After the registration, all new investments require industrial approvals and clearances from relevant authorities, including regulatory bodies and local governments. In December , the Modi government also approved the formation of an Inter-Ministerial Committee, led by the DPIIT, to help track investment proposals that require inter-ministerial approvals.
Business and government sources report this committee meets informally and on an ad hoc basis as they receive reports from business chambers and affected companies of stalled projects. Bureau of Economic Analysis, Indian direct investment into the U. RBI contends that the growth in magnitude and spread in terms of geography, nature and types of business activities of ODI from India reflects the increasing appetite and capacity of Indian investors.
This followed a string of rulings against Indian firms in international arbitration. The new model BIT does not allow foreign investors to use investor-state dispute settlement methods, and instead requires foreign investors to first exhaust all local judicial and administrative remedies before entering into international arbitration.
The government has served termination notices to roughly 58 countries, including EU countries and Australia. Currently 14 BITs are in force. The TECC is the representative office of the government in Taipei in India and is responsible for promoting bilateral relations between Taiwan and India. Policies pertaining to foreign investments are framed by DPIIT, and implementation is undertaken by lead federal ministries and sub-national counterparts. As of February 1, , these platforms may not offer exclusive discounts; sell products from companies in which they own a stake; or have any vendor who sources more than 25 percent of their retail stock from a single source.
The Guidelines were issued without prior notification or opportunity to provide public comments. The refusal of Indian authorities to extend the deadline for implementation beyond just over one month, further exacerbated the undue and unnecessary disruption to U. The Indian Accounting Standards are named and numbered in the same way as the corresponding International Financial Reporting Standards. The National Advisory Committee on Accounting Standards recommends these standards to the Ministry of Corporate Affairs, which all listed companies must then adopt.
Dispute resolution in India has been through tribunals, which are quasi-judicial bodies. India has been a member of the WTO since , and generally notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade; however, at times there are delays in publishing the notifications.
The Governments of India and the United States cooperate in areas such as standards, trade facilitation, competition, and antidumping practices. India adopted its legal system from English law and the basic principles of the Common Law as applied in the UK are largely prevalent in India. However, foreign companies need to make adaptations per Indian Law and the Indian business culture when negotiating and drafting contracts in India to ensure adequate protection in case of breach of contract.
The Indian Judicial Structure provides for an integrated system of courts to administer both central and state laws. The legal system has a pyramidal structure, with the Supreme Court at the apex, and a High Court in each state or a group of states which covers a hierarchy of subordinate courts. Article of the Constitution of India provide that a decision declared by the Supreme Court shall be binding on all courts within the territory of India.
Apart from courts, tribunals are also vested with judicial or quasi-judicial powers by special statutes to decide controversies or disputes relating to specified areas. Courts have maintained that the independence of the judiciary is a basic feature of the Constitution, which provides the judiciary institutional independence from the executive and legislative branches.
These notifications are effective on the date of the issued press release, unless otherwise specified. The judiciary does not influence FDI policy measures. The U. Government continues to urge the Government of India to foster an attractive and reliable investment climate by reducing barriers to investment and minimizing bureaucratic hurdles for businesses. The central government has been successful in establishing independent and effective regulators in telecommunications, banking, securities, insurance, and pensions.
Mergers meeting certain thresholds must be notified to the CCI for its review. Upon receipt of a complaint, or upon its own enquiry, if the CCI is of the opinion that there exists a prima facie case, it must direct its investigative arm the Director General to investigate. Currently the Director General is required to seek the approval of the local chief metropolitan magistrate for any search and seizure operations. The RBI, which regulates the Indian banking sector, is also held in high regard.
Some Indian regulators, including SEBI and the RBI, engage with industry stakeholders through periods of public comment, but the practice is not consistent across the government. The government has taken steps to provide greater clarity in regulation. India also has transfer pricing rules that apply to related party transactions. The government implemented the Goods and Services Tax GST in July , which reduced the complexity of tax codes and eliminated multiple taxation policies.
It also enacted the Insolvency and Bankruptcy Code in , which offers uniform, comprehensive insolvency legislation for all companies, partnerships and individuals other than financial firms. Legislation approved by the Central Government is used as guidance by the State Governments. Land acquisition in India is governed by the Land Acquisition Act , which entered into force in , but continues to be a complicated process due to the lack of an effective legal framework.
The displacement of poorer citizens is politically challenging for local governments. India made resolving contract disputes and insolvency easier with the establishment of a modern bankruptcy regime with the enactment in and subsequent implementation of the Insolvency and Bankruptcy Code IBC.
The World Bank Report noted that the law has introduced the option of insolvency resolution for commercial entities as an alternative to liquidation or other mechanisms of debt enforcement, reshaping the way insolvent companies can restore their financial well-being or close down. The Code has put in place effective tools for creditors to successfully negotiate and effectuated greater chances for creditors to realize their dues.
As a result, the overall recovery rate for creditors jumped from India enacted the Arbitration and Conciliation Act in , based on the United Nations Commission on International Trade Law model, as an attempt to align its adjudication of commercial contract dispute resolution mechanisms with most of the world. Judgments of foreign courts are enforceable under multilateral conventions, including the Geneva Convention.
The government established the International Center for Alternative Dispute Resolution ICADR as an autonomous organization under the Ministry of Law and Justice to promote the settlement of domestic and international disputes through alternate dispute resolution.
It is not unusual for Indian firms to file lawsuits in domestic courts in order to delay paying any arbitral award. Seven cases are currently pending, the oldest of which dates to The office would provide an arbitration forum to match the facilities offered at The Hague but at a lower cost. In the government also presented amendments to the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act to establish specialized commercial divisions within domestic courts to settle long-pending commercial disputes.
Since formal dispute resolution is expensive and time consuming, many businesses choose methods, including ADR, for resolving disputes. The most commonly used ADRs are arbitration and mediation. Experts agree that the ADR techniques are extra-judicial in character and emphasize that ADR cannot displace litigation. In cases that involve constitutional or criminal law, traditional litigation remains necessary.
An increasing backlog of cases at all levels reflects the need for reform of the dispute resolution system, whose infrastructure is characterized by an inadequate number of courts, benches and judges, inordinate delays in filling judicial vacancies, and only 14 judges per one million people. Almost 25 percent of judicial vacancies can be attributed to procedural delays. According to the World Bank, it used to take an average of 4. The introduction and implementation of the Insolvency and Bankruptcy Code IBC in led to an overhaul of the previous framework on insolvency and paved the way for much-needed reforms.
The IBC focused on creditor-driven insolvency resolution, and offers a uniform, comprehensive insolvency legislation encompassing all companies, partnerships and individuals other than financial firms. The law, however, does not provide for U. The government is proposing a separate framework for bankruptcy resolution in failing banks and financial sector entities. Supplementary legislation would create a new institutional framework, consisting of a regulator, insolvency professionals, information utilities, and adjudicatory mechanisms that would facilitate formal and time-bound insolvency resolution process and liquidation.
These amendments were geared at improving the effectiveness of debt recovery laws and helping address the problem of rising bad loans for domestic and multilateral banks. It will also help banks and financial institutions recover loans more effectively, encourage the establishment of more asset reconstruction companies ARCs and revamp debt recovery tribunals.
The regulatory environment in terms of foreign investment has been eased to make it investor- friendly. The measures taken by the Government are directed to open new sectors for foreign direct investment, increase the sectoral limit of existing sectors and simplifying other conditions of the FDI policy. The Indian government does issue guarantees to investments but only in case of strategic industries.
The government established several foreign trade zone initiatives to encourage export-oriented production. In , the Indian government announced guidelines for the establishment of the National Industrial and Manufacturing Zones NIMZs , envisaged as integrated industrial townships to be managed by a special purpose vehicle and headed by a government official. So far, three NIMZs have been accorded final approval and 13 have been accorded in-principle approval. They also receive exemptions from industrial licensing requirements and enjoy tax holidays and other tax breaks.
EPZs are industrial parks with incentives for foreign investors in export-oriented businesses. STPs are special zones with similar incentives for software exports. EOUs are industrial companies, established anywhere in India, that export their entire production and are granted the following: duty-free import of intermediate goods, income tax holidays, exemption from excise tax on capital goods, components, and raw materials, and a waiver on sales taxes. Pe r formance and Data Localization Requirements.
Preferential Market Access PMA for government procurement has created substantial challenges for foreign firms operating in India. In December , PMA guidelines were revised and reflect the following updates:. The Government of India allows for percent FDI in research and development through the automatic route. The RBI mandate went into effect on October 15, , despite repeated requests by industry and the U. In addition to the RBI data localization directive for payments companies and banks, the government formally introduced its draft Data Protection Bill in December , which contains restrictions on all cross-border transfers of personal data in India.
Property rights are generally well-enforced in such places, and district magistrates—normally senior local government officials—notify land and property registrations. Banks and financial institutions provide mortgages and liens against such registered property. In other urban areas, and in areas where illegal settlements have been built up, titling often remains unclear. The program requires the government to survey an area of. The program requires the government to survey an area of approximately 2.
Initially scheduled for completion in , the program is now scheduled to conclude in Traditional land use rights, including communal rights to forests, pastures, and agricultural land, are sanctioned according to various laws, depending on the land category and community residing on it. In , India introduced its first regulator in the real estate sector in the form of the Real Estate Act. The Real Estate Act, aims to protect the rights and interests of consumers and promote uniformity and standardization of business practices and transactions in the real estate sector.
Foreign and domestic private entities are permitted to establish and own businesses in trading companies, subsidiaries, joint ventures, branch offices, project offices, and liaison offices, subject to certain sector-specific restrictions. The government does not permit foreign investment in real estate, other than company property used to conduct business and for the development of most types of new commercial and residential properties.
They can also participate in pre-IPO placements undertaken by such real estate companies without regard to FDI stipulations. To establish a business, various government approvals and clearances are required, including incorporation of the company and registration under the State Sales Tax Act and Central and State Excise Acts. Businesses that intend to build facilities on land they own are also required to take the following steps: register the land; seek land use permission if the industry is located outside an industrially zoned area; obtain environmental site approval; seek authorization for electricity and financing; and obtain appropriate approvals for construction plans from the respective state and municipal authorities.
Promoters must also obtain industry-specific environmental approvals in compliance with the Water and Air Pollution Control Acts. Petrochemical complexes, petroleum refineries, thermal power plants, bulk drug makers, and manufacturers of fertilizers, dyes, and paper, among others, must obtain clearance from the Ministry of Environment and Forests.
The Foreign Exchange Management Regulations and the Foreign Exchange Management Act set forth the rules that allow foreign entities to own immoveable property in India and convert foreign currencies for the purposes of investing in India. Foreign investors operating under the automatic route are allowed the same rights as an Indian citizen for the purchase of immovable property in India in connection with an approved business activity.
In India, a registered sales deed does not confer title ownership and is merely a record of the sales transaction. It only confers presumptive ownership, which can still be disputed. Accordingly, before purchasing land, buyers should examine all documents that establish title from the original owner. Many owners, particularly in urban areas, do not have access to the necessary chain of documents. This increases uncertainty and risks in land transactions. The CASE system enables patent offices to securely share and search examination documentation related to patent applications, and DAS provides details of the types of applications managed by individual digital libraries together with any operational procedures and technical requirements.
India has made efforts to streamline its IP framework through administrative actions and awareness programs and is in the process of reducing its decade-long backlog of patent and trademark applications. Without an active copyright board in place to determine royalty rates for authors, weak enforcement of copyright regulations, and the widespread issue of pirated copyrighted materials are all contributing factors to why copyright law requires more emphasis on implementation. The movie industry identified new illegal cam cording hubs of operation in Indore and Noida, and the Telangana police cracked down on two syndicates that used under-age children to illegally record movies.
Industry groups welcomed this move, which included criminal and financial penalties for offenders. The bill is now awaiting Parliamentary approval. However, the penalties for infringement and IP theft are significantly weakened from those suggested in the initial draft legislation in The memo places internet service providers on par with radio broadcasters, allowing them to provide music on their websites by paying the same royalties to copyright societies, two percent of ad revenues.
The industry argues that most of the websites have little to no ad revenue, and some may be hosted on servers outside India, which makes collection of royalties challenging. However, in February , India issued a notice to all event organizers that they would have to pay music royalties to artists when played at an event. Wynk Music LTD Airtel that statutory licensing under section 31D of the Copyright Act does not cover Internet transmissions streaming , but rather is limited to traditional television and radio broadcasts.
The Court also stated that Section 31D was an exception to copyright and must be distinctly interpreted. However, in , the DPIIT proposed amendments to the Copyright Rules that would, in contravention to the plain statutory text, broaden the scope of the statutory licensing exception to encompass not only radio and television broadcasting, but also Internet broadcasting.
In April , the Delhi High Court judgment struck down a patent held by Monsanto in a summary judgment. In a series of decisions on this matter, most recently in August, , the Supreme Court overturned Delhi High Court Divisional Bench judgement of April and reinstated the March Single Judge decision, pointing to the Divisional Bench failing to have confined itself to the examination of the validity of the order of injunction granted by the Single Judge decision.
Issues remain complex and unsettled. The GM Licensing Guidelines remain in draft form but could have significant and wide-ranging implications for Monsanto and many other IP holders. Moreover, follow-on decisions and administrative legal actions could set important Indian legal precedents for stopping a patent, the role of the PVPFRA and its relationship to biological innovation, the application of administrative regulations regarding price and term of a patent, and the interplay between the Patents Act, PVPFRA, and the Biodiversity Act.
It is worth noting that in December , Monsanto terminated more than 40 of its license agreements with Indian companies for nonpayment of licensing fees. Other biotech-led industries are also following this development and are greatly concerned, as the action reaches beyond compulsory licensing under the Patents Act. Indian law still does not provide any statutory protection for trade secrets.
After a workshop conducted in October , DIPP agreed to provide guidance to start-ups on trade secrets. The Designs Act allows for the registration of industrial designs and affords a year term of protection. Other long-standing concerns remain. All these measures across various sectors create uncertainty at best, and at worst perceptions of a hostile business environment. This is implemented by filing a required annual form called Form 27 on patent working.
The current requirement to file Form 27 is not only onerous and costly for patentees and ill-suited to the reality of patented technology, it also hinders any incentives to invent and advance innovation. Several cases are pending before the Delhi High Court surrounding the issue of royalty payments for standard essential patents. Facebook has challenged the judgment before a Division Bench. In , we observed that public notice and comment procedures on policy — including on IPR related issues — were often not followed.
Stakeholders were not properly notified of meetings with agencies to discuss concerns, including for changes to critical issues like price controls on medical devices or changes to key policies. As a result, in April , the MOHFW issued a notification that amended the manufacturing license form Form 44 , taking out any requirement to notify the regulator if the drug, for which manufacturing approval was being sought, is under patent or not.
Industry contracts point to the clear benefit this change has delivered to the Indian generic pharmaceutical industry, which now has an even easier path to manufacture patented drugs for years, while IP holders are forced to discover the violation and challenge the infringement in separate courts.
These negotiations will have an impact on innovation, trade, and investment in IP-intensive products and services. The court also noted that Section 31 D is an exception to copyright and must be strictly interpreted. Delhi High Court Confronts Online Piracy: The Delhi High Court decided that approved site take down requests will apply to those sites with addresses specifically listed in the request as well as similar sites that operate under different addresses.
IPAB was established in to adjudicate appeals over patents, trademarks, copyrights, and other decisions, but lacked the necessary number of technical members to form a quorum and make judgements, resulting in a significant backlog.
To clear the backlog of cases, the court decided that until the appointments were filled, the chairman and available technical members could issue decisions despite lacking a quorum. If no technical members were available, the IPAB chairman could consult a scientific advisor from the panel of scientific advisors appointed under Section of the Patents Act. Additionally, in October , the court permitted the current IPAB chairman to serve past his term — which ended in September , reinstating him until a replacement takes over.
Nonetheless, Indian equity markets were tumultuous throughout The BSE Sensex generally gained from the beginning of the year until July 5, when Finance Minister Nirmala Sitharaman introduced a tax increase on foreign portfolio investment in her post-election Union Budget for the remainder for FY The Sensex declined, erasing all previous gains for the year as the new tax led to a rapid exodus of foreign portfolio investors from the market.
The market continued to fluctuate even after the tax increase was repealed on August 23 until September 20, when the Finance Minister made a surprise announcement to slash corporate tax rates. After that, the Sensex surged and hit a record high of 41, on December However, even as the benchmark Sensex hit record highs, the midcap and small cap indices disappointed investors with a year of negative returns.
Domestic money also continued to flow into equity markets via systematic investment plans SIP of mutual funds. They can also set up domestic asset management companies to manage funds. FVCIs can invest in many sectors, including software, information technology, pharmaceuticals and drugs, biotechnology, nanotechnology, biofuels, agriculture, and infrastructure.
Standard Chartered Bank, a British bank which was the first foreign entity to list in India in June , remains the only foreign firm to have issued IDRs. Total external commercial borrowings through both the approval and automatic route increased The RBI has taken a number of steps in the past few years to bring the activities of the offshore Indian rupee market in Non Deliverable Forwards NDF onshore, in order to deepen domestic markets, enhance downstream benefits, and generally obviate the need for an NDF market.
FPIs with access to currency futures or the exchange-traded currency options market can hedge onshore currency risks in India and may directly trade in corporate bonds. The BSE was the first to start operations there, in January The public sector remains predominant in the banking sector, with public sector banks PSBs accounting for about 66 percent of total banking sector assets. Aside from the large number of state-owned banks, directed lending and mandatory holdings of government paper are key facets of the banking sector.
The RBI requires commercial banks and foreign banks with more than 20 branches to allocate 40 percent of their loans to priority sectors which include agriculture, small and medium enterprises, export-oriented companies, and social infrastructure. Additionally, all banks are required to invest The RBI plans to reduce this by 25 basis points every quarter until the investment requirement reaches 18 percent of their net demand and time liabilities. PSBs currently face two significant hurdles: capital constraints and poor asset quality.
As of September , gross non-performing loans represented 9. With the new bankruptcy law IBC in place, banks are making progress in non-performing asset recognition and resolution. As of December , the resolution processes have been approved in cases Lengthy legal challenges have posed the greatest obstacle, as time spent on litigation was not counted against the day deadline.
In July , Parliament amended the IBC to require final resolution within days including litigation time. The capitalization largely aimed to address the capital inadequacy of public sector banks and marginally provide for growth capital. In , the Indian authorities also announced a consolidation plan entailing a merger of 10 public sector banks into 4, thereby reducing the total number of public sector banks from 18 to Women in India receive a smaller portion of financial support relative to men, especially in rural and semi-urban areas.
MUDRA , which supports the development of micro-enterprises. About 5, members are currently registered and using the services of the portal said a NITI Aayog officer who has an oversight of the project. Capital account transactions are open to foreign investors, though subject to various clearances. NRI investment in real estate, remittance of proceeds from the sale of assets, and remittance of proceeds from the sale of shares may be subject to approval by the RBI or FIPB. They may also repatriate capital, capital gains, dividends, interest income, and compensation from the sale of rights offerings without RBI approval.
The RBI also authorizes automatic approval to Indian industry for payments associated with foreign collaboration agreements, royalties, and lump sum fees for technology transfer, and payments for the use of trademarks and brand names. Royalties and lump sum payments are taxed at 10 percent. Remittances are permitted on all investments and profits earned by foreign companies in India once taxes have been paid. Nonetheless, certain sectors are subject to special conditions, including construction, development projects, and defense, wherein the foreign investment is subject to a lock-in period.
Profits and dividend remittances as current account transactions are permitted without RBI approval following payment of a dividend distribution tax. Foreign banks may remit profits and surpluses to their headquarters, subject to compliance with the Banking Regulation Act, They may also offer forward coverage to non-resident entities on FDI deployed since The government owns or controls interests in key sectors with significant economic impact, including infrastructure, oil, gas, mining, and manufacturing.
Reforms carried out in the s focused on liberalization and deregulation of most sectors and disinvestment of government shares. These and other steps to strengthen CPSE boards and enhance transparency evolved into a more comprehensive governance approach, culminating in the Guidelines on Corporate Governance of State-Owned Enterprises issued in and their mandatory implementation beginning in Governance reforms gained prominence for several reasons: the important role that CPSEs continue to play in the Indian economy; increased pressure on CPSEs to improve their competitiveness as a result of exposure to competition and hard budget constraints; and new listings of CPSEs on capital markets.
The government tried to unsuccessfully privatize the state-run loss- incurring airline Air India. Foreign investments are allowed in the CPSEs in all sectors. While the CPSEs face the same tax burden as the private sector, on issues like procurement of land they receive streamlined licensing that private sector enterprises do not. Despite the financial upside to disinvestment in loss-making state-owned enterprises SOEs , the government has not generally privatized its assets as they have led to job losses in the past, and therefore engender political risks.
Instead, the government has adopted a gradual disinvestment policy that dilutes government stakes in public enterprises without sacrificing control. Such disinvestment has been undertaken both as fiscal support and as a means of improving the efficiency of SOEs. In recent years, however the government has begun to look to disinvestment proceeds as a major source of revenue to finance its fiscal deficit.
The Indian Government constituted inter-ministerial panel recommended percent stake sale in Air India to make it more lucrative as against a 76 percent stake sale last year. Government did say that they have received some good bids, but the process might go to a back burner because of the COVID19 pandemic and its resulting impact on the economy.
Foreign institutional investors can participate in these disinvestment programs subject to these limits: 24 percent of the paid-up capital of the Indian company and 10 percent for non-resident Indians and persons of Indian origin. The limit is 20 percent of the paid-up capital in the case of public sector banks.
There is no bidding process. The shares of the SOEs being disinvested are sold in the open market. Among Indian companies there is a general awareness of standards for responsible business conduct. The Ministry of Corporate Affairs MCA administers the Companies Act of and is responsible for regulating the corporate sector in accordance with the law.
The MCA is also responsible for protecting the interests of consumers by ensuring competitive markets. About companies spent 3 percent or more as against the mandated 2 percent of profits. The preferred spending heads were education, skill development, healthcare, and sanitation and preferred areas being National Capital region, Karnataka and Maharashtra. There are provisions to promote responsible business conduct throughout the supply chain.
Anti- corruption laws amended since have granted additional powers to vigilance departments in government ministries at the central and state levels. In addition, the Comptroller and Auditor General is charged with performing audits on public-private-partnership contracts in the infrastructure sector on the basis of allegations of revenue loss to the exchequer.
An August RBI report stated 99 percent of demonetized cash was deposited in legitimate bank accounts, leading analysts to question if the exercise enabled criminals to launder money into the banking system. Digital transactions increased due to demonetization, as mobile banking inclusion jumped from 40 percent to 60 percent of the populace. India is investigating 1. On August 7, SEBI directed stock exchanges to restrict trading and audit suspected shell companies on the basis of large cash deposits during demonetization.
The Benami Transactions Prohibition Amendment Act of entered into effect in November , and strengthened the legal and administrative procedures of the Benami Transactions Act , which was ultimately never notified. Note: A b e na m i property is held by one person, but paid for by another, often with illicit funds. Analysts expect the government to issue a roadmap in to begin implementing the Act.
In November , India and Switzerland signed a joint declaration to enter into an Agreement on the Exchange of Information AEOI to automatically share financial information on accounts held by Indian residents, beginning in India also amended its Double Taxation Avoidance Agreement with Singapore, Cyprus, and Mauritius in to prevent income tax evasion.
The new Act penalizes the concealment of foreign income, as well as provides criminal liability for foreign income tax evasion. In February , the government enacted the Whistleblower Act, intended to protect anti- corruption activists, but it has yet to be implemented.
Experts believe that the prosecution of corruption has been effective only among the lower levels of the bureaucracy; senior bureaucrats have generally been spared. Businesses consistently cite corruption as a significant obstacle to FDI in India and identify government procurement as a process particularly vulnerable to corruption.
To make the Whistle Blowers Protection Act, more effective, the government proposed an amendment bill in This bill is still pending with the Upper House of Parliament; however anti-corruption activists have expressed concern that the bill will dilute the Act by creating exemptions for state authorities, allowing them to stay out of reach of whistleblowers. The Companies Act of established rules related to corruption in the private sector by mandating mechanisms for the protection of whistle blowers, industry codes of conduct, and the appointment of independent directors to company boards.
As yet, the government has established no monitoring mechanism, and it is unclear the extent to which these protections have been instituted. No legislation focuses particularly on the protection of NGOs working on corruption issues, though the Whistleblowers Protection Act, , may afford some protection once it has been fully implemented. Till December , the government had not appointed an ombudsman.
Note: An ombudsman was finally appointed in March Internet connections have since been largely opened, but with continued severe limitations on data download speeds to the extent that everyday activities of Kashmiris often take hours or need to be completed outside the region.
In December , the government passed the Citizenship Amendment Act CAA , which promises fast-tracked citizenship to applicants from six minority religious groups from Afghanistan, Bangladesh, and Pakistan, but does not offer a similar privilege to Muslims from these countries. The new law sparked widespread protests that sometimes-included violence by demonstrators, government supporters, and security services.
Travelers to India are invited to visit the U. Although there are more than 20 million unionized workers in India, unions still represent less than 5 percent of the total work force. Most of these unions are linked to political parties. Unions are typically strong in state-owned enterprises. Labor unrest occurs throughout India, though the reasons and affected sectors vary widely. A majority of the labor problems are the result of workplace disagreements over pay, working conditions, and union representation.
In an effort to reduce the number of labor related statutes, the Indian parliament passed the Code on Wages legislation in Retrenchment, closure, and layoffs are governed by the Industrial Disputes Act of , which requires prior government permission to lay off workers or close businesses employing more than people, although some states including Haryana, Madhya Pradesh, Rajasthan, and Maharashtra have increased the threshold to people.
RBI approval is also required for foreign banks to close branches. Permission is generally difficult to obtain, which has resulted in the increasing use of contract workers i. Private firms successfully downsize through voluntary retirement schemes. Since the current government assumed office in , much of the movement on labor laws has taken place at the state level, particularly in Rajasthan, where the government has passed major amendments to allow for quicker hiring, firing, laying off, and shutting down of businesses.
The Ministry of Labor and Employment launched a web portal in to assist companies in filing a single online report on compliance with 16 labor-related laws. The government has also drafted a Code on Industrial Relations that is currently being reviewed by a parliamentary committee. In March , the Maternity Benefits Act was amended to increase the paid maternity leave for women from 12 weeks to 26 weeks.
The amendment also makes it mandatory for all industrial establishments employing 50 or more workers to have a creche for babies to enable nursing mothers to feed the child up to 4 times in a day. In August , the Child Labor Act was amended establishing a minimum age of 14 years for work and 18 years as the minimum age for hazardous work. In December , the government promulgated legislation enabling employers to pay worker salaries through checks or e-payment in addition to the prevailing practice of cash payment.
There are no reliable unemployment statistics for India due to the informal nature of most employment. In contrast, the unemployment rate was only 2. The government acknowledges a shortage of skilled labor in high-growth sectors of the economy, including information technology and manufacturing.
The current government has established a Ministry of Skill Development and has embarked on a national program to increase skilled labor. DFC is the U. Agency for International Development. Since , DFC under its predecessor agency, OPIC has provided support to over projects in India in the form of loans, investment funds, and political risk insurance.
These commitments are concentrated in utilities, financial services including microfinance , and impact investments that include agribusiness and healthcare. However, with the fallout from the Covid pandemic, the government shifted its focus to providing fiscal and monetary stimulus to support the economy. Regardless of the outcome of further reforms, factors such as a decentralized decision-making process, legal and regulatory uncertainty, economic nationalism, and powerful domestic vested interests in both the private and public sectors, create a complex investment climate.
Other factors relevant to investors include: government requirements, both formal and informal, to partner with Indonesian companies, and to manufacture or purchase goods and services locally; restrictions on some imports and exports; and pressure to make substantial, long-term investment commitments.
Despite recent limits placed on its authority, the Indonesian Corruption Eradication Commission KPK continues to investigate and prosecute corruption cases. However, investors still cite corruption as an obstacle to pursuing opportunities in Indonesia.
Other barriers to foreign investment that have been reported include difficulties in government coordination, the slow rate of land acquisition for infrastructure projects, weak enforcement of contracts, bureaucratic inefficiency, and ambiguous legislation in regards to tax enforcement. Businesses also face difficulty from changes to rules at government discretion with little or no notice and opportunity for comment, and lack of consultation with stakeholders in the development of laws and regulations.
Investors have noted that many new regulations are difficult to understand and often not properly communicated to those affected. In addition, companies have complained about the complexity of inter-ministerial coordination that continues to delay some processes important to companies, such as securing business licenses and import permits. Indonesia restricts foreign investment in some sectors through a Negative Investment List that Indonesian officials have indicated will be scrapped as part of omnibus legislation.
The latest version, issued in , details the sectors in which foreign investment is restricted and outlines the foreign equity limits in a number of other sectors. The Negative Investment List allows greater foreign investments in some sectors, including e-commerce, film, tourism, and logistics. In health care, the list loosens restrictions on foreign investment in categories such as hospital management services and manufacturing of raw materials for medicines, but tightens restrictions in others such as mental rehabilitation, dental and specialty clinics, nursing services, and the manufacture and distribution of medical devices.
Companies have reported that energy and mining still face significant foreign investment barriers. Indonesia began to abrogate its more than 60 existing Bilateral Investment Treaties BITs in , allowing some of the agreements to expire in order to be renegotiated.
Despite the challenges that industry has reported, Indonesia continues to attract significant foreign investment. Singapore, Netherlands, United States, Japan and Hong Kong were among the top sources of foreign investment in the country in latest available full-year data.
Private consumption is the backbone of the largest economy in ASEAN, making Indonesia a promising destination for a wide range of companies, ranging from consumer products and financial services, to digital start-ups and franchisors. Indonesia has ambitious plans to improve its infrastructure with a focus on expanding access to energy, strengthening its maritime transport corridors, which includes building roads, ports, railways and airports, as well as improving agricultural production, telecommunications, and broadband networks throughout the country.
Indonesia continues to attract U. UN agencies and the World Bank have recommended that Indonesia do more to grow financial and investor support for women-owned businesses, noting obstacles that women-owned business sometimes face in early-stage financing.
With GDP growth of 5. Indonesian government officials often state that they welcome increased FDI, aiming to create jobs and spur economic growth, and court foreign investors, notably focusing on infrastructure development and export-oriented manufacturing. The Indonesia Investment Coordinating Board, or BKPM, serves as an investment promotion agency, a regulatory body, and the agency in charge of approving planned investments in Indonesia.
As such, it is the first point of contact for foreign investors, particularly in manufacturing, industrial, and non-financial services sectors. While the OSS system is operational, overlapping authority for permit issuance across ministries and government institutions, both at the national and subnational level, remains challenging. Special expedited licensing services are available for investors meeting certain criteria, such as making investments in excess of approximately IDR billion USD 6.
To further improve the investment climate, the government drafted an omnibus law on job creation to amend dozens of prevailing laws deemed to hamper investment. In February , the draft omnibus law was submitted to the legislature for deliberation.
The DNI aims to consolidate FDI restrictions from numerous decrees and regulations, in order to create greater certainty for foreign and domestic investors. The revision to the list eased restrictions in a number of previously closed or restricted fields.
Previously closed sectors, including the film industry including filming, editing, captioning, production, showing, and distribution of films , on-line marketplaces with a value in excess of IDR billion USD 6. Though the energy sector saw little change in the revision, foreign investment in construction of geothermal power plants up to 10 MW is permitted with an ownership cap of 67 percent, while the operation and maintenance of such plants is capped at 49 percent foreign ownership.
For investment in certain sectors, such as mining and higher education, the DNI is useful only as a starting point for due diligence, as additional licenses and permits are required by individual ministries. A number of sensitive business areas, involving, for example, alcoholic beverages, ocean salvage, certain fisheries, and the production of some hazardous substances, remain closed to foreign investment or are otherwise restricted.
Foreign investment in small-scale and home industries i. Even where the DNI revisions lifted limits on foreign ownership, certain sectors remain subject to other restrictions imposed by separate laws and regulations. The government also intends to shorten the list of restricted sectors to six categories including cannabis, gambling, and chemical weapons.. In , Bank Indonesia issued Regulation No.
The regulation governs all companies providing the following services: principal, issuer, acquirer, clearing, final settlement operator, and operator of funds transfer. The BI regulation capped foreign ownership of payments companies at 20 percent, though it contained a grandfathering provision. Foreigners may purchase equity in state-owned firms through initial public offerings and the secondary market.
Capital investments in publicly listed companies through the stock exchange are not subject to the DNI. Nevertheless, the government encourages companies to utilize domestic goods and services that meet franchisor quality standards. In order to conduct business in Indonesia, foreign investors must be incorporated as a foreign-owned limited liability company PMA through the Ministry of Law and Human Rights.
An NIB remains valid as long as the business operates in compliance with Indonesian laws and regulations. Existing businesses will eventually be required to register through the OSS system. In general, the OSS system simplified processes for obtaining NIB from three days to one day upon the completion of prerequisites.
Special expedited licensing services are also available for investors meeting certain criteria, such as making investments in excess of approximately IDR billion USD 6. After obtaining a NIB, investors in some designated industrial estates can immediately start project construction. Foreign investors are generally prohibited from investing in MSMEs in Indonesia, although the Negative Investment List opened some opportunities for partnerships in farming and catalog and online retail.
Foreign firms are not required to disclose proprietary information to the government. The OSS serves as an online portal which allows foreign investors to apply for and track the status of licenses and other services online. The OSS coordinates many of the permits issued by more than a dozen ministries and agencies required for investment approval.
BKPM has also been tasked to review policies deemed unfavorable for investors. In addition, BKPM now issues soft-copy investment and business licenses. Likewise, certain tax and land permits, among others, typically must be obtained from local government authorities. Though Indonesian companies are only required to obtain one approval at the local level, businesses report that foreign companies often must seek additional approvals in order to establish a business. The Ministry of Home Affairs, the Ministry of Administrative and Bureaucratic Reform, and BKPM issued a circular in to clarify which government offices are responsible for investment that crosses provincial and regional boundaries.
Investment in a regency a sub-provincial level of government is managed by the regency government; investment that lies in two or more regencies is managed by the provincial government; and investment that lies in two or more provinces is managed by the central government, or central BKPM.
BKPM has plans to roll out its one-stop-shop structure to the provincial and regency level to streamline local permitting processes at more than sites around the country. BKPM has responsibility for promoting and facilitating outward investment, to include providing information about investment opportunities in and policies of other countries.
BKPM also uses their investment and trade promotion centers abroad to match Indonesian companies with potential investment opportunities. The government neither restricts nor provides incentives for outward investment. Indonesia continues to bring its legal, regulatory, and accounting systems into compliance with international norms and agreements, but progress is slow. Notable developments included passage of a comprehensive anti-money laundering law in and a land acquisition law in Although Indonesia continues to move forward with regulatory system reforms foreign investors have indicated they still encounter challenges in comparison to domestic investors and have criticized the current regulatory system for its failure to establish clear and transparent rules for all actors.
Certain laws and policies, including the DNI, establish sectors that are either fully off-limits to foreign investors or are subject to substantive conditions. Decentralization has introduced another layer of bureaucracy for firms to navigate, resulting in what companies have identified as additional red tape. Certain businesses claim that Indonesia encounters challenges in launching bureaucratic reforms due to ineffective management, resistance from vested interests, and corruption.
Government ministries and agencies, including the Indonesian House of Representatives DPR , continue to publish many proposed laws and regulations in draft form for public comment; however, not all draft laws and regulations are made available in public fora and it can take years for draft legislation to become law.
Laws and regulations are often vague and require substantial interpretation by the implementers, leading to business uncertainty and rent-seeking opportunities. The law also sets out procedures for revoking regulations and introduces requirements for academic studies as a basis for formulating laws and regulations. Nevertheless, the absence of a formal consultation mechanism has been reported to lead to different interpretations among policy makers of what is required.
In , the Jokowi administration repealed 3, regional bylaws that overlapped with other regulations and impeded the ease of doing business. The Ministry continues to play a consultative function in the regulation drafting stage, providing input to standardize regional bylaws with national laws. In , the government issued Presidential Instruction No.
The new regulation requires lead ministries to coordinate with their respective coordinating ministry before issuing a regulation. Presidential Instruction No. The presidential instruction did not address the frequent lack of coordination between the central and local governments. Pursuant to various Indonesian economy policy reform packages over the past several years, the government has eliminated regulations as of September Fifty-one of the eliminated regulations are at the Presidential level and at the ministerial or institutional level.
The regulation focuses on three areas: licenses, state finances primarily government revenue and expenditures , and law enforcement reform. In October , the government issued Presidential Regulation No. As a member of ASEAN, Indonesia has successfully implemented regional initiatives, including real-time movement of electronic import documents through the ASEAN Single Window, which reduces shipping costs, speeds customs clearance, and reduces opportunities for corruption.
Notwithstanding progress made in certain areas, the often-lengthy process of aligning national legislation has caused delays in implementation. Indonesia joined the WTO in At this point, Indonesia has met However, foreign investors bringing aircraft to Indonesia to serve the aviation sector have faced difficulty in utilizing Cape Town Convention provisions to recover aircraft leased to Indonesian companies. Foreign owners of leased aircraft that have become the subject of contractual lease disputes with Indonesian lessees have been unable to recover their aircraft in certain circumstances.
The court system consists of District Courts primary courts of original jurisdiction , High Courts courts of appeal , and the Supreme Court the court of last resort. Notify of new replies to this comment. The reason is likupang if you computer crashes and you do not have a copy of your wallet.
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