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Opportunities for Foreign Investment  

Guarantees for Foreign Investment in Puntland State of Somalia 

Area: Over 200,000 Sq. Km out of 637, 000 square kms

Population: 2.5 Million out of Somalia’s estimated 6 million

The climate is determined by Monsoons. The period of the Northeast Monsoon lasts December to March bringing relatively high temperatures, over 25 degrees centigrade. The period of the Southwest Monsoon lasts from June to October with relatively cool weather and temperatures below 22 degrees centigrade.

The year is divided into dry and rainy periods:

January _ April, dry season autumn(jiilaal/diraac)

May _ June, rainy season, spring(gu’)

July __ September, dry season, Summer(xagaa)

October __ December, rainy season, winter (deyr)

The rainfall and temperature vary considerably from one region to another and from season to season. The average annual rainfall is from 50mm to 40mm in some regions.

Puntland is an autonomous, self-governing state which is an integral part of the Somali nation. It holds that the unity, integrity and sovereignty of the Somali Republic is inviolable and it does not believe in any form of secession, disunity and breakdown of the Somali nation.

Puntland of Somalia promotes stability, good neighborliness and cooperation in Somalia, and the peaceful resolution of disputes regionally, nationally and internationally. It supports the maintenance of national unity and the advancement of bottom up approach of the national reconciliation.

Puntland State of Somalia is committed to practice good governance at home and cooperation and mutual respect in its conduct in international relations. It recognizes the implications and responsibilities of global trade, health and environmental interdependence. 

Puntland State of Somalia 

Under this law, a foreign investor is any foreign juridical or physical person. 

Foreign investment can be made any of the following forms:

1. convertible currency specified by the central bank of Puntland and duly transferred to Puntland of Somalia;
2. machinery, equipment, spare parts, installation and current production inputs whose importation is permitted under the prevailing import legislation;
3. Patent rights, trademarks and licenses duly registered in Puntland of Somalia, provided they are necessary for the activities to be pursued under the approved investment;
4. the amount of foreign currency spent on studies and technical documentation, prepared in connection with the approved investment;
5. profit reinvested, originating from foreign investment approved in accordance with this law;

The foreign investment Board hereafter referred as the "Board" shall have the supreme decision making authority over all matters concerning foreign investment in Puntland , Somalia. It shall be established at the Ministry of Commerce and Industry where it shall convene at least once a month.

1. A directors from the Ministry of Commerce and Industry
2. A director from the International Relations
3. A Director from the Finance ministry
4. A Director from the Social affairs Ministry(especially from labor department)
5. A director from the Planning and the Banking commission
6. The chairman of the Chamber of Commerce, Industry and Agriculture
8. The chairman of the Board is suggested to come from the Ministry of Commerce and Industry

The functions of the Board shall be the following:

1. To approve proposed foreign investment in accordance with the policy guidelines laid down in the law.
2. To prove the registration of foreign investment.
3. To review the registration of foreign investment made under previous foreign investment legislation in order that such investment may benefit from the more favorable provisions, as per article 20 of this law.
4. To determine the value of foreign investment made as per article 2, paragraphs 2, 3 and 4 of this law.
5. To ensure compliance with the provision of article 16.1 concerning the contracting of debt from domestic sources.
6. To facilitate the granting of visas to foreign personnel to be employed by the enterprise under this law and their families.
7. To perform any other functions concerning foreign investment in conformity with this law.
8. To invite experts and technicians specialized in certain fields to attend the meetings of the committee. Such experts and technicians will have no rights to vote.

1. Six members of the Board, including the chairman shall constitute the quorum.
2. Decisions will be made by simple majority vote.

The foreign Investment Office, hereafter referred to as "The Office," shall be administrative and promotion office responsible for assisting the Board in the performance of its functions.

1. To implement the decisions taken by the Board;
2. To propose the administrative and regulatory procedures required for the implementation of this law;
3. To provide information and advice to foreign investor on matters such as applications and registration procedures under this law, taxation; foreign exchange regime, economic legislation, foreign trade regime, investment opportunities; institutional framework; local sources of debt financing and for local partners.
4. To assist the foreign investor in meeting the application requirements related to foreign investment;
5. To assist approved investment, at the incorporation and development stages, with guidance and advice concerning official institutions and channels and related administrative procedures;
6. To formulate proposals concerning foreign investment policy and improvement of investment conditions;
7. To promote and attract new foreign investment in collaboration with other institutions involved in this field;
8. To perform any other duty related to foreign investment, assigned to it by the Board.

Priority will be given to foreign investment in those areas where it:

1. Puts Puntland of Somalia’s human and natural resources to productive use;
2. Introduce innovative technology suited to the country’s conditions;
3. generate new earnings or savings of foreign exchange through exports, resource-based import substitutions or service activities;
4. Contributes to regionally balanced socio-economic development.

1. Livestock.
2. Fishing.
3. Industrial activities __ light industries in particular using significant amounts of inputs produced by the aforementioned sectors
4. Frankincense
5. Mineral resources
6. Agriculture
7. Tourism, provided the investment harmonizes with the prevailing social, economic and infrastructural conditions;
8. any other investment production and service activities appropriate to support and stimulate, to a significant degree, the development of the aforementioned sectors.

1. The application by the foreign investor will be made by completing an "application Form for approval and registration," available at the office located in the Ministry of Commerce and Industry, and mailing it by registered letter to "The foreign Investment Board C/O Ministry of Commerce and Industry, Garowe, Somalia".
2. Alternatively, the foreign investor may deliver the application directly to the office which will issue a delivery receipt.
3. The office will review the application, at the applicant’s request for completeness and certify its satisfaction in respect of this requirement. 

1. Within 60 days from the date of the receipt of a duly completed investment application, the Board will notify the applicant by registered mail of its decisions. At the applicant’s option, this notification can be picked up/collected by his representative directly from the office against the issue of a delivery receipt.
2. In case a modification of the application is required, the Board have to notify the applicant to this effect by registered mail. At the applicant’s option, this notification can be picked up/collected by his representative directly from the office against the issue of a delivery receipt.
3. The Board will notify, through the Office, the approval of a foreign investment by issuing a " Certificate of Foreign Investment in an Approved Enterprise". Such approval will be construed by the foreign investor as conferring eligibility for registration under this law.
4. The "Certificate of Foreign Investment in an Approved Enterprise" will be valid for a period of a year (12 months) from the date of issue. During that period, the applicant will effect the transfer of assets to Puntland of Somalia listed in Article 2, paragraphs 1, 2, 3 and 4. In case this period is extended, the Board may grant at the applicant’s request, an additional period or ask for a new application.
5. Additional investment to be made as per Article 2, paragraphs 1, 2, 3 and 4, in an enterprise that is the object of a foreign investment already duly registered, will require application and approval as per article 8 and paragraphs 1, 2, 3 and 4 of this Article.

1. The Board will proceed with the registration of an approved investment as soon as the foreign investor has affected the transfer of assets to Puntland of Somalia listed in Article 2, paragraphs 1, 2, 3 and 4 in accordance with the terms and conditions in the "Certificate Foreign Investment in an Approved Enterprise". To this purpose, the Board will issue to the foreign investor a "Certificate of Foreign Investment Registered".
2. In case of a transfer of assets listed under paragraph 2, 3 and 4 of Article 2, The Board will proceed with the said registration as soon as it is satisfied that the value assigned by the foreign investor to the assets transferred, represents fair market value. The Board may ask the foreign investor to produce sufficient documentary evidence to demonstrate the fair market value of the assets transferred. In case of a transfer of assets as per paragraph 2 of Article 2 this value will be determined in accordance with independent evaluation.
3. The foreign investment shall be registered in convertible currency, as specified by the Central Bank of Puntland of Somalia. In case there is no central bank, the market exchange rate will be used. 

1. Approved foreign investors under this law are entitled to free entry of goods and services that are verifiably destined to their investment operations in Puntland; and among which are machinery and raw materials.
2. After a five year period of operations in Puntland, foreign investors are free to the capital value of their investments. But net profits after five years period will be subject to the corporate and/or company taxes are in force in Puntland.
3. The government of Puntland will grant to approved foreign investors physical facilities such as land allocations within reach of essential services such as water, electricity and transport.
4. Incomes earned by the foreign workers of approved foreign enterprises are free from Puntland incomes taxes.

1. "Profit" is understood as net income less income taxes payable and /or applicable , in accordance with the prevailing legislation.
2. Profit originating from duly registered foreign investment may be reinvested in the same enterprise, or in another enterprise in accordance with the provision of this law.
3. When such profit is not to be reinvested, the Board is to be notified to this effect by registered mail or directly, against issue of delivery receipt.
4. The Board shall proceed to register the profit reinvested in the convertible currency in the "Certificate of Foreign Investment Registered". The amount will be determined in accordance with the prevailing laws and regulations governing foreign exchange.
5. To this purpose, the Board issues a " Certificate of Reinvestment".
6. Subsequent rights to transfer profit and repatriate investment, as well as other benefits under this law, shall be determined on the bases of the original registered investment plus profit reinvested.
7. In the case of the reinvestment of the profit in an enterprise, other than the enterprise of a duly registered foreign investment, the provisions of articles 8 and 9 of this law shall apply.

1. Profit originating from duly registered foreign investment, as per paragraph 1 of article 11, may be freely transferred abroad.
2. In the case that only part of such profit is transferred abroad in one year, the foreign investor may transfer the remaining portion in any of the following years.

1. Duly registered foreign investment, defined as the original investment plus profit reinvested, will be freely transferable abroad after five years from the date of the registration of original investment, specified in the "Certificate of Foreign Investment Registered".
2. The Board is entitled to reduce the said period , taking into consideration the priorities under the policy guidelines as per Article 7 of this law.
3. The money which is to be transferred abroad will be in the same currency as the original specified in the "Certificate of Foreign Investment Registered". The funds to be transferred is to originate from the liquidation of assets or the transfer of capital stock of the enterprise of foreign investment to other juridical or physical persons. The foreign investor is free to transfer abroad the physical assets that were the object of the investment in the event this alternative is opted for.
4. In case where the amount realized from the liquidation or sale of capital stock exceed the amount of the original investment plus registered reinvested profit, the foreign investor is entitled and free to transfer the difference, in accordance with the prevailing legislation and foreign exchange regulations.

Article 15

1. Alienation of Foreign Investment will be effected either through the liquidation of assets or through the transfer of capital stock of the enterprise juridical or physical persons.
2. In the event of Alienation of Foreign Investment to a resident Puntland juridical or physical persons, the transferee will lose the status to enjoy the benefits derived from the status of a foreign investor.
3. Any alienation is subject to prior notification to the Board by both the transferor and the transferee. Such notification will be accompanied by appropriate supporting documentation.
4. The Alienation of a Foreign Investment to other foreign investors will not require approval, as per Article 9 of this law, but only notification, as per paragraph 3 of this Article.

Foreign investments are eligible for incentives and facilities, in accordance with the legislation in force governing such incentives and facilities.

1. Any enterprise registered in accordance with this law may be established as foreign company or firm or as Somali company or firm.
2. Any enterprise which is the subject of a duly registered foreign investment may contract debt from institutional domestic financial sources up to the limit established by the Central Bank of Puntland Somalia, in consultation with the Board. However, the total debt contracted from institutional domestic financial resources may not exceed the total value of the original investment and of subsequent approved reinvestment of profits.
3. The proceeds from such debt contracted from the domestic sources will be used strictly for the carrying out of the activities specified in the "Certificate of Foreign Investment Registered The Board is entitled to verify the due application of the proceeds.

1. The Board shall ensure that the immigration authorities facilitate the granting of the entry permits and residence visas to foreign personnel employed by an enterprise registered under this law and their families.

2. The Board also have to ensure that said personnel and their families be granted access, for reasons of work, to any part of Puntland Somalia.Foreign personnel may freely transfer abroad portion of their salaries, wages, gratuities and allowances paid in Puntland Somalia by the employing enterprise.

3. Any enterprise registered under this law is fairly required to hire qualified Somali nationals whenever they are available. Foreign investment should contribute to the technology and managerial know-how, and the upgrading of professional skills available in Puntland of Somalia.

 

 

Article 19

Guarantees for Foreign Investment

1. All enterprises which are object of foreign investment will receive treatment as favorable as the domestic enterprises.

2. The property that accorded of foreign investment, duly registered under this law, will not be subject to nationalization measures. In the case where it is proved that public interests are not served, duly registered enterprises shall not be subject to administrative measures of seizure.
3. In case of a war where nationalization becomes inevitable, direct compensation will be paid with respect to relevant international conventions. Such compensation will reflect the fair market value of the assets, as going concern and will freely be transferable.
4. Customs, duties, direct taxes, profits and relevant additional municipal taxes in force at the time of registration of foreign capital investment may be waived from foreign investors for the first five years.

 

Article 20

Settlement of Disputes

1. Disputes in respect of the implementation of this law will be settled:

1. In a manner to be agreed upon with the investor, or in the absence of such agreement;
2. within the framework of agreements in force between the Puntland of Somalia and and/or representatives of the investors.
3. within the framework of the convention for the settlement of Investment Disputes between the state and the nationals of other countries, to which Puntland of Somalia had adhered by virtue of law no. 11 of 1967, when such convention applies.

1. In the absence of agreements or convention as per paragraph 1 of this Article, disputes will be settled by arbitration.
2. An arbitration Board will be established, comprising one member from on behalf of each disputing party and a third member acting as a chairman, to be jointly named by the said two members.
3. In the case that the disputing parties fail to reach an agreement on the nomination of chairman within 30 days of the date of the nomination of the second member, the Minister of commerce and Industry may propose a person to the partners.
4. The arbitration Board will lay down its rules of procedure unrestricted by the rules contained in the civil and Commercial Code of procedures, save for the rules which relate to the basic guarantees and principle of litigation.
5. The Board will see to it that the disputes be expediently resolved. Awards will be rendered by majority vote, and will be final and binding on both parties and enforceable as any other final judgment.
6. The Arbitration Board will decide who will bear the arbitration costs.

 

Article 21

Benefits to Existing Foreign Investment

1. Existing foreign investment in Puntland of Somalia, duly registered under current or previous laws concerning foreign investment, shall continue to enjoy the rights and obligations conferred to it by said laws.
2. Such foreign investment shall be entitled to benefit, at the foreign investor’s option, from the provisions of this new law, provided the registration requirements and other provisions of the previous laws have been complied with, and satisfactory documentary evidence is produced to this effect by the foreign investor.
3. In such case, the foreign investor may apply to The Board for registration under this law within hundred eighty (180) days as of the date of its promulgation.

 

Article 22

Foreign Investment in Mining, Fishing & Nuclear Power

1. The general provisions of this law will apply to foreign investment in mineral research and mining activities, including those related to the petroleum industry, fishing and nuclear power.
2. With respect to international law, different agreements and regulatory laws by the Puntland government will apply to the especial features of mining, fishing and nuclear power.

1. Banks, public notaries and entities involved with foreign investment will notify The Board of the particulars of any important pertinent acts and transactions within 30(days) from the date of completion of such acts or transactions. This refers to acts or transactions concerning incorporation, contracting of debt from institutional domestic financial sources, transfer of profit and repatriation of investment.

Failure to comply with the provisions of the law, on the part of the foreign investor, shall result in a review of the investors’ position by the puntland government.

No provisions of this law will constrain the enjoyment by the foreign investor of benefits under more favorable provisions which might be subsequently promulgated.

Repeal

Any law incompatible with the provisions of this law is hereby repealed.

This law will come into effect as of the date of its approval of the parliament of Pumtland Somalia.