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Samoa is an enabling business environment with strong economic infrastructure, but doing business can be tricky for firms unfamiliar with the local investment climate.
As the global economy pulls from the downturn that has engulfed developed nations, many corporates are seeking growth areas with healthier fundamentals. Once an economy reliant on development aid and the agricultural industry, Samoa has become an international success of late, showcasing strong economic indicators throughout the financial crisis. Foreign reserves are in a relatively healthy state, the external debt is stable, and inflation is low. Economic growth has also been sustained, underlining the health of the island nation.
Not only is Samoa economically sound, it is also the most politically stable country in the region. An attractive fiscal scheme and investment incentives have attracted a wealth of international businesses, which are also being pulled by several well performing industries and affordable, English-speaking skilled labour. Tourism, fisheries, food processing and engineering are developing with real vigour in the country, as the agricultural stronghold remains stable.
There are, however, several areas in which the Samoan economy can be hard to navigate for international businesses. The World Bank and International Finance Corporation (IFC) cite the credit environment and regulatory requirements as being two of the main areas where Samoan businesses can struggle, although there are several areas in which international firms are likely to require guidance.
Starting a Business
Samoa has laid the welcome mat out for international firms, and starting a business is a relatively straightforward task. That being said, there are several government departments that must be contacted during the process, including the Commercial Registry, the Ministry of Revenue, Inland Revenue Services, the National Provident Fund and the Accident Compensation Board.
Dealing with Construction Permits
There are 21 stages to complete when obtaining construction plans, taking an average of 87 days. Inspections and certificates must be sought from the Land Transport Authority (LTA), the Samoa Water Authority (SWA), the Electric Power Corporation (EPC), the Fire and Emergency Services Authority (FESA) and SamoaTel, as well as several other requirements to be fulfilled with the Land Registry.
EPC carries out electrical connections, taking an average of 34 days to do so. The cost of getting electricity is very high compared to the OECD average, although about normal for East Asia and the Pacific.
The first step to registering property is searching for a title at the Ministry of Natural Resources, Environment and Meteorology. Once that is done a lawyer is required to complete the sale and purchase agreement and notarise the deed of transfer, before stamp duty requirements can be completed at the Finance and Treasury Department.
Getting Credit and Protecting Investors
The credit environment is rather weak in Samoa, scoring zeroes on three out of four key indices tracked by the World Bank and IFC. Investor protection, on the other hand, is far more stable, particularly in relation to neighbouring countries.
There are 37 tax payments to be made each year which can take an average of 224 hours to complete. National provident fund payments take 96 hours to process alone, and corporate income tax - flat rate of 27% - and VAT payments take more than 120 hours to work through.
Trading Across Borders
As an island economy, the cost of trading across borders is relatively cheap. However, the time it takes to move shipments is one of the highest in the world, taking almost a month on average to export and import goods.
It takes 455 days to enforce contracts thanks to 44 procedures and lengthy judicial processes. The cost of the claim, however, is much lower than the average in East Asia and the Pacific.
Resolving insolvency is a timely process, and the recovery rate is well below both the OECD norm and the average in East Asia and the Pacific. Companies can expect to recover an average of 15 cents on the dollar, compared to the OECD average of 70.
Communication style is exceedingly polite and formal in Samoa, and businesspeople can often tell you what you want to hear, rather than the truth, to avoid spoiling relations. As a consequence of this outlook, there are times when Samoans can be very vague and tend to go around and around in circles instead of getting to the point, which can make business relations a little complicated.
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Samoa or just want to streamline your Samoan operations, talk to us.