foreign investment are handled directly by the Federal Government although the Foreign Investment Review Board refers significant investment proposals to relevant States for comment.

The Victorian Government generally does not impose any restrictions on foreign investments. Foreign investors that approach the Victorian government for assistance are assessed based on the level of strategic value and contribution that the company will potentially make to the Victorian economy. Investments that are facilitated into the state with a grant component are subject to performance requirements. In these cases, companies are expected to reach contracted milestones and outcomes in order to be paid in accordance with the grant agreement.

(ii) Other Policy Measures affecting Inward Foreign Investment

Australia does not use policies targeting foreign investment in the area of the environment or sustainable development, or affecting indigenous persons, to promote broad economic development objectives.

INVESTMENT PROMOTION AND INCENTIVES

(i) Investment Promotion Agencies (scope of Agencies and interaction with any screening mechanisms)

Federal Government

Invest Australia is the Australian Government's national inward investment attraction agency responsible for attracting productive foreign direct investment into Australia. Invest Australia undertakes investment attraction work through 14 overseas offices: London, Paris, Frankfurt, New York, San Francisco, Seoul, Mumbai, New Delhi, Beijing, Shanghai, Guangzhou, Singapore, Tokyo, and Dubai.

Invest Australia is the first national point of contact for investment inquiries. It provides free and comprehensive advice including:

• information on Australian industry capabilities, skills availability, R&D capacities, infrastructure, business costs, intellectual property issues, regulations and tax matters.
• an initial contact point for Australian Government approvals and direct investors to key State/Territory and local government agencies.
• information on the range of relevant government assistance programs.
• Major Project Facilitation status for significant, strategic projects.
• access to tailored business immigration agreements through the Invest Australia Supported Skills Program.
• investment incentives for strategic projects, through the Strategic Investment Coordination process, in limited and special circumstances where projects are expected to generate significant net economic benefits for Australia.

Invest Australia's website is at http://www.investaustralia.gov.au and contact details for its offices around the world can be found at http://www.investaustralia.gov.au/index.cfm?menuid=3D5D8296-EB77-C709-36153CFE42024159&setLanguage=AU.

Invest Australia works closely with all the States and Territories in promoting, attracting and facilitating foreign direct investment into Australia. There are a range of mechanisms in place with the State and Territory investment promotion bodies covering cooperation on research, marketing, events, re-investment, and protocols for investment leads.

Incentives Invest Australia administers two programs in attracting and facilitating investment projects into Australia.

Supported Skills Program

This program allows companies that make a significant investment in Australia to bring out key expatriate managerial and specialist employees from within the company group that are essential to establish operations in Australia. Agreements will be granted for three years. Details and eligibility criteria can be found at http://www.investaustralia.gov.au/index.cfm?menuid=0DA862B8-B0D0-36D2-5CFA57191BEEE29A&setLanguage=AU.

Strategic Investment Coordination

The Strategic Investment Coordination process considers requests for investment incentives where a project:

• Provide significant net economic benefits to Australia;
• Complement Australia's areas of competitive advantage;
• Would not occur in Australia without an incentive;
• Is viable in the long term without subsidy; and
• That assistance is consistent with our international obligations, including under the World Trade Organisation.

Eligibility is not limited to foreign investors. Details of the process can be found at http://www.investaustralia.gov.au/index.cfm?menuid=7AA9CD69-D0B7-180C-1609A505287904C9&setLanguage=AU

Aside from the programs described above, investors are able to access the full range of government programs, subject to eligibility, availability to industry in areas like research and development, export development, and innovation. Further information can be obtained by contacting Invest Australia or from the Australian Government business website http://www.bep.gov.au/Business+Entry+Point/Business+Topics/Grants+assistance/.

Film Industry

Ausfilm promotes Australia as the world’s best destination for filmmaking, acting as a one-stop shop or gateway for filmmaking in Australia. Ausfilm is an association of over 40 corporate members from Australia’s screen production industry and the state and territory film offices, with Australian Government support. Ausfilm can offer information on locations, incentives, facilities, crew depth and a range of production services. Please see www.ausfilm.com.au for further information.

The refundable film tax offset (the offset) is the Australian Government’s incentive to attract high- budget film and television production to Australia. The offset provides a 12.5% tax refund on all qualifying expenditure of eligible film and television productions. A minimum qualifying spend of A$15 million is required and if the production has a qualifying spend of less than A$50 million, 70% of its total production expenditure must be qualifying spend in Australia. The offset is jointly administered by the Department of Communications, Information Technology and the Arts and the Australian Tax Office. Please see www.dcita.gov.au/filmtaxoffset for further information.

Sub-federal

All State and Territory Governments in Australia are actively involved in investment promotion. They have dedicated investment promotion personnel based domestically and most have representatives abroad who offer facilitation services to investors.

New South Wales

The Department of State and Regional Development pro-actively seeks to attract FDI to New South Wales. The Department offers a range of programs to assist investors. Further information is available on the Department’s website: www.business.nsw.gov.au.

The Department provides a one stop shop for investors. Please contact:

Executive Director
Investment Division
Department of State and Regional Development
L49 MLC Centre
19 Martin Place
Sydney NSW 2000
Australia
Tel: (61 2) 9338-6641
Fax: (61 2) 9338-6728
E-mail: investment@business.nsw.gov.au
Website: http://www.directory.nsw.gov.au/showorgunit.asp?id=%7BA0A8A5AE-009D-45F8-B6EC-EBE6C469A50C%7D

• •New South Wales offers project facilitation and assistance packages to attract FDI. Whether assistance will be offered and the nature and extent of assistance is assessed on a case by case basis taking into account the economic benefits that will flow to the State from the new project.
• Businesses locating in certain areas of the State can qualify for special incentive programs. These programs are:
  • the Regional Business Development Scheme (RDBS)
    • The RBDS facilitates economic development in regional (areas outside Sydney) NSW by providing short-term financial assistance to businesses contemplating relocation, establishment or expansion in non-metropolitan areas. It is equally available to foreign and domestic investors.
    • Applications for assistance through the RBDS are assessed on a case by case basis with regard to the degree of influence assistance will have in gaining a positive benefit for the project for regional NSW which would otherwise not be attained.
    • Assistance levels are up to $5,000 per new job created and up to 10% of the capital investment.
  • the Pay-Roll Tax Incentive Scheme (PTIS).
    • The PTIS assists new and existing businesses to establish and grow in a range of eligible regional and metropolitan locations. It is available to both foreign and domestic investors. However it is not available to employers liable for payroll tax in NSW in previous years.
    • The scheme provides rebates of payroll tax amounting to a maximum amount of $575,856 paid over a five year period.
• Further information on the New South Wales assistance schemes is available on the Department’s website: www.business.nsw.gov.au.

Northern Territory

The Department of the Chief Minister (Major Projects, Asian Relations and Trade) facilitates major economic and resource development projects, works to attract business to the Territory, and promotes Territory trade and business opportunities across Australia and throughout the wider Asian region. The Department coordinates other government agencies to help the private sector in developing major projects such as the $3 billion Bayu-Undan gas field and 500 kilometre pipeline to Darwin, the $1.6 billion Darwin Liquid Natural Gas Plant and Alcan’s $2.5 billion expansion of the Gove Alumina Refinery.

The Department of the Chief Minister promotes the Territory’s competitive advantages and works to build closer economic ties with our Asian neighbours. The Department works in partnership with key stakeholders, including industry, professional associations, peak bodies, investors and government counterparts, to secure economic growth and employment for the Territory.

For further information contact:

Execuive Director
Major Projects, Asian Relations and Trade
Department of the Chief Minister
GPO Box 4000
Darwin NT 0801
Australia
Tel: (61-8) 8946-9555
Fax: (61-8) 8946-9556
Email: majorprojects.info@nt.gov.au
Websites: http://www.dcm.nt.gov.au/dcm/trade/index.html ; and http://www.theterritory.com.au

Queensland

• Invest Queensland is the official investment attraction agency for the Queensland Government, providing a one-stop-facility for foreign investors.
• Invest Queensland pursues global investment opportunities in the following target industry sectors:
  • Aviation, Marine and Defence
  • Biotechnology / Pharmaceuticals
  • Food and Agribusiness
  • Advanced Manufacturing
  • ICT / Creative Industries
  • Professional services
  • Mining and related services
  • Tourism and Business Events
• Invest Queensland has a strong relationship with Invest Australia.
• Contact details for Invest Queensland follow.

The Director
Invest Queensland
Department of State Development & Trade
Level 24, 111 George Street, Brisbane QLD 4000
Tel: (61 7) 3224 4051
Fax: (61 7) 3224-4910
www.investqueensland.com.au
www.sd.qld.gov.au

The Queensland Government welcomes foreign investment as a major contributor to Queensland’s economic development. The Government recognises that Australia has historically been capital deficient and that foreign investment has played a significant role in the development of Queensland and Australian economic capacity, particularly in the export sector.

The Queensland Government encourages foreign investment in all sectors of the State’s economy. However, the Government seeks to influence the flow of such investment into sectors of the economy which will provide the greatest contribution to the long term growth and development of Queensland.

Invest Queensland provides financial incentives to attract businesses to Queensland. The scheme is discretionary and projects are considered on a case-by-case basis. To be eligible for consideration, a company or project must:

• provide a significant net economic benefit to the state;
• demonstrate commercial viability in the absence of incentives;
• demonstrate a need for the government to provide support to overcome a short-term impediment to a project’s development in Queensland; and
• demonstrate no significant detriment to and/or substitutes for existing businesses in Queensland.

Should financial incentives be offered to eligible projects, types of support may be in the form of payroll tax rebates or establishment grants. Offers are conditional and subject to the fulfilment of due diligence requirements and contractual obligations.

Invest Queensland can also offer:

• comparative information on business costs, skills availability and other business investment opportunities for you in Queensland
• site visits for you, to explore the investment opportunities here
• facilitated introductions to local companies and service providers, such as education and training organisations and raw materials suppliers
• business migration assistance with visa entry options for key staff relocating to Queensland or
• or information about relevant business visas for senior executives or investors.
• a network of 10 Queensland Government Trade and Investment Offices which provides advice assistance, contacts and intelligence to companies looking to expand into international markets.

Overall, the Queensland Government adopts a balanced and positive approach to foreign investment. Such investment should provide benefit to Queensland’s economy as well as to the investors themselves. The role of the State Government with regard to foreign investment is recommendatory.

Invest Queensland is responsible for implementing the Queensland Government’s approach to foreign investment. The Secretariat has responsibility for:

• data gathering and analysis of foreign investment trends within the State;
• liaising with potential foreign investors and/or their agents in respect of foreign investment issues; and
• assessing applications for foreign investment approval referred by the FIRB and provision of advice to the Government.

There is no legislative requirement for prospective foreign investors to make submissions direct to Invest Queensland. However, proponents are encouraged to consult with the Secretariat on significant and possibly contentious proposals at the same time as making submissions to the FIRB. Such consultation may enable the early identification, and remedy, of potential issues of concern.

The Commonwealth Government consults with the Queensland Government as it recognises that particular State interests should be taken into account.

The Queensland Government fully recognises that much of the information provided to Invest Queensland will be sensitive, commercial information, and thus confidential. The Queensland Government will respect this confidence and will award it appropriate security.

For the purposes of foreign investment policy, the Queensland Government adopts the same definition of ‘foreign person’ as the Commonwealth Government.

South Australia

The Investment Branch of the Commercial Division attracts and secures private sector investment into South Australia and maximises future investments by organisations currently located within South Australia. The Branch establishes and markets the case for South Australia as an investment destination and identifies financing opportunities for investment sourced from both the private sector and government. The Branch develops and maintains high level networks and gathers and disseminates market intelligence to other key divisions and agencies across government in relation to strategic industries. The Investment Branch is responsible for investment attraction across the breadth of the economy, with a particular focus on the following strategic industry sectors within both metropolitan and regional South Australia:

• Resources
• Defence
• Services
• ICT/Electronics/Creative Industries

Further information and key contacts can be found at the Department of Trade and Economic Development’s website http://www.southaustralia.biz

Although there is potential for assistance to be provided for projects of significant strategic value the State Government focuses on facilitating and promoting economic development and creating a business environment that encourages investment opportunities.

Tasmania

The Tasmanian Department of Economic Development is the first point of contact for companies wishing to invest in Tasmania. The Department acts as a conduit to State and Australian Government departments, Local Government and Tasmanian business.

A Tasmanian prospectus showcases Tasmania as a place to invest and details the assistance available to investors. The prospectus is available at: http://www.development.tas.gov.au/investintas/economy/prospectus.html

Contact information follows.

General Manager
Investment Attraction and Research
Department of Economic Development
22 Elizabeth Street
Hobart Tasmania 7000
Australia.
Tel: (61-3) 6233 5800
Tel: (61-3) 6233 5800 (same as for telephone) Email: info@development.tas.gov.au
Website: www.development.tas.gov.au

Victoria

Victoria’s investment promotion and attraction activities are undertaken by Invest Victoria, which acts as the Victorian Government’s single entry point for potential investors.

Contact details follow. CEO
Invest Victoria
Level 36 / 121 Exhibition Street
Melbourne, Victoria 3000
Australia
Tel: (61-3) 9651 8100
Fax: nil
Email: info@invest.vic.gov.au
Website: http://invest.vic.gov.au

Invest Victoria also markets and promotes Victoria in overseas markets and has a network of 11 international offices which actively promote the State in those markets and receive inquiries from potential investors.

Invest Victoria provides a range of free and confidential services to international companies designed to make investing and re-investing in Melbourne as simple as possible. These services include:

• working with companies in their market, through one of Invest Victoria's eleven international business offices,
• arranging itineraries and programs for prospective investors visiting Melbourne with relevant contacts and introductions,
• providing information on Australian and Victorian market conditions and identifying partners or client groups,
• identifying suitable local suppliers and service providers, helping with employee recruitment and providing training assistance, and;
• identifying a range of available sites and assisting with negotiation for land, infrastructure and approvals.

Invest Victoria also provides assistance to Victorian companies looking to develop export opportunities, through the Access Program, which offers short-term desk and office facilities to pre-qualified Victorian companies requiring a temporary base for exploring market opportunities in the US, China, India and the Middle East. Further details on the Access Programs can be found at:

http://invest.vic.gov.au/About+Melbourne/Export+Assistance+Programs.htm

Detailed information about the Victorian Governments grants programs can be found under the ‘grants and assistance’ section of the Victorian Government’s business website:

htpp://www.business.vic.gov.au

(ii) Fiscal, Financial, Tax or Other Incentives

Invest Australia has responsibility for a number of programs described below which were designed specifically to encourage investment in Australia:

• Regional Headquarters (RHQ) Program
  • Offers assistance with immigration arrangements for executives and specialists and tax concessions for international companies considering Australia as the location for regional headquarters and regional operating centres.
• Immigration
  • The issuing of an Immigration Agreement is a free service from Invest Australia and exempts expatriate employees from many of the migration tests.
• Tax Concessions
• Investment Incentives
  • The Australian Government will consider the provision of investment incentives to strategic investment projects in limited and special circumstances where the project would generate significant net economic and employment benefits for Australia.
• Feasibility Study Fund
• Offers financial assistance, in conjunction with State and Territory Governments, to eligible companies to undertake pre-feasibility or feasibility studies into the commercial viability of new investment projects.

Aside from the programs described above, investors are also able to access the full range of government programs, subject to eligibility, available to industry in areas like R&D, export development, training and education and infrastructure.

Further information is available through:

Invest Australia
Department of Industry, Tourism and Resources
Industry House
10 Binara Street
Canberra ACT 2600
Australia
Tel: (61-2) 6213 7560, (61-2) 6213 7715
Fax: (61 2) 6213 7843
http://www.investaustralia.gov.au

(iii) Free Trade Zones or ‘Special Investment Areas’

Australia does not operate such zones or areas.

MOBILITY OF CAPITAL AND TECHNOLOGY

There are no restrictions on the repatriation of capital and earnings by foreign investors related to foreign investment. There is a reporting system for cash transactions over $10,000 and a maximum of $10,000 in cash (Australian or foreign currency equivalent) may be taken out of Australia by an individual. Any larger amounts must be transferred through the banking system.

There are no laws or regulations that restrict the export of technology.

LABOUR, MOVEMENT OF PEOPLE, AND SENIOR MANAGEMENT AND BOARDS OF DIRECTORS

(i) Labour Laws and Regulations

The Workplace Relations Amendment (Work Choices) Act 2005 is the principal industrial relations law in Australia. The Act took effect from 27 March 2006 and established a new system which provides a single, national set of rules for minimum terms, conditions, awards and agreements. Australian domestic law does not discriminate between foreign and locally owned enterprises.

Accordingly, a foreign firm employing Australian workers has the same legal rights and obligations in relation to conditions of employment and related matters as any local firm in a similar situation. For further information see https://www.workchoices.gov.au/ourplan/legislation/ Foreign investors should note, however, that there are some ‘grey areas’ where it is either unclear whether the Australian or state laws refer, e.g. public servants, council workers, non-incorporated firms, etc.

For further information please contact the Department of Employment and Workplace Relations http://www.dewr.gov.au/dewr/Contact/Nationaloffice.htm

For the purposes of obtaining entry to Australia for business temporary residence minimum salary and skill thresholds apply. Skilled positions are occupations that are classified as Managers and Administrators, Professionals, Associate Professionals, and Tradespersons and Related Workers.

(ii) Domestic labour laws which apply to foreign firms in the context of labour disputes/relations

Overview

Foreign firms are subject to the same laws as locally owned enterprises.

Australian domestic laws relating to the settlement of industrial disputes and industrial action vary in detail from one jurisdiction to another. The regulatory arrangements and the mechanisms available for resolving industrial conflict, however, are broadly similar. In each jurisdiction legislation provides for the settlement of industrial disputes by way of third party arbitration as well as by direct negotiation and other informal means. As a general rule any industrial dispute may be brought before the relevant industrial tribunal at the behest of either party.

The incidence of industrial action has declined dramatically since the early 1980s. The Australian system seeks to encourage the resolution of industrial disputes through direct negotiation rather than by third party arbitration. The overwhelming majority of disputes are settled by such means and, increasingly, awards and determinations have established grievance handling procedures for resolving disputes at the enterprise level without the need for third party intervention.

Sub-federal

New South Wales

Domestic and foreign firms are subject to the same labour regulations. For further details see www.industrialrelations.nsw.gov.au

South Australia

The South Australian Government participates in a range of State-specific and regional migration schemes that attract favourable policy and priority processing.

Immigration South Australia, a division of the Department of Trade and Economic Development, encourages business and skilled people to invest and migrate to South Australia.

As part of the ‘South Australia: Make the Move Campaign, the government has compiled an information kit and companies or individuals can register at www.southaustralia/biz/move to obtain a kit.

The government can also assist with relocation including settlement orientation and skills/qualification recognition and employment assistance for partners of relocating staff.

(iii) Permits/entry visa requirements for non-resident staff of foreign firms

All Australian State and Federal domestic labour laws apply to the subsidiaries of foreign firms

operating in Australia in the context of labour disputes/relations within the boundaries of Australia’s jurisdictional coverage.

In the case of a secondment or a short-term deployment of a worker from an overseas foreign firm, where the employment relationship is entered into in a foreign country, the laws that would apply to that worker would be dependent on factors including the level, regularity and substantiveness of the work performed in Australia on or behalf of the overseas firm. It would therefore be difficult to provide advice without more detailed information about the relationship between the parties.

Temporary business entry arrangements provide for the entry of foreign personnel for both short and long stay business entry.

Short stay business visitor entry provides for a stay of up to three months on each occasion for business purposes such as pursuing investment opportunities, attending business meetings or attending to business interests in Australia, whereas long stay business entry visas are more appropriate for personnel seeking ongoing work in Australia.

Short stay visa options include a multiple entry visa, usually valid for one year. This visa is available in many APEC economies through Electronic Travel Authority (ETA) arrangements. There is an ETA option which is valid for the life of the holder’s passport (up to a maximum of 10 years).

Information on short stay business visas is available online can be found online:

www.immi.gov.au/allforms/visiting_business_short.htm

Passport holders of participating APEC Business Travel Card (ABTC) Scheme economies can apply for an ABTC for the purposes of short-term business visitor entry to Australia. The ABTC

cuts through the red tape of business travel, and gives accredited business people pre-cleared entry to 17 participating APEC economies. Benefits include:

• Fast-track entry and exit through special APEC lanes at major Australian airports,
• Exemption from having to individually apply for visas or entry permits each time you travel to any of the participating economies,
• Multiple short-term entry to Australia for 90 days stay each visit, and
• Card validity of three years.

For information on eligibility criteria and where to apply for the APEC Business Travel Card, see www.businessmobility.org/key/abtc.html.

Long-stay business entry provides for a stay of up to four years principally for:

• highly skilled personnel for companies operating in Australia;
• highly skilled personnel from offshore companies seeking to establish a business presence in Australia such as setting up a branch of the company or participating in joint ventures; and
• personnel coming under a Labour Agreement or Regional Headquarters Agreement. Streamlined arrangements are in place for Australian companies sponsoring skilled personnel.

These streamlined sponsorship arrangements extend to the entry of skilled personnel for the purpose of establishing a business presence of an overseas company in Australia. All applicants must be sponsored by their prospective employer and meet certain prescribed criteria including any qualifications or licensing/registration requirements.

(iv) Restrictions on the entry/sojourn of foreign technical/managerial personnel and their accompanying family members

A spouse and dependent children who are part of the family unit of the principal applicant are granted a visa with the same conditions and period of validity as that of the principal. Spouses of approved business temporary residents are permitted to work while in Australia.

Further information about Australia’s business temporary entry arrangements are available from:

www.immi.gov.au/allforms/temp_bus.htm

A spouse and dependent children who are part of the family unit of the principal applicant are granted a visa with the same conditions and period of validity as that of the principal. Spouses of approved long stay business entrants are permitted to work while in Australia.

Further information about Australia’s business temporary entry arrangements are available at http://www.immi.gov.au/skilled/skilled-workers/visa-temporary.htm

(v) Laws or policies that restrict appointments by foreign investors to senior management positions or the board of directors.

The Australian Government does not impose nationality requirements on senior management positions.

Under the Corporations Act 2001, at least two of the directors of a public company must be ordinarily resident in Australia.

• Telstra Corporation — The Chairperson and a majority of directors of Telstra must be Australian citizens, and Telstra is required to maintain its head office, main base of operations, and place of incorporation in Australia.
• Qantas Airways Ltd — At all times, at least two thirds of the directors of Qantas must be Australian citizens.

(vi) Sub-federal Schemes

South Australia

The South Australian Government participates in a range of State-specific and regional migration schemes that attract favourable policy and priority processing. Immigration South Australia, a division of the Department of Trade and Economic Development, encourages business and skilled people to invest and migrate to South Australia. As part of the ‘South Australia: Make the Move Campaign, the government has compiled an information kit and companies or individuals can register at www.southaustralia/biz/move to obtain a kit.

The government can also assist with relocation including settlement orientation and skills/qualification recognition and employment assistance for partners of relocating staff.

GOVERNMENT PROCUREMENT

(i) Federal Government

The procurement policy framework is a subset of the financial management framework related to the procurement of property or services. The Commonwealth Procurement Guidelines establish the core procurement policy framework and articulate the Government’s expectations for all departments and agencies (agencies) subject to the Financial Management and Accountability Act 1997 and their officials, when performing duties in relation to procurement.

Value for money is the core principle underpinning Australian Government procurement. In a procurement process this principle requires a comparative analysis of all relevant costs and benefits of each proposal throughout the whole procurement cycle (whole-of-life costing). Value for money is enhanced in Government procurement by:

• encouraging competition by ensuring non-discrimination in procurement and using competitive procurement processes;
• promoting the use of resources in an efficient, effective and ethical manner; and
• making decisions in an accountable and transparent manner.

Further information may be found at:

http://www.finance.gov.au/procurement/docs/CPGs_-_January_20051.pdf

(ii) Sub-federal Level

New South Wales

Foreign owned companies are treated the same as domestically owned companies.

Tasmania

The Tasmanian Government procurement policy framework is based on Instructions issued pursuant to the Financial Management and Audit Act 1990 and additional guidance provided in guidelines, manuals and other documentation. The Act applies to all Tasmanian inner-Budget agencies.

All goods and service procurement, excluding common use contractual arrangements, and all building and construction procurement is devolved to individual Departments.

The primary principle underlying Tasmanian Government purchasing is the encouragement of fair and open competition between suppliers with the objective of achieving value for money purchasing outcomes. Government buyers must behave ethically and comply with a code of conduct. They must also enhance opportunities for local businesses to bid for government business, although preference cannot be given to local suppliers.

The Tasmanian Government is bound by certain international agreements which include specific Government procurement commitments and these have been incorporated into the Instructions. The relevant agreements are:

• The Australian and New Zealand Government Procurement Agreement; and
• The Australia - United States Free Trade Agreement.

The Tasmanian Government procurement policy framework is non-discriminatory with all suppliers having the same opportunities to compete for business. The policy framework does not provide for potential suppliers to be discriminated against on the basis of their degree of foreign affiliation.

Tasmania’s procurement policies apply generally to procurement from all sectors. However, a small number of specific policies apply to some sectors as set out below:

Building and construction sector: where appropriate categories exist and certain thresholds are met, suppliers of services are to be pre-qualified with the Department of Treasury and Finance.

• Roads and bridges construction sector: where appropriate categories exist and certain thresholds are met, suppliers of services are to be pre-qualified with the Department of Infrastructure, Energy and Resources.
• Information technology sector: all providers are required to enter into a Government Information Technology Contract Head Agreement.

Victoria

The Victorian Industry Participation Policy (VIPP) is designed to foster industry development by encouraging bidders to genuinely and systematic consider Australian and New Zealand[17]SME suppliers. Where a project or procurement involving a Victorian Government grant exceeds $3 million in metropolitan Melbourne or $1 million in regional Victoria, short-listed bidders need to provide information about the percentage of local content, number of local jobs and levels of skill and technology transfer. The VIPP statement will be used to distinguish a winning bid when the competing bids can not be distinguished through value for money considerations. Where one bidder clearly offers the best value for money, that bidder will be successful provided the required VIPP information has been completed with reasonable estimations.

COMPETITION POLICY

(i) National Competition Policy

In April 1995, all Australian governments reached agreement to implement a National Competition Policy (NCP) to enable competition reform to be undertaken in a structured, transparent and comprehensive manner. NCP is underpinned by three intergovernmental agreements, which outline the reforms that Australian, State and Territory governments agreed to put in place under the NCP process.

The NCP consists of six essential elements:

• universal application of the competitive conduct rules contained in the Trade Practices Act to all sectors of the Australian economy;
• the review of legislation which restricts competition to ensure that such restrictions are necessary to achieve the objects of the legislation and that there is a net benefit to the community as a whole as a result of the restriction;
• structural reform of public monopolies where a government has decided to introduce competition or undertake privatisation;
• enabling access to services provided by means of significant infrastructure facilities;
• price oversight of firms (including government businesses) with a high degree of market power; and
• competitive neutrality principles which state that government businesses should not enjoy any net competitive advantage simply as a result of their public sector ownership.

Further information is available at http://www.accc.gov.au

Competitive Neutrality

Under the umbrella of NCP, the Australian, State and Territory governments agreed in the Competition Principles Agreement 1995 to abide by principles of competitive neutrality in respect of government businesses. The objective of competitive neutrality policy is the elimination of resource allocation distortions arising out of the public ownership of entities engaged in significant business activities.

Government businesses should not enjoy any net competitive advantage simply as a result of their public sector ownership. In order to neutralise any net competitive advantage, the Competition Principles Agreement sets out a number of measures to be applied to significant government businesses including corporatisation, imposition of full taxes (or tax equivalents), debt guarantee fees, and imposition of regulation on an equivalent basis to the private sector.

Each government is required to report annually on their compliance with the Competition Principles Agreement.

The Competition Principles Agreement 1996 and the Australian Government’s policy documents on the application of competitive neutrality are available at: http://www.pc.gov.au/agcnco/reports/external/index.html

Competitive Conduct Rules

Australia’s primary competition laws are contained in the Trade Practices Act 1974 and the Prices Surveillance Act 1983. The laws consist of rules against certain types of anti-competitive conduct (the competitive conduct rules) and laws relating to price oversight.

The competitive conduct rules contained in Part IV of the Trade Practices Act prohibit conduct

which has the purpose or effect of substantially lessening competition in the relevant market. These prohibitions include secondary boycotts, exclusive dealing, and mergers which are likely to substantially lessen competition in a substantial market. In addition, collusive price-fixing, third-line forcing, primary boycotts, and resale price maintenance are prohibited, and subject to a per se prohibition (i.e. no competition test). Part IV also prohibits the misuse of market power by a corporation. Competitive conduct matters are determined exclusively by the Court. The Australian Competition and Consumer Commission (ACCC) is charged generally with bringing enforcement proceedings in the Court.

The Prices Surveillance Act establishes a price oversight regime administered by the ACCC. Under the regime, there are three types of oversight – surveillance, monitoring and public inquiries. Surveillance acts to restrain or limit price increases, is triggered by a Ministerial direction and is applied where there is a concern about prices in a significant market where competition is weak or ineffectual. Under monitoring, the ACCC collects data on prices, costs and profits in an industry or business and provides a report on its findings, as directed by the Australian Minister. Monitoring is intended to provide information on the industry’s performance and whether any other policy actions are required.

There are specific exemptions from the competitive provisions of Part IV of the TPA:

• the authorisation/notification process set out in the TPA;
• legislative exceptions by the Federal Government and the States and Territories; and
• specific limited exemptions relating to matters which are regulated under a different regime, e.g. contracts of employment and provisions of intellectual property contracts.

Authorisation is a process whereby the ACCC, upon application, grants immunity from breach of the competitive conduct rules, where the conduct is likely to produce a net public benefit. Exclusive dealing conduct may also receive immunity from court action under a simple notification scheme until, and if, it is revoked by the ACCC, where it is of the opinion that there is no net public benefit from the conduct.

For further information please see the ACCC’s website on http://www.accc.gov.au/content/index.phtml/itemId/277796

(ii) National Reform Agenda

In February 2006, the Council of Australian Governments (comprising the Prime Minister, State Premiers, Territory Chief Ministers and the President of the Australian Local Government Association) announced its commitment to deliver a substantial new National Reform Agenda, embracing human capital, competition and regulatory reform streams. The competition stream is a substantial addition to, and continuation of, the highly successful NCP reforms. It will further boost competition, productivity and the efficient functioning of markets by focusing on further reform and initiatives in the areas of energy, transport and infrastructure regulation and planning.

The COAG communiqué and the report of the NCP review are available at:

http://www.coag.gov.au/meetings/100206/index.htm#related

(iii) Regulatory Reform

The Australian Government is reducing the burden of red tape for businesses to further improve the economic environment so that all businesses, large and small, can prosper and grow. The Australian Government appointed a taskforce (the Banks Taskforce) to identify practical options for alleviating the compliance burden on business from Australian Government regulation. In August 2006, the Australian Government announced its final response to the Banks Taskforce report Rethinking Regulation: Report of the Taskforce on Reducing Regulatory Burdens on Business, agreeing to the majority of the Report’s recommendations. The Australian Government’s response tackles the burden of business red tape now and into the future. The Australian Government has agreed to a range of measures to cut existing regulation across a wide range of sectors and business activities, including health, labour market, consumer, environment, financial and corporate, and taxation. The response also introduces a strengthened regulation-making and review framework to ensure that systems are in place to guard against the introduction of unnecessary regulation and improve the quality of existing and new regulation. Finally, the Australian Government has agreed to explore options for improving the administration of regulation and to improve efficiency across government.

The Banks Taskforce Report is available at:

http://www.regulationtaskforce.gov.au/

The Australian Government’s response to the Banks Taskforce Report is available at:

http://www.treasury.gov.au/contentitem.asp?NavId=002&ContentID=1141

BRUNEI DARUSSALAM

Acronyms

BEDB Brunei Economic Development Board

INTRODUCTION

Brunei Darussalam owes its economic prosperity mainly to its abundant petroleum and natural gas resources. However, recognising that a more diverse economic base is in the long-term interest of the nation and the community; the Government of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam is also driving towards economic diversification in order to steer away from this continued dependence on non-renewable resources so as to ensure a more sustainable economy.

This aspiration is sought particularly through the strengthening of the currently under-developed private sector, by encouraging more FDI and corporatisation, commercialisation of government agencies and enhancing the capabilities of SMEs that make up more than 90% of Brunei’s business operations.

In this regard, the investment regime of Brunei Darussalam has undergone a substantive revision in order to create an environment that is favourable and conducive for trade and investment. By establishing a strong legal infrastructure, supported by a competitive market environment, Brunei Darussalam intends to attract and facilitate the flow of more FDI into the country.

Competitive investment incentives are ready and available for investors throughout the business cycle of start up, growth, maturity and expansion. The Investment Incentive Act (1975) provides tax advantages at start up and ongoing incentives throughout growth and expansion that are comparable if not better than those offered by other countries in the region.

Industrial policies including manpower, ownership, government support and facilities remain open and flexible for all categories of industrial activities. Brunei Darussalam maintains a realistic approach where a variety of arrangements are feasible. Policies relating to ownership allow for full foreign ownership, majority foreign ownership and minority foreign ownership, as per the type of industry and situation.

In November 2001, the Brunei Economic Development Board (BEDB) was formed with the primary responsibility of attracting and retaining local and FDI to further diversify Brunei Darussalam’s economy and create employment opportunities for its people. Its primary focus is in attracting investment in advanced technology industries and skill-intensive services with good export market prospects.

The BEDB also aims to coordinate with relevant ministries and agencies to facilitate investors and maximize benefits. As such its role is to prepare, promote and develop industrial sites and strategic competitive facilities for prioritised industries.

Targeted industries include developing downstream and manufacturing industries in Sungai Liang and Pulau Muara Besar. The strategy involves developing four prioritized industry clusters to complement the development of Sungai Liang and Pulau Muara Besar. This includes services, financial services, hospitality and tourism, and transport and logistics.

Where to find further information:

Brunei Economic Development Board website: http://www.bedb.com.bn

Ministry of Industry and Primary Resources website: http://www.mipr.gov.bn

Changes since 2001 also appear in Brunei Darussalam’s Individual Action Plans at http://www.apec-iap.org/

SCREENING OF FOREIGN INVESTMENT

(i) What is screened?

In general foreign ownership of investment in Brunei Darussalam is limited to 49%. However, investment made through negotiations with BEDB can allow for 100% foreign ownership.

Brunei Darussalam does however maintain its right to screen investment to ensure that foreign investments do not contradict and cause negative impact to the overall National Development Plan and to the national interest.

The point of responsibility for foreign investment policy does not rest with a central agency but with several sectoral agencies.

(ii) Transparency of the screening process

The Government of Brunei Darussalam seeks to ensure that proposals for foreign investment are dealt with quickly and efficiently.

The process of application does remain within the responsibility of sectoral agencies and potential investors are often advised to consult these relevant agencies.

SECTOR-SPECIFIC LAWS AND POLICIES

(i) Banking

Foreign investment in the banking sector needs to be consistent with the Banking Act (1995).

(ii) Media, Broadcasting, Newspapers

Foreign investment in this sector is restricted in these areas.

(iii) Telecommunications

Foreign ownership in this industry is restricted under the Telecommunications Act (1974)

(iv) Real Estate

Under the Land Code Act (revised 2000), no foreign ownership of land is allowed. Lease of land for industrial development however is examinable and often allowed.

INVESTMENT PROTECTION

(i) Conversion, Repatriation and Transfers (including any Balance of Payments safeguards)

The Brunei dollar is a convertible currency.

The Government does not maintain any currency controls or limit remittance, loan and lease payments.

Exchange rates are determined on the basis of demand and supply conditions in the exchange market.

(ii) Expropriation and Compensation

Brunei Darussalam is a signatory to the 1987 ASEAN Agreement for the Promotion and Protection of Investments which:

• extends protection to investment against expropriation; and
• guarantees repatriation of capital, profits and earnings on direct investments activities from nationality (legal or natural) of the contracting parties.

Provision for expropriation and compensation is usually included in bilateral investment agreements. There has been no instance of expropriation and compensation of foreign investment in Brunei.

(iii) IPR

The Registries Division of the Attorney General’s Chambers is responsible for the registration and administration of IPR protection in Brunei Darussalam. The Division advises the government on all matters concerning IP, formulates and reviews IP policies, and drafts the relevant IP legislation.

The Division is also the agency responsible for promoting awareness and disseminating information on IP in the country.

Membership of International Organizations

• WIPO — 1994
• WTO — 1995

Membership of International Treaties and Agreements

• TRIPS — 1995
• Berne Convention for the Protection of Literary and Artistic Works — 30 August 2006

Other conventions being studied for accession include the Paris Convention, Patent Cooperation Treaty, Madrid Protocol and the Singapore Treaty on the Laws of Trade Marks. Protection of IP rights is contained in various Administrative Orders and legislation: Copyright Order, new Trademarks Act, Industrial Designs Order, Layout Designs Order, and the Patents Order (pending completion of Rules).

The Trademarks Act (19Cap 98) and Trade Marks Rules (2000) are the legislation governing the registration of trademarks in Brunei Darussalam. To be registrable under the Act, a trademark must be visually perceptible, capable of being represented graphically (smell and scent marks are excluded) and capable of distinguishing goods and services of one undertaking from those of others.

In addition, the proposed trademark must satisfy the formalities and substantive requirements as set out in the Act that governs the registration procedures. Once registered, a trademark is protected for 10 years but can be further renewed subject to the payment of the renewal fee.

Patents

The Registries Division operates a re-registration system for patent grants which have been registered in the United Kingdom, Singapore or Malaysia. To be enforced in Brunei Darussalam, the patents must be registered within three years from the date of grant in any of the aforementioned countries. Such grants will remain valid as long as the patent remains valid in the said countries.

Copyright

The categories of work that are protected under the Copyright Order are literary works, dramatic works, musical works, artistic works, films, sound recordings, broadcasts, cable programmes and published editions. Protection of copyright is automatic thus there are no formal procedures for registration in Brunei Darussalam. For literary, artistic, dramatic and musical works, protection is 50 years from the end of the calendar year in which the author died. For film and sound recordings, 50 years from the year in which they were made or released. For broadcasts and cable programmes, 50 years from the end of the year in which they were first broadcasted or transmitted. For typographical arrangements, 25 years from the end of the calendar year in which the edition was published.

Industrial Designs

The Emergency (Industrial Designs) Order (1999) and the Industrial Designs Rules (2000) provide for registration of new industrial designs for the visual appearance of products. The Registry does not conduct prior art searches and only examines the formalities requirements. To be registrable, an industrial design must be new at the filing date of the application. An industrial design is new if it has not been registered, published, used or sold in Brunei Darussalam or elsewhere before the date on which the application for registration was lodged. Registration is for an initial period of 5 years extendable for two periods of 5 years each totalling a maximum of 15 years subject to the payment of a renewal fee at the end of the 5^th year.

Layout Designs

The Emergency (Layout Designs) Order provides statutory protection for original layout designs that are created after the commencement of the Order. A layout design must be original in that it is the result of its creator’s own intellectual effort and is not commonplace among creators of layout designs and manufacturers of integrated circuits at the time of manufacture. Original layout designs are protected automatically as there is no requirement for registration or deposit of the layout. The duration of the protection is either 10 years after the first commercial exploitation, if the exploitation takes place within 5 years after the year it is created or, in any other case, 15 years after the year of the creation of the layout design.

Enforcement

The agencies responsible for the enforcement of IPR in Brunei Darussalam are the Royal Brunei Police Force and the Customs and Excise Department. Prosecution of offences is initiated by the Criminal Justice Division of the Attorney General’s Chambers. Enforcement of IP rights is based on complaints lodged by the registered owner. Both civil remedies and criminal sanctions are available in infringement cases.

Prosecutions of IP rights infringement is initiated by copyright owner/exclusive licensee through complaints and subsequent investigations by the Royal Brunei Police Force.

The Royal Brunei Police Force is responsible for general enforcement and the investigation of criminal offences under the relevant legislations while the Royal Customs and Excise Department is responsible for enforcement of border control measures.

For further information please contact:

The Registries Division
1^st Floor, The Law and Courts Building
KM 1 Jalan Tutong
Brunei Darussalam
Tel: (673) 2231200. 2220382, 2231193/4/6
Fax: (673) 2231230
Website: www.agc.gov.bn
Email: info@agc.gov.bn.

(iv) Dispute Settlement

General settlement of disputes is covered under the Arbitration Act (Cap 173). The Act incorporated the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”), as adopted by the United Nations Conference on International Commercial Arbitration on The 10th June 1958.

Other mechanisms used include BITS and ICSID to which Brunei Darussalam is a party. No cases have reached arbitration over the last three years.

The agency responsible for such matters is:

Attorney General’s Chambers The Law and Courts Building, KM 1 Jalan Tutong
Brunei Darussalam
Tel: (673) 2231200; 2220382; 2231193/4/6
Fax: (673) 2231230
Website: www.agc.gov.bn

Email: info@agc.gov.bn

INVESTMENT AND DEVELOPMENT

(i) Performance requirements

Brunei Darussalam does not impose any non WTO-inconsistent restriction or requirement as per its WTO commitment under TRIMS, 1995.

(ii) Other policy measures affecting inward foreign investment

None.

INVESTMENT PROMOTION AND INCENTIVES

(i) Investment Promotion Agencies (scope of Agencies and interaction with any screening mechanisms)

There are several agencies responsible for the promotion of investment into Brunei Darussalam namely the Ministry of Industry and Primary Resources and the Brunei Economic Development Board. Each agency is responsible for investment in different areas and investors are advised to consult these agencies prior to engaging in investment activities. Contact details follow.

(ii) Fiscal, financial, tax or other incentives

Investment Incentives Act (Cap 97) as amended under Investment Incentives Order (2001)

Industries Granted Pioneer Status

Investment Incentives:

• 30% corporate tax is exempted for a pioneer industry.
• Exemption from taxes on imported duties on machinery, equipment, component parts, accessories or building structures.
• Exemption from taxes on imported raw materials not available or produced in Brunei Darussalam intended for the production of the pioneer products
• Carry forward losses and allowances

Tax Exemption Periods are as follows:

Pioneer Service Companies

Investment Incentives:

• Exemption from income tax
• Carry forward losses and allowance

Tax exemption period is 8 years and can be extended (not exceeding 11 years in total).

Activities Granted For Pioneer Services Status:

• Any engineering or technical services including laboratory, consultancy and r&d activities;
• Computer-based information and other company-related services;
• The development or production of any industrial design;
• Services and activities which relate to the provision of leisure and recreation;
• Publishing services;
• Services which relate to the provision of education;
• Medical services;
• Services and activities which relate to agricultural technology;
• Services and activities which relate to the provision of warehousing facilities;
• Services which relate to the organization or management of exhibitions and conferences;
• Financial services;
• Business consultancy, management and professional services;
• Venture capital fund activity;
• Operation or management of any mass rapid transit system;
• Services provided by an auction house;
• Maintaining and operating a private museum;
• Such other services or activities as the minister may prescribe.

(iii) Tax Incentives

Income Tax (Cap 35)

i. Basic rights and guarantees to investors Repatriation of capital is not restricted. No restrictions are imposed on remittance of earned profits and dividends on investment.

ii. Carry forward losses

iii. Carry forward capital allowances during the relief period

iv. Deduction from taxable corporate income (depreciation allowance)

Tax-payer is entitled to claim wear and tear allowance calculated as follows:-

a) Industrial Buildings:

an initial allowance of 10% is given in the year of expenditure, and an annual allowance of 2% of qualifying expenditure is provided on a straight line basis until the total expenditure is written off.

b) Machinery and Plant:

an initial allowance of 20% of the cost is given in the year of expenditure together with annual allowances calculated on the reducing value assets. The rate prescribed by the collector of income tax ranges from 3% to 25% depending on the nature of the asset.

Further information is available through:

Ministry of Industry and Primary Resources website: www.industry.gov.bn

Brunei Economic Development Board website: www.bedb.com.bn

(iv) Incentives:

None.

(v) Free Trade Zones or ’Special Investment Areas’

Brunei Darussalam does not operate a Free Trade Zone however a special zone — the Sungai Liang

Industrial Area under the purview of the BEDB has been created. In general, foreign ownership of land on long-term lease is allowable within this area.

MOBILITY OF CAPITAL AND TECHNOLOGY

Brunei Darussalam does not impose any restrictions on the repatriation of capital and earnings by foreign investors.

LABOUR, MOVEMENT OF PEOPLE, AND SENIOR MANAGEMENT AND BOARDS OF DIRECTORS

All foreigners require work permits which are valid for two years. Application must first be made to the Labour Department for a labour license. On the recommendation of the Labour Department, the Immigration Department will give grant visas for workers to enter Brunei Darussalam. .

The Labour Department requires either cash, or in lieu of that, a banker’s guarantee when an employer submits an application for a work permit. The deposit or bank guarantee is used for purposes in connection with the entry, subsistence allowance, housing, medical care and repatriation.

Identity cards must be obtained from the Immigration Dept and are subject to annual renewal.

(i) Domestic labour laws which apply to foreign firms in the context of labour disputes/relations

The Trade Disputes Act (Cap 129) accords to trade unions the customary immunities and protections in respect of acts done in furtherance of trade disputes. It prescribes procedures for conciliation and, subject to the consent of the parties, arbitration in disputes where machinery within the industry concerned does not exist or has failed to achieve settlement.

Trade unionism is not widespread in Brunei Darussalam. As has been already observed, the industrial structure consists almost entirely of small-scale enterprises. This state of affairs and the nature and cultural characteristics of the population are conductive to accommodation and a “give and take attitude” rather than a confrontational attitude. Except in the oil industry, the system of collective bargaining has not emerged.

Relations between employers and employees are generally good. Existing labour laws have adequate provisions such as for termination of employment, medical care and maternity leave and compensation for disablement. Labour disputes are very rare. The Government has implemented the Workers’ Provident Fund Enactment (1993) to cover workers both in the public and private sectors.

(ii) Permits/entry visa requirements for non-resident staff of foreign firms

Malaysian, Singaporean and British nationals with the right of abode in the UK are exempted from the requirement to obtain a visa for visits not exceeding 30 days.

Visas are also waived for visits ranging from 14 days – 90 days for various nationals. The updated list of visa exemptions for nationals of other countries can be found at: http://www.mfa.gov.bn/visainformation/visaarrangements.htm

However, visas are required if nationals of these countries intend to stay in Brunei Darussalam for longer than 14 days.

All other nationals entering Brunei Darussalam must have visas obtainable from any Brunei Darussalam diplomatic mission or representatives of other governments who are performing consular functions on behalf of His Majesty’s Government.

Visitors who wish to enter Brunei Darussalam to take up employment must arrange with their employers to obtain employment passes prior to their arrival Brunei Darussalam is a member of the APEC Business Travel Card scheme. This scheme cuts down red tape for business travel, and provides bona fide and accredited business people pre-cleared entry to participating APEC economies. Card holders enjoy:

• special APEC lanes at Brunei International Airport;
• no pre- application of visas or entry permits to any of the participating economies;
• multiple short-term entry to Brunei Darussalam for 90 days stay each visit; and
• cards are valid for three years.

For more information on the APEC Business Travel Card see www.businessmobility.org/key/abtc.html

(iii) Restrictions on the entry/sojourn of foreign technical/managerial personnel and their accompanying family members.

Spouses and children under 18 years of age of pass holders are required to obtain dependents’ passes.

(iv) Laws or policies that restrict appointments by foreign investors to senior management positions and Boards of Directors.

Brunei Darussalam does not restrict the appointment of foreign nationals to senior management position to Boards of Directors.

GOVERNMENT PROCUREMENT

Brunei Darussalam undertakes a procurement process that is non-discriminatory and transparent.

COMPETITION POLICY

Brunei Darussalam does not have any general competition laws. A Price Control Act (1974) (amended 1999) is in place to ensure that price tags are placed on all commodities offered for sale as well as to provide a mechanism for undertaking surveillance to ensure no price oversight, collusive price-fixing and unfair pricing activities occur.

The Department of Economic Planning and Development is responsible for enforcing the Price Control Act.

Further information is available at:

Department of Economic Planning and Development Prime Minister’s Office Brunei Darussalam http://www.depd.gov.bn

CANADA

Acronyms

INTRODUCTION

FDI is recognized as bringing with it technology transfers, international management expertise, production know-how and product innovation and market access. It is an important element in the creation and preservation of high-value-added jobs, and is the source of other benefits, such as tax revenue and retained earnings. Thus Canada has continued to pursue policy objectives domestically and internationally with a view to enhancing investment.

The attitude of the Government of Canada to foreign investment was clearly articulated two decades ago with the passage of the Investment Canada Act (ICA) in 1985, which replaced the more restrictive Foreign Investment Review Act. Since 1989, Canada has been negotiating Foreign Investment Protection Agreements (FIPAs) in order to secure investment liberalisation and protection commitments on the basis of a model agreement developed under the auspices of the OECD. In 2003, Canada updated its FIPA model to reflect, and incorporate the results of, its growing experience with the implementation and operation of the investment chapter of the NAFTA.

The new Model FIPA can be found at http://www.international.gc.ca/tna-nac/what_fipa-en.asp#structure.

Canada has responded directly to the increased importance of international investment (both inward and outward). It has taken concerted actions that have greatly improved the Canadian investment climate; developed targeted investment attraction strategies; and actively participated in the development and implementation of international rules governing investment.

Canada welcomes, and indeed actively seeks, beneficial foreign investment. The following pages provide information on Canada's foreign investment policy.

SCREENING OF FOREIGN INVESTMENT

(i) Review Required Only in Limited Circumstances

The ICA reflects Canada’s policy of welcoming international investment and, indeed, of working to attract quality investment to all regions of Canada. At the same time, to ensure that such investment will be of net benefit to Canada, the ICA contains provisions for the review of certain acquisitions of control of Canadian businesses by foreign investors above a certain threshold (see below) and the establishment of new businesses in industries related to Canada's national identity or cultural heritage. To encourage investment by non-Canadians, Canadian government officials work with potential non-Canadian investors to help them develop investment plans and undertakings that will comply with relevant policies and fully satisfy the net benefit criterion.

The ICA specifies the factors to be taken into account in reviewable investments. Assessments are made in terms of the factors that are relevant to the individual investment proposal. Not all factors are relevant in all reviews. It is the net result of the assessment of the factors that determines the outcome; negative impacts can often be offset by positive impacts and result in an overall positive assessment. Each review is conducted on a case-by-case basis by examining the merits of the individual investment proposal. The factors of assessment are set out in Section 20 of the ICA and are as follows:

• the effect on the level of economic activity in Canada, on employment, on resource processing, on the utilization of parts and services produced in Canada, and on exports from Canada;
• the degree and significance of participation by Canadians in the Canadian business or new Canadian business and in any industry or industries in Canada;
• the effect of the investment on productivity, industrial efficiency, technological development, product innovation and product variety in Canada;
• the effect of the investment on competition within any industry in Canada;
• the compatibility of the investment with national, provincial and territorial industrial, economic and cultural policies; and
• the contribution of the investment to Canada’s ability to compete in world markets.

(ii) Notification is usually the only requirement

Foreign acquisitions of Canadian businesses with assets below the threshold (outlined below) and new businesses established by foreign investors which are not reviewable, are subject only to the notification provisions of the ICA. Notification entails the submission of a short filing which advises Industry Canada of the nature and size of the investment. A notification may be filed up to 30 days following the implementation of the investment.

(iii) General Exemptions from the ICA

The ICA contains a number of exemptions from the review mechanism in the Act:

• Securities Dealers;
• Venture Capitalists;
• Realization of Security (granted for a loan or other financial assistance);
• Financing (on the condition of divestiture within two years of acquisition);
• Corporate Reorganizations;
• Government Vendors;
• Tax-Exempt Vendors;
• Banks;
• Involuntary Acquisitions;
• Real Estate in a farming business;
• Insurance Company Portfolios.

(iv) Screening Requirements

A website has been established which provides detailed information on the ICA and copies of the documentation/forms required. These may be completed and submitted on-line. This website is at http://investcan.ic.gc.ca/en_form.htm Hard copies of the relevant documentation can be obtained from the contacts listed in the section below. Contact details follow.

The following website provides specific information on foreign investment in the cultural sector:

http://www.canadianheritage.gc.ca/progs/ac-ca/progs/eiic-csir/index_e.cfm. For additional information, please see the contact provided in the next section.

To ensure a prompt review and decision, the ICA sets certain time limits for the responsible Ministers. Within 45 days after a complete application has been received, the investor must be notified that the Minister (a) is satisfied that the investment is likely to be of net benefit to Canada;

or (b) is unable to complete the review, in which case a further 30 days will be necessary for its completion (unless the applicant agrees to a longer period); or (c) is not satisfied that the investment is likely to be of net benefit to Canada.

If 45 days have elapsed from the completion date without such a notice, or if a further 30 days (or a number of further days agreed upon) have elapsed after notice that the Minister is unable to complete the review and no decision has been taken, then the Minister is deemed to be satisfied that the investment is likely to be of net benefit to Canada.

The average period of time in processing an investment application is about 40 days. For cultural cases, the period is often extended to 75 days.

When advised that the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the applicant has the right to make representations and to submit undertakings within 30 days of the date of notice (or any other period that is agreed upon between the applicant and the Minister). On the expiration of the 30-day period (or agreed extension), the applicant must be notified forthwith that the Minister (a) is satisfied that the investment is likely to be of net benefit to Canada; or (b) confirms that the investment is unlikely to be of net benefit to Canada. In the latter case, the applicant may not proceed with the investment or, if the investment has already been implemented, must relinquish control of the Canadian business.

After these further representations, a decision by the Minister that she/he is not satisfied that an investment is likely to be of net benefit to Canada cannot be appealed under the ICA. While an investor can always resubmit his application, this would not normally be done unless there were significant new factors or undertakings to be offered for consideration. Contact details follow.

Foreign investment in Canada is subject to multilateral obligations (e.g. through the OECD and (WTO and, more recently, to obligations in regional and bilateral agreements: the North American Free Trade Agreement (NAFTA), Canada-Chile Free Trade Agreement (CCFTA) and 22 FIPAs. If required, existing domestic legislation is amended to bring it into conformity with international obligations. Examining Canadian foreign investment obligations as represented by Chapter 11 of the NAFTA, will provide a clear picture of commitments on foreign investment access and protection. More information on Canada’s FTAs can be found at http://www.international.gc.ca/tna-nac/menu-en.asp.

The only domestic law of general application with respect to foreign investment is the ICA (the Act). Under the Act, the establishment of a new business in Canada by an investor making its first investment in Canada or the establishment of a new business by an existing investor where the new business is unrelated to any existing business in Canada is subject to a straightforward notification procedure, but is not generally subject to review. There are some exceptions to this, outlined in this section and the section on restricted sectors. In addition to the ICA, there are a number of federal and provincial laws applying to specific industry sectors. At the federal level, for example, there are the Bank Act, the National Transportation Act, and the Broadcasting Act. The Canada Business Corporations Act also has provisions related to management and equity in federally incorporated businesses.

SECTOR-SPECIFIC LAWS AND POLICIES

Foreign investments are accorded national treatment and MFN status in accordance with international agreements signed by Canada that cover investment (e.g. WTO, the NAFTA, the Chile-Canada FTA, and bilateral protection agreements). These international agreements contain some derogations from these principles, which are clearly laid out in those agreements.

INVESTMENT PROTECTION

(i) Conversion, Repatriation and Transfers (including any Balance of Payments Safeguards)

There are no restrictions which limit the repatriation of funds related to foreign investment, such as profits, dividends and royalties, loan payments and liquidation.

There are also no restrictions on the convertibility of currencies for the overseas transfer of funds. There are no restrictions to the foreign exchange regime. Exchange rates are determined on the basis of supply and demand conditions in the exchange market.

Canada’s FIPA model allows for Transfer of Funds under Article 14. It states that each Party shall permit all transfers relating to a covered investment to be made freely, and without delay, into and out of its territory. This is also included in Canada’s FTA Investment Chapters.

(ii) Expropriation and Compensation

Both at the federal and provincial levels, there exists legislation giving authority to expropriate for the public purpose in accordance with the rule of law, subject to compensation. In all circumstances, a fair and equitable legal process is available to the expropriated party for the determination of compensation. Expropriation is included in Canada’s FIPA Model under chapter 13.

Authorities first attempt to reach agreement on appropriate compensation, failing which the action is subject to the judicial process. Compensation is based on fair market value. Valuation criteria are determined by the courts and can include such things as asset value, going concern value, and other criteria.

(iii) IPR

Intellectual property is protected in Canada principally by six federal statutes governing rights to inventions (Patent Act); trade-marks (Trade-marks Act); literary, dramatic, musical or artistic works, and related rights (Copyright Act); industrial design (Industrial Design Act); plant breeding (Plant Breeders’ Rights Act); and integrated circuits (Integrated Circuit Topography Act). These Acts are administered by the Canadian Intellectual Property Office (CIPO) of the Department of Industry except for the Plant Breeders Rights Act, which is administered by the Canadian Food Inspection Agency. Undisclosed information of commercial value is protected by federal and provincial statute and jurisprudence.

Canada supports effective intellectual property protection, that provides certainty and transparency to encourage marketing of goods, services, technology and entertainment; investment in R&D and innovation; and licensing arrangements (transfer of technology) to establish or expand existing business investment. Canada continues to improve intellectual property laws and their administration, to ensure adequate protection for owners of intellectual property, including effective mechanisms for enforcement of rights.

Canada recognizes the importance of intellectual property to the Canadian economy and is committed to developing effective intellectual property laws throughout the world. This is reflected in Canada's active participation in the work of the WTO, Council for Trade-Related Aspects of Intellectual Property (TRIPs), and the WIPO. Canada has adhered to the following international treaties with IP obligations:

• • Paris Convention for the Protection of Industrial Property;
• Berne Convention for the Protection of Literary and Artistic Works;
• Universal Copyright Convention;
• Patent Cooperation Treaty;
• North American Free Trade Agreement;
• World Trade Organization Agreements, including TRIPs;
• Budapest Treaty on the International Recognition of the Deposit of Micro-organisms for the Purposes of Patent Procedure; and
• Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations.

(iv) Dispute Settlement

Foreign and national investors have equal access to legal procedures in Canada. In addition, under the NAFTA and a number of bilateral investment agreements, foreign investors can appeal to international arbitration mechanisms.

Canada is a party to the Convention on the Recognition and Enforcement of the Foreign Arbitral Awards (the “New York Convention”) signed in New York, 10 June 1958. It entered into force for Canada on 12 May 1986.

The British Columbia International Arbitration Centre (Vancouver, B.C.) and the Quebec National and International Commercial Arbitration Centre (Montreal, Quebec) offer services that may be accessed by foreign investors.

While Canada has not signed or acceded to the International Convention on the Settlement of Investment Disputes (ICSID) Convention, Canada provides for use of the ICSID Additional Facility Rules and the Arbitration Rules of UNCITRAL in its bilateral investment protection agreements and in the NAFTA.

INVESTMENT AND DEVELOPMENT

Canada adheres to the obligations of the WTO Agreement on Trade Related Investment Measures. Canada has made additional and more rigorous commitments on performance requirements within the NAFTA and the CCFTA. Canada also has made performance requirements commitments in each of its bilateral FIPAs.

INVESTMENT PROMOTION AND INCENTIVES

For background information see Investment Partnerships Canada http://investincanada.gc.ca

In June 1996, the Canadian government approved a new Investment Strategy. This new strategy committed it to increase efforts to attract foreign investment to Canada, and to facilitate the growth of Canadian-based, globally competitive companies. The strategy focuses on a number of priorities:

(a) Marketing Canada as an investment site to international business executives

To increase international awareness of the advantages of Canada as an investment site, the Government is actively promoting specific opportunities and our positive economic policies to potential investors.

(b) Targeting sectors and companies and offering customized servicing

The government is targeting decision-makers in specific multinational companies with strategic campaigns to influence their new investment decisions. Through, the Investment Promotion Branch the Department of Foreign Affairs and International Trade is working to develop and manage investment campaigns directed at leading international investment prospects.

(c) Addressing investor concerns: making further improvements in Canada's investment climate

Many factors determine the attractiveness of the business environment. Some of these include access to sizable markets, labour force quality and productivity, costs of capital, taxation levels, the business infrastructure and government economic policies. The Canadian government is working to improve the investment climate by addressing the concerns of both existing and potential investors.

(d) Building Partnerships with other levels of government and the private sector to attract and retain investment

In Canada, provincial and municipal authorities compete among themselves for international investment capital. Investors consider this healthy, but it means that cooperation on investment initiatives is more difficult to achieve unless mutual interests and opportunities for complementary efforts are identified.

The federal government continues to build partnerships with provinces and municipalities to attract investment to various industry sectors.

In 2006, the Government of Canada announced funding to support Canadian communities in efforts to attract foreign investment. The Community Investment Support Program (CISP) program provides marketing, data and training funds to assist municipalities attract international investment.

CISP, which is the evolution of PEMD-I (Program for Export Market Development — Investment), is a $4.5 million program (annually), which assists municipalities and community economic development organizations in attracting, retaining and expanding FDI into their regions. On a project basis, CISP provides up to $300,000 per year in 50% matching funds towards eligible activities.

The program supports communities in two ways. CISP funding for communities in the early stages of investment attraction readiness is often devoted to research, training, and community profile development activities. For communities already engaged in investment promotion, CISP funding can help further efforts to identify targets, develop contacts, refine investment strategies, and develop and upgrade websites.

All applications are evaluated by regional adjudication committees chaired by a Senior Trade Commissioner and include representatives from the public and private sector, and provincial/territorial officials. On average, the amount of funding approved in each province and territory is proportional to the provincial/territorial population (based on Statistics Canada 2001 Census Data).

Since the program’s inception in 1998, more than 290 communities across Canada have received support through 1,271 projects, valued at nearly $42 million. Several municipalities have attributed CISP as having helped with the attraction of more than $510 million in investment and the creation of 2,000 jobs.

A number of federal government incentive programs are available to Canadian and non-Canadian businesses. There are no specific federal incentives provided to foreign investors.

Information on government programs and services, (including incentive programs) can be obtained by contacting any Canadian Embassy/High Commission or by contacting the International FaxLink System, an automated fax delivery system used to order publications from outside of Canada. Call from a [touchtone] fax machine at (1 613) 944-6500. A master index of documents available via FaxLink International may be ordered from the system.

The Government of Canada Primary Internet Site (Canada Site) is the Internet electronic access point through which interested parties from around the world can obtain information about Canada, its government and its programs and services. Direct links are also provided from this site to government departments and agencies that have Internet facilities. This website may be accessed at http://Canada.gc.ca/main_e.html.

Information on investment policies, Canada’s participation in international investment discussions and Canada’s investment agreements; and access to an extensive collection of studies on the impact of FDI is available on the Government of Canada International Investment Policy Website at: http://www.international.gc.ca/tna-nac/other/invest-en.asp and on the Department of Foreign Affairs and International Trade — Trade Negotiations and Agreements Website at: http://www.international.gc.ca/tna-nac/menu-en.asp.

Also, users can read about Canada’s Investment Promotion Strategy and find detailed provincial and federal information on investing in Canada may be accessed at the following addresses at: http://www.investincanada.gc.ca/en/1792/What_CISP_supports.html or http://www.investincanada.gc.ca/en/984/Supporting_Canadas_Municipalities.html.

MOBILITY OF CAPITAL AND TECHNOLOGY

There are no regulations/institutional measures that limit capital or technology exports or the outflow of foreign investment.

LABOUR, MOVEMENT OF PEOPLE, AND SENIOR MANAGEMENT AND BOARDS OF DIRECTORS

(i) Labour Laws and Regulations

In Canada, responsibility for the regulation of labour relations is divided between the federal government and the governments of the 10 provinces and three territories, with the majority of employees and employers subject to the labour laws of the province or territory in which they work or operate. All companies operating in Canada, and all employees working in Canada, including temporary foreign workers, are subject to Canadian labour laws.

Canadian labour laws are generally divided into four areas: industrial relations, employment standards, occupational safety and health, and workers’ compensation.

Industrial relations legislation in each Canadian jurisdiction provides a framework for organizing and collective bargaining. The rights of workers and employers to join organizations and to participate in their lawful activities are recognized and protected. Legislation encourages collective bargaining and the voluntary resolution of disputes with the assistance of conciliation and mediation services.

Employment standards legislation covers such topics as minimum age for employment, hours of work and overtime pay, minimum wages, equal pay, weekly rest-day, general holidays with pay, annual vacations with pay, maternity and parental leave and individual and group terminations of employment. Minimum wages vary between the provinces and territories.

Occupational health and safety legislation sets out the general duties of employers and workers with respect to safe workplaces. Regulations specify technical requirements that must be complied with, set standards that must be met, and prescribe procedures that must be followed to reduce the risk of occupational accidents and diseases.

Workers’ compensation systems provide appropriate compensation for work-related disabilities and assist injured workers and their employers by providing timely health care and rehabilitative support to facilitate the efforts of injured workers to return to work.

Information on labour legislation in Canada is available on the Internet at:

http://www.hrsdc.gc.ca/en/home.shtml

Information on workers’ compensation systems is available on the Internet at:

http://www.awcbc.org/english/wcb_links.asp

(ii) Permits/Visa Requirements

Canada’s Immigration legislation stipulates that only Canadian citizens and permanent residents have a right to work in Canada without being subject to regulation, and that with some exceptions, no foreign persons shall engage or continue in employment in Canada without a valid and subsisting work permit. It further recognizes that there is a need to admit foreign workers to complement the labour market or to benefit Canada, while ensuring that Canadians continue to have employment opportunities.

In order to work in Canada in an employee-employer relationship or under contract to a Canadian enterprise, a foreign worker will require a work permit. Generally an application for a work permit should be made at a visa office abroad before leaving for Canada. Application for extension can be made from within Canada.

There are many mechanisms to permit temporary foreign workers to be issued with a work permit. These are based on labour market assessment; to honour international commitments (i.e. NAFTA, GATS, CCFTA); where significant benefits exist for Canada; where reciprocal employment opportunities exist for Canadians; and to fulfil social, cultural or humanitarian objectives.

The principal categories which apply to “business” can be summarized as follows:

• Confirmation of offer of employment supported by a labour market assessment provided by Human Resources Development Canada (HRDC).
• Intra-company transferees for managers, executives and persons with specialized knowledge transferred within the same company.
• Traders and Investors for NAFTA and CCFTA business persons seeking to conduct trade or establish services to operate an investment.
• Professionals for NAFTA and CCFTA business persons.
• Self-employed for persons establishing a business which may result in direct employment.
• Workers generating significant benefits to Canada — including training personnel providing instruction in Canadian subsidiaries or headquarters

Individuals may also be admitted to Canada to carry out business or trade related activities without the need for a work permit. They may work for or represent foreign companies or organizations and are not considered to seek to enter the domestic labour market to compete with Canadian workers. For instance, GATS business visitors are permitted entry to market their services, including establishing a business. They are considered visitors and will not be documented on a work permit but are still subject to the requirement for a temporary resident visa if applicable. Entry is usually for short durations of stay.

Canada has a business program for immigrants designed to attract experienced business people who will create jobs and contribute to economic development. There are three categories of business immigrants – entrepreneurs, investors and self-employed persons.

General provisions of the Immigration and Refugee Protection Act and Regulations apply to all temporary foreign workers. The most obvious is the general requirement for proof of identity and citizenship (passport). Citizens of some countries need to obtain a Canadian temporary resident visa before coming to Canada. Provisions of Immigration legislation also exist to bar the entry of persons with a criminal record, persons who are likely to be a danger to public health or to public safety or whose admission may cause excessive demands on health or social services.

Dependents may accompany the foreign worker to Canada, provided they meet the entry provisions which apply to all visitors to Canada. Spouses/common-law partners may apply for their own work permit and in certain cases are exempt from HRDC labour market assessment.

For more information on working in Canada, please see http://www.cic.gc.ca/english/work/

(iii) Guidelines and conditions that restrict appointments by foreign investors to senior management positions or the board of directors.

GOVERNMENT PROCUREMENT

The Treasury Board Contracting Policy states that the method of procurement used for a particular acquisition must, within the limits of practicality, give all qualified firms an equal opportunity for access to government business.

Canada’s contracting policies, procedures, Notices and Circulars, Statistics (& links to other sites) can be found at: http://www.tbs-sct.gc.ca/cmp/home-accueil.asp?Language=EN.

The Department of Public Works and Government Services (PWGSC) Supply Manual applies the Treasury Board Contracting Policy to PWGSC supply activities: http://www.pwgsc.gc.ca/acquisitions/text/sm/sm-e.html.

Canada is an active participant in the APEC Government Procurement Experts Group:

http://www.apec.org/content/apec/apec_groups/committees/committee_on_trade/government_procurement.html.

More information is also available in Canada’s 2006 APEC Individual Action Plan:

http://www.apec-iap.org/.

COMPETITION POLICY

Competition is essential for an efficient market economy. It encourages healthy rivalry, innovation and productivity. With competitive forces at work, consumers are provided with quality products, choice and best possible price. A competitive economy at home enhances a nation's competitiveness abroad.

Canada’s principal laws aimed at the protection of competition is the federal Competition Act, R.S.C., 1985, c. C-34, as amended, which came into force on June 19, 1986, replacing the Combines Investigation Act which has antecedents dating from 1889. The Competition Act (the “Act”) is a law of general application which establishes basic principles for the conduct of business in Canada. The purpose of the Act is to maintain and encourage competition in Canada in order to:

• promote the efficiency and adaptability of the Canadian economy;
• expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada;
• ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy; and
• provide consumers with competitive prices and product choices.

Canada’s competition legislation applies to all sectors of the economy. All business is subject to the Act, with the exception of selected activities specifically exempted such as collective bargaining, amateur sport and some regulated industries subject to other legislation. Section 2.1 of the Act expressly provides that the Act is binding on Crown corporations in respect of commercial activities engaged in by such corporations in competition with other persons.

The Competition Bureau (the “Bureau”) is an agency of Industry Canada and is responsible for the enforcement and administration of the Act under the supervision and authority of the Commissioner of Competition (the “Commissioner”). The Commissioner is an independent law enforcement official responsible for the Act, as well as three statutes involving the labelling of consumer products, textiles and precious metals. The Commissioner is appointed by, and serves at the pleasure of, Cabinet with a mandate to promote competition in Canada.

Competition law in Canada consists of both criminal offences and civil reviewable matters.

Criminal charges are prosecuted before the various courts of criminal jurisdiction in each province. The Federal Court of Canada, Trial Division, also has jurisdiction with regard to indictable offences. The Commissioner initiates legal proceedings in non-criminal reviewable matters by filing an application with the Competition Tribunal. The Commissioner is also responsible for providing competition policy advice to federal and provincial governments, and for statutory representations before regulatory boards.

The Bureau has four enforcement branches organized along functional lines: mergers, civil matters, criminal matters, and fair business practices. The enforcement branches are primarily responsible for investigative work and litigation support for cases that proceed before the Tribunal or the courts. The Bureau also has an economics branch that provides economic analysis and , support for enforcement and policy matters. The International Affairs Division of the External Relations and Public Affairs Branch (ERPA) coordinates relations, in both policy and transactional matters, with competition enforcement authorities in other countries and at international fora such as the OECD and International Competition Network. ERPA also includes a Communications Division. In addition, the Bureau has a Compliance and Operations Branch that is responsible for the coordination of compliance initiatives with the business and legal communities and the public at large, as well as for coordinating management functions within the Bureau. Finally, the Bureau has a Legislative and Parliamentary Affairs Branch whose role is to ensure that the legislation is kept up-to-date.

The Competition Tribunal is a quasi-judicial tribunal, which operates at arms’ length from the Commissioner. Whereas the Commissioner's role is investigatory, the Tribunal's is exclusively adjudicative. It was created in 1986 with a view to developing special expertise in competition matters. The Tribunal consists of judges from the Federal Court, Trial Division, as well as lay members. It sits in panels comprised of both judicial and lay members, with only judicial members deciding questions of law. The Tribunal's structure has been upheld as respecting the Constitutional right to a hearing by an independent and impartial tribunal.

The Tribunal may issue orders designed to remedy the effects of the reviewable conduct in question. The Tribunal also registers consent agreements with the consent of the Commissioner and persons under inquiry.

The Competition Tribunal Act provides that any affected person may apply for leave to intervene in proceedings before the Tribunal to make representations relevant to those proceedings, except in respect of fair business practices matters. This Act also provides rights of intervention before the Tribunal to provincial attorneys general. Leave may be sought to appeal to the Federal Court of Appeal. Private litigants may also apply to the Tribunal for leave to make an application under section 75 and 77 of the Competition Act, or may sue in Court for actual damages resulting from conduct contrary to the criminal provisions of the Act or a breach of a Tribunal or Court order made pursuant to the Act.

As mentioned above, the Competition Bureau is responsible for reviewing M&As in Canada to ensure that they are not anti-competitive. To do this, the Bureau applies the merger provisions of the Act. However, there are no specific merger provisions that favour domestic over foreign firms.

If the Commissioner believes that a merger may be anti-competitive, she can make an application to the Tribunal. However, parties to a proposed merger are encouraged to approach the Commissioner early in the process to determine if there are potential competition concerns, and if there are, to determine whether they could be resolved without resorting to litigation.

This section only provides a general description of competition policy in Canada. For further information on this or specific merger notification requirements, please visit the Competition Bureau Canada’s website at http://www.competitionbureau.gc.ca.

CHILE

Acronyms

INTRODUCTION

Chilean investment has displayed remarkable dynamism against the backdrop of a policy that seeks to ease the regulatory burden on business and to accommodate Chile’s increasing international economic engagement. Direct Foreign Investment in Chile shows, just like the foreign trade record, a relatively high volume in relation to the size of Chile’s economy. Chile is among the 10 non- OECD countries with the highest level of foreign investment in recent years, while Chilean companies have become important investors abroad, mainly within the Latin American region, since the early 1990s.

Chilean economic policy has reflected the importance given to foreign investment, which, once established in the country, receives a treatment equally favorable than the one accorded to comparable Chilean companies. Chile’s Constitution guarantees to all individuals, Chilean and aliens, the right to develop any economic activity, provided applicable legislation is observed and such activities are not contrary to public morals and order, or to national security interests. There

are no economic activities reserved for the State, notwithstanding the special property, exploration and exploitation regime established under constitutional provisions regarding mineral substances. Private property rights are fully protected under the Constitution. Property may only be expropriated pursuant to specific constitutional provisions: expropriations may only be affected by law on grounds of public use or national interest, require the approval of the Congress and the expropriated parties have the right to indemnification for patrimonial harm caused.

Accordingly, one of the main objectives of Chile has been to ensure the establishment of clear investment rules, with a view to creating a wider and safer market. Furthermore, it has completed international negotiation processes in order to gradually liberalize the markets for investors, as well as to strengthen integration processes that may contribute to trade expansion and the creation of strategic alliances to tackle global markets.

FOREIGN INVESTMENT REGIME

In Chile, there is a free entrance of capital. Thus, subject to domestic regulations, investors can materialize their investment freely.

The Chapter XIV of the Central Bank’s Compendium of Foreign Exchange Regulations establishes rules for investment, capital contributions, and foreign credit. Under Chapter XIV, the Central Bank is not allowed to reject foreign investments, although it may impose conditions based on its monetary policy on the transfer of funds into and out of Chile, such as a one-year retention requirement. Once the investments are materialized, investors should provide information to the Central Bank under Chapter XIV.

In addition, there is a special and voluntary regime known as Decree Law No. 600.

Any foreign individual or legal entity, as well as Chileans with residence abroad, can invest through D.L. 600. Under this mechanism, investors enter into a legally binding contract with the Chilean State, which cannot be modified unilaterally by the State or by subsequent changes in the law. However, investors may, at any time, request the amendment of the contract to increase the amount of the investment, change its purpose or assign its rights to another foreign investor.

D.L. 600 guarantees investors the right to repatriate capital one year after its entry and to remit profits at any time. In practice, the one-year capital lock-in has not represented a restraint since most productive projects -in areas such as mining, forestry, fishing and infrastructure- require more than a one-year start-up period. Once all relevant taxes have been paid, investors are assured access to freely convertible foreign currency without any limits on the amount, for both capital and profit remittances. In addition, they are guaranteed the right of access to the formal exchange market. The repatriation of all capital invested is devoid of any tax, duty or charge up to the amount of the originally materialized investment. Only capital gains over that amount are subject to the general regulations contained in the tax code.

It should be noted that although there are no foreign exchange restrictions currently in place, the Central Bank has the authority to impose restrictions to foreign exchange transactions, in order to preserve the stability of the currency and the normal functioning of external and internal payments. However, D.L. 600 investors are exempt from these restrictions and their right to access the market in order to repatriate profits or capital is not affected.

The D.L. 600 contract acknowledges as foreign investment:

• Freely convertible currency that can be exchanged at the most favorable rate that foreign investors can obtain from an entity authorized to operate in the Formal Exchange Market.
• Tangible assets, in any form or condition brought into the country according to general import regulations, without exchange coverage. The value of these goods will be determined using general procedures applied to imports. These tangible assets include, among others, machinery or equipment used in productive processes.
• Technology, in any form susceptible to be capitalized, which will be appraised by the Foreign

Investment Committee according to its real international market value, within 120 days after the foreign investment application is submitted. If the appraisal is not carried out, the value assigned shall be that estimated by the investor in an affidavit. In previous cases, independent consultants have performed this task.

• Credits associated to foreign investment: The general regulations, terms, interest and other modalities of foreign credit contracts, as well as surcharges related to total costs to be paid by the debtor, including commissions, taxes and expenses, shall be those authorized by the Central Bank of Chile.
• Capitalization of foreign loans and debts, in freely convertible currency, whose contract has been duly authorized by the Central Bank Under D.L. 600: Investors can increase the capital of the company which received the investment through both the capitalization of credits made under Chapter XIV and the credits derived from current imports and pending payments.
• Capitalization of profits transferable abroad: D.L. 600 allows capital increases of the company receiving the investment through the capitalization of transferable profits.

Foreign investors may request a maximum time-limit of three years to materialize their contributions. Under article 11 bis of DL 600, investments of not less than US$ 50 million for industrial or non-mining extractive projects can request a time-limit of up to eight years. In the case of mining projects, the time-limit is eight years but, if previous exploration is required, the Foreign Investment Committee may extend it to up to twelve years.

Special Advantages for Foreign Investors: Although Chile's Constitution is based on the principle

of non-discrimination, D.L. 600 offers some tax advantages for foreign investors. These are not "tax breaks" or "tax holidays", but are intended to provide a stable tax horizon, acting as a form of "tax insurance". D.L. 600 offers several different tax options, but basically allows the investor to lock into the tax regime prevailing at the time an investment is made.

Invariability of Income Tax Regime: All Chilean companies have to pay a First-Category Tax (or

Corporate tax) equivalent to 17% Under Chile's Common Tax Regime, a 35% tax is currently levied on distributed or remitted profits. Interest paid to non-residents is also subject to a 35%

additional withholding tax, however, interest on loans granted by foreign banking or other financial institutions is subject to a 4% tax, provided that excess indebtedness provisions do not apply. Under DL 600, a foreign investor can opt to lock into an effective fixed overall tax rate of 42% on taxable income for up to ten years, or -under article 11 bis- for up to twenty years in the case of industrial and extractive investments of US$ 50 million or more. The investor, thereby, acquires immunity from any tax increases in the Common Tax Regime that may occur during that period. The lock-in can be waived at any time, but an investor cannot subsequently revert to the guaranteed 42% rate. The First-Category payment of 17% can be set against tax returns under both the Common Tax and Invariable Tax Regimes.

Invariability of Indirect Taxes: D.L. 600 states that foreign investments brought into the country in the form of tangible assets are subject to the general VAT taxation regime and customs regulations. However, foreign investors are entitled to include a clause in their contracts giving them access to a regime that freezes Value Added Tax (currently at 19%), as well as import tariffs on capital goods for the project, at their rate at the date of the investment. This special regime applies throughout the period authorized for carrying out the investment. Additionally, imports of some of these capital goods such as machinery or equipment are exempt from VAT in the case they are not produced in Chile and are on a list compiled, prepared and published by the Ministry of Economy's Foreign Trade Department. The current list was approved by Decree 204 of the Ministry of Economy, published in the Official Gazette ("Diario Oficial") on December 12, 2002, and is available at the Ministry of Economy's website.

Foreign investors who sign a D.L. 600 contract are exempted from VAT on other technology imports, providing they appear on this list compiled by the Foreign Trade Department. The products currently listed include accounting and data processing machines, TV cameras, lasers and magnetic resonance imaging diagnostic equipment (MRI), among several others.

Special Regime for Large Projects: Under article 11 bis of D.L. 600, investments in new industrial or extractive activities, including mining, are entitled to additional tax benefits, providing they have a value of at least US$ 50 million. Currently, the Foreign Investment Committee is revising its policy regarding article 11 bis, and new contracts under this regime are not being approved at this time. This policy is subject to change in the future.

New Legislation for mining projects: On 16 June, 2005, Law 20.026 was published in the Official Gazette. It establishes a specific tax on mining activities, which will come into force on 1 January, 2006. The Law amends Decree Law 600 by adding a new Article 11 ter. That article establishes a regime of invariability for the aforementioned tax, for those investors that sign a new foreign investment contract related to projects with a value of no less than US$ 50 million. In order to opt into this special regime, investors with existing foreign investment contracts must not have made use of the special invariability regimes set out in articles 7 and 11 bis of DL 600, or they must renounce those regimes at the time of opting into the rights under article 11 ter. The deadline for submitting a request to opt into the regime under 11 ter for investors with existing foreign investment contracts was November 30, 2005. More information may be found at http://www.cinver.cl/index/plantilla2.asp?id_seccion=1&id_subsecciones=140

Foreign Investment Procedures: A foreign investor who wishes to invest through the D.L. 600 must submit an application to the Executive Vice-Presidency of the Foreign Investment Committee. Applications forms are available through our website (www.cinver.cl). Since June 6 of 2003, the minimum investment amount for a new project is US$ 5,000,000 (five million dollars) when investments consist of foreign currency and associated credits. The minimum amount is US$ 2,500,000 (two and a half million dollars) when the investment is in the form of tangible assets, technology, and capitalization of profits or capitalization of credits. The Foreign Investment Committee retains the right to modify both figures. Projects submitted to the Committee's consideration must involve a ratio between equity and associated credits of up to 25/75.

In the case of foreign currency, investors can execute their foreign exchange operation only when the contract has been duly signed. However, when submitting the application, they can request a special authorization to exchange their currency immediately. Any other type of capital contribution requires the Foreign Investment Contract to be duly signed.

It is important to note, that the Foreign capital investment funds law (FCIFs), (LawNº 18.657) establishes a preferential tax treatment for Foreign capital investment funds.. FCIFs are required to obtain a favorable report issued by the Chilean Securities and Insurance Supervisor [“Superintendencia de Valores y Seguros” (SVS)] in order to conduct business in Chile. FCIFs may not remit capital for five years following the investment of such capital, although earnings maybe remitted at any time. A FCIF may hold a maximum of 5% of a given company’s shares, although this can be increased to a maximum of 10% if the company issues new shares. Furthermore, no more than 10% of a FCIF’s assets may be invested in a given company’s stock, unless the security is used or guaranteed by the Republic of Chile or the Central Bank. All together, no more than 25% of the outstanding shares of any listed company may be owned by FCIFs.

Finally, it is worth mentioning that the Central Bank of Chile, pursuant to its Basic Constitutional Act and in order to provide for stability of the currency and the normal functioning of the internal and external payment system, is entitled to issue regulations on foreign exchange transactions. At the present time, there are no restrictions to perform foreign exchange transactions.

A summary of all general relevant laws/regulations and policies pertaining to investment (i.e. that may impact before or after entry) including website references for up to-date information follows:

SECTOR-SPECIFIC LAWS AND POLICIES

Foreign investors in Chile can own up to 100% of a Chilean-based company, and there is no time limit on property rights. They also have access to all productive activities and sectors of the economy, except for a few restrictions in areas that include coastal trade, air transport and the mass media. In the case of fishing, restrictions are subject to the rules of international reciprocity.

The State has a very minor productive role in Chile. Only a few strategic activities --such as exploration and exploitation of lithium, liquid and gaseous hydrocarbons deposits in coastal waters under national jurisdiction or located in areas classified as important to national security, and the production of nuclear energy-- are restricted to the State. However, under certain circumstances, foreign companies can invest even in these sectors.

Local and sector-specific legislation exists at the national, regional and municipal levels.

For more detailed information on sector-specific policies see http://www.cinver.cl/index/links.asp

For inquiries please contact the FIC at:

Teatinos 120, 10th floor
Santiago, Chile

Tel: (562) 698 4254Fax (562) 698 9476
chileinvestment@cinver.cl

INVESTMENT PROTECTION

(i) Overview

The repatriation of all capital invested is devoid of any tax, duty or charge up to the amount of the originally materialized investment. Only capital gains over that amount are subject to the general regulations contained in the tax code.

There are no restrictions on the convertibility of currency Chile has 51 bilateral investment agreements to promote and protect investment, in accordance with the applicable domestic legislation in force, 37 are in force, with countries such as Argentina, Australia, Austria, Belgium, Bolivia, China, Costa Rica, Croatia, Cuba, the Czech Republic, Denmark, Ecuador, El Salvador, Finland, France, Germany, Greece, Guatemala, Honduras, Italy, Indonesia, Lebanon, Malaysia, Nicaragua, Norway, Panama, Paraguay, the Philippines, Poland, Portugal, Romania, Spain, Sweden, Switzerland, Ukraine, the United Kingdom, Uruguay, and Venezuela. A complete list of the above mentioned Agreements can be found at www.direcon.cl

In those agreements the provision that rules transfers sets out that any investor may send the benefits derived from his investment to his country of origin, and also repatriate invested capital in the event of termination of activities or liquidation of the investment freely and without delays, considering the due application of relevant domestic provisions governing this issue. Likewise, in the Chapters of the FTAs negotiated by Chile investors are guaranteed the right to effect transfers freely and without delays.

Notwithstanding, such FTAs explicitly declare that the Central Bank of Chile in accordance with its Constitutional Organic Act, in order to ensure currency stability and the normal operation of domestic and foreign payments, has the right to maintain or adopt measures on foreign exchange operations, including the establishment of restrictions or limitations on current payments and transfers (capital movements) to or from Chile. These measures cannot be applied on a discriminatory basis.

(ii) Expropriation and Compensation

Expropriation is not defined directly under Chilean law. The Chilean Constitution makes reference to expropriation in article 19.24, which states:

In no case may anyone be deprived of his property, of the assets affected or any of the essential faculties or powers of ownership, except by virtue of a general or a special law which authorizes expropriation for the public benefit or the national interest, duly qualified by the legislator. The expropriated party may protest the legality of the expropriation action before the ordinary courts of justice and shall, at all times, have the right to indemnification for patrimonial harm actually caused, to be fixed by mutual agreement or by a sentence pronounced by said courts in accordance with the law.

General expropriation procedures are established by Decree Law No. 2186. All Chilean regulations relating to expropriation, including the Constitution, refer only to direct expropriation. No mention is found under Chilean law or jurisprudence to indirect expropriation. However, the term is used in international agreements signed by Chile. One significant recent example is the FTA with the United States, which contains specific regulation on indirect expropriation. Article 10.9 sets out as a general rule that “Neither Party may expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization”, subject to a series of exceptions and terms. Annex 10-D regulates expropriation, and particularly indirect expropriation.

It’s text is transcribed below:

National jurisprudence has established that expropriation is an administrative act undertaken by virtue of the powers given directly by the legislation to the competent authorities, which must comply with a series of conditions, as set out in the Constitution.

Further, Article 19, Nº 24, paragraph 1 of the Constitution guarantees to all persons: “The right of ownership in its diverse aspects over all classes of corporeal and incorporeal property. Only the law may establish the manner to acquire property and to use, enjoy and dispose of it, and the limitations and obligations derived from its social function. Said function includes all the requirements of the Nation's general interests, the national security, public use and health, and the conservation of the environmental patrimony.”

Therefore, limitations to property that can be established by means of an expropriation act can only be carried out by virtue of their social function. The Constitution has not defined this social function, but has rather described in detail its components: the Nation's general interests, national security, public welfare and health, and the conservation of the environment.

The Constitution further mandates that all expropriation acts must be compensated: “The expropriated party... shall, at all times, have the right to indemnification for patrimonial harm actually caused...”

(iii) IPR

The Chilean legal and institutional framework on IPR confers protection to all categories of intellectual property included in the TRIPS Agreement: copyright and related rights, trademarks, geographical indications, patents, industrial designs, layout designs of integrated circuits and protection of undisclosed information.

The Chilean intellectual property regime has significantly evolved in recent times as a result of the incorporation of TRIPS commitments into national law. In addition, several modifications have been driven to meet international standards reached in bilateral commercial agreements. Even while the implementation of IPR standards is an ongoing process, Chile has one of the highest levels of IPR protection in the region.

Chile has been a member of WIPO since June 1975, and has signed a number of IPR conventions (see table below). The TRIPS Agreement was incorporated into Chilean law as a result of the ratification of the Marrakech Agreement, and came into force nationally in 2000.

Chile's participation in IPR treaties administered by WIPO

The main domestic statutes for the protection of IPR in Chile are the Intellectual Property Law (Copyright Law), No. 17.336 of 2 October 1970, with its Regulations (Supreme Decree No. 4.764, of 8 January 1985), and the Industrial Property Law, No. 19.039, of 25 January 1991 (with amendments introduced by Law 19.996 of 1 December 2005, and Law Nº 20.160 of January 26^th 2007). The protection of new plant varieties is regulated through Law No. 19.342.

Industrial Property

In Chile, the term industrial property refers to trademarks, patents, utility models, industrial designs, geographical indications, appellation of origin, layout designs of integrated circuits and protection of undisclosed information.

In late 2003, through Law Nº 19.912 special border measures were implemented for enforcement of IPR as established in TRIPS and in the Chile-US FTA. In December 2005, one of the largest reforms to the Chilean Industrial property system came into force, through amendments introduced by Law 19.996. Its consequence is that nowadays Chile has special registries and grants protection for patents/utility models, industrial designs, geographical indications/appellation of origin, trademarks, layout designs of integrated circuits and provides for the protection of undisclosed information of regulated products. This system establishes international exhaustion of industrial property rights as a general rule.

The Department of Industrial Property of the Ministry of Economy is in charge of granting industrial property rights.

Trademarks

Trademarks are granted for 10 years, and they may be indefinitely renewed. There are no requirements of use for the registration or renewal of trademarks. Rights’ holders have both civil and criminal remedies. They can collect costs and damages and courts have, among others, the power to order the destruction of tools and implements used to produce the falsification or copy. The Customs Service may also enforce some industrial property rights at the border.

Patents and Utility Models

Patents are protected for 20 years following their filing, and may be granted to products or to procedures. The patent system establishes for international exhaustion of rights. Economic models and business plans, discoveries, scientific theories and mathematical methods, surgical, therapeutic or diagnostic methods, plant varieties, animals and software are excluded from patent or utility models protection. The patent system includes the possibility of granting compulsory licences in cases of (i) monopoly abuse, (ii) national security, public health, and national emergencies, (iii) non-commercial public use, or (iv) cross-licensing in relation with patented subject matters.

Rights’ holders have both civil and criminal remedies. They can collect costs and damages and courts have, among others, the power to order the destruction of tools and implements used to produce the falsification or copy.

Industrial Designs

Novel industrial designs are protected for 10 years from the date of filing and they include textile designs and stampings. This period is non-extendable. Industrial designs can be protected at the same time under copyright law as copyrights goods.

Copyrights and Related Rights

For copyrights and related rights the term of protection is 70 years. Protection is automatically recognized once works are created, so the register is just a publicity measure; it also constitutes a legal presumption in favour of the person who registered it.

Rights’ holders have both civil and criminal remedies. Infringers, once convicted, may be forced tay damages, fines and also be imprisoned. The Customs Service may also enforce some IPR at the border.

A bill was introduced in Congress in May 2007 to improve enforcement regulation for both civil and criminal procedures of copyright and related rights, and to introduce a new regime foxceptions and limitations to copyright and related rights. This bill is currently at the Chamber of Deputies.

The Copyright Department of the Library, Archives and Museums Directorate is in charge of the Copyright Registry.

Geographical Indications

Chilean geographical indications for wines and spirits are regulated through Law No. 18.455. As mentioned earlier, since 2005 a general registry for both Chilean and foreign geographical indications is available.

Most of Chile’s preferential agreements contain provisions on geographical indications’ protection. For instance, the Chilean geographical indication “Pisco” has been recognized in agreements with Brunei, China, Canada, the European Union, Mexico, Japan, New Zealand, Singapore; South Korea and the United States. This denomination identifies spirits coming from Regions III and IV regionn Chile, where “Pisco” has been produced since the sixteenth century.

At the international level, in 2005 Chile, together with Argentina, Australia, Canada, Chinese Taipei, Ecuador, Mexico, New Zealand and the United States submitted to the Council of TRIPS a proposed Draft on the Establishment of a Multilateral System of Notification and registration of Geographical Indications for Wines and Spirits (TN/IP/W/10) that facilitates the protection of Geographical Indications for wines and spirits through a system that is voluntary, that preserves the existing balance of rights and obligations in the TRIPS Agreement, the territoriality of IPR for geographical indications, and that allows WTO Members to determine for themselves thppropriate method of implementing the provisions of TRIPS Agreement within their own legal system and practices.

Undisclosed Information

A whole chapter on undisclosed information was introduced in 2005 to the Industrial Property Law, both for trade secrets and for data that must be submitted to government agencies for grantinanitary approval of pharmaceutical and agrochemical products. Protection is granted for 5 years to pharmaceutical products, and 10 years to agrochemical products, from the registry.

Authorities in charge of granting protection are the National Health Institute (ISP), to pharmaceutical products, and the Agriculture and Livestock Service for agrochemical products.

Enforcement of IPR

There are specific procedures for the suspension of release by Customs authorities of goods that infringe upon rights established in the Industrial Property Law (Law 19.039) and the Copyright

Law (Law 17.336) at the request of the rights’ holder. It also allows in certain cases for ex-officio action for suspending the release of counterfeit merchandise and pirated goods.

The Department of Industrial Property, the Arbitration Court for Industrial Property and the Agriculture and Livestock Service, for issues related to plant varieties, are responsible for preventive and protective administrative actions.

Industrial Property and Intellectual Property provide for both criminal and civil remedies. But nullity cases related to industrial property must be filled before the Department of Industrial Property.

Persons convicted for offences against right holders of intellectual or industrial property rights are required to pay costs and damages to right holders and also fines.

Finally, the modification of the Chilean criminal system, whose implementation process finished in 2005, has shown increasing efficacy in the pursuit of IPR infractions.

Other Issues

Chile is committed to adhere to UPOV by 2009. Rights related to New Varieties of Plants must be pursued before the Civil Courts. The Seeds Department of the Agriculture and Cattle Service administers applications for the protection of new plant varieties, while the Qualifying Committef Plant Varieties grants plant-breeder rights.

(iv) Dispute Settlement

A fully regulated dispute resolution mechanism, to settle controversies arising between thontracting Parties or between one Party and investors from the other Party are included in all of the

Agreements signed by Chile. In this latter case, the investor is entitled to choose whether to submio the jurisdiction of national courts or to initiate an international arbitration proceeding before ICSID —which Chile signed up to with effect from 24 October 1991 — or before an ad-hoc tribunal constituted according to UNCITRAL rules. The decision of the arbitrator is final.

Therefore, if an investor of a country which doesn’t have a treaty with Chile wants to sue the State, avenues for appeal are available.

Chile has been sued in three cases:

• Víctor Pey Casado and President Allende Foundation v. Republic of Chile (Case No. ARB/98/2)
• MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile (Case No. ARB/01/7)
• Sociedad Anónima Eduardo Vieira v. Republic of Chile (Case No. ARB/04/7)

INVESTMENT AND DEVELOPMENT

Chile applies a limited number of performance requirements in its legislations. However, none of them are imposed as a condition for the approval of the foreign investment in the country.

Chile does not have any kind of specific policy that might fall under this premise.

INVESTMENT PROMOTION AND INCENTIVES

(i) Investment Promotion Agencies

Incentives

The Investment Platform Law (Law No. 19.840) of 23 November 2002 is aimed at permitting multinational companies to use Chile as a regional base under a special regime granting tax-free status on earnings from international operations. At the same time, the Law contains various provisions designed to prevent the use of Chile as a tax haven or the misuse of the regime bomestic entrepreneurs to avoid paying domestic taxes. The Chilean operations of these companies are taxed under the regime that normally applies to foreign investment.

Aware of the vital role that workplace training plays in improving productivity and in sustaining Chile’s competitiveness in international markets, Chile offers a tax rebate for staff traininrograms. Administered by Chile’s labor training agency, the Servicio Nacional de Capacitación y Empleo (SENCE), the scheme allows companies to set training costs, up to 1% of annual payroll, against corporate tax payments. A company can also use 10% of the rebate to finance a diagnosis ots training needs, and 15% to run a training department. In addition, firms with annual sales of less than approximately US$8 million are also eligible to apply for training grants from a fund operatey SENCE.

Chile has two tax-free zones — one in the northern port of Iquique (Region I) and the other in Punta Arenas (Region XII).

Merchants and manufacturers in these zones are exempt from first-category corporate tax and from VAT and customs duties on imports. Goods can be re-exported without paying taxes, but goods sold within Chile must pay import duties and VAT upon leaving the zone unless, in the case of import duties, they are from a country with which Chile has a FTA.

In addition, goods that are moved to the area surrounding a tax-free zone (defined legally as the “extension area”) are liable only for a tax of 1.7%. This can be set against import duties and VAT, if the goods are subsequently transferred to the rest of the country, or be reclaimed, if they are subsequently exported.

The same exemptions also apply to manufacturers, but not to merchants, in the city of Arica (Region I). Under a law approved in May 2004, Regions XI and XII and the Palena province of Region X were declared an “extension area” of the Punta Arenas tax-free zone. Under this law, which is expected to come into force in mid-2004, manufacturers and research centers in this area will be exempt from VAT and customs duties, and liable only for a tax of 1.7%, on imports oapital goods and inputs.

For further information see the websites of the Iquique Free Trade Zone (ZOFRI) http://www.kishtpc.com/Free-En/free_chile.htm and the Sociedad Administradora Zona Franca Punta Arenas Free Trade Zone (Parenazone) http://www.parenazon.com/

(ii) Area-specific Incentives

Grants and Tax Incentives

Schemes of this type include principally:

a) D.F.L. 15

• Geographical coverage: Regions I, XI, and XII, and the Chiloe and Palena provinces of Region X
• Investor eligibility: Firms with annual sales of up to US$1 million(*); large copper and iron mining companies and industrial fishing companies are not eligible
• Project eligibility: Projects with a maximum value of US$ 1.4 million
• Incentive: Grants equivalent to 20% of investment in fixed assets, excluding land (a limited number of grants are available)
• Additional information: Chilean Economic Development Agency, CORFO

(*) Grants and qualification limits are often set in Unidades de Fomento (UF), an inflation-linked currency unit, or in Unidades Tributarias Mensuales (UTM), a currency unit used for tax purposes, and their exact value is subject to variations in dollar terms. As a result, the figures mentioned here are only approximate.

b) D.L. 889

• Geographical coverage: Regions I, II, III, XI, and XII, and the Chiloe province of Region X
• Investor eligibility: All firms, except large mining, financial services, and industrial fishing companies
• Incentive: Reimbursement of 17% of wage bill, up to a monthly maximum of approximately US$38 per employee
• Additional information: Internal Revenue Service, SII (www.sii.cl)

c) Arica Plan

• Geographical coverage: Arica and Parinacota provinces of Region I
• Duration: Until 2007
• Project eligibility: Projects with a minimum value of US$100,000 in the Arica province anf US$50,000 in the Parinacota province
• Incentive: Corporate tax rebate equivalent to 30% of investment outlay on fixed assets, excluding land, in the Arica province (40% for tourist projects), and 40% of outlay in the Parinacota province
• Additional information: Internal Revenue Service, SII (www.sii.cl) or CORFO

d) Austral Plan

• Geographical coverage: Regions XI and XII and the Palena province of Region X
• Duration: Until 2008
• Investor eligibility: Available to companies in Transport industries, Agriculture, Fish farming, Manufacturing, Energy, Real Estate, Tourism, and R&D
• Project eligibility: Projects with a minimum value of approximately US$50,000
• Incentive: Corporate tax rebate equivalent to a maximum of 32% of investment outlay on fixed assets, excluding land
• Additional information: Internal Revenue Service, SII (www.sii.cl) or CORFO

e) Navarino and Tierra del Fuego Laws

• Geographical coverage: Chilean territory of Tierra del Fuego Island and Chilean Antarctic
• Duration: Until 2035 (or 2036 in some areas)
• Investor eligibility: Available to companies in Mining, Manufacturing, Transport, Fishing and tourist industries, providing products or services contain at least a 25% local value-added component
• Incentive: Tax incentives that include exemption from 17% first-category corporate tax, VAT sales tax, and import duties; in addition, a monthly grant, equivalent to 20% of value of saleo mainland Chile
• Additional information: Internal Revenue Service, SII (www.sii.cl) or CORFO

f) Tocopilla Law

• Geographical coverage: Tocopilla port in Region II
• Duration: Until 2027
• Investor eligibility: Companies that manufacture, or repair, mining equipment and other inputs for the Mining industry
• Incentive: Tax incentives that include exemption from 17% first-category corporate tax, VAT, and import duties
• Additional information: Internal Revenue Service, SII (www.sii.cl)or CORFO
• The CORFO also provides a number of additional incentives not only for the areas covered by the Arica and Austral Plans, but also for the Arauco province and parts of the Concepcion province in southern Chile's Region VIII, and for the Valparaiso province of Region V in central Chile. Ieneral, investment projects with a minimum value of US$100,000 are eligible for these incentives, which include:
• Co-funding of pre-investment studies: this is available for a maximum of 50% of the cost of pre-investment studies with an upper limit of US$8,400 in the area of the Austral Plan and ihe province of Valparaiso, and of 60% with an upper limit of US$10,000 in the area of the Arica Plan and in the province of Arauco.
• Co-funding of investment costs: co-funding is available for the acquisition of land, for construction and equipment costs and, in some cases, for the installation of basic utilities. The terms of this co-funding vary significantly depending on a project’s location; details can be obtained from CORFO in Santiago or regional capitals.
• Grants towards staff training: this incentive, which is available the area of the Arica Plan ann some parts of the Arauco province, varies from US$850 to US$2,100 per employee, depending on the specific area; details can be obtained from CORFO in Santiago or the corresponding regional capital.
• Credit guarantees: to help investors raise finance, CORFO provides loan guarantees under a scheme described in the Countrywide Investment Incentives section (below).

(iii) High-technology Projects

In 2000, CORFO introduced a program of special incentives for investments in high-technologrojects. As well as information technology and biotechnology projects, firms that introduce new methods in traditional processes also qualify for this program, which is available for investments with a minimum value of US$1 million.

The incentives provided under this program include:

• Co-funding of pre-investment studies, including pre-feasibility and feasibility studies, environmental impact studies, analysis of soils, and architectural and engineering design. These studies may be carried out by external consultants or by the companies themselves.
• Co-funding of start-up expenses, including the completion of a project's business plan.
• Co-funding of investments in fixed assets, such as the acquisition or long-term rental of land and buildings, as well as the installation of basic services, infrastructure and technological equipment.
• Grants for the development of human resources, covering workforce training for up to one year.
• Co-funding of R&D, for which high-tech projects may apply to the Technological Development Fund (FONTEC), administered by CORFO.

The program supports and facilitates the installation of businesses in the following areas: shared services, call and technical support centers, IT, back offices, and software development.

LABOUR, MOVEMENT OF PEOPLE, AND SENIOR MANAGEMENT AND BOARDS OF DIRECTORS

The Labour Code of Chile (DFL Nº. 1) governs personnel management of foreign firms and provides the domestic labour law which applies to foreign firms in the context of labour disputes/relations.

(i) Movement of People

The general “Entry” regime can be considered as highly convenient for foreigners. Chileaigration laws are contained in Decree Law No. 1,094 of 1975, on foreign citizens and in Supreme Decree Nº 597 of 1984 which is specifies how to make applicable the Decree Law.

Chile has included a specific Chapter on Temporary Entry of Business Persons (TEBP) in FTAith the U.S., Canada, Mexico, Peru, Colombia and Korea. With the E.U., the TEBP commitments are reflected on the positive list as Mode four concessions.

These legal texts vest the power to issue visas and resident permits for foreigners in the Ministrief Interior and Foreign Affairs.

The Ministry of Interior exercises these powers through the Department of Migration and Alien Affairs at central level, and through interior government offices at regional and provincial levels. In turn, the Department of Consular Affairs and Immigration of the Ministry of Foreign Affairs is responsible for matters affecting foreign citizens and issues consular authorizations and residencisas through Chilean Consulates abroad.

The relevant legislation contains the following migration categories:

• Tourists

A tourist is any individual entering the country for a period not exceeding 90 days, for recreation, sports, health, study, business, family, religious and other similar reasons, but not for purposes of immigration, residence or development of remunerated activities.

In some cases, for reasons of national interest or based on the principle of international reciprocity, individuals should obtain a consular authorization (visa) from the relevant Chilean Consulatbroad prior to their entry to Chile. However, holders of the APEC Business Travel Card do not require consular authorization.

• Residence

Residence Subject to a Labour Contract: this permit is granted to foreigners who enter the country with a work contract. This type of residence visa is conditioned to the performance of the activities agreed with the employer (who must be domiciled in Chile) and is issued for a maximum period of two years, and may be extended for similar periods while the contract duration.

Student Residence permits are granted to foreigners who enter the country in the capacity of registered students in State or State-recognized educational institutions or a private institutioecognized by a latter, or in a higher or specialized educational centres or institutions provided they can substantiate their corresponding enrollment. This permit only allows doing the relevant studies and is issued for a maximum period of one year, and may be renewed until completion of thelevant study program. In the case of scholarships, the permit is issued for one year but it may be renewed until the completion of the scholarship.

Temporary Residence permits are granted to foreigners with proven family ties or interests in the country whose residence is deemed useful or convenient. Generally, this type of visa allows itolder to carry out any activity in Chile, to the extent that the laws permit such activities. It is issueor a maximum period of one year, and may be renewed for a like period only once again. If the person wants to be renewed a third time, it is obligatory that he ask for definitive residence.

Permanent Residence Permits (granted for an indefinite time) are granted to aliens to livndefinitely in the country and undertake all kinds of activities, without any restrictions other than those established in all legal and regulatory bodies.

(ii) Other Issues

• Communications

– Law 18,838, published in the Official Gazette on September 30, 1989, National Television Council, Titles I, II and III

– Law 18,168, published in the Official Gazette on October 2, 1982, General Telecommunications Law, Titles I, II and III

– Law 19,733, published in the Official Gazette on June 4, 2001, on Freedom of Speech and Freedom of Information, and the Practice of Journalism, Titles I and III.

The owner of a social communication medium such as sound and image transmissions or a national news agency, shall in the case of a natural person, have a duly established domicile in Chile and in the case of juridical persons be constituted and be domiciled in Chile or have an agency authorized to operate within the national territory. Only Chilean nationals may be President, administrators or legal representatives of the juridical person. In the case of public radio broadcasting services, the board of Directors may be integrated by foreigners only if they do not represent the majority. The legally responsible Director and the person who subrogates him/her must be Chilean with domicile and residence in Chile.

Only juridical persons duly constituted in Chile and having domicile in the country may be thitleholders or make use of permits for limited radio broadcasting telecommunications, cable television or microwave television services. Only Chilean nationals may be president, directors, managers, administrators or legal representatives of that juridical person.

• Printing, Publishing, and Other Related Industries

– Law Nº 19733, Official Gazette, 4 June 2001, Law on Liberties of Opinion and

Information and the Exercise of Journalism, Titles I & III

The owner of a social communication medium such as newspapers, magazines, or regularly published texts whose publishing address is located in Chile, or a national news agency, shall ihe case of a natural person have a duly established domicile in Chile and, in the case of juridical person, be constituted and be domiciled in Chile or have an agency authorized to operate withihe national territory. Only Chilean nationals may be president, administrators, or legal representatives of the juridical person. The director legally responsible and the person who replaces him or her must be Chilean with domicile and residence in Chile.

• Air Transportation

– Law Nº 18.916, Official Gazette, 8 February 1990, Code of Aeronautics, Preliminary Title & Titles II & III

– Decree Law Nº 2.564, Official Gazette, 22 June 1979, Commercial Aviation Norms

– Supreme Decree Nº 624 Ministry of Defence, Official Gazette, 5 January 1995

– Law Nº 16.752, Official Gazette, 17 February 1968, Title II Ley 16.752,

– Decree Nº 34 Ministry of Defence, Official Gazette, 10 February 1968

– Supreme Decree Nº 102 Ministry of Transportation and Telecommunications, Official Gazette, 17 June 1981

– Supreme Decree Nº 172 Ministry of Defence, Official Gazette, 5 March 1974

– Supreme Decree Nº 37 Ministry of Defence, Official Gazette, 10 December 1991

– Decree Nº 234 Ministry of Defence, Official Gazette, 19 June 1971

Only a Chilean natural or juridical person may register an aircraft in Chile. A juridical person must be constituted in Chile with principal domicile and real effective seat in Chile. Iddition, a majority of its ownership must be held by Chilean natural or juridical persons, which in turn must comply with the aforementioned requisites.

The president, manager, majority of directors, and/or administrators of the juridical person must be Chilean natural persons.

• Water Transport Services and Shipping

– Decree Law Nº 3.059, Official Gazette, 22 December 1979, Merchant Fleet Supreme

– Decree Nº 24, Official Gazette, 10 March 1986, Act of Decree Law Nº 3.059, Titles I & II Promotion Law, Titles I & II

– Decree Law Nº 2.222, Official Gazette, 31 May 1978, Navigation Law, Titles I, II, III, IV, & V

– Supreme Decree Nº 153, Official Gazette, 11 March 1966, Approves the Sea People, Fluvial and Lacustrine Personnel Registration General Act

– Code of Commerce, Book III, Titles I, IV, & V

– Law Nº 19.420, Official Gazette, 23 October 1995, Establishes incentives for the economic developments of the Provinces of Arica and Parinacota, and modifies the legal bodies indicated therein,, Title, Various Provisions.

Only a Chilean natural or juridical person may register a vessel in Chile. A juridical persoust be constituted with principal domicile and real and effective seat in Chile. Its president, manager, and majority of the directors or administrators must be Chilean natural persons. In addition, more than 50% of its capital must be held by Chilean natural or juridical persons.

For these purposes, a juridical person with ownership participation in another juridical person that owns a vessel has to comply with all the aforementioned requisites.

A joint ownership (comunidad) may register a vessel if (1) the majority of the joint ownershis Chilean with domicile and residency in Chile; (2) the administrators are Chileans; and (3) the majority of the rights of the joint ownership belong to a Chilean natural or juridical person. For these purposes, a juridical person with ownership participation in a joint ownership

(comunidad) that owns a vessel has to comply with all the aforementioned requisites to be considered Chilean.

COMPETITION POLICY

The Chilean government regards the principal goal of its competition law as being to promote economic efficiency with the expectation that in the long run this will maximize consumer welfare. Moreover, the Chilean Competition law explicitly states that its purpose is to promote and defenree market competition.

The legal basis of Chilean competition law is the Chilean Competition Act (Decree Law Nº 211 of 1973 of the Ministry of Economy, as amended by D.F.L. Nº 1, 2004, published in the Chilean Official Gazette on 7 March 2005).

On 14 November 2003, Law Nº 19.911 introduced important reforms to the original Decree Law Nº211. Among others, it created an independent Competition Tribunal who´s role is to prevent, correct and punish any anti-competitive conduct.

Chile’s Competion Law describes anti-competitive practices as any act that tends to hinder, or is aimed at eliminating, restricting and obstructing competition. The competition regulations apply to nationals and foreigners, private and public entities, and goods and services sectors. It does not prescribe mandatory premerger reviews.

A new amendment to the Competition Law, aiming to improve the institutional framework (more independence for the members of the Competition Tribunal, establishment of leniency programs to improve the detection and prosecution of hard core cartels, among others), and to raise thaximum of fines, is currently being discussed in the Parliament.

Recently, the enforcement agency, the National Economic Prosecutor’s Office, published “the horizontal mergers guidelines” (the first guideline it has ever produced). Even though the guidelinere not mandatory, they intend to increase predictability regarding policy and enforcement activitief the National Economic Prosecutor’s Office.

PEOPLE’S REPUBLIC OF CHINA

Acronyms

INTRODUCTION

To absorb foreign investment is an important part of China’s basic state policy of opening up to the outside. China has consistently implemented the fundamental strategy of utilizing foreignvestment actively and effectively in the past 27 years of reforms and open-door experience which has proven that foreign investment has made great contributions to China’s economic growth.

Major liberalisations which have been undertaken in the last five years include the following.

A. Decentralization of approval competence at provincial level: threshold for encouraged and permitted sectors is total investment US$50 million. The threshold for restricted sectors is total investment US$100 million. In the cases of some newly opened service sectors, regulations or provisions on screening procedures would apply. Approval power orojects with foreign investment in some service sectors has also been delegated to the

15 national economic and technological development zones. (See the “Industrial Catalogue for Guiding Foreign Investment”, reproduced within this contribution by China, for further detail.)

B. China strictly honors WTO commitments and adheres to time schedules (in its post-WTO transition period) on market access for foreign investment. There has been a relaxation on geographical restrictions, ownership restrictions, restrictions on scope of business anther restrictions accordingly. Great progress has been made on further opening up service sectors including financial services (banking, securities, insurance, funds management, etc.), distribution, direct selling, investment by strategic investors in listed companies, education, travel agencies, cinemas, etc.

C. On the area of legislative build-up, over 40 regulations and provisions have been promulgated to guide foreign investment on newly opened sectors covering financial services, insurance, distribution, logistics, commercial services, communication, civil aviation, architecture, tourist, transportation.

D. To further improve transparency and legal administrative performances of government agencies, the “Administrative Licensing Law” was promulgated in 2004, with a view to regulate the administrative conduct of government agencies.

E. To further strengthen work on protection on IPR, an IPR protection office — a special body consisting of 12 administrative departments — was established to coordinate anntensify work on a crackdown of IPR infringement cases and other matters related to IPR

protection.

F. To improve the investment environment, China offers more protection for the legitimate rights of foreign investors, and provides guidance to dispute centres all across the country.

A national dispute centre for foreign investment and its coordinating office have been set up under the the Ministry of Commerce and Finance (MOFCOM).

SCREENING OF FOREIGN INVESTMENT

(i) Overview

At present, screening mechanisms apply to all cases of establishment of foreign investment anperate at different levels of government depending on specifics: including total investment, category of industries according to “Industrial Catalogue for Guiding Foreign Investment”, and any other requirement indicated by relevant regulations or provisions.

The relevant documentation concerning orientation or guidance on foreign investment including the above mentioned documents are available at:

http://www.fdi.gov.cn and http://www.mofcom.gov.cn

For information or consultation on applicatiosn and screening, MOFCOM’s Department of Foreign

Investment Administration and all of MOFCOM’s local branches are able to assist. Also, consulting agencies, law firms, and accounting offices are able to provide advice.

The following is a description of the different treatment that China applies in cases involving foreign takeovers or mergers as distinct from new business/greenfield investment. The maiifference concerning screening in cases of foreign takeovers and mergers, and greenfield foreign investment is in the cases of the former, examining authorities can review and examine any impacf M&As on national economic security, or whether such M&A cases would lead to substantive control of domestic industries or of some of China’s traditional brand names.

The time taken for approval of each case of foreign investment varies depending on whether the specific conditions of each project meet all the criteria and requirements according to the relevant laws and regulations. However, MOFCOM and its authorised agencies should be able to make a decision within three months after application.

Investors should have a good understanding on the related laws and regulation concerning the investment they are going to make, and keep all documents for submission in line with all the legal requirements accordingly.

The following government agencies provide avenues for consultation for investors on policy decisions projects applications. The National Development and Reform Commission and its authorised agencies are responsible for project examination and approval. MOFCOM and its authorised agencies are responsible for the screening and approval of contracts and articles of association. The Industrial and Business Administration Bureau and its authorised agencies are responsible for registration.

Avenues for appeal include administrative government agencies according to Administrative Reconsideration Law and Administrative Procedures Law. There are no published statistics on the outcomes of investment screening.

(ii) Major Laws and Regulations Governing Foreign Investment

Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures and its Implementation Regulations;

Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures and its Implementation Rules;

Law of the People’s Republic of China on Wholly Foreign-owned Enterprises and its Implementation Regulations;

“Regulations Guiding Foreign Investment”;

“The Industrial Catalogue for Guiding Foreign Investment”; Company Law of People’s Republic of China (revised in 2005); Contract Law of the People’s Republic of China; and

Income Tax Law of the People’s Republic of China Concerning Foreign investment Enterprises and Foreign Enterprises and its Implementation Regulations

For further information see: http://www.fdi.gov.cn and http://www.mofcom.gov.cn

(iii) Summary

China’s legislative framework concerning FDI has basically taken shape since the Law of The People’s Republic of China on Chinese-Foreign Equity Joint Ventures was enacted anmplemented in 1979. According to the existing laws, foreign investment enterprises in China fall into three categories: Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and wholly foreign-owned enterprises.

Chinese-foreign equity joint ventures, which are jointly established within China by foreign individuals, enterprises or other economic organizations on one side, and enterprises or other economic organizations in China on the other. According to the provisions of the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures, joint ventures shall take the form of a limited liability company and the proportion of investment contributed by the foreign participants to the registered capital of a venture shall not be less than 25%. All parties to a joint venture shall share the profits, risks and losses of that joint venture in proportion to theiontributions to the registered capita1. Each party to a joint venture may contribute cash, capital goods and other materials, as well as industrial properties, know-how and land use rights as its investment in the venture. The highest authority in a joint venture is the board of directors. Members of the board shall be appointed by the parties concerned while the chairman and vichairman of the board shall be selected through consultation or be elected by the board members.

Chinese-foreign contractual joint ventures, mean that parties to such a venture shall agree in their cooperative venture contract on the conditions for investment, the ratio of the distribution, thharing of risks, the form of operations and management and the ownership of the assets at the timf the termination of the venture. A contractual joint venture may take the form of a limited liability company or an economic entity without having legal person status. Parties to the contractuaenture may not share risks and profits in proportion to their contribution to the total investment.

The form of contribution, the amount of investment and the rights and responsibilities of all parties to the cooperative venture shall be specifically laid out in the contract. The profits as well as thights and liabilities of the parties shall be treated in accordance with the provisions of the contract. Contractual joint ventures are more flexible than equity joint ventures.

Wholly foreign-owned enterprises are established within the territory of China and involve capital investment solely made by foreign investors. The term “wholly foreign-owned enterprise” does not cover branches of foreign enterprises established within the territory of China. The establishment o wholly foreign-owned enterprise must be beneficial to the development of China’s national economy. It shall meet one of the following requirements: using advanced technologies and equipment, or a large proportion of its production being for export.

In case of a company limited by shares, its entire capital is divided into shares of equal value and shareholders shall be liable to the company to the extent of their shareholdings. A company limitey shares is liable to the debts of the company with all its assets. The Chinese and foreign shareholders should jointly hold the company’s stock, with the shares subscribed to and held by foreign investors being more than 25% of the company’s registered capital. The company may be established by means of promotion or offer.

“CATALOGUE FOR THE GUIDANCE OF FOREIGN INVESTMENT INDUSTRIES”

(SECTOR-SPECIFIC GUIDANCE FOR INVESTORS)

Just like most countries which have imposed regulations on foreign investment in line with national development priorities, China also gives guidance to foreign investment according to its national economic development planning.

The “Catalogue for the Guidance of Foreign Investment Industries” (last amended in 2004) covers:

A. “encouraged industries”,

B. “restricted industries”; and

C. “prohibited industries”.

Industries beyond the scope of the Catalogue are permitted without qualification as sectors for foreign investment.

A. Catalogue of Encouraged Foreign Investment Industries

1. Farming, Forestry, Animal Husbandry and Fishery Industries

1.1. Improvement of low and medium yielding field

1.2. Planting technology of vegetables without pollution, (including edible fungus anelon-watermelon), fruits, teas and serial development and production of these products

1.3. Development and production of new breed varieties (excluding those gene-modified varieties) of fine quality, high-yielding crops such as sugar-yielding crops, fruit trees, flowers and plants, forage grass and related new technology.

1.4. Production of flowers, construction and operation of nursery base

1.5. Reusing in fields and comprehensive utilization of straws and talks of crop, development and production of organic fertilizers

1.6. Cultivation of traditional Chinese medicines (equity joint ventures or contractual joint ventures only)

1.7. Planting of trees (including bamboo) and cultivation of fine strains of trees

1.8. Planting of caoutchoucs, sisals and coffees

1.9. Breeding of quality varieties of breeder animals, breeder birds and aquatic offspring

(excluding precious quality varieties peculiar to China)

1.10. Breeding of famous, special and fine aquatic products, as well as cage culture in deep water

1.11. Construction and operation of ecological environment protection projects preventing and treating desertification and soil erosion, such as planting trees and grasses, etc.

2. Mining and Quarrying Industries

2.1. Venture prospecting and exploitation of petroleum, natural gas

2.2. Exploitation of oil field and gas deposits (fields) with low osmosis

2.3. Development and application of new techniques that can increase the recovery factor of crude oil

2.4. Development and application of new techniques for prospecting and exploitation of petroleum, such as geophysical prospecting, well drilling, and well logging and down hole operation, etc.

2.5. Prospecting and exploitation of coal and associated resources

2.6. Prospecting and exploitation of coal-bed gas

2.7. Exploitation and beneficiation of gold mines with low quality or difficult to beneficiate

(equity joint ventures or contractual joint ventures only)

2.8. Prospecting, exploitation, and beneficiation of iron ores and manganese ores

2.9. Prospecting and exploitation of copper ores, plumbum ores and zinc ores (equity joint ventures or contractual joint ventures only, wholly foreign-owned enterprises are permitted in west regions)

2.10. Prospecting and mining of aluminium ores (equity joint ventures or contractual joint ventures only, wholly foreign-owned enterprises are permitted in west regions)

2.11. Mining and beneficiation of chemical mines including sulfur ores, phosphate ores, kalium ores, etc.

3. Manufacturing Industries

1). Food Processing Industries

1.1 Storage and processing of food, vegetables, fruits, fowl and livestock products

1.2 Aquatic products processing, seashell products cleansing and processing, and development of function food made from seaweed

1.3 Development and production of drinks of fruits, vegetables, albumen, teas and coffees

1.4 Development and production of food for babies and agedness, as well as function food

1.5 Production of dairy products

1.6 Development and production of biology feeds and albumen feeds

2). Tobacco Processing Industry

2.1 Production of secondary cellulose acetate and processing of tows

2.2 Production of tobacco slices in the way of papermaking

3). Textile Industry

3.1 Production of special textiles for engineering use

3.2 Weaving and dyeing as well as post dressing of high-grade loomage face fabric

4). Leather, Coat Products Industry

4.1 Processing of wet blue skin of pig, cow and sheep with new technology

4.2 Post ornament and processing of leather with new technology

5). Lumber Processing Industry and Bamboo, Bine, Palm, Grass Products Industry

5.1 Development and production of new technology and products for thomprehensive utilization of “sub-quality, small wood and fuel wood” and bambon the forest area

6). Paper Making and Paper Products Industry

6.1 Construction and operation of integrated engineering of raw material base with an annual production capacity of over 300 thousand tons of chemical wood pulp of an annual production capacity of over 100 thousand tons of chemical mechanicaood pulp (equity joint ventures or contractual joint ventures only)

6.2 Production of high-quality paper and cardboard (equity joint ventures or contractual joint ventures only)

7). Petroleum Refining and Coking Industry

7.1 Deep processing of needle coke and coal tar

7.2 Production of asphalt for heavy traffic road asphalt

8). Chemical Raw Material and Products Manufacturing Industry

8.1 Production of alkene through catalyzing and cracking of heavy oil

8.2 Production of ethylene with an annual production capacity of 600 thousand tons or over (the Chinese partners shall hold relative majority of shares)

8.3 Comprehensive utilization of ethylene side-products such as C5-C9

8.4 Mass Production of corvic (in the way of ethylene)

8.5 Production of organochlorine serial chemical industrial products (excluding high- residual organochlorine products)

8.6 Production of basic organic chemical industrial raw materials such as benzene, methylbenzene, dimethylobenzene, etc. and its derivatives

8.7 Production of supporting raw materials for synthesized materials (bisphennol-A, 4.4’diphenylmethane, diiso-cyan ester, and vulcabone toluene)

8.8 Production of synthetic fibre raw materials: precision terephthalic acid, vinyl cyanide, caprolactam and nylon 66 salt

8.9 Production of synthetic rubber (liquid butadiene styrene rubber by butadiene method, butyl rubber, isoamyl rubber, butadiene neoprene rubber, butadiene rubber, acrylic rubber, chlorophydrin rubber)

8.10 Production of engineering plastics and plastic alloys

8.11 Fine chemistry industry: new products and technology for catalytic agent, auxiliary and pigment; processing technology for the commercialization of dye (pigment); production of high-tech chemicals for electronics and paper-making, foodditives, feed additives, leather chemical products, oil-well auxiliaries, surface active agent, water treatment agent, adhesives, inorganic fibre, inorganic powder stuffing and equipment

8.12 Production of auxiliary agent, preparation agent, and dye-stuff for textile and chemical fibre ladder

8.13 Production of depurant of automobile exhaust, catalyzer and other assistant agents

8.14 Production of nature spices, synthetic spices and single ion spices

8.15 Production of high capability dope

8.16 Production of chloridized titanium white

8.17 Production of chloroflurocarbon substitution

8.18 Production of mass coal chemical industrial products

8.19 Development and production of new technology and products for the forestry chemicals

8.20 Production of ion film for caustic soda

8.21 Production of biologic fertilizers, high-density fertilizers (potash fertilizer, phosphate fertilizer) and compound fertilizers

8.22 Development and production of new varieties of effective, low poisonous and low residual agriculture chemicals and pesticides

8.23 Development and production of biology agriculture chemicals and pesticides

8.24 Development and production of inorganic, organic and biologic films for environment protection

8.25 Comprehensive utilization and disposal of exhaust gas, discharge liquid, and waste residue

9) Medicine Industry

9.1 Production of material medicines under patent and administrative protection in our country or chemical material medicines that we have to import

9.2 Vitamins: production of niacin

9.3 Amino acid: production of serine, tryptophan, histidine, etc.

9.4 Production of analgesic-antipyretic medicines with new technique and new equipment

9.5 Production of new variety of anticarcinogen medicines, as well as cardiovascular and cerebrovascular medicines

9.6 Production of new, effective and economical contraceptive medicines and devices

9.7 Production of new variety of medicines, which are produced by means of biological engineering technology

9.8 Production of vaccine through genic engineering technology (vaccine against AIDS, vaccine against type-C hepatitis, contraceptive vaccine, etc.)

9.9 Development and production of medicines made from oceans.

9.10 Production of diagnostic reagent for AIDS and radio-immunity diseases

9.11 Medicines and pharmaceutics: production of products and new dosage forms adopting new techniques such as slow release, control release, target preparation and absorbed through skins

9.12 Development and application of new variety of adjuvant medicines

9.13 Processing and production of traditional Chinese herb medicines, products which distill from traditional Chinese herb medicines and Chinese patent medicines (excluding preparing technique of traditional Chinese medicines in small pieces ready for decoction)

9.14 Production of biological medical materials and products

9.15 Production of antibiotic material medicines used for animals (including antibiotics and chemical synthesis medicines)

9.16 Development and production of new products and new dosage forms of antibiotic medical, anthelmintic, insecticide, anti-coccidiosis medicines used for animals

10). Chemical Fibre Manufacturing Industry

10.1 Production with high and new technological fibre of differential chemical fibre and aromatic synthetic fibre, of function environmental friendly aromatic synthetiibre, amino synthetic fibre and carbon fibre with annual production capacity of 5000 tons and over

10.2 Production of chemical fibre of environmental protection variety such as direct viscose and asepsis spinning, etc.

10.3 Production of polyester used for non-fibre with a daily production capacity of 500 tons or over, production of new polyester (poly terephthalic acid propylene glycol ester, poly sebacic acid glycol ester, polybutylene terephthalate(PBT), etc.) used for fibre and non-fibre

11). Plastic Products Industry

11.1 Production of polyimide film which can keep fresh

11.2 Development and production of new products and new technologies for agricultural films (photolysis film, multifunctional film and raw materials, etc.)

11.3 Reutilization and counteraction of waste and old plastic

12). Non-metal Mineral Products Processing Industry

12.1 Production of fine-quality floating glass with a daily melting capacity of 500 tonr over (only in central and west region of China)

12.2 Production of new type process cement of clinker with a daily output capacity of 2,000 tons or over (only in central and west region of China)

12.3 Production of glass fibre (product line with technology of wire drawing in tank furnace) and glass fibre reinforced plastic products with an annual capacity of 10,000 tons or more

12.4 Production of high-level sanitation porcelain with an annual production of 500,000 pieces or over

12.5 Standardization refine of ceramic material and production of high-level decorative materials used for ceramics

12.6 Production of high-level refractory material used in furnaces for glass, ceramics and glass fibre

12.7 Production of inorganic, non-metal materials and products (artificial crystal, high- capacity complex materials, special kind of glass, special kind of ceramics, special kind of airproof materials and special kinds of cementation materials)

12.8 Production of new type of building materials (light-weight, high-intensity anulti-function materials for wall, high-level environment protecting decorating and finishing materials, high quality water-proof and airproof materials, and effective thermal insulation materials)

12.9 Deep processing of non-metal mineral products (super-thin comminuting, high level pure, fine production, modification)

13). Ferrous Metallurgical Smelting and Rolling Processing Industry

13.1 Production of direct and fusion-reduced iron

14). Non-Ferrous Metallurgical Smelting and Rolling Processing Industry

14.1 Smelting of gold mines with low quality or difficult to beneficiate (equity joint ventures or contractual joint ventures only, wholly foreign-owned enterprises are permitted in west regions)

14.2 Production of hard alloy, tin compound and antimony compound

14.3 Production of non-ferrous composite materials, new type of alloy materials

14.4 Utilization of rare-earth

15). Metal Products Industry

15.1 Design and manufacturing of non-metal products molds

15.2 Design and manufacturing of car and motorcycle molds (including plunger die, injection mold, molding die, etc.) and chunking appliances (chucking appliances for welding, inspection jig, etc.)

15.3 Development and production of high-grade hardware for building, water supply and heating equipment and hardware

16). General Machinery-building Industry

16.1 Manufacturing of numerically controlled machine tools, digital control system and servomechanism installations which exceed triaxiality linkage

16.2 Manufacturing of high performance welding robot and effective welding and assembling production equipment

16.3 Production of high temperature resistant and insulation material (with F, H

insulation class), as well as insulation shaped parts

16.4 Production with techniques of proportional, servohydraulic pressure, low-power pneumatic control valve and stuffing static seal

16.5 Production of precision plunger dies, precision cavity molds and standard components of molds

16.6 Manufacturing of precision bearings and all kinds of bearings used specially for principal machines

16.7 Manufacturing of casting and forging stocks for cars and motorcycles

17). Special Equipment Manufacturing

17.1 Development and manufacturing of new technology and equipment for the storage, preservation, classifying, packing, drying, transporting and processing of food, cotton, oil, vegetables, fruits, flowers, pasture plants, meat and aquatic products

17.2 Manufacturing of facility agriculture equipment

17.3 Manufacturing of new technical agriculture and forestry equipment

17.4 Design and manufacturing of engines for tractors, combine harvesters, etc.

17.5 Manufacturing of equipment for reusing in fields and comprehensive utilization of straws and stalks of crop

17.6 Manufacturing of equipment for comprehensive utilization of waste agriculture products and waste fowl and livestock products which are bred in scale

17.7 Manufacturing of water-saving irrigation equipment with new technique

17.8 Manufacturing of earthwork for wet land and desilting machines

17.9 Technology of hydrophily ecological system for protecting environment and equipment and equipment manufacturing

17.10 Manufacturing of equipment for scheduling system, which is used in long-distance transmitting, water engineering

17.11 Manufacturing of special machines and equipment for flood prevention and emergency rescue

17.12 Manufacturing of key equipment in food industry such as high-speed asepsis canning equipment and brander equipment, etc.

17.13 Production technology and key equipment manufacturing of aminophenol, zymin, food additive, etc.

17.14 Manufacturing of complete set equipment with an hourly feed processing capacitf 10 tons or more and key spare parts

17.15 Manufacturing of multi-color offset press for web and folio of paper of larger size

17.16 Manufacturing of equipment with new technique for post ornament and processinf leather

17.17 Manufacturing of high-tech involved special industrial sewing machines

17.18 Manufacturing of complete set of equipment of new type of knitting machines, new type of paper (including pulp) making machines

17.19 Design and manufacturing of new type of mechanical equipment for highways and ports

17.20 Manufacturing of equipment for highways and bridges maintenance, automatic detection

17.21 Manufacturing of equipment for operation supervisory control, ventilation, disaster prevention and rescue system of highway and tunnels

17.22 Design and manufacturing of large equipment for railway construction and maintenance

17.23 Manufacturing of equipment for garden machines and tools with new technology

17.24 Manufacturing of special equipment for cities’ sanitation and environment work

17.25 Manufacturing of machines for road milling and overhauling

17.26 Manufacturing of tunneling digger, equipment of covered digging for city metro

17.27 Manufacturing of city sewage-disposal equipment with capacity of 80,000 tons/day or more, industrial sewage film treatment equipment, up-flow anaerobic fluidized bed equipment, and other biological sewage disposal equipment, recycling equipment for waste plastics, desulphurization and denitration equipment for industrial boiler, larger high-temperature resistant, acid resistant bag dusemover, incinerating equipment for rubbish treatment

17.28 Manufacturing of turbine compressors and combined comminutes of the complete set equipment with an annual production of 300,000 tons or over of synthetic ammonia, 480,000 tons or over of urea, 450,000 tons or over ethylene

17.29 Technique for desulfurization of thermal power station and equipment manufacturing

17.30 Manufacturing of sheet conticasters

17.31 Deep processing technique and equipment manufacturing of plate glass

17.32 Manufacturing of equipment for down hole trackless mining, loading and transporting, mechanical power-driven dump trucks for mining of 100 tons or over, mobile crushers, 3,000 m3/h or over bucket excavator, 5 m3 or larger mininoader, full-section tunneling machines

17.33 Design and manufacturing of new instruments and equipment for prospecting and exploitation of petroleum

17.34 Manufacturing of cleaning equipment for electromechanical wells and production and medicine

17.35 Manufacturing of electronic endoscopes

17.36 Manufacturing of medical X-ray machines set with high-frequency technique, direct digital imagery processing technology and low radiation (80kW or over)

17.37 Manufacturing of equipment for high magnetic field intensity Magnetic Resonance Imagery (MRI)

17.38 Manufacturing of machines for collecting blood plasm only

17.39 Manufacturing of equipment for auto enzyme immunity system (including the functions of application of sample, microplate, wash plate, incubation, data, post treatment, etc.)

17.40 New techniques of quality control for medicine products and new equipment manufacturing

17.41 New analytical technology and extraction technologies, and equipment development and manufacturing for the effective parts of traditional Chinese medicines

17.42 Producing and manufacturing of new packing materials, new containers for machine, and advanced medicine producing equipment

18). Communication and Transportation Equipment Industries

18.1 Manufacture of complete automobiles (including R&D)

18.2 Manufacture of engines for automobiles (including R&D)

18.3 Manufacture of key spare parts for automobiles: complete disc brakes, complete driving rods, automatic gearboxes, fuel pumps of diesel engine, air supercharger of motor, discharging control equipment of motor, electric steering knuckles system, adhesive axial organ (used for four-wheel drive, puffing shock absorber, aianging stand,hydraulic jib,compound meters

18.4 Automobile electronic equipment manufacture (including motor control system, underpan control system, electronic control system for car body)

18.5 Manufacture of vehicles for special-purpose in petroleum industry, vehicles for deserts, etc.

18.6 Technology and equipment for railway transportation: design and production of locomotives and main parts, design and production of equipment for railways and bridges, related technology and equipment production for rapid transit railway, equipment production for communicational signals and transportation safety monitoring, production of electric railway equipment and instrument

18.7 Equipment for urban rapid transit track transportation: design and manufacture of set of powered car and main parts for metro, city light rail

18.8 Design and manufacture of civil planes (Chinese partner shall hold the majority of shares)

18.9 Production of spare parts for civil planes

18.10 Design and manufacture of civil helicopters (Chinese partner shall hold the majority of shares)

18.11 Design and manufacture of aeroplane engines (Chinese partner shall hold the majority of shares)

18.12 Design and manufacture of civil air-borne equipment (Chinese partner shall hold the majority of shares)

18.13 Manufacture of light gas-turbine engine

18.14 Design and manufacture of crankshafts of low-speed diesel engine for vessel

18.15 Repairing, design and manufacture of special vessels, high-performance vessels

(Chinese partner shall hold the majority of shares)

18.16 Design and manufacture of the equipment and accessories of high-speed diesel engines, auxiliary engines, radio communication and navigation for vessels (Chinese partner shall hold the majority of shares)

18.17 Manufacture of fishing boats and yachts made of glass fibre reinforced plastic

19). Electric Machinery and Equipment Industries

19.1 Thermal power plant equipment: manufacture of super critical units of 600,000 kW or over, large gas-turbine, gas-steam combined cycle power equipment of over 100,000KW, coal gasification combined cyclic (IGCC) technique and equipment, pressure boost fluidized bed (PFBC), large air-cooling power units of 600,000kr over, large circling fluidized (CFB)boiler (equity joint ventures or contractual joint ventures only)

19.2 Hydropower plant equipment: manufacture of large pump-storage power units of

150,000 kW and over, large tubular turbine units of 150,000 kW or over (equity joint ventures or contractual joint ventures only)

19.3 Nuclear-power plant equipment: manufacture of power units of 600,000 kW or over (equity joint ventures or contractual joint ventures only

19.4 Power transmitting and transforming equipment: manufacture of supeigh-voltage DC power transmitting and transforming equipment of 500 kilovoltr over (equity joint ventures or contractual joint ventures only)

20). Electronic and Telecommunications Industries

20.1 Manufacture of digital television, digital video camera, digital record player, digital sound-playing equipment

20.2 Manufacture of new type plate displays, medium and high-resolution color kinescope and glass shielding

20.3 Key components manufacture of optic engine, lamp-house, projection screen, high-definition projection tube and LCOS models used for colorful projective display for large screen

20.4 Manufacture of digital audio and visual coding or decoding equipment, digital broadcasting TV studio equipment, digital cable TV system equipment, digital audio broadcast transmission equipment

20.5 Design of integrated circuit and production of large-scale integrated circuit with a line width of 0.35 micron of smaller

20.6 Manufacture of medium- and large-sized computers, portable microcomputers, high-grade server

20.7 Development and manufacture of drivers of high capacity compact disk and disk and related parts

20.8 Manufacture of 3-dimension CAD, CAT, CAM, CAE and other computer application system

20.9 Development and manufacture of software

20.10 Development and production of materials specific for semi-conductor and components

20.11 Manufacture of electronic equipment, testing equipment, tools and moulds

20.12 Manufacture of new type electronic components and parts (slice components, sensitive components, sensors, frequency monitoring and selecting components, hybrid integrated circuit, electrical and electronic components, photoelectric components, new type components for machinery and electronics)

20.13 Manufacture of hi-tech green batteries: non-mercury alkali-manganese batteries, powered nickel-hydrogen batteries, lithium-ion batteries, high-capacity wholly sealed maintenance-proof lead-acid accumulators, fuel batteries, pillar-shapeinc-air batteries, etc.

20.14 Development and manufacture of key components for high-density digital compact disk driver

20.15 Manufacture of read-only and recordable compact disk.

20.16 Design and manufacture of civil satellites (Chinese partner shall hold the majoritf shares)

20.17 Manufacture of civil satellites effective payload (Chinese partner shall hold the majority of shares)

20.18 Manufacture of spare parts for civil satellites

20.19 Design and manufacture of civil carrier rockets (Chinese partner shall hold the majority of shares)

20.20 Manufacture of telecommunication system equipment for satellites

20.21 Manufacture of receiving equipment of satellite navigation and key components

(equity joint ventures or contractual joint ventures only)

20.22 Manufacture of optical fiber preformed

20.23 Manufacture of serial transmission equipment of digital microwave synchronization of 622 MB/S

20.24 Manufacture of serial transmission equipment of photo-timing synchronization of 10 GB/S

20.25 Manufacture of equipment for cut-in communication network with broad bond

20.26Manufacture of optical cross connection equipment (OXC)

20.27 Manufacture of ATM and IP data communication system

20.28 Manufacture of mobile communication systems (GSM, CDMA, DCS1800, PHS, DECT, IMT2000): mobile telephone, base station, switching equipment and digital colonization system equipment

20.29 Development and manufacture of high-end router, network switchboard of gigabit per second or over

20.30 Manufacture of equipment for air traffic control system (equity joint ventures or contractual joint ventures only)

21). Machinery Industries for Instrument and Meter, Culture and Office

21.1 Development and production of digital cameras and key components

21.2 Development and manufacture of precision on-line measuring instrument

21.3 Manufacture of new technical equipment for safe production and environment protection detecting instrument

21.4 Manufacture of new-tech equipment of water quality and fume on-line detecting instrument

21. 5 Manufacture of instrument and equipment for hydrological data collecting, processing, transmitting and flood warning

21.6 Production of new type of meters’ spare parts and materials (mainly new switches and function materials for meters such as intelligent sensors, socket connector, flexible circuit board, photoelectric switches and proximity switches.)

21.7 Manufacture of new type printing devices (laser printers, ink-jet printers)

21.8 Maintenance and post-sale services of precision instrument and equipment

22). Other Manufacture Industries

22.1 Development and utilization of clean-coal technical product (coal gasification, coal liquefaction, water-coal, industrial lump-coal)

22.2 Coal ore dressing by washing and comprehensive utilization of powered coal (including desulphurized plaster), coal gangue

4. Production and Supply of Power, Gas and Water

1. Construction and management of thermal-power plants with a single unit installed capacity of 300,000kw or above

2. Construction and management of power plants with the technology of clean coal burning

3. Construction and management of heat power plants

4. Construction and management of power plants with natural gas

5. Construction and management of hydropower stations with the main purpose of power generating

6. Construction and management of nuclear-power plants (Chinese partner shall hold the majority of shares)

7. Construction and management of new energy power plants (solar energy, wind energy, magnetic energy, geothermal energy, tide energy and biological mass energy, etc)

8. Construction and management of urban water plants

5. Water Resources Management Industry

1. Construction and management of key water control projects for comprehensive utilization (the Chinese party shall hold the relative majority of shares)

6. Communication and Transportation, Storage, Post and Telecommunication Services

1. Construction and management of grid of national trunk railways (Chinese partner shall hold the majority of shares)

2. Construction and management of feeder railways, local railways and related bridges, tunnels and ferry facilities (equity joint ventures or contractual joint ventures only)

3. Construction and management of highways, independent bridges and tunnels

4. Construction and management of public dock facilities of ports

5. Construction and management of civil airports (the Chinese party shall hold the relative majority of shares)

6. Air transportation companies (Chinese partner shall hold the majority of shares)

7. General aviation companies for agriculture, forest and fishery (equity joint ventures or contractual joint ventures only)

8. Regular or irregular international liner and tramp maritime transportation business

9. International containers inter-model transportation

10. Road freight transportation companies

11. Construction and management of oil (gas) pipelines, oil (gas) depots and petroleum wharf

12. Construction and management of the facilities of coal delivery pipelines

13. Construction and management of storage facilities relating to transportation services

7. Wholesale and Retail Trade Industry

1. Wholesale, retail and logistic distribution of general goods

8. Real Estate Industry

1. Development and construction of ordinary residential houses

9. Social Service Industry

1. Public Facility Service Industry

1.1 Construction and management of urban access-controlled roads

1.2 Construction and management of metro and city light rail (Chinese partner shall hold the majority of shares)

1.3 Construction and management of treatment plants for sewage, garbage, the dangerous wastes (incineration and landfill), and the facilities of environment pollution treatment

2. Information, Consultation Service Industry

2.1 Information consulting agencies of international economy, science and technology, environmental protection

* 2.2 Accounting and auditing

10. Public Health, Sports and Social Welfare Industries

1. Service agencies for the elderly and the handicapped

11. Education, Culture and Arts, Broadcasting, Film and TV Industries

1. Higher education institutes (equity joint ventures or contractual joint ventures only)

12. Scientific Research and Poly-technical Services Industries

1. Biological engineering technique and bio-medical engineering technique

2. Isotope, irradiation and laser technique

3. Ocean and ocean energy development technology

4. Seawater desalting and seawater utilization technology

5. Oceanic monitoring technology

6. Development of energy-saving technology

7. Technology for recycling and comprehensive utilization of resources

8. Technology for environment pollution treatment and monitoring

9. Technology for preventing from desertification and desert improvement

10. Application technique of civil satellite

11. R&D centers

12. Centers for hi-tech, new products developing, and incubation of enterprises

13. Permitted foreign investment projects whose products are to be wholly exported directly

B. Catalogue of Restricted Foreign Investment Industries

1. Farming, Forestry, Animal Husbandry and Fishery Industries

1. Development and production of grain (including potatoes), cotton and oil-seed (Chinese partner shall hold the majority of shares)

2. Processing of the logs of precious varieties of trees (equity joint ventures or contractual joint ventures only)

2. Mining and Quarrying Industries

1. Exploring and mining of minerals such as wolfram, tin, antimony, molybdenum, barite, fluorite (equity joint ventures or contractual joint ventures only)

2. Exploring and mining of precious metals (gold, silver, platinum families)

3. Exploring and mining of precious non-metals such as diamond

4. Exploring and mining of special and rare kinds of coal (Chinese partner shall hold the majority shares)

5. Mining of szaibelyite and szaibelyite iron ores

6. Mining of celestite

3. Manufacturing Industries

1. Food Processing Industry

1.1 Production of millet wine and spirits of famous brands

1.2 Production of soda beverage of foreign brand

1.3 Production of synthetic sweet agent such as saccharin

1.4 Processing of fat or oil

2. Tobacco Processing Industry

2.1 Production of cigarettes and filter tips

3. Textile Industry

3.1 Wool spinning, cotton spinning

3.2 Silk reeling

4. Printing and Record Medium Reproduction Industry

4.1 Printing of publications (Chinese partner shall hold the majority of shares except printing of package decoration)

5. Petroleum Processing and Coking Industries

5.1 Construction and management of refineries

6. Chemical Raw Material and Products Manufacturing Industry

6.1 Production of ionic membrane caustic soda

6.2 Production of sensitive materials

6.3 Production of benzidine

6.4 Production of chemical products from which narcotics are easily made (ephedrine, 3, 4-idene dihydro pheny1-2-acetone, phenylacetic acid, 1-pheny1-2-acetone, heliotropin, safrole, isosafrole, acetic oxide)

6.5 Production of sulphuric acid basic titanium white

6.6 Processing of baron, magnesium, iron ores

6.7 Barium salt production

7. Medical and pharmaceutical Products Industry

7.1 Production of chloramphenicol, penicillin G, lincomycin, gentamicin, dihydrostreptomycin, amikacin, tetracycline hydrochloride, oxytetracycline, medemycin, kitasamycin, kitasamycin, ilotyin, ciprofloxacin and offoxacin

7.2 Production of analgin, paracetamol, Vitamin B1, Vitamin B2, Vitamin C, Vitamin E

7.3 Production of immunity vaccines, bacterins, antitoxins and anatoxin (BCG vaccine, poliomyelitis, DPT vaccine, measles vaccine, Type-B encephalitis, epidemic cerebrospinal meningitis vaccine) which are included in the State’s Plan

7.4 Production of material medicines for addiction narcotic and psychoactive drug (Chinese partner shall hold the majority of shares)

7.5 Production of blood products

7.6 Production of non-self-destructible expendable injectors, transfusion systems, blood transfusion systems, blood bags

8. Chemical Fiber Production Industry

8.1 Production of chemical fiber drawnwork of conventional chipper

8.2 Production of viscose staple fiber with an annual single thread output capacity of less than 20,000 tons

8.3 Production of polyester and spandex used for fiber and non-fiber with a daily production capacity of less than 400tons

9. Rubber Products

9.1 Cross-ply and old tire recondition (not including radial tire), and production of industrial rubber fittings of low-performance

10. Non-Ferrous Metal Smelting and Rolling Processing Industry

10.1 Smelting and separating of rare earth metal (equity joint ventures and contractual joint ventures only)

11. Ordinary Machinery Manufacturing Industry

11.1 Manufacture of containers

11.2 Manufacture of small and medium type ordinary bearings

11.3 Manufacture of truck cranes of less than 50 tons (equity joint ventures or contractual joint ventures only)

12. Special Purpose Equipment Manufacturing Industry

12.1 Production of low or middle class type-B ultrasonic displays

12.2 Manufacture of equipment for producing long dacron thread and short fiber

12.3 Manufacture of crawler dozers of less than 320 horsepower, wheeled mechanical loaders of less than 3 cubic meters (equity joint ventures or contractual joint ventures only)

13. Electronic and Telecommunication Equipment Manufacturing Industry

13.1 Production of satellite television receivers and key parts

4. Production and Supply of Power, Gas and Water

4.1 Construction and operation of thermal-power plants with a single unit installed capacitf less than300, 000kw (excluding small power network)

5. Communication and Transportation, Storage, Post and Telecommunication Services

1. Road passenger transportation companies

2. Cross-border automobile transportation companies

3. Water transportation companies

4. Railway freight transportation companies

5. Railway passenger transportation companies (Chinese partner shall hold the majority of shares)

6. General aviation companies engaging in photographing, prospecting and industry

(Chinese partner shall hold the majority of shares)

7. Telecommunication companies

6. Wholesale and Retail Trade Industries

1. Commercial companies of commodity trading, direct selling, mail order selling, Internet selling, franchising, commissioned operation, sales agent, commercial management companies, and wholesale, retail and logistic distribution of grain, cotton, vegetable oil, sugar, medicines, tobaccos, automobiles, crude oil, capital goods for agricultural production

2. Wholesale or retail business of books, newspaper and periodicals

3. Distributing and selling of audiovisual products (excluding movies)

4. Commodity auctions

5. Goods leasing companies

6. Agencies (ship, freight forwarding, tally for foreign vessels, advertising)

7. Wholesaling product oil, and construction and operation of gasoline stations

8. Foreign trade companies

7. Banking and Insurance Industries

1. Banks, finance companies, trust investment companies

2. Insurance companies

3. Security companies, security investment fund management companies

4. Financial leasing companies

5. Foreign exchange brokage

6. Insurance brokage companies

8. Real Estate Industry

1. Development of pieces of land (equity joint ventures or contractual joint ventures only)

2. Construction and operation of high-ranking hotels, villas, high-class office buildings and international exhibition centers

9. Social Service Industry

1. Public Facility Service Industries

1.1 Construction and operation of networks of gas, heat, water supply and water drainage in large and medium sized cities (Chinese partner shall hold the majoritf shares)

2. Information, Consultation Service Industries

2.1 legal consulting

2.2 Market Research (equity joint ventures and contractual joint ventures only)

10. Public Health, Sports and Social Welfare Industries

1. Medical treatment establishments (equity joint ventures or contractual joint ventures only)

2. Construction and operation of golf courts

11. Education, Culture and Arts, Broadcasting, Film and TV Industries

1. Education establishments for senior high school students (equity joint ventures or contractual joint ventures only)

2. Construction and operation of cinemas (Chinese partner shall hold the majority of shares)

3. Making and issuing of broadcast and TV programs, movie making (Chinese partner shall hold the majority of shares)

12. Scientific Research and Poly-technical Services Industries

1. Mapping companies (Chinese partner shall hold the majority of shares)

2. Inspection, verification and attestation companies for imported and exported goods

13. Other industries restricted by the State or international treaties that China has concluded or taken part in

C. Catalogue of Prohibited Foreign Investment Industries

1. Farming, Forestry, Animal Husbandry and Fishery industries

1. Cultivation of China’s rare precious breeds (including fine genes in plants industry, husbandry and aquatic products industry)

2. Production and development of genetically modified plants’ seeds

3. Fishing in the sea area within the Government jurisdiction and in-land water

2. Mining and Quarrying Industries

1. Exploring, mining and dressing of radioactive mineral products

2. Exploring, mining and dressing of terrae rare metal

3. Manufacturing Industry

1. Food Processing Industry

1.1 Processing of green tea and special tea with China’s traditional crafts (famous tea, black tea, etc.)

2. Medical and Pharmaceutical Products Industry

2.1 Processing of traditional Chinese medicines that have been listed as the State Protection resources (musk, licorice, jute, etc.)

2.2 Application of preparing technique of traditional Chinese medicines in small pieces ready for decoction, and production of the products of secret recipe of traditional Chinese patent medicines

3. Non-Ferrous Metal Smelting and Rolling Processing Industry

3.1 Smelting and processing of radioactive mineral products

4. Manufacture of Weapons and Ammunition

5. Other Manufacturing Industries

5.1 Ivory carving

5.2 Tiger-bone processing

5.3 Production of bodiless lacquerware

5.4 Production of enamel products

5.5 Production of Xuan-paper (rice paper) and ingot-shaped tablets of Chinese ink

5.6 Production of carcinogenic, teratogenic, mutagenesis and persistent organic pollutant products

4. Production and Supply of Power, Gas and Water

1. Construction and operation of power network

5. Communication and Transportation, Storage, Post and Telecommunication Services

1. Companies of air traffic control

2. Companies of postal services

6. Finance, Insurance Industries

1. Futures companies

7. Social Service Industry

1. Development of wild animal and plant resources protected by the State

2. Construction and operation of animal and plant natural reserves

3. Social investigations

4. Gambling (including the racecourse for gambling)

5. Pornographic services

8. Education, Culture and Arts, Broadcasting, Film and TV Industries

1. Educational institutes for basic education (compulsory education)

2. Business of publishing, producing, master issuing, and importing of books, newspaper and periodical

3. Business of publishing, producing, master issuing and importing of audio and visual products and electronic publications

4. News agencies

5. Radio stations, TV stations, radio and TV transmission networks at various levels (transmission stations, relaying stations, radio and TV satellites, satellite up-linking stations, satellite receiving stations, microwave stations, monitoring stations, cable broadcasting and TV transmission networks)

6. Companies of producing, publishing, issuing and playing of broadcast and TV programs

7. Companies of films producing and issuing

8. Companies of video tape showing

9. Other Industries

1. Projects that endanger the safety and performance of military facilities

10. Other industries restricted by the State or international treaties that China has concluded or taken part in

Note:

(1) In the case that “the Mainland and Hong Kong Closer Economic Partnership Arrangement” and its complementary agreements or “the Mainland and Macao Closer Economic Partnership Arrangement” and its complementary agreements have prescribed specific rules, those regulations shall be observed.

(2) The items marked “*” are related to the commitment of China’s accession to WTO. Please see the Appendix for details.

Appendix of “Catalogue for the Guidance of Foreign Investment Industries”

1. Notes for Catalogue of Encouraged Industries:

1. Prospecting an exploitation of oil and natural gas: in cooperation with Chinese partner only.

2. Exploitation of oil deposits (fields) with low osmosis: in cooperation with Chinese partner only.

3. Development and application of new technologies that can increase recovery factor of crude oil: in cooperation with Chinese partner only.

4. Development and application of new technologies for prospecting and exploitation of petroleum, such as geophysical prospecting, well-drilling, well-logging and downhole operation, etc.: in cooperation with Chinese partner only.

5. Manufacturing of automobile and motorcycle: the proportion of foreign investments shall not exceed 50%

6. International liner and tramp maritime transportation business: the proportion of foreign investments shall not exceed 49%.

7. International container multi-modal transportation: the proportion of foreign investments shall not exceed 50%. Foreign majority ownership will be permitted no later than

11 December 2002. Wholly foreign ownership will be permitted no later than 11 December 2005.

8. Road freight transportation companies: foreign majority ownership will be permitted no later than 11 December 2002. Wholly foreign ownership will be permitted no later than 11 December 2004.

9. Wholesale, retail and logistic distribution of general goods: As described in No. 5 of Notes for Catalogue of Restricted Industries of the Appendix.

10. Accounting and auditing: in cooperation with Chinese partner and in the form of partnership only.

2. Notes for Catalogue of Restricted Industries:

1. Cross-border automobile transportation companies: foreign majority ownership will be permitted no later than 11 December 2002. Wholly foreign owned enterprises will be permitted no later than 11 December 2004.

2. Water transportation companies: the proportion of foreign investment shall not exceed 49%.

3. Rail freight transportation companies: the proportion of foreign investment shall not exceed 49%. Foreign majority ownership will be permitted no later than 11 December 2004. Wholly foreign owned enterprises will be permitted no later than 11 December 2007.

4. Telecommunication Companies

4.1 Value-added services and paging services in basic telecommunication services: foreign investments are permitted no later than 11 December 2001 with the proportion of foreign investment not exceeding 30%. The proportion of foreign investment in joint venture shall not exceed 49% no later than 11 December 2002, and shall be allowed to reach 50% no later than 11 December 2003.

4.2 Mobile voice and data services in basic telecommunication services: foreign investments are permitted no later than 11 December 2001 with the proportion of foreign investment not exceeding 25%. The proportion of foreign investment in joint venture shall not exceed 35% no later than 11 December 2002, and shall be allowed to reach 49% no later than 11 December 2004.

4.3 Domestic and international services in basic telecommunication services: foreign investments will be permitted no later than 11 December 2004 with the proportiof foreign investment not exceeding 25%. The proportion of foreign investment in joint venture shall not exceed 35% no later than 11 December 2006 and shall be allowed to reach 49% no later than 11 December 2007.

5 Commodities trade, direct selling, mail-order selling, Internet selling, sales agents, franchising, commercial management; whole sale, retail and logistic distribution orain, cotton, vegetable oil, sugar, pharmaceutical products, tobacco, automobile, crudil, capital goods for agricultural production; whole sale and retail of books, newspapers, periodicals; whole sale of product oil, construction and operation of gasoline station.

5.1 Commission agents’ services and wholesale trade services (excluding salt, tobacco): foreign investment enterprises are permitted no later than 11 December 2002 with foreign investment not exceeding 50%, bur can not engage in the distribution of books, newspapers, magazines, pharmaceutical products, pesticides, mulching films, chemical fertilizers, processed oil and crude oil. Foreign majority ownership will be permitted no later than 11 December 2003. And wholly foreign- owned enterprises will be permitted no later than 11 December 2004, and cangage in the distribution of books, newspapers, magazines, pharmaceutical products, pesticides, mulching films. The distribution of Chemical fertilizers, processed oil and crude oil are permitted no later than 11 December 2006.

5.2 Retailing services (excluding tobacco): foreign investment enterprises arermitted but can not engage in the distribution of books, newspapers, magazines, pharmaceutical products, pesticides, mulching films, chemical fertilizers, processed oil. The proportion of foreign investment can reach 50% no later than 11 December 2002, and can engage in the distribution of books, newspapers and magazines. Foreign majority ownership will be permitted no later than 11 December 2003. And wholly foreign-owned enterprises will be permitted nater than 11 December 2004, and can engage in the distribution of pharmaceutical products, pesticides, mulching films, and processed oil. The distribution ohemical fertilizers is permitted no later than 11 December 2006. Foreign investors can not take majority ownership of a Chain-store that has over 30 branch storend engages in the distribution of automobiles (the limitation will be lift no latehan 11 December 2006), books, newspapers, magazines, pharmaceutical products, pesticides, mulching films, processed oil, chemical fertilizers, grain, vegetable oil, sugar, tobacco, cotton.

5.3 Franchising and wholesale or retail trade services away from a fixed location: foreign investment enterprises are permitted no later than 11 December 2004.

6. The distribution of audiovisual products (excluding movies): in cooperation with Chinese partner only, and Chinese partner dominates.

7. Goods leasing companies: foreign majority ownership shall be permitted no later than 11 December 2002. Wholly foreign owned enterprises shall be permitted no later than 11 December 2004.

8. Agencies

8.1 Ship agencies: the proportion of foreign investment shall not exceed 49%.

8.2 Freight forwarding agencies (excluding those services specially reserved for Chinese postal authorities): the proportion of foreign investment shall not exceed 50% (not exceed 49% in the case of courier services). Foreign majority ownership shall be permitted no later than 11 December 2002. Wholly foreign owned enterprises shall be permitted no later than 11 December 2005.

8.3 Cargo handling for foreign vessels: in forms of equity join ventures or contractual join ventures only

8.4 Advertising agencies: the proportion of foreign investment shall not exceed 49%. Foreign majority ownership shall be permitted no later than 11 December 2003. Wholly foreign owned enterprises shall be permitted no later than 11 December 2005.

9. Insurance

9.1 Non-life insurance companies; the proportion of foreign investments shall not exceed 51%. Wholly foreign owned enterprises shall be permitted no later than 11 December 2003.

9.2 Life insurance companies: the proportion of foreign investments shall not exceed 50%.

10. Securities companies, securities investment funds management companies.

10.1 Securities companies: foreign investment shall be permitted no later than 11 December 2004 with the proportion of foreign investment not exceeding 1/3.

10.2 Securities investment fund management companies: the proportion of foreign investment shall not exceed 33%. The proportion of foreign investment shall be allowed to reach 49% no later than 11 December 2004.

11. Insurance brokage companies: the proportion of foreign investment shall not exceed 50%. The proportion shall be allowed to reach 51% no later than Dec 11, 2004. Wholly foreign owned enterprises shall be permitted no later than 11 December 2006.

12. Companies of inspection, verification, attestation for imported and exported goods: foreign majority ownership shall be permitted no later than 11 December 2003. Wholly foreign owned enterprises shall be permitted no later than 11 December 2005.

INVESTMENT PROTECTION

(i) Conversion, Repatriation and Transfers (including any Balance of Payments safeguards)

China has been undertaking reforms in its foreign exchange administration system since 1994. As esult of China’s official commitment to Article No. 8 of the IMF Agreement in 1996, China allows realized free convertibility of the RMB under its current account, while still maintaining control ots foreign exchange under its capital account.

China’s foreign exchange administrative system has made significant progress over the last decade.

It successfully avoided any damage from the Asian financial crisis. It has maintained its balance of international payments and the stability of the RMB exchange rate. China will continue to carry out foreign exchange reforms. The long-term goal is to achieve full convertibility of the RMB while the short-term goals are to create a more elastic RMB exchange and a formation mechanism for the RMB exchange rate. Measures have been taken to foster and develop foreign exchange and capital markets.

Foreign investment enterprises are required to provide the authorized banks with the following documents upon repatriation of distributed profits or dividends of foreign partners:

• tax-paid certificate and tax declaration forms
• audit report provided by accounting firms on profit and dividend of the year
• foreign exchange registration certificate for foreign-funded enterprises
• resolution of board of directors on distribution of profit and dividend
• capital verification report provided by accounting firms
• other documents required by the foreign exchange administration

Apart from providing the above-mentioned information, foreign investment enterprises intending to repatriate profits or dividends from previous years should also entrust accounting firms to conducn “authenticity audit” on the year after profits and dividends occurs, and provide banks with audit reports.

Any foreign investment enterprise which has not fully paid in registered capital according to the terms of their contract, is not allowed to repatriate profit or dividend in foreign exchange.

Organizations within China (including foreign investment enterprises) should, before paying royalties for intangible assets, submit a series of certificates or receipts to authorized foreign exchange banks for screening. Only when these certificates and receipts have been checked anound correct can enterprises make payments or purchase foreign exchange for payment from their foreign exchange accounts.

Repayment of interest and fees related to foreign currency loans lent by Chinese financianstitutions can be handled directly by authorized foreign exchange banks, while repayment of the principal of such loans requires screening by the foreign exchange administration, and should be handled with approval documents issued by foreign exchange administration. According to regulations on administration of foreign debt, on repaying principal, interest and related fees ooreign debt, and borrowers should apply to the foreign exchange administration with their “Foreign Debt Registration Certificates”, loan contracts and repayment notice issued by creditors, and makhe payment through foreign exchange accounts or by purchasing foreign exchange at designated banks with approval documents issued by the foreign exchange administration.

In the case of expiration of foreign investment enterprises by law, the after-tax income in RMB earned by foreign partners after liquidation according to the law, can be remitted abroad or taken abroad by purchasing foreign exchange from designated banks.

The following is an outline of restrictions on the convertibility of currencies for the overseas transfer of funds.

(1) According to the present regulations on foreign debt, organizations within China should, when repaying the principal and interest on foreign debt, apply to the foreign exchange administration with their “Foreign Debt Registration Certificates”, loan arrangement contracts and notices of repayment of loan from creditors. Then with review and approval documents issued by the foreign exchange administration, they can repay the loan froheir foreign exchange account or by purchasing foreign exchange from designated banks. Except for the repayment of interest, repayment of the principal of foreign exchange loans lent by financial institutions within China needs to be approved by the foreign exchange administration.

In the case where there is no stipulation on the anticipated payment in the contract, such anticipation cannot be unallowed. When there are articles on anticipation in a loaontract, relevant parties can, upon approval by the foreign exchange administration, repay the loan with their foreign exchange equities.

Borrowers are not permitted to purchase foreign exchange with RMB for the anticipatiof foreign debt, or the re-granting of loans or dealer loans in foreign exchange. Repaying loans by purchasing foreign exchange in a different place is not permitted.

(2) Organizations within China needing foreign exchange as a guarantee to others should apply to the foreign exchange administration with guarantee agreements, guarantee registration certificates, balance sheets of debtors and notice of payment from creditors. Then they can repay the loans from their foreign exchange accounts or by purchasing foreign exchange at designated banks.

(3) In case of increase or transfer (or by other means) of capital (in foreign exchange) in an enterprise with foreign investment, the enterprise should apply for approval to the foreign exchange administration with a resolution of the board of directors and other documents required, before it can make the payment from its foreign exchange account or honor at a designated foreign exchange bank with a notice of sale of foreign exchange issued by the foreign exchange administration.

Foreign investment holding companies which invest with their foreign exchange capital or increasr reinvest with the profits of foreign counterparts in China should go through approval proceduret the foreign exchange administration.

China has negotiated BITs in which the repatriation of funds’ guarantee’ shall be subject to laws and regulations of each party.

(ii) Expropriation and Compensation

Governing laws, regulations and policies include:

The Constitution (Article 13);

Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures and its implementing regulations;

Law of the People’s Republic of China on Wholly Foreign-owned Enterprises and its implementing regulations;

The Law of the People’s Republic of China on State Compensation

National treatment is applied under the Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures, the Law of the People’s Republic of China on Chinese-Foreign Cooperative Joint Ventures and the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises. They stipulate that the State will not nationalize or expropriate any foreign investment enterprises; except in special circumstances, i.e. for the requirement of social and public interests (and then only in accordance with legal procedures.) Appropriate compensation shall be provided.

China has signed IPPAs with 116 economies. All the IPPAs contain provisions concerning expropriation and stipulate that investments of nationals or companies of either contracting party shall not be expropriated, nationalized or subjected to measures having effect equivalent to expropriation, or nationalization, in the territory of the other contracting party (except for the sakf a public interest), under legal procedure, on the bases of non- discrimination and against reasonable compensation.

No statistics are available for the number of expropriations involving foreign investors under domestic law over the last three years.

(ii) IPR

With a view to keep the legislative system fully in line with WTO rules ( TRIPS specifically), Chinas modified the Patent Law, Trademark Law, Copyright Law, Regulations to Protect Computer Software and other related laws and regulations in recent years. China is a member of 15 international IPR conventions, treaties or organizations including: WIPO, Paris Convention for the Protection of Industrial Property, Berne Convention, Madrid Trademark Convention, Universal Copyright Convention, the Patent Cooperation Treaty, Budapest Treaty, the International Patent Classification Agreement, Geneva Phonogram Convention, the International Union for the Protection of New Varieties of Plants, etc.

The Chinese government has taken effective measures to strengthen IPR law enforcement. There have been special IPR courts established in all provinces and major cities. A special taskforcomposed of 12 government judicial and administrative agencies has been set up to coordinate and intensify combating IPR violation activities. IPR education has also been fostered to raiswareness of ordinary Chinese citizens. Recently China has launched another IPR protection campaign — the “Blue Sky Trade Show” — to strengthen surveillance on IPR infringement on exhibitions and trade shows.

(iii) Dispute Settlement

Existing channels for dispute settlement and processing of grievances include the following:

• Administrative review process according to Law on Administration Reconsideration;
• Judicial review under various laws and regulations; and
• International arbitration process under BITs.

China has signed the ICSID Convention. Statistics for the last three years on disputes are not available.

INVESTMENT AND DEVELOPMENT

China has no performance requirements for the granting of approval for foreign investment.

Upon entering to the WTO, China undertook a through review and revision over 2,500 laws and regulations related to China’s foreign economic relations and trade policies. With regard to its administrative regime on foreign investment, basic laws and regulations on FDI (Law on Chinese- Foreign Equity Joint Ventures, Law on Chinese-Foreign Contractual Joint Ventures and the Law on Wholly Foreign-owned Enterprises) were revised and provisions which require the balance ooreign exchange, export and localization of supplies were removed. No laws and regulations or policies that do not conform to TRIMs exist.

According to the “Provisions on Guiding the Orientation of Foreign Investment”, projectnvolving foreign investment that have adverse effects to saving energy and improving environment belong to the category of restricted sectors.

Projects which are energy-consuming or produce high levels of pollution, whether with domestic investment or with foreign investment, are severely restricted.

INVESTMENT PROMOTION AND INCENTIVES

(i) Investment Promotion Agencies (scope of Agencies and interaction with any screening mechanisms)

MOFCOM’s Department of Foreign Investment Administration is responsible for providinuidance on national investment promotion and work on attracting foreign investment. MOFCOM’s Investment Promotion Agency oversees the implementation of investment promotion strategies and guidelines. At the provincial level, investment promotion agencies also operate.

Ministry of Commerce and Finance (MOFCOM) of the People’s Republic of China
2 Dong Chang An Jie, Beijing, 100731
PEOPLE’S REPUBLIC OF CHINA Tel: +86-10-65197886
Fax: +86-10-65197839
Website: http://english.mofcom.gov.cn/
Email: caohy@mofcom.gov.cn

Investment Promotion Agency
82, Dong Chang An Jie, Beijing, 10074
PEOPLE’S REPUBLIC OF CHINA Tel: +86-10-85226556
Fax: +86-10-85226558
Website: http://www.fdi.gov.cn
Email: Service@fdi.gov.cn

For more information on investment promotion agencies, please see http://www.fdi.gov.cn

With a view to facilitate foreign investment and to streamlining screening procedures, provincial, municipal and other local governments have set up one-stop-shop facilities according to their specific conditions. No model measures have been adopted.

(ii) Incentives

Favourable tax treatment is provided to foreign-investment enterprises as follows:

(iii) Preferential corporate income tax rate

The new “Corporate Income Tax Law” was passed at the fifth session of the 10^th National People’s Congress on 16 March 2007. The new unified income law will apply to both domestic and foreign investment enterprises.

The new tax law will be implemented on 1 January 2008. Productive foreign investment enterprises which enjoy 15% and 24% favorable income tax rates based on the present income tax law, will pay income tax on 10% and 1% higher rates. Income tax incentives of “2 years exemption and 3 years deduction” will be abolished. Income tax rate for companies in service trade will go down from 33% to 25%, indicating a greatly reduced tax. Small-sized and tiny-profit companies will enjoy a 20% preferential tax rate.

The new income tax law will adopt a new mechanism with incentive orientations “focusing on priority industries and supplemented by priority regions.” Foreign investment enterprises engagen development of high-tech\new-tech, infrastructure, agriculture, forestry, animal husbandry, environment protection sectors will be granted new tax incentives. The new income tax law will provide incentives to the western region and special economic areas.

Taking into account the interests of already established foreign investment enterprises, the new law will offer transition period to existing foreign investment enterprises.

(iv) Income Tax Holidays

Production-oriented enterprises with foreign investment that have an operation period exceeding 10 years, shall from the first profit-making year, be exempted from income tax the first and the second years and be allowed a 50% reduction in the third to the fifth years.

Technology-oriented enterprises with foreign investment shall be exempted from income tax for the first two years and allowed a 50% reduction for the following six years.

Export-oriented enterprises with foreign investment shall be exempted from income tax for the first two years and allowed a 50% reduction for the following three years. In addition, this type onterprise shall be allowed a reduced income tax rate of 50% as long as their annual export accountor 70% or more of their sales (the minimum tax rate shall be 10% if the enterprise enjoys double preferential tax treatment).

The income tax on foreign investment enterprises located in Central and Western China that are engaged in projects encouraged by the government shall be levied at a reduced rate of 15% for a period of another three years following the expiration of the five-year period of tax exemption and reduction.

(v) Reinvestment and tax refunds

Foreign investors who reinvest in its share of profit obtained from the established enterprise with aperation period of no less than 5 years shall, upon approval by the taxation authority, be refunded 40% of the income tax already paid on the reinvested amount. Foreign reinvested export-oriented enterprises shall be refunded 100% of the income tax already paid on the reinvestment amount.

(vi) Deduction of local tax

The exemption and deduction of local income tax on foreign investment enterprises that arngaged in encouraged industries shall be decided by the local governments of the relevant province, autonomous region or municipality.

(vii) Tariff exemption for imported machinery and equipment

Machinery and equipment imported for foreign investment or domestic investment projects that arncouraged and supported by the state shall, enjoy tariff and import-stage VAT exemption if the commodities are not listed in the “Catalogue of Imported Commodities not Entitled for Tariff Exemption for Foreign investment Projects”.

MOBILITY OF CAPITAL AND TECHNOLOGY

According to relevant laws and regulations, Chinese enterprises are allowed to invest overseas subject to verification by relevant authorities.

Export of technology by a Chinese company is permitted except for some traditional and peculiar technologies and technologies for military purpose.

LABOUR, MOVEMENT OF PEOPLE, AND SENIOR MANAGEMENT AND BOARDS OF DIRECTORS

Labor laws, regulations and rules that apply to foreign investment enterprises mainly include the Labor Law of the People’s Republic of China and its related rules and regulations; Regulations for Labor Management in Foreign-funded Enterprises, Regulations of the People’s Republic of Chinn the Settlement of Labor Disputes in Enterprises.

(i) Laws and Regulations on the Minimum Wage

The government implements the minimum wage security system. The detailed standards of thinimum wage are determined by provincial level governments which are required to file the standards with the State Council. The wage paid to the employee should not be lower than the local minimum wage standards. Excerpts from the relevant law and regulations follow.

(Article 48 of the Labor Law of the People’s Republic of China)

The minimum wage of an employee for a legal working hour shall not be less than the local minimum wage level. Allocation of remuneration in enterprises shall follow the principle of equal pay for equal work. The wage level of the enterprise shall increase gradually on the basis of itrofit growth. The enterprise shall determine the wage level of the employees through collective negotiations, in line with the guidance of the local government or the labor authority.

(Article 14 of the Regulations for Labor Management in Foreign investment Enterprises)

If the wage of an employee is below the minimum wage level, the local labor authority shall order the Enterprise to make corrections within a limited time period. Apart from making up thifference between the actually paid wage and the minimum wage, the Enterprise shall also pay compensation to the employee worth 20% to 100% of the difference. If the Enterprise refuses to pahe difference and the compensation, it can receive a fine worth one to three times the sum of the difference and the compensation.

(Article 29 of the Regulations for Labor Management in Foreign-funded Enterprises)

(ii) Laws and Regulations on Minimum Requirement for Training and Employment of Local

Staff

Summary: foreign-investment enterprises shall establish a system for professional training. Staff to be employed for their technical ability with special requirements must receive training and shall take up their posts with qualification certificates.

Foreign investment enterprises can determine the organization establishment, payroll and decide the time, quality and means of hiring staff by themselves according to their production ananagement characteristics. When foreign-funded enterprises employ staff and workers, they may apply to job introduction centers (or institutions) permitted by the local labor department. With the approval of the labor administrative department, they can employ staff members trans-regionally, including employing personnel with special technical abilities, senior technicians and senior administrators from abroad who are not available in China. Foreign-funded enterprises shall not employ staff who have not yet revoked their existing labor relationship. Employment of children under 16 years of age is strictly prohibited.

Foreign investment enterprises should sign labor contracts with their employees subject to the principles of equality and voluntarism, and shall reach consensus through consultation. Signed labor contracts shall be ratified by labor administration departments. In case a labor dispute occurs,

parties concerned can make an application for arbitration to local labor arbitration departments. If any party refuses to accept the award, a legal proceeding may be taken to court. Foreign-funded enterprises can fire, without interference by any unit or individual, staff members who are proveot qualified after the probation and training period, or have seriously infringed rules and regulations of the enterprise, or have caused great losses to the enterprise because of seriouereliction of duty, or have infringed state laws and have to take relevant criminal responsibilities. Enterprises can fire redundant personnel according to the law after changes of productioechnology. However, employees should not be fired by enterprises in the following cases:

• In time of receiving treatment, recuperating from injury at work or suffering from occupational diseases; in time of receiving treatment in hospital for illness or injury out of work; in time of pregnancy, giving birth or nursing for female employees.
• Under normal conditions: if an enterprise fires any employee due to internal reasons it must pay a certain amount of compensation according to the working time of the employee in the enterprise.

Foreign investment enterprises must make social insurance of endowment, medical treatment, unemployment, injury at work, bearing and so on for their employees. Enterprises and employees must pay a full basic endowment insurance fee to designated social insurance organizations in timccording to rules issued by local governments. Enterprises should pay an unemployment insurancee to unemployment insurance organizations of the labour administration departments according to the proportion stipulated by the local governments. Also, Enterprises must set aside a housing subsidiary fund according to stipulations.

If an Enterprise recruits any employee in violation of these Regulations, the local administrative department can impose fines on the Enterprise worth 5 to 10 times of the average monthly wage ohe recruited employee and order the Enterprise to send back the recruited employee.

If the Enterprise or the employee violates the labour contract, infringes upon the interests of the other party and brings losses thereto, the Enterprise or the employee shall be held possible for compensation according to their responsibility.

Working conditions in foreign-funded enterprises must meet the China’s working safety and health standards. The Enterprise’s production equipment and facilities must be fitted out with protective outfits and facilities for safety and health.

Foreign-funded enterprises should carry out the state working system of 8 hours a day and less than

40 hours a week and should not prolong working time. Higher payments shall be made for work conducted in prolonged working time or on holidays or vacations according to the relevant state stipulations.

Workers in foreign-funded enterprises have entitlements to rest days, holidays, home-visiting leave, wedding days, mourning days and female workers’ nursing days, as stipulated by the State.

Workers who have worked continuously over one year have an entitlement to annual leave with salary.

The following laws and regulations apply to labor disputes:

Labor Law of the People’s Republic of China (Chapter 10); Regulations on Settlement of Labor Disputes in Enterprises; Regulations on Labor Management of Foreign-funded Enterprises;

Opinions on Some Issues on Implementation of the Labor Law of the People’s Republic of China.

(iii) Summary

Where disputes arise between an employer and employee, the parties may seek settlement througegotiation or apply for mediation, arbitration, or bring a lawsuit. After labor disputes arise, tharties may apply to a labor dispute mediation committee within their own work unit for mediation.

If mediation fails and one party asks for arbitration, the party may apply to a labor dispute arbitration committee for arbitration. If a party does not agree with the arbitration decision it may bring a lawsuit to court.

Where disputes arise from signing a collective labor contract and the parties fail to settle them through negotiation, the local government may coordinate the parties concerned to seek a settlement.

Where the parties fail to settle a dispute arising from the implementation of a collective laboontract by way of coordination, they may apply to a labor dispute arbitration committee. If they do not accept the arbitrator’s decision, they may bring a lawsuit to the court.

Foreigners entering, passing through or residing in China, must go through procedures for entry, transit, and residence according to the Law of the People’s Republic of China on Administration over Foreigners’ Entry and Departure. In accordance with reasons for the foreigner’ applicatioor entry, the relevant department of the Chinese government will issue the corresponding visa of F, L, G, C or X type.

(iv) Restrictions

If foreign technical or administrative personnel want to enter China and get a job, or if an enterprisants to employ a foreigner, they must submit applications for employment approval for the foreigner according to “Administrative Provisions on Foreigner’s Employment in China”.

Non-resident staff of foreign firms, together with their accompanying family members, must obtain occupation visas from the Chinese embassies located in their country, with employment credentials supplied by their employers on their behalf before entering China (except for visa exemptiongreed upon through bilateral agreements), and go through formalities to obtain employment certificate from labor administrative departments within 15 days upon entry, and to receive residence certificate from public security departments within 30 days.

There are no laws or policies that restrict appointments by foreign investors to senior management positions or the board of directors.

COMPETITION POLICY

There is no single administrative agency in charge of competition policy particularly in China, but many agencies are involved in competition matters, such as the State Reform and Development Commission, MOFCOM, and the State Administration for Industry and Commerce.

In September 1993, the Law for Countering Unfair Competition was adopted and promulgated by

the Standing Committee of the National People’s Congress. The aim of the Law is to promote the healthy development of the socialist market economy, to encourage and protect fair competition, and to defend the rights and interests of operators and consumers. The Law has one chapter whicists all acts of unfair competition, one chapter concerning the control and inspection of unfair competition acts by concerned authorities, and one chapter concerning the legal responsibility of operators who violate laws and regulations.

The Department of Fair Trade and the Department of Industry Investigation have been set up after China’s accession to the WTO. In addition, regulations cover anti-monopoly issues.

HONG KONG, CHINA

Acronyms

INTRODUCTION

The Government of the Hong Kong Special Administrative Region (HKSAR) of the People’s

Republic of China firmly believes in, and supports, a free market economy and a liberal investment regime. In general, there are no special legislative, regulatory or administrative guidelineoverning the admission and establishment of foreign investment in Hong Kong, China (HKC).

There are also no restrictions on foreign exchange transactions, capital movement, or repatriation of capital and returns related to foreign investments.

HKC offers a level playing field to all investors. We have not sought any exemption to thost favoured nation treatment under the WTO General Agreement on Trade in Services. Other than a few minor exceptions primarily in terms of residency requirements which are common practices in the relevant sectors, no discrimination is applied in treatment as between “foreigervices and service providers” and “domestic services and service providers” on either a de jure oe facto basis.

As a corollary of this free market policy, there has been sustained growth in both outward and inward investment attributed to HKC during 2002-04. The stock of outward direct investment at market value amounted to US$403.1 billion as of end-2004 and the corresponding inward direcnvestment was US$453.0 billion. The World Investment Report 2005 published by United Nations

Conference on Trade and Development (UNCTAD) ranked HKC as the second largest foreigirect investment (FDI) recipient in Asia, after the People’s Republic of China. On a global scale, HKC ranked 7^th in FDI inflows in 2004. HKC has been ranked the freest economy in the world for 12 consecutive years since 1995. (See the Heritage Foundation and Wall Street Journal, 2005 Index of Economic Freedom.)

Given HKC’s free market economy and liberal investment regime, no major liberalisations have been undertaken in the last five years.

SCREENING OF FOREIGN INVESTMENT

There are no screening requirements for foreign investment proposals.

SECTOR-SPECIFIC LAWS AND POLICIES

(i) Banking

Banks incorporated locally/overseas intending to set up an operation in HKSAR must fulfiltandard prudential requirements. An overseas-incorporated applicant seeking authorization as a licensed bank must also satisfy certain market entry criteria. More information can be found at the

“Information Centre – Guidelines and Circulars” at the website of the Hong Kong Monetary Authority (HKMA) http://www.hkma.gov.hk Once an overseas-incorporated applicant is authorized as a licensed bank, it can conduct the full range of banking business.

Full banking licences are granted to banks incorporated outside HKSAR on the basis of reciprocity. However, the reciprocity requirement does not apply to applicants incorporated in a place which is, or is part of the territory of, a member of the WTO.

There is no additional regulatory requirement for operation which discriminate between domestic and foreign service suppliers.

The contact point for further information is:

Banking Development Department
Hong Kong Monetary Authority
Tel: (852) 2878 1846
Fax: (852) 2290 5168
Email: raymond_kw_chan@hkma.gov.hk
Website: http://www.info.gov.hk/hkma/eng/bank/index.htm

(ii) Insurance

An applicant for authorized insurer which is a company incorporated outside HKSAR must satisfhe Insurance Authority that it is:

• a company incorporated in a country where there is a comprehensive companies law and insurance law;
• an insurer under effective supervision by the authority or authorities of its home country responsible for the proper conduct of insurance business; and
• a well established insurer with international experience and of sound financial standing. However, an overseas applicant may, if it so chooses, incorporate a subsidiary company in HKSAR for the purpose of the application, in which event the above requirements will not apply.

There is no additional regulatory requirement for operation which discriminate between domestic and foreign service suppliers.

The contact point for further information is:

Office of the Commissioner of Insurance
Tel: (852) 2867 2565
Fax: (852) 2869 0252
Email: iamail@oci.gov.hk
Website: http://www.oci.gov.hk

(iii) Trading in Securities and Futures

The Stock Exchange of Hong Kong Limited and the Hong Kong Futures Exchange Limited havstablished admission criteria which are equally applicable to local and foreign companies. Exchange participant of the Stock Exchange of Hong Kong Limited or the Hong Kong Futures Exchange Limited, however, must be a company incorporated in HKSAR. This requirement is to provide legal backing to operations of the clearing houses for the purpose of enhancing market integrity.

The contact point for further information is:

Corporate Communications
Hong Kong Exchanges and Clearing Limited
Tel: (852) 2522 1122
Fax: (852) 2295 3106
Email: info@hkex.com.hk
Website: http://www.hkex.com.hk

There is no additional regulatory requirement for operation which discriminates between domestic and foreign service suppliers.

The contact point for further information is:

Licensing Department Securities and Futures Commission
Tel: (852) 2840 9393
Fax: (852) 2501 0375
Email: enquiry@sfc.hk

Website : http://www.sfc.hk

(iv) Broadcasting

Television Services

For domestic free television program services, there are restrictions on voting control held by unqualified voting controllers as follows:

• the Broadcasting Authority’s approval is required before an unqualified voting controller can hold, acquire or exercise equal to or greater than 2% of the total voting control of a licensee company; and
• where the aggregate voting control exercised by unqualified voting controllers on a poll, if any, at a general meeting of a licensee company exceeds 49% of the total voting control exercised on that poll, the votes cast by the unqualified voting controllers shall be scaled down to 49%.

The above restrictions do not apply to other television program service licensees.

An “unqualified voting controller” means a voting controller who is not a qualified voting controller. A “qualified voting controller” means a voting controller who in the case of an individual, is ordinarily resident in HKSAR and has been so resident for at least one continuoueriod of not less than 7 years; or in the case of a corporation, is ordinarily resident in HKSAR;[18]

(a) the trustee or manager of any unit trust or mutual fund corporation authorized under the Securities and Futures Ordinance (Cap. 571);

(b) the trustee of a charitable scheme made by order of a court of a competent jurisdiction;

I a judicial officer on whom the estate of a deceased is vested between the time of death and the grant of letters of administration;

(d) the Registrar of the High Court; or

(e) such other person as may be prescribed.

Radio Services

A sound broadcasting licence may be granted to or held by a corporation that is formed anegistered in HKSAR. The management and control of the licensee shall be bona fide exercised in HKSAR.

As a condition of licence, unless otherwise approved by the Broadcasting Authority, the chairmand the managing director and the majority of the directors who take an active part in the control o licensee shall each be ordinarily resident in HKSAR and has been so resident for at least one continuous period of not less than 7 years.

The aggregate of the voting shares in a licensee to or in which unqualified persons have, directly or indirectly, any right, title or interest, shall not at any time exceed 49% of the total number of voting shares in the licensee. This applies to voting shares in a licensee where the voting rights carried by such shares are for the time being exercisable as regards any question or other matter whatsoever which may be determined by a poll at general meetings of the licensee.

A person shall be deemed as an “unqualified person” unless he is ordinarily resident in HKSAR and has been so resident for at least one continuous period of not less than 7 years.

More details about the licensing requirements are contained in Sections 13F to 13I of the Telecommunications Ordinance (Cap. 106) (available at http://www.legislation.gov.hk/blis_export.nsf/CurAllEngDocAgent?OpenAgent&Chapter=106).

There is no additional regulatory requirement for operation which discriminate between domestic and foreign service suppliers.

The contact point for further information on television and radio services is:

A Division
Communications and Technology Branch Commerce,
Industry and Technology Bureau
Tel: (852) 2189 2226
Fax: (852) 2511 1458
Email: wwchong@citb.gov.hk
Website : http://www.citb.gov.hk/ctb/eng/broad/content.htm

(v) Legal Services

Overseas law firms registered in HKSAR as foreign law firms are subject to the followinestrictions:

• a law firm registered as a foreign firm is not permitted to practise Hong Kong law or employ and/or enter into partnership with Hong Kong solicitors; and
• a registered foreign firm may enter into an association with a local law firm provided that the number of foreign lawyers to local lawyers in the association does not exceed the ratio of 1:1.

(This requirement may be waived by the Law Society under exceptional circumstances).

The contact point for further information is:

Legal Policy Division Department of Justice
Tel: (852) 2867 4898
Fax: (852) 2180 9928
Email: lpd@doj.gov.hk
Website : http://www.doj.gov.hk/eng/new/index.htm

(vi) Supporting Services for Air Transport

There is no additional regulatory requirement for foreign entry into this sector, except that thgreements with the aviation fuel supply system and the air cargo terminal franchises prohibit the acquisition of a controlling stake in the franchises by any government other than the HKSAR Government.

The contact point for further information is:

Aviation Division, Economic Development Branch
Economic Development and Labour Bureau
Tel: (852) 2810 3161
Fax: (852) 2524 9397
Email: samhui@edlb.gov.hk
Website : http://www.edlb.gov.hk/edb/eng/resp/airport.htm

(vii) Land

The HKSAR Government only grants land on a leasehold basis and there is no restriction on foreign ownership of land for commercial purposes or residential uses.

INVESTMENT PROTECTION

(i) Conversion, Repatriation and Transfers (including any Balance of Payments safeguards)

The linked exchange rate system has been implemented since October 1983. This is basically urrency board system which requires the monetary base to be fully backed by foreign reserves ahe fixed exchange rate. In HKSAR, the monetary base comprises the Certificates of Indebtedness against which banknotes are issued, notes and coins issued by the HKSAR Government, the sum of clearing account balances held by banks with the HKMA for settlement purposes (i.e. the Aggregate Balance) and outstanding Exchange Fund Bills and Notes. Certificates of Indebtedness are issuend redeemed against US dollars at the fixed exchange rate of HK$7.80 to US$1.

Exchange Fund Bills and Notes are issued only when there are inflows of funds. At present, additional exchange paper is issued to absorb interest payments on existing stock of Exchange Fund papers.

The HKMA conducts foreign exchange operations to maintain exchange rate stability. Their impacn the monetary base is effected through the Aggregate Balance. Under the present arrangement, the Hong Kong Dollar (HKD) market exchange rate is allowed to move within a band of 7.75-7.85. When there is a decrease in demand for HKD assets and the market exchange rate weakens to HK$7.85/US$1, the HKMA is committed to buying HKD from licensed banks, leading to a contraction of the Aggregate Balance. Interest rates then rise, creating the monetary conditions conducive to capital inflows to maintain exchange rate stability. When there is an increase iemand for HKD assets and the HKD market exchange rate strengths to HK$7.75/US$1, the HKMA is committed to selling HKD to licensed banks, leading to an expansion of the Aggregate Balance and exerting downward pressure on interest rates to discourage continued capital inflows. There is no restriction regarding the repatriation of funds related to foreign investment.

There is no restriction regarding the convertibility of currencies for the overseas transfer of funds.

The HKSAR Government has entered into bilateral Investment Promotion and Protection Agreements with 15 economies, namely, Australia, Austria, the Belgo-Luxembourg Economic Union, Denmark, France, Germany, Italy, Japan, the Republic of Korea, the Netherlands, New Zealand, Sweden, Switzerland, Thailand and the United Kingdom. These agreements provide fohe unrestricted right to transfer investments and returns by investors of one contracting party out of the area of the other contracting party. In the agreements entered into with Australia, Denmark and

New Zealand, it is stipulated that the transfer shall be subject to the laws, regulations and/or policief each contracting party.

(ii) Expropriation and Compensation

Some of the HKSAR laws provide for the deprivation of property and resultant compensation (e.g. the Lands Resumption Ordinance (Cap. 124), the Roads (Works, Use and Compensation) Ordinance (Cap. 370), and the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance (Cap. 276)). These laws apply indiscriminately to all investors affected. The statutory laws of the HKSAR that relate to expropriation and compensation are subject to Article 105 of the Basic Law of the HKSAR which provides that:

• the HKSAR shall, in accordance with law, protect the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property and their right to compensation for lawful deprivation of their property;
• such compensation shall correspond to the real value of the property concerned at the time and shall be freely convertible and paid without undue delay; and
• the ownership of enterprises and the investments from outside the HKSAR shall be protectey law.

Over the last three years, no cases of expropriation involving foreign investors under domestic law have occurred.

(iii) IPR

Protection of Intellectual Property

The HKSAR Government strives to provide effective protection of intellectual property through:

• the administration of comprehensive intellectual property and related laws which provide for civil redress for owners of IPR and criminal sanctions for the manufacture and sales of pirated and counterfeit goods;
• the provision of an efficient and impartial judicial system to deal with law suits relating to intellectual property; and
• the promotion of public awareness in the importance of IPR and their protection.

The comprehensive legal framework in HKSAR enables both foreign nationals and local residento exploit and protect their IPR.

Recent Enforcement Efforts

IPR in HKSAR are primarily civil rights, and the prime responsibility for their protection and enforcement rests with the owner of these rights. To complement civil actions by the owners, therre also criminal sanctions against the manufacture and distribution of pirated works and counterfeit goods.

The Customs and Excise Department (C&ED) is responsible for enforcement actions against IPR infringement activities. Under the sustained and vigorous enforcement action of C&ED, copyright piracy and trade mark counterfeiting activities in HKSAR have been curbed significantly in recent years.

Local counterfeiting activities are mostly related to the sale of counterfeit goods, including clothing, leather goods, watches, electronic products, foodstuff and pharmaceuticals. In 2005, C&ED detected 1,114 cases involving counterfeit trade marks and false trade descriptions with seizure of goods worth HK$305.3 million and the arrest of 726 persons. From January to July 2006, 559 cases were detected with seizures valued at HK$79.2 million and the arrest of 397 persons.

Video discs, including VCD and DVD, are major products subject to piracy in the market, followey other types of optical discs such as TV and computer games, computer software and music. As a result of C&ED’s regular and territory-wide raiding operations, retail outlets for pirated opticaiscs have been significantly reduced. In 2005, C&ED detected a total of 9,794 copyright caseith seizure of goods worth HK$137.2 million and the arrest of 957 persons. From January to July 2006, 4,807 cases were detected with seizures valued at HK$93.5 million and the arrest of 582 persons.

The contact point for further information is:

Assistant Director (Advisory)
Intellectual Property Department
Tel: (852) 2961 6802
Fax: (852) 2838 6276 Email: enquiry@ipd.gov.hk
Website : http://www.ipd.gov.hk

(iv) Dispute Settlement

In HKSAR, there are a variety of ways of resolving disputes. These include negotiation, conciliation, mediation, arbitration and litigation. The HKSAR has a well-developed system of courts which have jurisdiction in civil matters:

• The High Court — its jurisdiction is unlimited in civil matters.
• The District Court — its jurisdiction is generally limited to civil actions involving claims of value over HK$50,000, but not exceeding HK$3,000,000 (for legal action related to land) or HK$1,000,000 (for legal action not related to land).
• The Small Claims Tribunal — it hears minor civil claims up to a limit of HK$50,000.
• The Lands Tribunal — it has a specialised role with jurisdiction in matters of rating and valuation, and in assessing compensation when land is resumed by government or reduced in value by development.

In addition, the Hong Kong International Arbitration Centre assists parties to choose the best available option to resolve disputes and provides a full set of support services for arbitration and mediation of disputes.

The Convention on the Settlement of Investment Disputes between States and Nationals of other States is applicable to the HKSAR. The HKSAR Government does not keep record of such disputes or their settlement.

INVESTMENT AND DEVELOPMENT

There are no performance requirements regarding foreign investment and no measures under the WTO Agreement on Trade-Related Investment Measures (TRIMs) in place in HKSAR. There aro other policy measures affecting inward foreign investment used to promote broad economic development objectives.

INVESTMENT PROMOTION AND INCENTIVES

(i) Investment Promotion Agencies (scope of Agencies and interaction with any screening mechanisms)

Invest Hong Kong (InvestHK) was established on 1 July 2000 to spearhead HKC’s efforts to attracnward investment.

Investment support services provided by InvestHK include supplying up-to-date information needeo make informed business decisions, such as corporate environment reports, profiles on economic sectors, comparative analyses of the costs of setting up business in HKC, vital government statistics and regulations, and key publications.

InvestHK also provides contacts, connects prospective business partners, and facilitates liaison with relevant government departments and commercial organisations.

Once companies arrive in HKC, InvestHK continues to support them with advice and assistance on such matters as work visas, incorporation, trademark registrations, and other administrative, legand financial matters.

Sector-specific experts in financial services; information technology; technology (especially electronics and biotechnology); telecommunications, media and multi-media; tourism and entertainment; consumer, retail and sourcing; business and professional services; and transportatiorovide consultation, regulatory advice, and logistics support guidance. InvestHK also gives advicn regional headquarters operations in all sectors.

InvestHK offers solution-oriented investment promotion and support services in a straightforward one-stop shop. In addition, there is a network of nine Investment Promotion Units operating in the Hong Kong Economic and Trade Offices in Brussels, Guangdong, London, New York, San Francisco, Sydney, Tokyo and Toronto, and the Office of the Government of the Hong Kong Special Administrative Region in Beijing. Investment Promotion Units are also planned for the

Hong Kong Economic and Trade Offices to be opened in Berlin, Chengdu and Shanghai (2006-07).

London

Hong Kong Economic and Trade Office
6 Grafton Street London W1S 4EQ United Kingdom
Tel : (44-20) 7499 9821
Fax : (44-20) 7409 0647
Email : general@hketolondon.gov.hk
Website : http://www.hketolondon.gov.hk

Toronto

Hong Kong Economic and Trade Office
174 St. George Street
Toronto
Ontario M5R 2M7
Canada
Tel : (1-416) 924 5544
Fax : (1-416) 924 3599
Email : info@hketotoronto.gov.hk
Website : http://www.hketo.ca

(ii) Incentives

There are no free trade zones or ‘special investment areas’ where special incentives are offered toreign investors established in HKSAR.

MOBILITY OF CAPITAL AND TECHNOLOGY

There are no regulations/institutional measures that limit capital exports or the outflow of foreign investment from HKSAR.

The import and export of specified strategic commodities as well as their technology are subject to licensing control under the Import and Export Ordinance (Cap. 60) and its “Import and Export (Strategic Commodities) Regulations” (Cap. 60G). In this regard, the HKSAR Government follows closely the control standards of various international non-proliferation regimes. In addition, the Weapons of Mass Destruction (WMD) (Control of Provision of Services) Ordinance (Cap. 526) prohibits the provision of services which will or may assist the development, production, acquisition or stockpiling of WMD in HKC or elsewhere. For the purpose of this Ordinance, the prohibition covers inter alia those services for transfer of technology related to WMD.

The contact point for further information is:

Strategic Trade Controls Branch
Trade and Industry Department
Tel: (852) 2398 5575
Fax: (852) 2396 3070
Email: stc@tid.gov.hk
Website: http://www.stc.tid.gov.hk

LABOUR, MOVEMENT OF PEOPLE, AND SENIOR MANAGEMENT AND BOARDS OF DIRECTORS

(i) Overview

The labour legislation of the HKSAR applies equally to local and foreign firms. The locamployees and expatriate staff of companies in the HKSAR enjoy the same degree of protection provided in the labour legislation.

Except for the wage level of foreign domestic helpers and low-skilled workers imported under the Supplementary Labour Scheme (whose pay cannot be below the Minimum Allowable Wage as sey the HKSAR Government and the median salary of comparable occupations respectively), the HKSAR Government does not regulate the wage levels of workers by legislative means.

Employers and employees are free to negotiate wage levels. The prevailing wage rates essentially reflect the situation of demand and supply in the labour market.

The Employment Ordinance (Cap. 57) prescribes the statutory minimum standards for employers to comply with in granting employment benefits (e.g. rest days, statutory holidays, paid annual leave, sickness allowance, etc.) to their employees, and provides for severance payment and long service payment payable by employers to employees. Under the Ordinance, employees may seek remedief reinstatement/re-engagement or terminal payments for unreasonable dismissal, unreasonable variation of the terms of employment contracts, and for unreasonable and unlawful dismissal.

The Employees’ Compensation Ordinance (Cap. 282) provides for payment of compensation to employees and family members of deceased employees, for injuries and fatalities caused by accidents arising out of and in the course of employment or by certain prescribed occupational diseases. The Ordinance applies to all workers who are employed under a contract of service or apprenticeship. All employers are required to possess valid insurance policies to cover their liabilities under the Ordinance and the common law.

The Factories and Industrial Undertakings Ordinance (Cap. 59) and the Occupational Safety and Health Ordinance (Cap. 509) and their subsidiary legislation prescribe minimum safety and health standards in workplaces. Employers are required to provide a safe and healthy workplace for their employees in such areas as safety management, accident prevention, fire prevention, first aid, work environment and hygiene.

The Disability Discrimination Ordinance (Cap. 487), the Sex Discrimination Ordinance (Cap. 480) and the Family Status Discrimination Ordinance (Cap. 527) prohibit discrimination in the contexf employment against persons with a disability at work, or on grounds of sex, marital status or pregnancy, or that of family status.

The labour legislation of the HKSAR applies equally to local and foreign firms.

(ii) Laws Relating to Labour Disputes / Relations

The contact point for further information is:

Labour Department
Tel: (852) 2717 1771
Fax: (852) 2544 3271
Email: enquiry@labour.gov.hk
Website: http://www.labour.gov.hk

(iii) Permits / Visas

For the purpose of making a business visit to HKSAR, most foreign nationals may enter visa-free, except for nationals of those countries who require a visit visa/permit for entry. During the visitors’ sojourn in HKSAR, they are permitted to conduct business activities such as attending meetings, conferences, seminars and trade fairs; negotiating and signing contracts; purchasing goods; giving advice on business matters; and making investments in the financial and property markets.

Foreign nationals wishing to take up employment or to establish or join in a business operation in HKSAR need to apply for an employment visa/permit. They must possess special skills, knowledge, or experience of value to and not readily available locally, or be in a position to bring substantial economic contribution.

The requirements mentioned above also apply to foreign technical and managerial personnel. Immediate family members such as spouse and unmarried dependent children of foreign nationals permitted to work or invest in HKSAR are normally allowed to take up residence as dependants.

The contact point for further information is: Employment and Visit Visas Section

Immigration Department
Tel: (852) 2294 2095
Fax: (852) 2136 6334
Email: enquiry@immg.gov.hk
Website: http://www.immd.gov.hk

(iv) Restrictions on Appointments by Foreign Investors to Senior Management Positions or the

Board of Directors

The chapters and sections of the Laws of Hong Kong as well as the rules mentioned above arvailable at http://www.legislation.gov.hk/eng/home.htm and http://www.hkex.com.hk/rule/listrules/MB%20Chapter%208%20(E).pdf.

GOVERNMENT PROCUREMENT

HKC has an open, fair, transparent and non-discriminatory procurement system that aims to ensure that all bidders are treated equally and impartially and the HKSAR Government gets the best valuor money. Tender specifications are drawn up according to the functions and performance of the products or services to be procured, not their brand or origin. All necessary information arrovided in the tender documents and all potential tenderers are given the same information.

Tender evaluation takes into account not just the price, but also compliance with user requirements, reliability of performance, quality, whole life costs, and after-sales support where applicable. All tenders are treated on equal footing and there is no discrimination between products or services ohe basis of origin. Normally the offer which is the most advantageous in terms of price and quality and conforms to the tender specifications will be selected for acceptance.

Open tendering is the norm whilst selective and prequalified tendering will be used in cases where is necessary to ascertain beforehand the financial and technical capabilities of the tenderers to deliver, such as in tenders for works contracts. Restricted or single tenders are used only in limited, approved circumstances, such as to ensure compatibility with existing equipment, for patented or proprietary products or to meet an urgent delivery schedule.

There is no restriction on the qualification or eligibility of bidders wishing to tender for goods and services invited by way of open tendering - except that as a condition for admission into the list of approved contractors for the purpose of tendering of works contracts, companies must set up a registered office in HKSAR, or appoint a local agent of good standing. HKC is a Party to the WTO Agreement on Government Procurement (GPA). All government departments and several other entities follow the Agreement in their procurement of goods and services above certain thresholds.

The homepage maintained by the Financial Services and the Treasury Bureau (The Treasury Branch) currently serves as the common entry point for government procurement information of HKC on the Internet. (See http://www.fstb.gov.hk/tb/eng/procurement/content.html) For general information on the government procurement system see the Guide to Government Procurement at http://www.fstb.gov.hk/tb/eng/procurement/tender04.html

There are no special laws or policies for specific sectors from government procurement perspective.

COMPETITION POLICY

HKC is fully committed to the promotion of free trade and competition. Our open economy, which exposes its traders and producers to acute international competition, is a good illustration of this policy.

HKC’s approach to promoting competition is grounded on the basic economic philosophy of minimum government intervention in market forces. As we are a small and externally-orienteconomy, we regard this approach as the best means to enhancing competition and efficiency on the one hand and keeping costs and prices down on the other. Where necessary, the HKSAR Government will use appropriate and pragmatic measures to address unfair business practices, safeguard competition and protect consumer interests.

The Competition Policy Advisory Group (COMPAG), which was established in 1997, provides a dedicated and high-level forum to review competition-related policy issues and examine the exteno which more competition should be introduced in the public and private sectors. It promulgated a "Statement on Competition Policy” in May 1998 to provide an overarching policy framework to guide sector-specific efforts to promote competition. COMPAG will seek to encourage businesectors to adhere to the guidelines and develop codes of conduct pertaining to their respective arean the basis of the guidelines. The guidelines are available at http://www.compag.gov.hk/reference/content.htm.

To ensure that the Government’s competition policy caters for present day’s circumstances aneets the needs of time to enable HKC to maintain its competitive edge, the HKSAR Government appointed in June 2005 an independent Competition Policy Review Committee (CPRC) to reviehe existing competition policy and the composition, terms of reference and operations of

COMPAG. The committee completed its review and released its report in June 2006. It recommended that HKC should introduce a cross-sector competition law targeting anti-competitive conduct and that such a law should be enforced by an independent Competition Commission.

Having reviewed the CPRC’s recommendations, in November 2006, the Government launched a public consultation exercise on the way forward for Hong Kong's competition policy by issuing a public discussion document. The consultation period ended in February 2007, and in March 2007 the Government issued a report on the outcome of the public consultation exercise, which noted that there was significant support for the introduction of a new cross-sector competition law and the establishment of a Competition Commission. The Government will shortly begin work on the preparation of a new competition law, having regard to the views expressed during the public consultation exercise.

More information can be found at http://www.compag.gov.hk/about/

INDONESIA

Acronyms

INTRODUCTION

On 29 March 2007 Indonesia adopted a new investment law — the Law Concerning Investment (LI) — which replaced the Foreign Investment Law No. 1 (1967) as amended by Law No. 11 (1970) and the Domestic Investment Law No. 6 (1967) as amended by Law No. 12 (1970) that primarily governed Indonesia’s investment regime.

The new law will provide impetus to investment growth through providing greater certainty to both foreign and domestic investors and a more transparent and streamlined regulatory environment. It in important step in the government’s strategy of investment-led growth. The implementing regulations are expected to be passed by Indonesia’s parliament before the end of 2007. Presidential Decree No. 76 of 2007 concerning Formulation Criteria and Requirement of List of Lines of Business Closed and Open With Conditions to Investment and Presidential Decree No. 77 of 2007 concerning List of Lines of Business Closed and Open With Conditions to Investment – which replaced Presidential Decree No. 96 of 2000 as amended by Presidential Decree No. 118 of 2000 concerning List of Business Fields Closed and Open to Investment on Certain Conditions.

Those new implementing regulations also replaced Presidential Decree No. 127 of 2001 concerning sectors reserved for Small-Scale Business and Sectors Open for Medium and Large-Scale Business with Patnership Condition.

Thus, the LI will introduce greater transparency. However, it is expected that sectoral ministries will continue to have a key role in setting standards for company operations.

Broadly, the LI should simplify registration and licensing processes, reducing the time taken for these to a maximum of 30 days, though in cases where an environmental permit is required it wilake longer. There are now only two main steps required: registration of a corporate entity through the Law and Human Rights Ministry and issue of a sectoral operating licence through the ministry with direct responsibility. Most this will occur at the local government level, which will also issuhe other required permits. To assist investors through the process, the LI provides for the establishment of integrated investment facilitation services set up by the provincial authorities. Where an investment project application straddles more than one region or is deemed strategically important, particularly in the natural resources, the BKPM (Indonesia’s Investment Coordinating Board) will adopt an integrated service role.

A new tax law, also of interest to investors, is expected to come into effect late in 2007 and should include inter alia the VAT and sales tax.

Article 3 of the LI sets out its principles and objectives.

(1) Investment shall be organized based on the principles of:

a. legal certainty;

b. openness;

c. accountability;

d. the equal treatment without discriminating the country of origin;

e. togetherness;

f. impartial efficiency;

g. sustainability;

h. environmental friendly;

i. independency; and

j. balance of progress and national economic unity

(2) The objective of investment organization shall be for, among others:

a. Increasing national economic growth;

b. Creating job opportunity;

c. Improving sustainable economic development;

d. Improving competitiveness of the national business sphere;

e. Increasing the capacity anf the capability of national technology;

f. Encouraging people economic development;

g. Processing economic potential into the real economic strength by using fund coming from both domestic and foreign countries; and

h. Improving the prosperity of the community

Article 4 of the LI outlines the basic principles of investment.

(1) Government stipulates the basic policy of investment for:

a. encouraging the creation of conducive national business climate for investment in order to strengthen the competitiveness of national economy; and

b. accelerating the increase in investment

(2) In making the basic policy set forth in paragraph (1) above, the Government is:

a. to provide the same treatment to any domestic and foreign investors, by continuously considering the national interest;

b. to warrant legal certainty, business certainty, and business security to any nvestors since the licensing process up to the end of investment activity pursuant to the rule of law; and

c. to give opportunity for development and to give protection to micro, small, and medium business, and cooperatives

(3) Basic policy set forth in paragraph (1) and (2) above shall be realized in form of General Plan of Investment

Article 5 of the LI describes the required status for foreign investors to invest in Indonesia.

(1) Domestic investment may be in the form of corporation, non-corporation or individual business, in accordance with the rule of law

(2) Unless otherwise stipulated by the law, any foreign nvestment shall be in the form of a limited liability company based on the law of the Republic of Indonesia

(3) Both domestic and foreign investors making an investment in the form of limited liability company shall be carried out by:

a. having shares when such company is established;

b. purchasing the shares; and

c. any other way pursuant to the rule of law

Article 6 of the LI provides for non-discrimination.

(1) The Government shall provide the same treatment to any investors originating from any countries making investment in Indonesia pursuant to the rule of law

(2) Treatment set forth stipulated in paragraph (1) shall not apply to investors of certain countries that have received privilege by virtue of an agreement with Indonesia.

SCREENING OF FOREIGN INVESTMENT

On 3 Juy 2007 Indonesia also adopted a new implementing regulations on list of business closend open with certain condition to investment (The Negative Investment List – NIL) – Presidential Decree No. 76 of 2007 concerning Formulation Criteria and Requirement of List of Lines of

Business Closed and Open With Conditions to Investment and Presidential Decree No. 77 of 2007 concerning List of Lines of Business Closed and Open With Conditions to Investment – which replaced Presidential Decree No. 96 of 2000 as amended by Presidential Decree No. 118 of 2000 concerning List of Business Fields Closed and Open to Investment on Certain Conditions. Thosew implementing regulations also replaced Presidential Decree No. 127 of 2001 concerninectors reserved for Small-Scale Business and Sectors Open for Medium and Large-Scale Business with Patnership Condition.

Article 5 of the NIL sets out the basic principles on formulating the lines of business closed and open with certain conditions to investment.

1. Simplifying;

2. In line with international agreement or commitments;

3. Transparency;

4. Law certainty;

5. The unity of Indonesian territory as a single market.

Article 8 of the NIL outlines the criteria on stipulating the lines of business closed to investment, to both foreign and domestic investment, based on: healthy, safety, defence and security, environment, and moral/culture (K3LM) and other national interest reasons.

Article 9 of the NIL points the criteria on stipulating the lines of business open to investment with certain conditions.

1. natural resources security;

2. security and encourage micro, small, medium business and cooperatives (UMKMK);

3. production and distribution control;

4. increase of technology capacity;

5. domestic capital participation;

6. in cooperation with business company appointed by Government.

List of Lines of Business regulated by Presidential Decree No. 77 of year 2007 concerning List of Lines of Business Closed and Open with Conditions to Investment. List of Lines of Business Closed to Investment

1. Gambling/ Casino

2. Historical and Archeological Relics (temples, palace, ancient inscriptions, burial place, archaic buildings, under sea discoveries, etc)

3. Museum

4. Traditional/ Customary Settlement

5. Monument

6. Pilgrimage Object (religious place, burial place, graveyard, etc)

7. Utilization (extraction) of Natural Coral

8. Fishing Species listed in the Appendix 1 CITES

9. Management and Operation of Station Monitoring Spectrum Radio Frequency and Satellite Orbit

10. Public Broadcasting Service (LPP) of Radio and Television

11. Provider and Operator of Terminal

12. Installation and Maintenance of Street Supports

13. Management and Operation of Weighing-Bridge

14. Operator of Motor Vehicle Type Test

15. Operator of Motor Vehicle Regular Test

16. Telecommunication/ Marine Aids to Navigation

17. Vessel Traffic Information System (VTIS)

18. Air Traffic Service (ATS) Provider

19. Chemical Industry Environmental Damageability, such as: Penta Chlorophenol, Dichloro Diphenyl Trichloro Ethane (DDT), Dieldrin, Chlordane, Carbon Tetra Chloride, Chloro Fluoro Carbon (CFC), Methyl Bromide, Methyl Chloroform, Halon, and the like

20. Chemical Industry Schedule-1 Chemical Weapon Convention (Sarin, Soman, Tabun Mustard, Levisite, Racine, Saxitoxin, VX, etc.)

21. Alcoholic Beverage Industry (Liquor, Wine, and Malt Beverage)

22. Chlor Alkali Industry with Mercury Contained Materials

23. Cyclamate and Saccharin Industry

24. Non-Ferrous Metal Industry (Lead)

25. Marijuana Cultivation

List of Lines of Business Open to Investment with Certain Conditions Reserved for Small and Medium Scales Enterprises

1. Small-Scale Electric Power Plant (up to 10 MW)

2. Travel Agent

3. Art Studio

4. Tourism Service

5. Other Plantation Forrest Development (Sugar Palm, Candlenut, Tamarind, Raw Material of

Charcoal, Cinnamon, etc)

6. Swallow Nest Business in the Surroundings

7. Sawn Timber Industry (Production Capacity up to 2000M3 / Year

8. Primary Industry of Rattan Processing

9. Semi-Finished Product Industry from Chip Wood

10. Primary industry of other non-wood forest products processing (Pine Resin, Bamboo, Essential Oil)

11. Wild Plants and Wild Animal Catching (TSL) from Natural Habitat

12. Marine Capture Fisheries by Using Fishing Vessel in a size up to 30 GT, within Waters Areas up to 12 Mil or less.

13. Fishing in Public Waters

14. Fishery Products Processing (UPI), Fermentation, Reduction/ Extraction, Processing of Surimi and Fish Jelly

15. Community Broadcasting Service (LPK) of Radio and Television

16. Courier Services / Custody Service:

- Printing Materials Deliveries

- Newspaper

- Parcels

- Packages

- Money Transfer (Small Scale)

17. Telecommunication Services covering:

- Telecommunication Stall

- Internet Stall

- Cable Installation to Houses and Buildings

18. Construction Service (Construction Services Contractor) for Small Scale

Excavating and Earth Moving Work

Site Preparation Work For Mining

Scaffolding Work

Demolition Work

For Multi Dwelling Buildings

For Warehouse and Industrial Buildings

For Commercial Buildings

For Public Entertainment Buildings

For Hotel, Restaurant and Similar Buildings

For Educational Buildings

For Health Buildings

For Highway (except elevated highway) Streets Roads, Railway and Airfield Runways

For Bridges, Elevated Highways, Tunnels

For Waterways, harbor, dams, and other water works

For Long Distance Pipelines, Communication and Power lines (cables) For Local Pipelines and Cables, Ancillary Work

For Construction For Sports and Recreation

For Stadium and Sports Grounds

For Other Sport and Recreation Installation

For Engineering Works n.e.c

Assembly and Erection of Prefabricated Construction

Foundation Work, incl. pile driving

Streets Bending and Erection (incl. welding)

Gas Fitting Construction Work

Fire Alarm Construction Work

Burglar Alarm System Construction Work

Lift and Escalator Construction Work

Renting Service Related to Equipment for Construction or Demolition of Buildings or Civil

Engineering Work With Operator

Site Investigation Work At Construction

Site Formation and Clearance Work For One and Two Dwelling Buildings Water Well Drilling

Roofing and Water Proofing

Concrete Work

Masonry Work

Other Special Trade Construction Work

Heating, Ventilation and Air Conditioning Work Water Plumbing and Drain Laying Work Electrical Wiring and Fitting Work

Residential Antenna Construction Work

Other Electrical Construction Work

Insulation Work(Electrical Wiring, Water, Heat, Sound) Fencing and Railing Construction Work

Other Installation Work

Other Installation Work n.e.c

Glazing Work and Window Glass Installation Work

Plastering Work

Painting Work

Ground Floor and Wall tiling Work

Other Floor Laying, Wall Covering and Wall Papering Work

Wood and Metal Joinery and Carpentry Work Interior Fitting Decoration Work Ornamentation Fitting Work

Other Building Completion and Finishing Work

19. Business Services / Construction Services Consultant for Small Scale Public Works

Advisory and Pre Design Architectural Service

Architectural Design Services

Contract Administration Service

Combined Architectural Design and Administration Service

Other Architectural Service

Engineering Design Service for the Construction of Foundation and Building Structures

Engineering Design Service for the Construction of Civil Engineering Works Other Engineering Services during the Construction and Installation Phases Other Engineering Services

Integrated Engineering and mgt Service for Water Supply and Sanitation Work Turnkey

Projects

Integrated engineering for the Construction of manufacturing Turnkey Projects

Integrated Engineering for Other Turnkey Projects

Urban Planning Service Landscape Architectural Service Composition and Purity

Testing and Analysis Service

Testing and Analysis of Integrated Mechanical System

Technical Inspection System

Other Technical Testing and Analysis Service

Landscape Architectural Service

20. Public transportation a. Route

- City/ Village Bus b. Non-Route

- Taxi

21. Public Shipping

22. Salting/drying industry of fish and other waters biota and boiling industry of fish and other waters biota

23. Industry of mills dying from natural fiber or synthetic fiber to be a motif/ dye, tie-dying material using machines powered by hand

24. Hand-made Batik Industry

25. Smoking Rubber Industry

26. Hand-tools industry being manufactured in manual or semi-mechanic basis for carpentry and cutting

27. Clay construction material industry either with or without lazing for households needs

28. Motorcycle maintenance and reparation services except those integrated in the sales businesf motorcycle (agent/distributor) and reparations industry for personal things and households.

29. Craftsmanship industry having typical of regional culture treasure and value or art that uses natural as well as artificial raw materials

30. Hand-tools industry for agricultural required for the land preparation, production process, harvesting, post harvest, and processing except mattocks and spades.

31. Brown Sugar

32. Foods processing from grains and tuberoses, sago, melinjo (three with edible seeds [gnetum genemon]) and copra.

33. Peeling and cleaning of tuberoses.

34. Tobacco drying and processing industry.

35. Paddy cultivation (less than or equal to 25 Ha)

36. Cassava cultivation (less than or equal to 25 Ha)

37. Corn cultivation (less than or equal to 25 Ha)

38. Cultivation of other foods plantation besides cassava and corn in an area less than or equal to 25 Ha

39. Breeding and cultivating pigs in a quantity less or equal to 125 pigs

40. Breeding and cultivating non-pedigreed chicken and its cross-breeding

41. Plantation business less than 25Ha.

42. Processing industry of plantation products bellow certain capacity in accordance with

Ministerial Regulation of Agriculture No. 26/2007

43. Plantation seedbed industry in an area less than 25Ha

Partnership

1. Cocoon / silkworm cocoon business (natural silkworm)

2. Bees business

3. Rattan business

4. Bamboo business

5. Aloe business

6. Seedlak business

7. Alternative Food Plant (Sago) Business

8. Pine Resin Business

9. Resin Business

10. Apocynaceae Business

11. Essential Oil Business

12. Seawater Fish Breeding

13. Seawater Fish Hatchery

14. Freshwater Fish Breeding

15. Brackish Water Fish Breeding

16. Brackish Water Fish Hatchery

17. Freshwater Fish Hatchery

18. Fishery products processing (UPI) of fish salting/ drying, smoking and boiling and Fishery

19. Marketing and distribution of fishery

20. - Operator of telephony added value services a. Call centr. Content centre (ring tone, SMS premium, etc)

c. Other telephony added value services

21.- Multimedia Service Operator a. Internet Access (ISP)

22. Clove cigarette, plain cigarette and other cigarette industries

23. Preserved fruits and vegetables industry

24. Foods processing from grains and tuberoses, sago, melinjo (three with edible seeds [gnetum genemon]) and copra.

25. Batik industry

26. Rattan Business

27. Finished goods of chip wood industry

28. Essential Oil Industry

29. Industries of hoods from clay for building materials, goods from lime and goods from cement

30. Silver Jewelry Industry

31. Wood boat industry for marine recreation and for fishing including its tools and equipment

32. Agricultural machines manufacture applying medium technology such as unhusked thresher, power corn sheller and handy tractor.

33. Other Craftsmanship Industry

34. Industry of nails, nuts and screws, industry of component and spare parts for motor driver, industry of pumps and compressor, industry of component and equipment of two and three wheels motor vehicle, industry of bicycle and pedicab component and spare parts.

35. Milk powder and sweetened condensed milk procession industry

36. Agriculture, plantation and fishery business in within transmigration area

Capital Ownership

Limitation of Foreign Capital Ownerhip

1. Offshore Oil and Gas Drilling Services outside Eastern Indonesia Area (Max. 95%)

2. Onshore Oil and Gas Drilling Services (Max. 95%)

3. Operation and Maintenance Services for Oil and Gas Facilities (Max. 95%)

4. Engineering Procurement Construction (EPC) Services (Max. 95%)

5. Power Plant (Max. 95%)

6. Power Plant Transmission (Max. 95%)

7. Electric power consultant (Max. 95%)

8. Construction and Installation of Electric Power Instrument (Max. 95%)

9. Maintenance and Operation Electric Power Instrument (Max. 95%)

10. Development of Technology of Energy and Power Plant Equipment Supplies (Max. 95%)

11. Distribution of Electric Power (Max. 95%)

12. Nuclear Power Plant (Max. 95%)

13. Art Gallery (Max 50%)

14. Art Performance Building (Max 50%)

15. *)Hotel (1-2 Stars) (Max 50%)

16. *)Non-Star Hotel (Max 50%)

17. *)Other Accommodation Services (Motel and Lodging Services) (Max 50%)

18. *)Homestay/similar lodging (Max 50%)

19. *)Catering (Max 50%)

20. *)SPA (Max 50%)

21. *)Game Maker (Max 50%)

22. *)Bar/ Café/ Singing Room (Karaoke) (Max 50%)

23. *)Restaurant (Max 50%)

24. *) Recreation and Entertainment Operator (recreation centre, swimming pool, natural spring water, fishing pool, game center, bowling alley, billiard house, night club, discotheque, massage parlor, steam-bath parlor) (Max 50%)

25. *)Travel Bureau (Inbound and Outbound Tour Operator) (Max 50%)

26. *)Professional Convention Organizer ( PCO) (Max 50%)

27. *)Impresario Services (Max 50%)

28. *)Cultural Tourism Object Operator (Max 50%)

29. *)Natural Tourism Object Operator Outside Conservation Area (Max 50%)

30. Other Forestry Services, in this case is carbon trade (Max 50%)

31. Natural tourism operator in the form of developing facilities, activities and echo-tourism within forest area (Max 25%)

32. Hunting in Buru Park and Buru Block (Max 49%)

33. Wild Plants Cultivating and Wild Animals Breeding (Max 49%)

34. Coral Breeding/ Cultivating (Max 49%)

35. Pharmaceutical Industry (Max 75%)

-Medicinal Drug Industry

-Medicinal Raw Material

36. *)Private Hospital Services (Specialist /Sub-Specialist) (Max 65%)

37. Clinic Specialized Medical Services (Max 65%)

38. Clinic Specialized Dental Services (Max 65%)

39. Supporting Health Services (Clinic Laboratory) (Max 65%)

40. Other Hospital Service (Clinic Mental Rehabilitation) (Max 65%)

41. Health care support services (Medical Check-up Clinic) (Max 65%)

42. *)Nursing Services (Max 49%)

43. *)Heath care support service (Rental Medical Equipment) (Max 49%)

44. Test laboratory services for the calibration, maintenance and reparation of medical equipment (Max 49%)

45. Heath care support service (Hospital Management Services) (Max 65%)

46. Heath care support service (assistance services in emergency medical evacuation and human evacuation) (Max 65%)

47. Acupuncture services (Max 49%)

48. Leasing (Max 85%)

49. Non-Leasing Financing (Max 85%)

50. Ventura Capital (Max 85%)

51. General Insurance Company (Max 80%)

52. Life Insurance Company (Max 80%)

53. Reinsurance Company (Max 80%)

54. Insurance Broker Company (Max 80%)

55. Reinsurance Broker Company (Max 80%)

56. Insurance Appraisal Company (Max 80%)

57. Actuary Consultant Company (Max 80%)

58. Insurance Agent Company (Max 80%)

59. Foreign Exchange Bank (Max 99%)

60. Non Foreign Exchange Bank (Max 99%)

61. Syariah Bank (Max 99%)

62. Money Market Company (Max 99%)

63. Telecommunication Network Operator a. Fixed Network Operator

- Local cable-based, with circuit switched or packet switched technology (Max 49%)

- radio-based, with circuit switched or packet switched technology (Max 49%)

b. Close-Fixed Network Operator (Max 65%)

c. Mobile Network Operator

- Cellular (Max 65%)

- Satellite (Max 65%)

64. Multimedia Service Operator

- data communication system services (Max 95%)

- Internet interconnection service (NAP) (Max 65%)

- Telephony internet services for public demands (Max 49%)

- Other multimedia services (Max 49%)

65. Establishment of Telekomunikasi Instrument Test Institute (laboratory test) (Max 95%)

66. Construction Services (Construction contractor services) Non-Small Scale (Max 55%) Excavating and earthmoving work

Site Preparation work for mining

Scaffolding work

Demolition work

For multi dwelling buildings

For warehouse and industrial buildings

For commercial buildings

For Public entertainment buildings

For hotel, restaurant and similar buildings

For education buildings

For health buildings

For other buildings

For highways (except elevated highway ), streets, roads, railways and airfield runway

For bridges, elevated highways, tunnels, harbor, dams and other waterworks

For long distance pipelines, communication and power-lines (cables)

67. Construction Services (Construction contractor services) (Max 55%) Non-Small Scale

Site Investigation Work at Construction

Streets bending and erection (incl. Welding)

Gas fitting construction work fire alarm construction work

Burglar alarm system construction work

Lift and escalator construction work

Renting service related to equipment for construction or demolition of buildings or civil engineering work with operator

Site Investigation work at construction

Site formation and clearance work

For one and Two Dwelling Buildings

Water well drilling

Roofing and Water Proofing

Concrete work

Masonry work

Other special trade construction work

Heating, ventilation and air conditioning work Water plumbing and drain laying work Electrical wiring and fitting work

Residential antenna construction work

Other electrical construction work

Insulation work (electrical wiring, water, heat, sound) Fencing and railing construction work

Other installation work

other installation work n.e.c

Glazing work and window glass installation work

Plastering work

Painting work

Ground floor and wall tiling work

Other floor laying, wall covering and wall papering work

Wood and metal joinery and carpentry work Interior fitting decoration work Ornamentation fitting work

Other building completion and finishing work.

68. Business services/ construction consultant services (Max 55%) Non-Small Scale

Advisory and pre design architectural service

Architectural design service

Contract administration service

Combined architectural design and administration service

Other architectural service

Engineering design service for the construction of foundation and building structures

Engineering design service for the construction of civil engineering work Other engineering service during the construction and installation phases Other engineering service during the construction

Integrated engineering for transportation infrastructure turnkey projects

Integrated engineering and mgt service for water supply and sanitation works turnkey projects

Integrated engineering for the construction of manufacturing turnkey projects

Integrated engineering for other turnkey projects

Urban planning service

Landscape Architectural service

Composition and purity testing and analysis service of physical properties Testing and analysis of integrated mechanical and electrical systems Technical inspection systems

Other technical testing and analysis service

69. Business services/ construction consultant services (Max 55%) Non-Small Scale

Landscape architectural service

70. Toll Road Operator (Max 95%)

71. Drinking Water Operator (Max 95%)

72. Basic and Middle Education (Max 49%)

73. High Education (Max 49%)

74. Non-Formal Education (Max 49%)

75. Business and management consultation services (Max 49%)

76. Direct selling through marketing network developed by business partner (Direct Selling) (Max 60%)

77. Crossing Transport Services (Max 49%)

78. River and Lake Transport Services with Boat < 30 GT (Max 49%)

79. ASDP Facilities (Max 49%)

80. General Cargos Transport Services (Max 49%)

81. Hazardous Materials Transport Services (Max 49%)

82. Specific-Cargos Transport Services (Max 49%)

83. Container Transport Services (Max 49%)

84. Heavy Equipment Transport Services (Max 49%)

85. Supporting services at terminal (Max 49%)

86. Scheduled Public Domestic Transport Services (Max 49%)

87. Scheduled Pioneer Domestic Air Transport Services (Max 49%)

88. Scheduled International Transport Services (Max 49%)

89. Non-Scheduled Public Domestic Air Transport Services (Max 49%)

90. Non-Scheduled Pioneer Domestic Air Transport Services (Max 49%)

91. Special Air Transport Services for Sky Activities: Spraying and Pulverizing (Max 49%)

92. Special Air Transport Services for Sky Activities: Photography, Survey and Mapping (Max 49%)

93. Special Air Transport Services for Sport (Max 49%)

94. Special Air Transport Services for Medical Evacuation (Max 49%)

95. Special Air Transport Services for Crews Training (Max 49%)

96. Airport Services (Max 49%)

97. Transportation Arrangement Services (Max 49%)

98. Air Forwarding Services (Max 49%)

99. General Sales Agent (GSA) of Foreign Air Transport Services (Max 49%)

100. Supporting Services for Flight Activities (Max 49%)

101. Domestic Sea Transportation, International (Max 49%)

102. Loading/ Unloading (Max 49%)

103. Port facilities services (jetty, building, delay time of vessel, container terminal, liquid-bulk terminal, dry-bulk terminal and RO-RO terminal) (Max 49%)

104. Providing port facilities in the form of waste reception facilities (Max 49%)

105. Salvage service and/or under water work (PBA) (Max 49%)

106. Car maintenance and reparation (Max 49%)

107. Paddy cultivation (more than 25 Ha) (Max 95%)

108. Corn cultivation (more than 25 Ha) (Max 95%)

109. Cassava cultivation (more than 25 Ha) (Max 95%)

110. Food plants cultivation other than cassava and corn (more than 25Ha) (Max 95%)

111. Seedling paddy (rice) and non-staple food crops (Max 95%)

112. Plantation business for more than 25Ha or more, until certain area in accordance with

Minister Regulation of Agriculture No. 26 of 2007, without processing unit (Max 95%)

113. Processing plantation products industry (with equal capacity or exceeding certain capacitn accordance with Ministerial Regulation of Agriculture No. 26 of 2007) (Max 95%)

114. Agriculture business for 25Ha or more which is integrated with processing unit with equal capacity or exceeding certain capacity in accordance with Ministerial Regulation of Agriculture No. 26 of 2007 (Max 95%)

115. Plantation seedbed industry in an area of 25Ha or more (Max 95%)

116. *)Plantation and/or Processing Industry of Palm Products above 25Ha and/or above certain capacity in accordance with Ministerial Regulation of Agriculture No. 26 of 2007 (Max 95%)

117. *)Raw material industry for explosives (Ammonium Nitrate) (Max 49%)

118. *) Explosives industry and its component for industry demands (commercial) (Max 49%)

119. Placement of Indonesian workers domestically (such as registration, recruitment, formalities, shelter, orientation of pre-departure, departure, assignment and repatriation of workers) (Max 49%)

120. Job Training (to provide, obtain, increase and develop work competence, productivity,

discipline, conduct and ethos of work which among others covers vocational of technique and engineering, commerce, language, tourism, management, information technology, art and agriculture directed to help youth generation entering the world of work) (Max 49%)

*) Remarks: in addition to the regulation as referred to herein, the said Lines of Business remain relation with other regulations.

Certain Locations

1. *)Hotel (1-2 Stars), [No conflict with PERDA (Regional Regulation)]

2. *)Non-Star Hotel, [No conflict with PERDA]

3. *)Other Accommodation Services (Motel and Lodging Services), [No conflict with PERDA]

4. *)Homestay/similar lodging, [No conflict with PERDA]

5. *)Catering, [No conflict with PERDA]

6. *)SPA, [No conflict with PERDA]

7. *)Game Maker, [No conflict with PERDA]

8. *)Bar/ Café/ Singing Room (Karaoke), [No conflict with PERDA]

9. *)Restaurant, [No conflict with PERDA]

10. *)Recreation and Entertainment Operator (recreation centre, swimming pool, natural spring water, fishing pool, game center, bowling alley, billiard house, night club, discotheque, massage parlor, steam-bath parlor), [No conflict with PERDA]

11. *)Travel Bureau (Inbound and Outbound Tour Operator), [No conflict with PERDA]

12. *)Professional Convention Organizer ( PCO), [No conflict with PERDA]

13. *)Impresario Office Services, [No conflict with PERDA]

14. *)Cultural Tourism Object Operator, [No conflict with PERDA]

15. *)Private hospital services (Specialist/ Sub-specialist), [Medan and Surabaya]

16. *)Nursing Services, [Medan and Surabaya]

17. *)Heath Care Support Services (Rental Medical Equipment), [Capital City of Province in Indonesia]

18. Trading in large scale, [In conformity with laws and regulations in spatial]