Venezuela, the two economies where establishing a foreign-owned business takes the longest time in the world.

At times, economies that are open to FDI are also the economies where it is easiest to set up a foreign subsidiary. We have observed economies such as Madagascar and Rwanda that are at the top of all indicators measured; as are FYR Macedonia and Georgia in ECA, Chile in LAC, Hong Kong SAR, China and Singapore in EAP, and New Zealand in high-income OECD economies. On the other end of the spectrum, we have economies such as the República Bolivariana de Venezuela and Algeria that are very restrictive both when it comes to the allowed share of foreign equity participation as well as the ease of establishment of foreign companies.

However, when comparing sectoral openness and startup requirements, we also observe that best performing economies in one of the indicators are not always the same in the other. In many instances, when economies have opened up their sectors to foreign equity participation, they have imposed stringent establishment rules. In Malaysia and Mexico, sectors are more restricted than elsewhere in their region. However, once an investment is approved, there are few procedures required for establishment and the process is one of the fastest in their respective regions. The opposite occurs in Bosnia and Herzegovina, Kosovo, as well as in Papua New Guinea and Cambodia. In fact, full foreign equity ownership is possible in almost 100% of these economies’ sectors but the procedures required for establishing a foreign-owned company are difficult and lengthy. For instance, Papua New Guinea is more open to foreign investment than many other economies in EAP; however, opening a foreignowned business takes 112 days, 30 of which relate to obtaining an approval of the foreign investment from the investment promotion agency. The discretionary power of the government agency to approve or reject the investment adds uncertainty to the lengthy process. In contrast, Mexico which is the most restricted economy in the LAC region (prohibiting full foreign ownership in 8 sectors) is one of the fastest economies with 18 days to establish a foreign-owned business and an automatic declaration of the investment before the Foreign Investment National Registry.

The legal and regulatory frameworks and their implementation can sometimes be a deal breaker for foreign investors when deciding on the location of their next investment. Below are some of the main concrete considerations that a government can implement in order to improve its investment climate in the areas measured:

- Liberalize restrictions in sectors especially petrochemicals, telecommunications, electricity, media and transport;

- Promote investment in sectors where there is no actual foreign participation by engaging in proactive investor targeting and by offering incentives;

- Rationalize and reduce the number of unnecessary procedures in order to obtain licenses, concessions and authorizations to operate in some industries;

- Remove anticompetitive regulation, such as, statutory monopolies, restriction on the number of firms and discriminatory treatment of certain firms;

- Consolidate the establishment procedures and abolish unnecessary ones for foreign companies creating a subsidiary;

- Provide for fast-track alternative to traditional registration, even if it entails higher fees. Create a one-stop-shop in order to simplify the establishment process and optimize its duration;

- Eliminate foreign investment approval requirements or limit them to investments done in strategic/sensitive sectors or above a certain threshold amount.

- Ratify the 1961 Hague Apostille Convention in order to expedite the authentication of parent company documentation;

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