measures the establishment process for domestic small and medium enterprises. The process of establishing a foreign-owned company requires two types of procedural steps: those required of both foreign and domestic companies and those required only of foreign companies. Both are covered in this analysis as both matter to foreign companies seeking a new location for their investment. In fact, foreign companies are equally concerned not only about onerous and unpredictable entry barriers, but also about differences in the way they are treated in comparison with domestic companies. Policy reforms which improve the business startup process for domestic investors benefit foreign companies equally by reducing entry barriers. The distinguishing value of the _FDI Regulations_ data is that it highlights findings that are specific to foreign investors. The indicators also evaluate the characteristics of the regulatory and **Box 1: The startup case study** administrative regimes for business start-up, including foreign investment approval requirements <mark>In order to gather comparable data across economies,</mark> (nature of investment approval requirement, <mark>the</mark> _<mark>Starting a Foreign Investment</mark>_ <mark>questionnaire is</mark> possibility of appeal, minimum required amount of <mark>based on case study of a hypothetical foreign</mark> investment, period of validity, etc.), the availability of <mark>company planning a capital investment of US$ 10</mark> online services (online laws, regulations, documents, <mark>million in order to establish a wholly foreign-owned</mark> and registration), among others. The topic presents <mark>subsidiary in the form of an LLC in the host country.</mark> indicators on economies’ laws, regulations ( _de jure_ ) <mark>The company will be established in the country’s most</mark> but also practices ( _de facto_ ) in the measured <mark>populous city, will produce consumer products and</mark> economies. <mark>will be involved in international trade. The firm will</mark>

**Box 1: The startup case study** <mark>In order to gather comparable data across economies, the</mark> _<mark>Starting a Foreign Investment</mark>_ <mark>questionnaire is based on case study of a hypothetical foreign company planning a capital investment of US$ 10 million in order to establish a wholly foreign-owned subsidiary in the form of an LLC in the host country. The company will be established in the country’s most populous city, will produce consumer products and will be involved in international trade. The firm will not benefit from any special incentives granted</mark> through multilateral treaties between economies.

In order to ensure consistency and comparability of data across all economies measured, the indicators are based on a case study that sets out assumptions about a foreign company hoping to establish a local subsidiary. The most critical elements of this case study are provided in Box 1, with more details in Annex 2.

# **_II. Results_**

Specific country-level data and indicators are presented in Annexes 1 and 2. The following section highlights the main findings related to sectoral restrictions as well as procedural implications for setting up a greenfield foreign investment.

## **_a. Investing Across Sectors: FDI equity restrictions across sectors and regions_**

- **_i._** _Restrictions by industry sectors_

Restrictions on inward foreign direct investment vary significantly across economic sectors. While the _FDI Regulations_ project measures such restrictions in 32 different sectors, those have been grouped into 12 sector groups. A score of 0 denotes that a sector or industry cluster is completely closed for foreign investment whereas a score of 100 indicates a fully open sector or industry cluster (calculated as the unweighted average of each sub-sector).

As a general trend, the manufacturing sector (represented in this database by food processing, light manufacturing and manufacturing of basic chemicals) is almost universally open, whereas FDI in the service sectors tends to be more restricted. This reflects the fact that FDI in manufacturing has been a more common occurrence for a longer period of time with evidence of productivity gains and training of labor force (Duggan et al., 2013). Services, in contrast, have become more tradable only in recent years, and economies are less certain about the optimal balance between openness and regulation. In 6