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Investing in the RMI
Licensing and Incorporation
The RMI is classified by the United Nations as a Small Island Developing State. The economy remains relatively small, with an estimated current-dollar Gross Domestic Product of about US$100 million as of 2003. The economy relies heavily on RMI Government and US military expenditure and employment, but has seen some growth in commercial and small-scale fisheries, mariculture/aquaculture, agriculture, traditional crafts manufacturing (handicrafts), and tourism.
For updated economic data and information, refer to the following links:
RMI Economic Policy, Planning and Statistics Office (EPPSO) statistical website (hosted by the Secretariat of the Pacific Community), click HERE
Insular Areas Statistical Enhancement Program (Census and Survey Data), click HERE
International Monetary Fund (IMF) RMI statistics, click HERE
US Trade Balance with RMI (US Census Bureau), click HERE
The World Bank Group RMI Data Profile, click HERE
The World Bank Group RMI At a Glance, click HERE for PDF
The Government of the Republic of the Marshall Islands wishes to encourage private sector development to help meet its development goals. These goals include employment generation, human resource development, generation of foreign exchange, and import substitution. It is particularly interested in encouraging private investment in its fisheries, tourism, manufacturing and agriculture sectors. The Government appreciates that the domestic private sector alone is not yet able to contribute sufficiently in this regard. It therefore is actively seeking direct foreign investment to assist the country meet its goals.
Download the full RMI Government National Investment Policy Statement, click HERE
With an Exclusive Economic Zone (EEZ) of about 750,000 square miles, the Republic of the Marshall Islands has great potential for the development of its fishing industry. At present, fishing vessels operating in the Marshall Islands EEZ hail from the United States, Japan, China, Taiwan, Korea, Vanuatu, Kiribati and the Federated States of Micronesia. In the case of the US, the RMI is party to the US Multilateral Tuna Treaty, which allows the US fishing vessels access to certain Pacific island EEZ’s. In addition, a Chinese longline fleet has vessels based in Majuro.
The Marshall Islands is a member of a regional arrangement known as the Forum Fisheries Agency (FFA). The FFA Secretariat assists its member countries in managing and conserving its region-wide tuna stock, in cooperation with non-Pacific island countries fishing in the region. The Secretariat of the Pacific Community (formerly known as South Pacific Commission), to which the Marshall Islands is also a member, provides necessary scientific and biological information on the marine species within the EEZ.
The capitol of the Marshall Islands, Majuro Atoll, possesses much of the necessary infrastructure and facilities for fishing vessel activities. Such facilities include: a floating dry dock, a deep-water harbor with container handling facilities, a fish base complex equipped with a bulk ice facility and a satellite chiller plant at the airport for air shipment, a 10 million liter bulk fuel storage bunker facility, regular international shipping services, and an international airport. In addition, Majuro contains many stores, fully-stocked with supplies and goods, mostly imported from the US. Ebeye, RMI’s second largest urban center, is also equipped with fishing facilities such as, a protected harbor and marina and fish base.
The Marshall Islands Marine Resources Authority (MIMRA) operates a National Fisheries and Nautical Training Center, training 75 students per year. Students learn skills that enable them to work on commercial fishing vessels. Several graduates are currently employed on US fishing vessels and reviews from vessel owners and operators regarding these Marshallese fishermen have been positive and encouraging. Vessel owners/operators wishing to base their activities in Majuro, and even vessels which are not based in Majuro would have access to highly trained and skilled seamen to work on their vessels.
MIMRA has recently undergone some major changes in the areas of development policies, legislation, and organizational structure. The recently adopted National Fisheries Development Plan and revised Marine Resources Act are two of the most proactive national fisheries documents in the region.
The construction of a service center for fishing vessels has been identified as a feasible investment opportunity for foreign investors. Activities such as repair and construction of boats, provision of fuel, ice, and selling of certain fishing gear, etc., can be undertaken at the center.
Great potential exists for both black-lip pearl and giant clam farming projects, for they are well suited to the protected lagoon environment many atolls in the Marshall Islands can provide. Currently, both clam and pearl farming projects are underway in Majuro, and several are in the early stages of development in some of the outer islands.
The farming of Trochus shells is another potential area for development. The Trochus is a marine snail with a large, conical shell that is prized by jewelers the world over. The Marshall Islands' waters have already demonstrated vast potential in this area, and some local businesses have begun to export Trochus shell to the US and Japan.
Other potential areas of mariculture/aquaculture development might include coral farming or small-scale fishing for reef fish.
Considerable opportunity for private sector investment exists in the area of tourism and the Marshall Islands possesses a number of unique selling points which set it apart as a distinct tourism destination. The islands are located in the northern Pacific region of Micronesia - one of the fastest growing regions for tourism in the world - and are centrally located between North America and Asia, two of the most productive tourism source markets.
As a coral atoll nation, one of only four in the world, the Marshall Islands offers a very unique environment and landscape, consisting of saltwater lagoons encircled by white beaches and small, lush islands. In all, the Marshall Islands contain over 1,200 individual islands, 870 reef systems, 800 species of fish, and 160 species of coral.
With dozens of WWII ship and plane wrecks, including the world’s only diveable aircraft carrier (the USS Saratoga), the flagship of the Japanese World War II fleet (the Nagato), and a German Cruiser launched by Adolf Hitler (the Prinz Eugen), the Marshall Islands offer unparalleled wreck scuba diving. Thus far, only one out of six atolls with WWII wrecks have developed a scuba diving operation. Meanwhile, non-wreck scuba divers can enjoy an abundance of reef and pelagic fish, coral species, and an ample supply of sharks. An abundance of land-based WWII relics can be found on the four main atolls used as Japanese military bases. Coastal defense guns, Japanese Zeros-fighter planes, tanks, buildings and other remarkably intact relics - all set in isolated, jungle-like conditions - offer very unique touring opportunities for history enthusiasts.
The Marshall Islands is also renown for having some of the best sport-fishing conditions in the world. In recent years, an increasing number of deep sea and fly fishing enthusiasts have found their way to some of the more remote and less-fished atolls, such as Bikini and Mili.
Visitors to the Marshall Islands can enjoy what is perhaps the country’s most treasured and renown attraction: its people and culture.
Recognizing tourism’s important potential, the Government of the Marshall Islands has taken significant steps to encourage the development of this sector. With Government-provided funding and technical assistance from the Asian Development Bank, the country’s first fully operational national tourism organization, the Marshall Islands Visitors Authority (MIVA), was established in 1997. An autonomous, statutory body with a private sector dominated Board of Directors, MIVA will carry out the important tasks of tourism planning, development, and marketing and promotion. In addition to the establishment of MIVA, the Government is also taking great strides to improve the Marshall Islands’ investment environment, recently introducing legislation to streamline and simplify foreign investment licensing and land lease procedures.
The RMI has potential for agricultural production which far exceeds the local demand for meat, vegetables and fruits. In addition to supplying the local population, such products can be exported to the U.S. Army in Kwajalein as well as to foreign countries, particularly the neighboring Pacific Island countries. Over the past two years, the government’s agricultural division has consistently exercised a facilitating and guidance role in the delivery of services to support agricultural development, including gaining a greater understanding of growers’ situations and their subsequent involvement in identifying and selecting development options. In addition, the agricultural division will assist local farming and livestock production through fiscal incentives, facilitating delivery of produce to the US Army in Kwajalein, to the outer islands, and to the neighboring countries on the national airline, Air Marshall Islands, as well as private run ships.
There are substantial opportunities for import substitution in meat production in particular, since the demand for pork, chicken and eggs is now almost wholly met by imports. The decisive factor determining local livestock production is perhaps the cost of animal feed since such feed has to be imported. However, with sufficient scale of production, the establishment of a local feed mill may become a viable proposition. Most raw materials needed for such an operation may be locally supplied. These include fish meal, copra cake, corn and sorghum. Further potential exists in the coconut industry, in the development of more commercially viable "edible and non-edible" products made from coconut. Promising edible coconut products include coconut biscuits, cream water, chocolate, wine and other drinks, all of which can supply the domestic market as well as nearby Hawaii. Non-edible products would include coconut fiber, timber, furniture, rope, charcoal and activated carbon, as well as building improved husking machines and copra dryers.
Fruits and vegetables such as banana, papaya, lime, melon, pumpkin, cabbage, green pepper, the traditional root and tree crops can be produced commercially in many parts of the country. In addition, chips from breadfruit, taro, sweet potato, and pandanus juice or pudding have great potential for finding a ready niche market in Hawaii, the U.S. mainland and the Pacific Rim countries. Also, hydroponic farming is a relatively new technology that is gaining popularity.
Many investment opportunities exist in the area of manufacturing, particularly light manufacturing. For example, processing of coconut, including coconut oil, can be used for the production of soap, cooking oil, salad oil, margarine, and cosmetics for both the local market and for export. As the Marshall Islands has an abundance of coconuts, and many outer island residents willing to work, supply needs will always be met.
Investment opportunities also exist in scrap recycling and waste management, as the demand for waste disposal increases. In addition, more than one million imported light tin cans are available for recycling every year. Also available are large quantities of scrap iron, metals and glass. Plastic in all forms also make up a large part of daily recyclable waste.
Further opportunities exist for coconut-based light industries producing coir fiber brooms, brushes, doormats, mattresses, ropes, as well as coconut timber products.
There is also potential for expansion of production and export of handicraft products using pandanus and other local materials. Marshallese handicrafts are known for being one of the best in the Pacific region, due to its high quality of material and output. Most handicraft makers are currently exporting their products to the Hawaiian market. Some are also exporting to Japan.
Large deposits of high quality cobalt, manganese and other minerals exist in the seabed of the RMI’s 200 mile exclusive economic zone. The existence of these minerals in sea mounts has been confirmed by recent geological surveys done by the United States, Japan and Germany. As soon as appropriate technology is developed such mines will provide great investment opportunities.
For a foreign investor to do business in the Marshall Islands as an individual, a partnership, a joint venture, or a corporation (domestic or foreign), the investor must first obtain a Foreign Investment Business License.
Application forms for a Foreign Investment Business License may be obtained from the Registrar of Foreign Investment in the Office of the Attorney General.
Applications are then reviewed by the sectoral Ministries and Agencies.
The process of review and approval normally takes no longer than four to six weeks (often less).
The National Government does not require foreign investors to obtain any other licenses, unless they are involved in regulated activities (e.g., the practice of law, the practice of medicine, banking, fishing, fishing base operation, etc.).
If a business entity has a Foreign Investment Business License, it need not obtain a business license from the local government in whose jurisdiction it operates for a period of one year from the date of issuance of the foreign investment license.
Domestic Corporation: Often, at the same time that foreign investors apply for a Foreign Investment Business License, they will create a domestic corporation through which to do business in the Marshall Islands.
Articles of incorporation and bylaws are filed with the Registrar of Corporations who in turn submits them to the Cabinet for approval.
Information regarding incorporation can be obtained from the Registrar of Corporations, located in the Office of the Attorney General.
If an investor chooses to do business in the Marshall Islands through a foreign corporation, partnership, trust, unincorporated association, or other entity, he/she can file with the Registrar of Corporations an Application for Registration of a Foreign Entity to do Business in the Marshall Islands.
All business entities "doing business" in the Marshall Islands are subject to a gross revenue tax of $80.00 per year on the first $10,000.00 of gross revenue and 3% of the gross revenue in excess of 10,000.00 per year.
Gross revenue is defined as the gross receipts derived from a trade, business, commerce or sale and receipts accruing from or by reason of the capital of the business, including interest, discounts, rentals, and the like.
No deduction is given for any expenses of doing business; however, excluded from the definition of gross revenue are refunds, rebates, and returns; monies held in a fiduciary capacity; and income in the form of wages and salaries taxed under the Income Tax Act 1989, as amended.
The gross revenue tax is assessed and collected quarterly.
The National Government imposes import taxes on goods and materials imported into the Marshall Islands.
With respect to their employees, businesses are required to withhold and pay to the National Government a tax imposed on the employee's wages and salaries.
The wages and salaries tax is 8 % per annum on the first $10,400.00 of taxable income earned by the employee, and 12% thereafter.
Employees whose gross annual wages and salaries are 5,200.00 or less are allowed an exemption of $1,040.00 per year (or $20.00 per week).
The tax is payable every four weeks. Further information on National Government Taxes can be obtained from the Division of Revenue and Taxation, Ministry of Finance, PO Box 29, Majuro, MH 96960.
As noted above, if a foreign investor obtains a National Government Foreign Investment Business License, he/she need not obtain a local government business license for a period of one year from the date of issuance of the foreign investment license. However, local governments do impose sales taxes.
In Majuro, the sales tax on most items is 4 percent of the selling price.
In Ebeye, the sales tax on most items is 2 percent of the FOB price.
With respect to employees, businesses are also required to make quarterly social security contributions on "covered earnings".
Covered earnings are defined as the compensation paid to employees up to $5,000 per quarter.
From the employee’s wages, the employer is to withhold and pay to the Social Security Administration 7% of covered earnings.
From the employer's revenues, the employer is to contribute to the Social Security Administration for the benefit of the employee another 7% of covered earnings.
Businesses are required to make quarterly health insurance contributions on covered earnings.
Covered earnings for health insurance is defined the same as for social security contributions.
From the employee's wages, the employer is to withhold and pay to the Social Security Administration 3.5 % of covered earnings.
From the employer's revenues, the employer is to pay to the Social Security Administration for the benefit of the employee another 3.5 % of covered earnings. Questions regarding the Social Security Tax or the Health Insurance Tax can be directed to the Marshall Islands Social Security Administration, PO Box 175, Majuro, MH 96960.
Most of the labor laws deal directly with the hiring of non-citizen labor and indirectly with the working conditions of citizen labor. However, there are minimum wage laws and exemptions to the minimum wage laws that deal directly with labor in general. The following is a list of pertinent labor laws: The Protection of Resident Workers Act, which sets forth the procedures that must be followed before importing non-citizen workers (including prior advertisement of the job in the Marshall Islands and employment of qualified residents);
The Protection of Resident Workers (Amendment) Act of 1990, which among other things requires the repatriation after two years of employment of non-resident workers (other than United States citizens);
The Nonresident Worker (Fee) Act 1987, which requires employers to make quarterly contributions into a training fund for Marshallese in the amount of 25 cents per hour for work done by aliens (other than citizens of the United States and Palau);
The Nonresident Worker's Health Certificate Act, which requires that non-citizen workers and family members entering the Marshall Islands obtain and maintain a certificate of freedom from communicable diseases, including AIDS;
The Minimum Wage Act of 1986 as amended in 1995 which sets the minimum wage at $2.00 per hour, in non-export oriented industries; and
The Minimum Wage (Amendment) Act 1989, which exempts from application of the minimum wage act:
non-citizen employees who are employed by private sector employers that have been authorized by the National Government to invest or to do business in the Marshall Islands, and;
Marshallese trainees and apprentices. For more information on the Marshall Islands Labor Laws, contact the Division of Labor, Ministry of Foreign Affairs and Trade, PO Box 1349, Majuro, MH 96960.
Under the Immigration and Emigration Act 1986, all non-citizens entering the Marshall Islands, with certain exceptions (e.g., diplomats and government workers), must have valid passports and entry permits (visas).
Currently, business visitors and tourists receive a 30-day, free visa upon arrival. On request, the "visitor's" entry permit can be extended for another 60 days, or the "visitor's" entry permit can initially be issued for 90 days.
Foreign investors and workers who intend to stay longer should obtain one-year visas. These visas are renewable for successive one-year terms. The one-year visas are to be obtained before entry into the Marshall Islands.
For information and to apply for the one-year visa, contact the Division of Immigration, Ministry of Foreign Affairs and Trade, PO Box 1349, Majuro, MH 96960.
Land ownership is customary and is restricted to natural-born Marshallese citizens. Non-Marshallese may lease land on a long-term basis, but are precluded by law from land ownership.
Land lease costs in the RMI range from a low of $2,000 per acre for residential land to $4,000 per acre for commercial purposes. Land can be leased in perpetuity, however, the mortgage on the land lease cannot exceed 50 years. In addition, mortgages can only be held against the lease on the land, not against the title to the land itself.
The RMI recently established the Marshall Islands Development Land Registration Authority in an effort to facilitate public registration of land available for development.
As a general rule, all articles wholly grown, made or produced in the Republic of the Marshall Islands have duty-free access into the United States except for the following categories of products:
Watches, clocks and timing apparatus provided for in Chapter 9.1 of the Harmonized Tariff Schedule of the United States;
Buttons (whether finished or not finished) provided for in item 9606.21.40 of the above named Tariff Schedule;
Textile and apparel articles which are subject to textile agreements;
Footwear, handbags, luggage, flat good, work gloves, and leather wearing apparel which were not eligible for the Generalized System of Preferences in the Trade Act of 1974, and; Tuna canned in oil.
Articles exported from the RMI qualify for this duty-free treatment if sum of the cost or value of the materials produced in the RMI, and the direct costs of processing operations performed in the RMI are not less than 35% of the appraised value of the merchandise at the time of its importation into the United States. In other words only 35% of the customs value of the U.S. import must be contributed in the Marshall Islands. As much as 15% of the value of the product may be contributed to this 35% added-value requirement when materials produced in the customs territory of the United States are used.
The cost of processing operations in the RMI can include the following:
All Actual labor costs involved in the growth, production, manufacture, or assembly of the specific merchandise, including fringe benefits, on-the-job training, and the cost of engineering, supervisory, quality control, and similar personnel;
Dyes, molds, tooling, and depreciation. Oil machinery and equipment which are allocable to the specific merchandise;
Research, development, design, engineering, and blueprint costs insofar as they are a allocable to the specific merchandise, and;
Costs of inspecting and testing the specific merchandise.
Products produced in the RMI are also not presently subject to any quota restrictions into the U.S. market. This is particularly relevant in the area of textile production. Textile imports into the U.S. are generally subject to highly restrictive quotas based on the country of origin.
For an analysis on business and investment opportunities in the RMI, download the RMI Business Opportunities Report (PDF format) prepared by the US Department of the Interior, Office of Insular Affairs.