GRENADA: INVESTMENT CLIMATE STATEMENT 2009

UNCLAS SECTION 01 OF 04 GRENADA 000151

SIPDIS

STATE FOR WHA/CAR (JMITCHELL) (VDEPIRRO) (WSMITH)
STATE FOR EB/IFD/OIA
WHA/EPSC (MROONEY) (FCORNEILLE)
EEB/ESC/IEC/EPC (MMCMANUS)
INR/RES (RWARNER)
SANTO DOMINGO FOR FCS AND FAS
TREASURY FOR ERIN NEPHEW

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV GJ
SUBJECT: GRENADA: INVESTMENT CLIMATE STATEMENT 2009

REF: SECSTATE 123907


1. Embassy Grenada response to reftel request for the investment
climate statement.


2. Begin text:

The Government of Grenada (GOG) seeks to attract foreign direct
investment and, with limited exceptions, encourages investors to
enter in and operate enterprises in all fields of lawful
economic activity. There is no minimum entry requirement and no
restriction on foreign ownership, repatriation of capital,
dividends, interest or other distributions and gains. Foreign
and local investors are given equal treatment. The main sources
of information and data: Grenada Industrial Development
Corporation and Ministry for Foreign Affairs.
A.1. Openness to Foreign Investment: The GOG encourages the
establishment and development of new businesses and offers a
wide range of incentives to potential investors. All of these
incentives and concessions are designed to make investments more
profitable. Concessions are available under the Investment Act,
Income Tax Act and Common External Tariff (SRO 37/99). The
judicial system upholds the sanctity of contracts. There is no
economic or industrial strategy that has discriminatory effects
on foreign investors. There are no limits on foreign ownership
or control. Screening of foreign investors is mandatory.
However, because of the lengthy and cumbersome process,
investors are required to sign a `shareholders declaration form'
to vouch for their bona fides. The process of investing begins
while screening is conducted. Screening is done to protect
domestic interests. Grenada has a generally liberal investment
regime. Investors may not invest in or operate Investment
Enterprises which are prejudicial to national security or
detrimental to the natural environment, public health or the
national culture or which contravene the Laws of Grenada. There
are no sectors in which foreign investors are not treated the
same as a national investors.
A.2. Conversion and Transfer Policies: The Reciprocal
Encouragement and Protection of Investment Agreement with the
United States protects U.S. investors against performance
requirements, restrictions on transfers, and arbitrary
expropriation and sets forth procedures for the settlement of
disputes. By providing a more open and secure environment for
investment, it also promotes private sector development. There
have been no recent changes in the Agreement. There is no
difficulty in obtaining foreign exchange.
A.3. Expropriation and Compensation: Under the Constitution,
the Government shall not compulsorily acquire or take possession
of any investment enterprise, or any asset of an Investor except
for a purpose which (a) is in accordance with the laws of
Grenada; (b) is on a non-discriminatory basis; (c) is in
accordance with the procedures provided by law; (d) provides for
prompt payment of adequate and effective compensation together
with interest from the date of acquisition or taking possession
of the investment enterprise or asset to the date of payment at
the commercial bank rate on loans to the corporate sector; and
(e) provides for the right of access to the Supreme Court by any
person claiming such compensation for the determination of any
interest in or right over the investment enterprise or asset and
the amount of compensation. There have been no expropriation
actions in recent times. There are no special sectors which may
be more at risk of expropriation than another. There are no
laws forcing local ownership.
A.4. Dispute settlement: Grenada is a constitutional monarchy
within a Parliamentary System based on the British Model. The
executive power is vested on the Prime Minister and his Cabinet,
who have responsibility for concluding and signing trade
treaties and trade-related agreements with foreign countries.

The Judicial System is based on English Common Law.

There are three local levels of judiciary courts, and the
Eastern Caribbean Court of Appeal. Magistrates Court deals with
minor civil and criminal cases, the High Courts deal with cases
falling under the different Acts of Parliament.

The Privy Council in London is the final Court of Appeal once
all appeals have been exhausted at the local and regional levels.

Grenada is a member of the International Centre for Settlement
of Disputes.

In the event of disputes between foreign parties within an
investment, or between Foreign Investors and Grenadian parties,

GRENADA 00000151 002 OF 004


or between Grenadian partners, or between the Investors and the
Government in respect of an enterprise, the disputants shall
first seek to settle their differences through consultation or
mediation to reach an amicable settlement. In the event that the
disputants fail to resolve the matter, they may then: (a) submit
their dispute to arbitration under the Arbitration Act No 2 of
1989; (b) invoke the jurisdiction of the courts of Grenada; or
c. the Caribbean Court of Justice; (d) adopt such other
procedures as provided for in the Articles of Association of the
investment enterprise. There is generally no government
interference in the court system although there occasionally
such government interference has been alleged, though never
proven. A more common problem in Grenada's judicial system is
lengthy and/or incomplete trials. They are dragged out by the
non-appearance of required witnesses or attorneys resulting in
multiple continuances. It is exceedingly rare that a judge
holds anyone in contempt for ignoring summonses and many trials
are eventually dropped because of the no-shows.

A.5. Performance Requirements/Incentives: The legislation of
Grenada provides a package of benefits and concessions for
specific activities. Incentives available include tax holidays,
import duty exemptions, repatriation of profits and withholding
tax exemptions. Incentives that are trade-related are notified
under Article 25 and Article 27 of the Agreement on Subsidies
and Countervailing Measures. The Government encourages the
establishment and development of new businesses and offers a
wide range of incentives to potential investors. All of these
incentives and concessions are designed to make investments more
profitable. Concessions are available under the Investment Act,
Income Tax Act, and Common External Tariff (SRO 37/99).
Incentives: Accelerated depreciation - 50% on plant & machinery;
10% on building; Investment allowance - 100% write off on total
investment; carry forward of losses for 5 years; 100% relief
from customs duties and taxes on plant, equipment & raw
materials; deductible expenditure incurred for marketing,
training, research and development. Other Incentives include:
no restrictions on foreign ownership; no restrictions on foreign
currency transactions; no restrictions on the repatriation of
profits, capital, and dividends; double taxation relief. There
are no performance requirements linked to investments. The
Reciprocal Encouragement and Protection of Investment agreement
with the United States protects U.S. investors against
performance requirements. An investment enterprise may be
wholly owned by either foreign or domestic investors. There is
no requirement that a domestic investor shall own any shares in
any investment enterprise.

A.6. Right to Private Ownership and Establishment: Investors
may purchase or lease privately owned land and dispose of or
transfer their interests in the land under the Alien Land
Holding Licence Act, and the Property Transfer Tax Act, No 37 of

1998. Investors may hold State lands by grant or lease from the
State.

A.7. Protection of Property Rights: The Constitution and
Investment Code Incentives Act protect personal property
including investments and the property of investors. The
intellectual property rights of investors and investment
enterprises, such as, but not limited to, patents, trademarks,
brand names, and copyrighted materials in printed, recorded, or
electronic format are guaranteed by the Patents and Act (Cap 227
of the consolidated laws of Grenada) or the Trademarks Act (Cap
284 of the consolidated laws of Grenada),or the Copyright Act
Cap No 32 of 1988 (Cap 67 of the consolidated laws of Grenada).
Grenada is a member of the World Intellectual Property
Organization (WIPO),the Paris Convention, the Berne Convention
and the Patent Cooperation Treaty.

Domestic legislation regarding intellectual property protection
has not yet been amended to bring it in line with the TRIPs
Agreement.

Administration of intellectual property laws in Grenada is under
the responsibility of the Ministry of Legal Affairs.

The registration of patents, trade marks and copyright is done
at the Registry of the Supreme Court.

Grenada's system for registering patents is governed by the
Registration of the United Kingdom Patents Act, Cap. 283. In
accordance with the legislation, based on Section 91 of the
U.K.'s Patents and Design Act of 1907, any patent holder in the

GRENADA 00000151 003 OF 004


United Kingdom may apply within three years from the date of
issue of the patent to have it registered in Grenada.

Grenada operates a re-registration system based on registration
in the United Kingdom.

Under the Registration of the United Kingdom Trade Marks Act,
Cap 284, any person being registered as the proprietor of a
trade mark in the United Kingdom may apply at any time during
the existence of the registration to have it registered in
Grenada.

A.8. Transparency of the Regulatory System: The Government of
Grenada recognizes that for investors, transparent information
on rules and regulations dealing with investment, how they are
formulated and implemented are critical. The Government
therefore promotes investments by consulting with interested
parties; simplifying and codifying legislation; using plain
language drafting; developing registers of existing and proposed
regulation; expanding the use of electronic dissemination of
regulatory material; and by publishing and reviewing
administrative decisions. Tax, labor, environment, health and
safety, and other laws and policies do not distort nor impede
investment, though the laws are not always applied in a
consistent manner. In theory, bureaucratic procedures,
including those for licenses and permits are sufficiently
streamlined and transparent. In practice, local authorities
recognize that the implementation of procedures is inconsistent
and greater emphasis on service with training to increase the
work force's capabilities is needed. There are no informal
regulatory processes managed by non-governmental organizations
or private sector associations.

A.9. Efficient Capital Markets and Portfolio Investment: There
are policies to facilitate free flow of financial resources.
Foreign personnel of Investment enterprises and their families
may also repatriate their earnings, after paying of Grenadian
personal income tax and all other taxes due. GOG policy is that
foreign investors are not permitted to borrow domestically in
Grenada from financial institutions chartered in Grenada, or to
access low-interest rate loans or government grants.

A.10. Political Violence: Grenada is a politically stable
country with little or no political violence. Political
infighting can negatively impact investment immediately
preceding or following a change in government. On the whole,
investors in Grenada can benefit from a stable economy;
developed infrastructure, relatively low crime rate, and
generally good quality of life. Several sectors, including
agriculture, health, and tourism remain underdeveloped.
A.11. Corruption: In March 2007, Parliament passed the
country's first anticorruption bill. According to the World
Bank's worldwide governance indicators, government corruption
was a problem. A new anticorruption law requires all public
servants to report their income and assets for review by an
Integrity Commission the law requires to be set up. The
Commission has yet to be organized as internal disputes within
the Government over its makeup continue.
A.12. Bilateral Investment Agreements: Bilateral Investment
Agreements established between Grenada and the following
countries are designed to encourage and protect international
investments and to ensure that investors receive fair,
equitable, and nondiscriminatory treatment. Reciprocal
Encouragement and Protection of Investment with the United
States - The agreement protects U.S. investors against
performance requirements, restrictions on transfers, and
arbitrary expropriation and sets forth procedures for the
settlement of disputes. By providing a more open and secure
environment for investment, it also promotes private sector
development. Investment Protection and Promotion Agreement with
the United Kingdom - The agreement encourages British investor
confidence by setting high standards of investor protection
applicable in international law. Key elements include
provisions for equal and non-discriminatory treatment of
investors and their investments, compensation for expropriation,
transfer of capital and returns and access to independent
settlement of disputes.
A.13. OPIC and other investment insurance programs: Grenada's
accession to the Overseas Private Investment Corporation (OPIC)
entered into force on June 27, 1968. Grenada is a member of the
Multilateral Investment Guarantee Agency (MIGA).
A.14. Labor: Grenada has signed and ratified all of the
International Labor Organization's undertakings and has

GRENADA 00000151 004 OF 004


enshrined these rights in its labor laws, including the Labour
Relations Act No.1 of 1999 and the Employment Act No. 1 of 1999.
Grenadian law upholds the right of workers to be represented by
a trade union of their choice. There are no restrictions on the
activities of trade unions as long as they operate within the
parameters set out by the local law. The majority of the
workforce is unionized and the labor relations atmosphere on the
island is generally stable. The recent sharp increase in prices
of food and other basic items as a result of higher oil prices
coupled with the global economic downturn will impact expected
2009 wage and salary negotiations, increasing the potential for
strikes. In accordance with the Trade Union Recognition Act No
29 of 1979 (Cap 325 of the consolidated laws of Grenada),
investors shall grant union representation at any site of
employment if the majority of their employees indicate the
desire for union representation and investment enterprises shall
contribute to the social insurance and welfare programs for
their workers in accordance with the National Insurance Act.
A.15. Foreign Trade Zones/Free Ports: There are no Free Zones.
A.16. Foreign Direct Investment Statistics
FDI Inflows, 2001-2006 (US $mil dollars)
2001 2002 2003 2004 2005 2006
Inflows: 52.59 55.83 59.00 60.50 79.2 97.0
Source: Grenada's Central Statistics Office

FDI Inflows by Country of Origin 2001-2006 (US $mil dollars)
Source: Grenada Industrial Development Corporation

2001 2002 2003 2004 2005
United States 0.55 4.0 3.5 12.1 1.6 2.3
Europe (including the UK) 1.64 11.9 6.3 24.9 64.4
Caribbean 11.2 6.80 6.6 3.8 13.1 1.6
China (PRC) 0.22 0.15
Other 0.27
Total 13.7 10.8 22.1 22.4 39.6 68.4

FDI Inflows by Sector 2001-2006 (US$ mil dollars)
Source: Grenada Industrial Development Corporation

SECTOR 2001 2002 2003 2004 2005 2006
Tourism 8.6 10.8 14.0 22.1 38.2 66.1
Manufacturing 5.0 - 0.1 - 1.2 0.2
Services 0.1 - 8.0 0.2 0.2 2.1
TOTAL 13.7 10.8 22.1 22.4 39.6 68.4

End text.
MCISAAC