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 2022 World Investment Report, FDI inflows decreased from USD 7 million to USD 5 million between 2020 and 2021. The total stock of FDI stood at USD 218 million in 2021. Foreign companies mostly invested in the Marshall Islands' tourism industry, particularly in the hotel and resort sectors. Foreign investors have also shown interest in the country's fishing industry due to its rich marine resources. The primary sources of FDI in the Marshall Islands come from countries such as the United States, Japan, Taiwan, and China.

Foreign investment is governed by 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 both export and local use, agriculture, hotel and resort facilities). Nevertheless, foreign investment 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 September 2023. However, the two countries signed a memorandum of understanding on the renewal of the economic provisions of the Compact in January 2023. The Marshall Islands have been removed from the EU and OECD’s list of non-cooperative tax jurisdictions.