Deadlines - Foreign Investment
Introduction
1. This update is intended to remind you of important deadlines which are approaching under the Foreign Investment Act, 1999 ("Act"). The critical date is 29 October 2000.
Scope
2. Under the Act, a "foreign investor" is any business enterprise (including, in our view, a company, partnership, sole trader, trust or joint venture) whether or not carried on for profit, which is not wholly-owned, either directly or indirectly, by Fiji citizens. The Act therefore applies to all enterprises carrying on business in Fiji which have any degree of foreign ownership, regardless of how small or how indirect that ownership is. As the Act applies to all business enterprises, it is important to consider whether your own enterprise and any that you co-own might be subject to the requirements of the Act.
Requirements
3. Among other things, the Act prohibits foreign investors from carrying on business in Fiji
• without a Foreign Investment Certificate ("FIC") (see below) or in contravention of the terms and conditions of a FIC
• in a "reserved activity" or
• in a "restricted activity".
The maximum penalty if convicted of contravening any of these requirements is $50,000.
Foreign Investment Certificates
4. Every enterprise which has any degree of direct or indirect foreign (ie non-citizen) ownership is required, before commencing business, to obtain a FIC from the Fiji Islands Trade and Investment Bureau (formally the Fiji Trade and Investment Board, or "FTIB"). This requirement has been applied to all foreign investors who began business after 29 October, 1999, the date the Act came into force.
5. Foreign investors already in business on 29 October 1999 were given a grace period of 12 months in which to apply for a certificate. All such foreign investors need to apply for a FIC by 29 October 2000 failing which they will be liable on prosecution for the statutory fine.
Changes in Ownership
6. An enterprise which was fully Fiji citizen-owned when the Act came into force but has subsequently had at least some of its direct or indirect ownership transferred to a non-Fiji citizen or citizens (and thereby become a "foreign investor") is under an obligation to apply for a FIC within 14 days of the transfer. Failure to meet this requirement renders the enterprise liable to a maximum fine of $50,000.
7. Enterprises which have already obtained FICs are also reminded that, unless they are listed public companies, they are required to notify the Chief Executive of the FTIB of any change in their membership or shareholding within 14 days of the change. The maximum penalty for a failure to meet this requirement is $5,000.
Variations in Activities
8. Any foreign investor which varies its business activities in Fiji from those for which a FIC was granted will need to apply for a resulting variation of its FIC. A "relevant activity" is classified according to the 30-page "Fiji Standard Industrial Classification" ("FSIC"), which is broadly benchmarked to the United Nations International Standard Industrial Classification of All Economic Activities ("ISIC"). Copies of the FSIC are available from us on request for F$10 plus VAT.
Reserved Activities
9. The Act empowers the relevant Minister (currently, we understand, Trade and Commerce) to prescribe certain activities which are reserved for wholly Fiji-owned businesses. These are known as "reserved activities". In October 1999 the Minister made Regulations which will reserve the following activities (among others) for wholly Fiji-owned enterprises -
• tourism businesses or ventures, or facilities ancillary to tourism businesses or ventures, having assets of less than $100,000
• retailing or distribution businesses having assets of less than $100,000
• restaurants other than "speciality restaurants"
• hire car or bus businesses
• motor vehicle repair and servicing businesses
• carpentry, plumbing or electrical businesses
• earthmoving businesses
• office service businesses having assets of less than $100,000.
The reservations will become effective on 29 October 2000 (but see paragraph 11 below).
Restricted Activities
10. Regulations have also been made prescribing activities which can only be carried on by foreign investors subject to the fulfilment of specified conditions. These are known as "restricted activities". Some of the restricted activities and the relevant conditions are:
• a fishing business must have at least 30% local equity and if it has a majority foreign shareholding it must pay the Ministry of Finance an amount equal to 5% of the landed value of any catch which is not processed locally
• a forestry enterprise must have at least 30% local equity
• an operator of leisure cruises must have at least 51% local equity
• any activity involving investment in the cultural heritage of the Fiji Islands must have at least 51% local equity
• a customhouse agent must have at least 60% local equity
• an enterprise engaging in real estate management or development or in the construction industry must have at least 51% local equity
• a pest control and fumigation service must have at least 51% local equity
• an inter-island shipping and passenger service must have at least 51% local equity
• an advertising, public relations or marketing business must have at least 30% local equity.
These reservations also become effective on 29 October 2000 (but see paragraph 11 below).
Existing Enterprises carrying on Restricted or Reserved Activities
11. The Act provides that if an enterprise already has a FIC when its activity becomes reserved or restricted, the new restriction or reservation will not apply to that enterprise. Thus if your enterprise is a foreign investor currently trading in a reserved or restricted activity, the only way it can continue to do so after 29 October 2000 is to ensure that it has an FIC before that date.
Practical Implications
12. If -
• any part of your enterprise is owned directly or indirectly by a non-Fiji citizen or non-Fiji company, or
• you jointly own another enterprise with a non-Fiji citizen or with a non-Fiji company and
• the enterprise has not yet applied for a FIC,
and
• none of the enterprise's activities are reserved or restricted
then you should ensure that you apply for a FIC before 29 October, 2000.
13. However, if -
• your enterprise or an enterprise in which you have an interest has some direct or indirect foreign ownership
• the enterprise has not yet applied for or received a FIC and
• it undertakes an activity which will become reserved or restricted on 29 October 2000
then it is essential that you apply immediately for a FIC so that it can be issued before 29 October, 2000.
Our View
14. We have doubts about the overall efficacy of this legislation, to say nothing of the ability of those charged with its enforcement to actually render it effective. However, the Act appears to be here to stay and, if nothing else, well-managed businesses will take the relevant steps to ensure that compliance is achieved and maintained.
What You Should Do
15. Application forms are available from our offices or the FITIB at:
P O Box 2303
Government Buildings
Suva
Phone No: 331 5988
Facsimile No: 330 1783
Email ftibinfo@ftib.org.fj
Internet: http//www.ftib.org.fj