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Foreign Direct Investment

FDI flows into the Marshall Islands, which depend on the American economy, have strongly decreased since 2008 following the global crisis. According to UNCTAD's 2021 World Investment Report, FDI inflows increased from USD 4 million to USD 7 million between 2019 and 2020, despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of FDI stood at USD 212 million in 2020. FDI is mostly directed towards the agriculture (coconut oil in particular), fishing and tourism sectors. The main investing countries in the Marshall Islands are China, Taiwan, the United States, Japan and Australia.

Foreign investment is governed through the Foreign Investment Business License Act. The Marshallese government formally encourages foreign investment, especially in the following sectors: fisheries, aquaculture, deep-sea mining, manufacturing, tourism, renewable energy, and agriculture. Tax and duty exemptions are available for investments in certain private-sector industries (i.e. off-shore or deep-sea fishing; manufacturing for export, or for both export and local use, agriculture, hotel and resort facilities). Nevertheless, foreign investment in the Marshall Islands is complicated by laws that prevent non-Marshallese from purchasing land: as there is no public land in the country, foreign businesses must lease land from private landowners to operate their businesses. Furthermore, the costs of doing business are relatively high due to the high costs of communications and utilities, poor infrastructure, the dependence on imported materials and services, and relatively high import duties. Foreign investment is restricted in certain small-scale retail and service businesses, including small scale agriculture and marine culture for local markets, small retail shops, car rentals, deli shops, etc. Since independence, the country has operated under a Compact of Free Association with the United States, which is set to expire in 2023. The Marshall Islands have been removed from the EU and OECD’s list of non-cooperative tax jurisdictions. The country ranked 153rd in the latest Doing Business report issued by the World Bank, losing three positions compared to the previous edition.

 
 
Foreign Direct Investment 201820192020
FDI Inward Flow (million USD) 1047
FDI Stock (million USD) 202206212

Source: UNCTAD - Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Country Comparison For the Protection of Investors Marshall Islands East Asia & Pacific United States Germany
Index of Transaction Transparency* 2.0 5.9 7.0 5.0
Index of Shareholders’ Power*** 8.0 6.7 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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