Acts of Parliament relating to the Kivu National Investment Policy

Title: This act may be cited as the

“Kivu National Investment Policy ACT 2007”

An Act to make provision for and in connection with a National Investment Policy for the United Republic of Kivu; to attract foreign investment and for connected purposes.

BE IT ENACTED by His Excellency The President of the United Republic of Kivu, by and with the advice and consent of the Baraza Kuu la Watambo wa Muungano wa Kivu, and Baraza la Wabunge, in this present Parliament of the United Republic of Kivu assembled, and by the authority of the same, as follows:

Contents
Executive Summary
1 Overview
2 Sectoral priorities
Tourism
Agriculture
Services
Fisheries
Mining
Industry
Forestry
3 Investment guarantees
Expropriation
Intellectual Property
Dispute settlement
Non-discrimination between source countries
National treatment
Non-commercial risk
4 Investment regulation
Company registration
Business licensing
5 Foreign investment approval
Foreign investment definition
Reserved list activities
Foreign investment administration
6 Access to land
7 Employment
8 Expatriate employment
9 Residency permits
Kivu National Investment Policy
10 Government revenue raising
Trade taxes
Valued added tax (VAT)
11 Import and export
12 Monetary matters
Local borrowing
Repatriation of funds
Foreign Exchange
Interest rates
13 Investment incentives
14 Industrial infrastructure
15 Environmental protection
16 Investment promotion and facilitation

Executive Summary

The purpose of this statement of investment policy is to clarify and enhance understanding of the Kivu Government’s policies on investment by investors, both foreign and domestic, and by Government officials. This statement of Kivu's investment policy has, therefore, sought to be: comprehensive – it includes all key areas related to investment;
Accurate – it reflects current policies as well as proposed policy changes;
Concise – it avoids unnecessary detail;
Informative – it provides full definitions of criteria for all restrictions and Approvals; and Consistent with private sector investor's policy expectations, Non-binding Investment Principles The policy statement addresses the following investment related areas:
Sectoral investment priorities;
Investment guarantees (expropriation, intellectual property, dispute settlement, non-discrimination between source countries, national treatment, non-commercial risk);
Investment regulation in relation to company registration and business licensing;
Foreign investment approval;
Access to land;
Employment of citizens and expatriates;
Residency;
Government revenue raising;
Importation and exportation;
Monetary issues involving local borrowing, funds repatriation, foreign exchange and interest rates;
Investment incentives;
Industrial infrastructure;
Environment protection; and
Investment promotion and facilitation.

For each of these areas, the policy statement states the Government’s intended objectives and, where possible, explains why the Government is pursuing this course of action. This will help increase the level of stability, certainty and predictability for investors – foreign and domestic alike.


1 Overview

The Government of Kivu has as its goal the raising of the welfare of the general population. In seeking to meet this goal, the Government recognises the significant role that private enterprise makes to economic development through employment creation, the earning of essential foreign exchange and by contributing significantly to Government revenues.

The Government wishes to increase the contribution of private enterprise to economic development in Kivu. It intends to do so by having in place an investment environment that is conducive to the maintenance of existing and the creation of new investment. In attempting this, it is aware that the interests of Government, such as the protection of public health and safety, achieving environment sustainability and the accumulation of revenues for public spending, may constrain the private sector when attempting to meet its own
profit objectives.

To achieve a balance that is acceptable to all, Government encourages constructive dialogue with the private sector on all matters related to investment. The objective is to have in place investment policies and procedures that are effective and efficient, incorporating, to the fullest extent possible, the principles of transparency, simplicity and automaticity. In addition to transparency, it is also intended that the policies will be consistent with the other non-binding investment principles adopted the Government of the United Republic of Kivu.

In seeking the greater participation of the private sector in economic development in Kivu, the Government appreciates that citizen owned investment cannot, alone, meet its development targets. Government therefore welcomes the involvement of foreign investment in Kivu to supplement and complement the efforts of citizen investors. However, to foster citizen owned investment endeavours in certain activities, entry to those particular activities is reserved for citizen investors only.

As part of its commitment to private sector development, Government has in place a policy that continues the objective of privatising Government owned investments.

2 Sectoral priorities

The Government welcomes private sector investment in all sectors of the economy, with the exception of a short list of prohibited activities closed to all investors to protect public health and safety.
The Government believes that the areas of greatest comparative advantage for Kivu lie in the Agriculture, Mining, Tourism, Industry and the services sectors. While highlighting these sectors, however, investment is welcome in all sectors. No specific incentives or inducements are provided by the Government to encourage investment in any sector, however, other than some exemptions on
import duties.

Tourism

Tourism has a huge potential for growth and developed significantly in Kivu appeal of Kivu culture and the attractiveness of the natural environment, particularly for Tropical rain Forests, the Lake Resorts, etc…. Many opportunities for investment in the tourism industry exist in these traditional sectors and in new endeavours.
The current objectives for the tourism sector are: to promote the industry as a means of conserving Kivu’s unique cultural patterns, archaeological and historical sites, and the natural environment;
to develop tourism so that it attracts the range and quality of tourists who appreciate the culture and the environment of the country;
to expand and ensure an effective government organization with adequate resources for tourism planning, development and marketing, essential for the continued development of the industry in Kivu;
and to allow sufficient flexibility of foreign investment where large amounts of capital are needed or when specialized operations or skills are necessary in order to offer variety in tourism attractions that currently do not exist. Examples might include theme parks, Safari parks, etc…

Agriculture

Kivu has land and a climate suitable for a wide array of agricultural, livestock and horticultural pursuits. Government encourages new investment in these areas, particularly those that lead to agro-processing and export.

Concessions on trades taxes are available to agricultural, livestock or horticultural projects for plant, machinery, materials and equipment, including fuel oils.

Services

Because of the “tax haven” status and the creation of an appropriate legislative framework, Kivu is an attractive location for off-shore financial sector investments. Opportunities also exist within the general services sector.

Fisheries

The marine resources of Kivu have attracted investments in sport fishing, trochus shell and beche-de-mer harvesting and aquarium fish trade. While continued investment in these areas is encouraged, Government is also looking to promote opportunities in aquaculture. An aquaculture development plan is expected to be in place within the near future.

The mission of the Government is to ensure the sustainable management, development and conservation of fish resources in order to achieve maximum social and economic benefits to Kivu for present and future generations. Kivu Legislation reflects a strong move towards sustainable management of the marine resource.

Under the Fisheries Act, all marine activities require a fishing licence issued by the Department of Fisheries. In particular, fishing boats, both foreign and local, require a fishing licence. Licences can be issued annually or quarterly, the current foreign fishing licence fee.
Concessions on trades taxes are available to fisheries projects. The concessions cover boats and boat building materials, fuel oils, machinery, materials and equipment, including in-board and outboard motors and refrigeration equipment.

Mining

Kivu has significant mineral resources, including precious metals.

Mining prospecting, exploration and extraction all require licences or permits under the Mines and Minerals Act.

Exemptions on trades taxes are available to mining projects for plant, machinery, materials and equipment, including fuel oils.

Industry

Government appreciates the small size of the domestic market and the limited opportunities for industrial investors to be able to compete on price and quality with imports. Because of the employment opportunities that do exist in industry, Government does provide some protection to investors in this sector through the imposition of a tariff regime.

Exemptions on trades taxes are available to manufacturing and processing for raw materials, machinery and equipment. Export manufacturers are exempt from trades taxes on their production inputs and from any taxes on exports.

Forestry

Kivu’s forest resources continue to provide investment opportunities for the private sector. The forest resource is able to environmentally sustain an annual cut of 7,878,000 cubic metres.

Government also encourages the establishment of plantation forests. It can leased large tracts of land that could be sub-leased to private sector investors for this activity.

Government’s policy in forestry is to maximise local value added in timber products.

To regulate the sector, investors require a Forestry Licence issued by the Forestry Board, the latter comprising representatives of the Secretary of State for Environment, Food and Rural.

Concessions on trades taxes are available to forestry projects for plant, machinery, materials and equipment, including fuel oils.

3 Investment guarantees

Expropriation
Government guarantees that it will not expropriate foreign investments or take measures that will have a similar effect. The exception is expropriation for a designated public purpose and will be done on a non-discriminatory basis.

Such expropriation would only occur in accordance with the Kivu “Private Property Rights Protection Act 2007”. Such action would result in the prompt payment of adequate and effective compensation.

Intellectual Property

To protect and safeguard intellectual property in Kivu, the Government has passed the Copyright and Related Rights Act 2007.
The Act applies to works, performances, sound recordings, broadcasts and expressions of native culture. In particular, original intellectual creations include artistic, literary, dramatic, musical, audiovisual and collective works.
Works are protected by the sole fact of their creation and irrespective of their mode or form of expression, content, quality or purpose.

Dispute settlement

Although Government is aware of the benefits for investment of having access to a range of appropriate dispute settlement mechanisms, resolution through the Kivu courts is the only legislative avenue available at this time. No litigious legislation, such as an arbitration law, is not in place.

Government is yet to sign and ratify either the Washington Convention on the Settlement of Investment Disputes between States and nationals of other States or the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Non-discrimination between source countries

Government extends equal treatment to investors from any country in relation to the establishment, expansion and operation of investments. The treatment of any individual is no less favourable than that which is extended to an investor from any other country in a like situation, without prejudice to any and all relevant international obligations.

National treatment

The Government accords to all foreign investors’ treatment no less favourable than that accorded to domestic investors in like situations with respect to the establishment, expansion, operation and protection of their investments.

Non-commercial risk

Government appreciates that foreign investors’ uncertainty in investing in a new country can be partly alleviated if they have access to some form of internationally recognised investment protection. Consequently, Kivu is currently seeking membership of the Multilateral Investment Guarantee Agency (MIGA), a part of the World Bank Group. MIGA can guarantee against non-commercial risks such as currency transfers, expropriation, and war and civil disturbance (civil risks).

4 Investment regulation

Government regulates many investment related matters, including, amongst others, those associated with the maintenance of public health and safety, the environment, and building standards. Two of the more specific regulations of relevance to investment are company registration and business licensing.

Company registration

Government requires all companies doing business in Kivu to be incorporated under the Companies Act 2007and registered with the Registrar of Companies (the Kivu Financial Services Commission).

Business licensing

Government requires all businesses operating in Kivu to hold a business licence. Primarily this is to maintain a register of business activities for planning purposes and to uphold business practice standards in economic activities not regulated by specific industry legislation. It also allows the raising of some revenue.

The licence is issued under the Business Licences Act 2007 and is administered by the Department of Revenue and Customs. The issue of such licences is a straightforward, automatic registration procedure for any business that meets the publicly stated, transparent registration criteria. Renewal is automatic, providing the annual fee is paid and the licence holder has not breached any conditions of the licence.

An annual fee is payable for a business licence. The extent of the fee varies with the type of business and turnover as follows:

Turnover Business License fee / year

< Panda 10 million Panda 20,000
Panda 10 million – <50 million Panda 50,000
Panda 50 million – < 200 million Panda 250,000
> Panda 200 million Panda. 1,000,000

Commercial banks and other financial institutions pay a minimum fee of Panda 300,000 and Panda 50,000 respectively. Insurance companies and professional and business services that are zero rated for VAT purposes pay a fee equivalent to 5% of turnover.

5 Foreign investment approvals

While the Government welcomes foreign investment to Kivu, it also seeks to protect the interests of citizen investments in certain sectors of the economy and to appraise foreign investment applications on economic feasibility and investor bonafides.

Foreign investment definition

A foreign investor is defined as:
a person who is not a citizen of Kivu; or
a body corporate:
that is not wholly controlled by persons who are citizens of Kivu;
or that has any of its shares (voting or otherwise) beneficially owned or controlled by persons who are not citizens of Kivu; or
any entity other than a natural person or a body corporate where control of, or benefit to be derived from the entity, will vest wholly in persons who are not citizens of Kivu or a body corporate that is a foreign investor.

Reserved list activities

Defence Industry and National Security related industries and sectors.

Foreign investment administration

To administer its foreign investment entry policy, Government requires all
foreign investments to be licensed. In determining an application for a foreign investment approval certificate, the Kivu Foreign Investment Promotion Board assesses whether the proposal is for a reserved or prohibited activity. If the investment proposed is acceptable in this regard, the proposal is further assessed for economic feasibility, whether the applicants are fit and proper persons and whether the financial resources for the venture are adequate. The Board will make its decision within 7 working days of the receipt of a completed application.

A successful applicant is issued a foreign investment approval certificate valid for a period of 12 months. The certificate is renewable annually, providing the annual fee is paid and the investment is not in breach of any conditions of the certificate.

The prescribed application fee for the issue of an approval certificate is based on investment size as follows:

Investment size Application fee

< Panda 1 million Panda 5,000
Panda 10 – 50 million Panda 25,000
Panda 50 million Panda 50,000
The annual renewal fee for an approval certificate is Panda 500.

The issue of an approval certificate entitles the recipient to a minimum of two residence permits and two work permits. It also ensures the issue of a business licence, and a certificate for negotiating the leasing of land. Further, it provides for VAT or import duty exemptions under the Value Added Tax Act 2007, the Import Duties and Customs Act 2007. It does not in any way, however, exempt foreign investors from meeting all their requirements under any other laws in Kivu.

6 Access to land

Foreign nationals may purchase land and private property in Kivu, the same needs to be done in a legal manner and registration of the property made and communicated to Kivu Land Registry the Department.

7 Employment

Government seeks to protect the interests of workers in Kivu through appropriate legislation and has in place the Employment Act of, the Trade Unions Act, the Trades Disputes Act, the Minimum Wage Act and the Workman’s Compensation Act. The Employment Act covers Government policy on contracts of employment, remuneration, hours of work and overtime pay, annual leave and sick leave. It also covers the employment of women and young persons, safety precautions and medical facilities, the termination of employment contracts, severance, and repatriation of employees.

8 Expatriate employment

The creation of employment opportunities for citizens is a major expectation by Government for investment in Kivu. Nonetheless, Government is aware that the citizen workforce does not necessarily include people with pertinent skills and experience in all the areas that investors may, from time to time, require. Government endeavours to accommodate this need by issuing work permits for expatriate employment.

All non-citizens require a work permit if they wish to work in Kivu, with the exception of foreign investors who wish to manage their own investments.
Such investors are exempted from the need for a work permit.
To facilitate foreign investors and to ease their uncertainty in relation to the employment of key personnel of their own choosing, Government automatically awards two work permits to each investment issued a foreign investment approval certificate. Additional work permits may also be obtained, if requested by the investor.

While being prepared to issue work permits, the Government, nonetheless, wishes to increase the pressure to localise already present through the marketplace.
It seeks to do this by tightly regulating the issue and duration of work permits, levying significant fees and requiring training of counterparts.
Investors can be exempted from the requirement to train counterparts, however, by application to the Commissioner of Labour.

Investors employing expatriates are required to pay a number of fees.

While work permits can be issued for periods of up to five years, they are routinely issued for a period of only one year. On application, the permits are renewable annually for an additional four years. Temporary work permits are available for employment periods of up to four months.

To obtain a work permit, an employer must make an application on a prescribed form to the Commissioner of Labour, who is authorised to issue the permit. Applications will be processed within five working days or the applicant has the right to appeal to the Minister for Labour for a decision.
When applying, the employer must demonstrate that the position for which a work permit is required was advertised locally and that, of those citizens who applied, none were suitable for the position. In addition, the following factors are considered:
whether the position is an occupation reserved for citizens by Ministerial Order;
the employer’s employment record;
the employer’s ability to provide training facilities for citizen counterparts;
the qualifications and experience of the proposed expatriate employee;
conformity of the position’s employment conditions with Kivu laws; and
protection of local and national interests.

9 Residency permits

The Government appreciates that non-citizens residing in Kivu can make a positive contribution to economic development. From the perspective of investment, the Government offers residency to investors who wish to reside in Kivu and manage their investment if it is awarded a foreign investment approval certificate. Such residency is available without the need for a work permit. Residency is also available to non-citizens nominated to fill work permit positions in an investment. Further, and indirectly related to investment, residency is offered to retirees who are prepared to transfer the equivalent of Panda 1,000 per month to their Kivu bank account.

Any non-citizen wishing to reside in Kivu must hold a valid residence permit issued by the Department of Immigration. Because of concerns for public health and safety, applications are screened using medical and police clearances provided by the applicant. Work permit documents, if applicable, must also accompany applications. Further, as an indicator of the resources available to the investor, a bank reference must be provided certifying a minimum deposit of Panda 200,000 in a Kivu bank.

Applicants are also required to lodge a bond to cover the costs of the repatriation of the expatriate (normally the equivalent of a return airfare) and an application fee of Panda 1,000. The passport of the proposed expatriate employee must be valid for a period of at least six months.

Residence permits are issued annually but can be renewed for a maximum of three years. The annual fee for a residence permit is Panda 500.

10 Government revenue raising

Kivu is free of income tax at both the corporate and individual levels. As Government policy is to raise revenue through a taxation system that is fair, simple, and conducive to investment, the majority of Government revenue is raised by levying trade, excise and value added taxes.

To supplement revenues raised by these taxes, a wide array of fees are levied for the provision of licences, permits or approvals and for an array of Government services. The most significant of these, from an investment perspective, are for business licences, work permits, residence permits, foreign investment licences, land leases, land taxes, rent taxes, and company registration.

Trade taxes

Trade taxes are a major source of Government revenue.

Valued added tax (VAT)

In 2007, the need for Kivu to broaden its tax base led to the introduction of a Value Added Tax (VAT).

The Value Added Tax Act requires any entity in Kivu carrying on a “taxable activity” with a turnover of at least Panda 5,000 to register for Value Added Tax. A “taxable activity” is defined as any activity (personal, professional, corporate or otherwise) carried on continuously or regularly involving the supply of goods or services to any other person for a consideration.

11 Import and export

The Government levies trade taxes on all imported goods as a mechanism for raising revenues, protecting selected local manufactures and encouraging import substitution. Trades tax exemptions are available to approved investments. While a trades tax drawback scheme is available for exporters, they are encouraged to seek trades tax relief through the trades tax exemption scheme rather than trades tax drawback.
Government policy is to clear:
Green Lane imports (goods that do not pose any potential risk and do not include prohibited and restricted items) within 45 minutes.
Yellow Lane imports (goods with a wrong tariff code, where a quarantine certificate is required or where the importer is prone to making false declarations) clearances occur within 1 day.
Red Lane imports (goods subject to random check or considered high risk for fraud) clearances occur within 3 days.
The Government supports and encourages all export-oriented investments and does not levy any export taxes on the export of any goods or services with the exception of shells and raw logs.

12 Monetary matters

Local borrowing

Government does not place any restrictions on investors borrowing locally, decisions on local lending being at the discretion of the commercial banks.
There is an expectation, however, although not a requirement, that foreign investors will bring their investment capital from abroad.

Repatriation of funds

The Government places no restrictions on the repatriation of funds, providing this guarantee through the VFIP Act. The allocation of foreign exchange is at the discretion of the commercial banks.

Foreign Exchange

The value of the Vatu in terms of other currencies is determined by the Kivu National Bank acting in accordance with written instructions from the Government after consultation with the Kivu National Bank. The current instructions are the use of an undisclosed basket of currencies, weighted according to trade and tourism receipts. The rate is established daily by the Reserve Bank and communicated to the commercial banks via electronic and surface mail.

Interest rates

The Kivu National Bank establishes the ‘official’ interest or rediscount rate after regular assessment of international and domestic economic, monetary and financial conditions. The rate is communicated to the commercial banks through the Governor’s Quarterly meeting with the Bankers Association of Kivu and published in the Bank’s Quarterly Economic Review, the Bank’s Monthly publication and on its website. The Bank’s objective in managing this function is the promotion of monetary or price stability.

With inflation low, currently at less than 3% per annum, the official interest rate is at 6.5% per annum.

13 Investment incentives

There is no corporate income tax in Kivu and, therefore, there is no scope for offering income tax holidays. Nonetheless, to assist investments to become established in Kivu, Government does provide certain types of investments with concessions on trades taxes, classified as economic reliefs.

Goods imported for:
Manufacture or processing;
Agriculture, horticulture, livestock or forestry projects;
National and international transportation of goods and people;
Tourism development projects;
Mineral exploration and extraction; and
Fisheries industry equipment.

While the ultimate decision on concessions lies with the Comptroller of Customs, investors are required to lodge applications with the appropriate sectoral department or with VIPA. These institutions make recommendations to the Comptroller. Concessions are normally awarded on an annual basis but are renewable.

The concessions provide for full exemptions on trade taxes for manufacturing, processing and mineral exploration and extraction of raw materials and capital items. For other sectors, the benefit, in general, is a reduction of trades taxes to not less than 5%. The extent of the reduction is discretionary.

The rationale and procedures for the award of these concessions to investments in Kivu are currently under review by Government to ensure they meet Government objectives and are applied equitably, efficiently and effectively.

14 Industrial infrastructure

The Government will assist investors to locate suitable premises or investment site if requested. Investors are required to lease or build their own facilities.

15 Environmental protection

The Government recognises the intrinsic value of Kivu’s natural environment and is concerned about its conservation, sustainable development and management. The Government’s environment policy is reflected in the Environmental Management and Conservation Act. Although the Act requires the development and implementation of a comprehensive National Environment Plan.

The Act also requires all projects, proposals or development activities that cause or are likely to cause significant environmental, social and or custom impact in Kivu to be subject to an environmental impact assessment.

Included in this requirement are investments that will or are likely to have all or any of the impacts specifically listed in the Act. These include:
physical impacts, such as changes in landscapes or river courses;
social or cultural impacts, such as relocation or access that affect livelihood and lifestyle;
economic impacts, such as ability to continue income generating activities; and
environment or ecological impacts, such as land based activities affecting the Great Lakes.

Further, the legislation also requires any investment involving bio prospecting to hold a permit issued by the Biodiversity Advisory Council. Bio prospecting is the harvesting or exploitation of samples of genetic resources, samples of any derivatives of genetic resources for the purposes of research, product development, conservation or industrial or commercial application. It also includes the knowledge, innovations and customary practices of local communities associated with those genetic resources.

16 Investment promotion and facilitation

The Government established the Kivu Investment Promotion Authority (VIPA) under the VFIP Act to undertake investment promotion activities in Kivu. While the Authority is responsible for the promotion of foreign investment, it is also responsible for the regulation of foreign investment in Kivu.

As a promotion unit, the Authority seeks to generate foreign investment interest in Kivu. It also acts as a single point facilitator for interested investors by meeting their investment related information needs and assisting them through the regulatory processes required to get into and stay in business in Kivu.

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