MALI Investment Guide
Openness to Foreign Investment
The Malian Government encourages foreign investment. It treats domestic and
foreign direct investment equally. The April 1996 Enhanced Structural
Adjustment Facility signed between the IMF/World Bank and Mali
encourages the mobilization of external resources to boost investment.
In the framework of past and ongoing structural adjustment programs, the
investment, mining, commerce and labor codes encourage investment and seek to
attract foreign investors in particular. Following the CFA franc devaluation in
January 1994, the Malian Government instituted policies promoting direct
investment and export-oriented businesses. Mali guarantees the
repatriation of capital and profit.
Foreign investors can own 100 percent of any businesses they create. They can
also purchase shares in parastatal companies being privatized or in other local
companies. Foreign companies may also start joint-venture operations with
Malian enterprises.
Foreign investors go through the same screening process as domestic investors.
All investors go through the “guichet unique” (one-stop procedure) to have a
business application processed. Criteria for granting authorization under the
investment code include the size of capital investment, the potential for
value-added, and the level of job creation. Environmental concerns are also
considered.
The Malian public has had a tendency to associate American companies with
structural economic reform programs – misunderstood and disliked by some – of
the IMF, the World Bank and other donors. In March 1991, during pro-democracy
demonstrations, the World Bank and a U.S. company's offices were sacked. Some demonstrators
believed that the company had close ties with the former dictator whom they
sought to overthrow.
The public has, at times, associated foreign companies (including American)
with the Government, and accused them of paying bribes to Government officials
for backing in business and labor disputes.
Foreign investors sometimes report that tax collectors interpret tax laws to
discriminate against foreign companies or companies with foreign capital. The
tax system remains complicated in spite of ongoing efforts to improve it.
Currency Conversion and Transfer Policies
The investment code gives the same incentives to both domestic and foreign
companies for licensing, procurement, tax and customs duty deferrals, export
and import policies, and export zone status if all production is to be
exported. Export taxes, import duties and price controls have been reduced or
eliminated as part of ongoing economic reforms.
The
investment code allows the transfer of funds associated with investments,
including profits. As a UEMOA member, Mali uses the CFA franc currency. Linked to the French
franc, the CFA is fully convertible at a rate of CFA Franc 100 – French franc
1. No parallel conversion market exists because the CFA franc is a fully
convertible currency supported by the French treasury with insures a fixed rate
of exchange.
There are no limits on the inflow or outflow of funds for remittances of
profits, debt service, capital, capital gains, etc. In the CFA zone there is no
restriction on the export of capital provided that adequate documentation to
support a transaction is presented. Most commercial banks have direct
investments in western capital markets.
Central bank rules require that all remittances go through its channels, with
supporting commercial documents required. Exceptions are occasionally made, as
in one case where the Government allowed a foreign mining company to have an
offshore bank account. No physical transfer of funds is authorized outside the
borders of the CFA zone. It takes less than a week (usually three working days)
to remit funds abroad. Several foreign companies interviewed noted that they
had encountered no problems in processing remittances.
Mali is also a member of the larger economic community of West African
States (ECOWAS). ECOWAS encourages investment between and among member
countries to promote economic integration. ECOWAS seeks to eliminate most trade
barriers to facilitate such investment. Fair competition, profitability and
economic benefits are criteria used to assess eligibility investment
incentives.
Expropriation and Compensation
Expropriation of private property for public purposes is very rare. When it
occurs it is done according to Malian law, which is in accord with established
principles in international law. The expropriation process is public and
transparent, and compensation is awarded by court decision. The Malian
constitution calls for an independent judiciary, largely eliminating the risk
of “creeping expropriation”.
The Government may expropriate property for public projects (major road or dam
construction), or in cases of bankrupt companies that have had a Government
guarantee for their financing, or in certain cases when a company has not
complied with the requirements of an investment agreement with the Government.
The only known expropriation against a foreign company occurred in the early
1960s. In 1994, an American company, which had submitted a bid on a Government
tender, had its deposit confiscated because it allegedly failed to comply with
certain agreed terms.
Dispute Settlement
Disputes occasionally arise between the Government and foreign companies. Some
cases involve wrongdoing on the part of companies; some involve corrupt
Government officials. In 1987 the Government accused a foreign firm of 1.9
million USD in tax evasion. It was later determined that tax officials had
fabricated the charges to benefit a national group of flour importers, the main
competitors to the foreign company. The Government threatened to shut down the
company, but did not do so.
In 1987, the Government accused a foreign multinational of illegally exporting
gold. The then minister of finance ordered the company aircraft grounded. The
plane was subsequently released after both parties agreed to settle the case
out of court.
In 1995 the Government accused an American company of not abiding by the
purchase agreement for acquisition of a state-owned company. In reality
ministry of finance officials, with the complicity of laid-off employees, were
trying to push the American investor out to assist another foreign company
competing in the same industry. When the American company brought the matter to
the attention of the Minister of Finance himself, at the suggestion of the
American Embassy, the case was dismissed.
In 1997, a case involved a dispute between a foreign company and a domestic
one. The foreign company lost the case at the commercial court for allegedly
illegally hiring an engineer who used to work for the domestic company. Later
the court's decision was overruled by the appeal court in favor of the foreign
company. Then a higher appeal court overruled that decision in favor of the
domestic company. The case is now pending, awaiting the involvement of the
Supreme Court. There have been allegations in the press that some of the judges
involved were corrupt.
Low salaries and inadequate resources impact negatively on the quality of
judicial decisions. In November 1991, an independent commercial court was
established with the active participation of the U.S. Government to expedite
the handling of business litigation. Since its inception, the commercial court
has handled many cases involving foreign companies. It is staffed by
professional magistrates assisted by elected Malian Chamber of Commerce and
Industry representatives. Hearings are conducted by teams composed of one
magistrate and two Chamber of Commerce and Industry representatives. The
magistrate's role is to ensure that decisions are rendered in accordance with
applicable commercial laws, including internationally recognized bankruptcy
laws, and that court decisions are enforceable under the law.
Performance Requirements and Incentives
The investment code allows a foreign company that has signed an agreement with the Government to refer to international arbitration any case, which the local courts are unable to resolve.
Mali is a member of the International Center for the Settlement of Investment Disputes (ICSID –
also known as the Washington Convention). Mali is a member of the New York Convention of 1958 on
the Recognition and Enforcement of Foreign Arbitrage awards.
The investment code offers incentives to companies that reinvest profits to
expand business. The code also encourages the use of locally sourced inputs.
Local value added is one criteria used for approving investment projects and in
calculating a tax exemption period.
There is no requirement that a Malian own shares in a foreign investment or that foreign equity be reduced over time. In the case of joint ventures with the Government, the Government share may not exceed 20 percent ownership.
Because most businesses are located in the capital city, the investment code
encourages the establishment of new businesses in other areas. Incentives
include:
• income tax exemptions for five to eight year periods;
• reduced-price energy;
• and installation of electric power lines to areas lacking energy.
Title V of the investment code relates to foreign-trade zones. Any company,
domestic or foreign, that plans to export at least 80 percent of its production
is entitled to tax-free status. Production that is not exported would be
subject to taxation.
The Government has identified priority sectors for furthering economic
development. Special incentives are offered for investment in the following
areas:
• agribusiness,
• fish and fish processing,
• livestock and forestry,
• mining and metallurgical industries,
• water and energy production industries,
• tourism and hotel industries,
• communication,
• housing development,
• transportation,
• human and animal health promotion enterprises,
• vocational and technical training enterprises,
• cultural promotion enterprises.
Job creation is an important criteria used in determining tax exemptions and
other incentives. Employers who hire young graduates can pay reduced rates of
social security taxes.
Private Ownership Rights
Domestic and foreign investors share equal rights to private ownership and
establishment as long as they go through the approval process and abide by
relevant regulations.
The Government allows the free market to determine prices. Domestic and foreign
companies compete on an equal basis with public enterprises. The Government's
privatization program for state enterprises creates opportunities for both
domestic and foreign private firms to acquire those entities through open
international bidding.
Protection of Property Rights
Property rights are protected. The “Direction Nationale des Industries” through
its “Division Protection de la Propriete Intellectualle” is the Government
agency which implements the legal system of protection, including the WTO Trips
Agreement. This division works with international agencies recognized by UNIDO,
which are concerned with these issues. Patents, copyrights, trademarks, etc.
are covered.
Transparency of Regulatory System
As reflected in agreements with the IMF and World Bank, the Government of Mali
has adopted a transparent regulatory policy and effective laws to foster
competition. The Commerce and Labor Codes adopted in 1992 are designed to meet
the requirements of fair competition, to ease bureaucratic procedures, and to
facilitate the hiring and firing of employees. The new investment code shortens
the application process to establish a business (maximum 30/45 days turnaround
time), and it favors investments, which promote handicrafts, exports, and
labor-intensive businesses. The mining code encourages investments in medium
and small mining enterprises, awards two year exploration permits free of
charge, and does not require a commitment from the exploring firm to lease the
area explored thereafter.
Political Violence
Mali's multi-party democracy, now six years old, has consistently encouraged
private enterprise and investment. Occasional student and labor strikes and
small-scale political demonstrations have sometimes resulted in political
vandalism and violence, but not enough to substantially impact the investment
climate. President Konare's ruling ADEMA party dominates the executive and
legislative branches of Government. Administrative and political difficulties
associated with the 1997 election process demonstrated that Mali's
democracy remains fragile.
Northern Mali has traditionally encountered friction between
nomadic and sedentary populations. The Malian Government effectively
consolidated the peace following the 1990-1995 Tuareg Rebellion in the northern
regions. The Government, along with international donors and United Nations
organizations, supports the socioeconomic reintegration of refugees and former
combatants. There is little infrastructure and business in the northern desert
regions. Past troubles there have had little direct impact on business
activities in the rest of the country. There are no signs of insurrection
anywhere in Mali. Mali has no belligerent neighbors.
Corruption and Crime
Corruption is considered a crime, and as such is punished by criminal law
(penal code). Despite reports in local papers of bribery cases on large
contracts and investment projects, corruption is not an obstacle to foreign
direct investment. A foreign company recently reported cases of Government
officials (at the lower and middle management level) requesting bribes to
facilitate paperwork. The bribes were refused without significant consequence
to the company.
In 1996, a foreign construction company videotaped Government agents seeking and obtaining bribes in the company's offices. Shortly afterwards, the information was made public and the agents and their supervisors were suspended from their jobs. When found guilty after their trial, some of them were fired.
Corruption seems most pervasive in Government procurement and dispute settlement.
Paying Government procurement agents a five to ten percent commission is common
practice. To fight this, the Government requires any procurement contract to be
inspected by the “Direction General des Marches Publics” that has to determine
whether the procedure meets requirements of fairness, price competitiveness and
quality standards.
In 1997 the President of Mali invited a delegation of the “Global Coalition for
Africa” leg by former Secretary of Defense Robert McNamara to assess the
corruption situation in Mali in order to make recommendations on how to fight
against it.
Blatantly unfair judgments have occasionally been successfully overturned at
the court of appeals. Yet there is a growing wave of complaints from the
business community about the judiciary, including both the judges and the
lawyers. Three months ago, the executive decided to tackle the problem by
creating a national commission in charge of reorganizing the judicial system.
Labor
Labor is widely available, albeit at varying skill levels. Many skilled workers
have been laid off from state-owned companies and are unemployed or hold jobs
well below their skill level. Many recent college and high school graduates
seek work. RS have the right to unionize. Relations between labor and management
have been difficult for the past three years, especially in new industry
sectors such as gold mining. Although a warning notice for strikes is not
required in the private sector, mediation procedures are generally followed
before resorting to a strike. The Government has signed the ILO Agreement
protecting the rights of workers. Although the labor code adopted in 1992
improved hiring and firing procedures, it still requires simplification. Labor
has constituted one of the major difficulties encountered recently by
employers, both national and foreign. Although it is not a requirement, it is
advisable to have regular contacts with the labor inspectors, especially when
concluding new hiring contracts or drafting firing decisions.
There is no discrimination between foreign-owned firms and host country
entities in terms of investment opportunities. Companies (domestic or foreign)
that export at least 80 percent of their production are entitled to the status
of “zone franche” (tax-free status). As such, they benefit from duty free
status on all equipment and other input they need for their operations.
International Investment Agreements
Mali has signed the Cirdi Treaty sponsored by the World Bank group. During
the past three years, Mali has signed investment protection agreements with South Africa,
Algeria, and Senegal.
Foreign Investment Statistics
Until
recently there has been little foreign direct investment. Statistics are
largely non-existent. Companies from Japan, Australia, Canada, and South
Africa have made significant
investments in the mining sector. France, Germany, and China have made significant investments in the
manufacturing and food processing sectors.
Taxation
Corporate profits tax rates vary according to the kind of activity in which the
enterprise is engaged. Limited liability companies are subject to a 35 percent
tax rate. Partnerships and other enterprises are subject to a profit tax of 15
percent. The minimum corporate tax is .75 percent of turnover. In some
situations, a deduction of 50 percent of investment expenditure may be granted.
Agricultural enterprises are subject to a 10 percent tax on profit, with new
enterprises exempt from tax for the first five years of operation. In addition
to these base tax rates, an additional tax is imposed on these enterprises
ranging from eight percent (for incomes between CFA 25,001-100,000) to 50
percent (for income over CFA 2,000,000). Employers are usually taxed 7.5
percent on their wage bill. However, wages paid to university graduates for the
first three years of employment are exempt.
The standard withholding tax on interest and dividends is 18 percent, with
special rates for lots paid to bond-bearers (25 percent) and for savings
account interest, resident company interest-bearing bonds and dividends
payments during the first 42 months of operation (nine percent).
Stock Market
The Bourse Regionale des Valeurs Mobilieres (BRVM) was opened in September 1998
to serve as a regional financial market for the member-states of the West African
Economic and Monetary Union (UMOEA), which includes Benin, Burkina Faso,
Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. At the end of the 1990's, the BRVM had 35 listed
companies.
Listing requirements include a share capital of CFAF 200-500 million; 15-20
percent public ownership; five annual reports and balance sheets.
The BRVM has computerized trading with satellite links. Trading occurs on
Mondays, Wednesdays, and Fridays. Trading is decentralized so that
member-countries can trade simultaneously from their national bourse via
satellite links.
For more information on the
Bourse Regionale des Valeurs Mobilieres, see URL: http://www.brvm.org
Sources: International Monetary Fund (Country Watch): http://www.imf.org