Openness to Foreign Investment
The Government of Cameroon seeks to attract foreign investment in order to create much-needed economic growth and new employment. Nonetheless, prospective foreign investors should be aware that Cameroon is still marked by endemic corruption that makes it one of the world’s most challenging business climates.
Cameroon’s legislative body, the National Assembly, adopted a new Investment Charter in April 2002 to attract international investors and replace the existing Investment Code of 1990. The 2002 Investment Charter has not been fully implemented. In May 2009, President Paul Biya signed a decree postponing the deadline for implementation of some provisions of the investment charter to 2014.
The 2010 revenue bill has eliminated the tax on registering for incorporation and the tax on corporate equity offerings.
The National Assembly passed legislation in 2008 to deal with large infrastructure projects worth more than $200 million. Benefits include tax incentives, such as an exemption on the Value-Added Tax (VAT). The relevant portions of the 1990 Investment Code - notably the provisions contained in the 1990 free trade zone legislation - remain in effect until the full implementation of the 2002 Investment Charter. Thus, investors must sort through conflicting and confusing legislation on investment.
If the 2002 Investment Charter becomes operational, it will establish three procedures for government screening of both foreign and domestic investments. The “automatic regime” permits investment without prior government approval. The “returns regime” permits investment after an application and the passage of two days without government objection, while the “approval regime" permits investment after an application and the expiry of fifteen days. Pending issuance of implementing regulations, however, it is unclear which process applies to which kind of investment.
In an attempt to render the Investment Charter operational, the government put in place 23 committees to draft separate sector codes. Some of the codes have already been adopted, such as the Forestry Sector Code (1994), the Petroleum Sector Code (1999), and the Mining Sector Code (2001). The other remaining sector codes, including the Telecommunications Sector Code, are yet to be presented to the National Assembly.
On the FY 2010 MCC scorecards, Cameroon passed only four out of 17 indicators for the second year in a row and failed the crucial Control of Corruption indicator. Cameroon scored in the 56th percentile in its income-level category in the Trade Policy indicator, 96th percentile in the Fiscal Policy indicator, and 63rd percentile in the Natural Resource Management indicator. Cameroon was the 146th most corrupt country out of 180 countries surveyed in Transparency International’s latest Corruption Perceptions Index, dropping two places from the previous survey. The Heritage Foundation’s Economic Freedom index ranked Cameroon’s economy only the 136th freest in the world. Cameroon slipped in the World Bank’s Doing Business survey from 167 to 171 out of 210 countries, ranking particularly poorly (174 out of 183) in the area of “Enforcing Contracts” and 119th in the area of “Investor’s Protection.”
Although the 1990 Investment Code places restrictions on foreign ownership on a reciprocal basis (by nationality), the 2002 Investment Charter permits 100 percent foreign equity ownership. In practice, substantial local equity ownership may help facilitate the investment approval process. Investors who intend to make direct investments of 100 million CFA francs (approximately USD 200,000) or more must declare their intent to do so to the Ministry of Finance (MINFI) 30 days in advance.
Cameroon is still in the process of privatizing its state owned companies, which must be done through a tender process. U.S. bidders are eligible to participate in international calls to tender when financing is from the public budget or from multilateral banks. The process may also include a call for tenders to recruit a consulting firm to help the government build terms of reference for the privatization. Some privatization programs are jointly managed by the government and the World Bank. Some of Cameroon’s recent international calls for tenders in the privatization process (since 2004) have suffered severe setbacks due to lack of interest from qualified bidders or disappointing bids, and several of them have had to be postponed, sometimes indefinitely. Full privatizations are rare, as the government generally continues to hold 30-45 percent shares of “privatized” companies (though it is willing to reduce these ownership shares in most cases). In strategic sectors, such as the railway, airway transportation or electricity, the foreign buyers retained market privileges provided for in previous lease contracts. In electricity transmission and distribution, the contract initially granted U.S. company AES exclusive market access over a 20 year period.
Conversion and Transfer Policies
The unit of currency used in Cameroon is the Communauté Financière Africaine (CFA) franc. It is issued by the regional central bank, the Bank of Central African States (BEAC in French), and is shared with the other members of the Central African Economic and Monetary Community (CEMAC, the regional grouping of Chad, Central African Republic, Gabon, Equatorial Guinea, and the Republic of Congo). Though it is at par with the West African CFA franc, the two currencies are not usually accepted for payment in each other’s zones. France’s treasury guarantees full convertibility of both currencies to the euro. Since 1999, the CFA franc has been pegged to the euro at a fixed exchange rate of 1 Euro to 655.957 CFA francs.
Dividends, capital returns, interest and principal on foreign debt, lease payments, royalties and management fees, and returns on liquidation can be freely remitted abroad. Liquidation of foreign direct investment, however, must be declared to the Minister of Finance (MINFI) and the BEAC 30 days in advance. Commercial foreign exchange transfers must also be cleared by MINFI for business deals amounting to more than 100 million francs CFA (about USD 220,000). For transactions below this amount the commercial banks are required to verify that the operations are genuine before proceeding with the transfer. These authorizations are routinely granted if the transactions comply with investment and fiscal regulations. BEAC has introduced a new-centralized computer system for electronic transactions within the banking system. This new system (SYGMA is the French acronym), has handled transactions amounting to $220 000 and above since September 2007. The system is also very useful in monitoring commercial banking compensations, succeeding in reducing transfer delays to twenty-four hours or one working day from the time the authorization has been granted.
Expropriation and Compensation
The 1967 Bilateral Investment Treaty (BIT) protects US investments in Cameroon. Foreign and domestic investors receive legal guarantees that substantially comply with international norms, including full and prior compensation in the event of expropriation on the basis of public interest. American investors are advised to seek Foreign Government Approval to protect their investments under the BIT. Undeveloped land is more at risk for local expropriation than developed property. There are no confiscatory tax regimes or laws that could be considered detrimental to American or other foreign investments. The 2002 Investment Charter recognizes property rights and facilitates land acquisition. Cameroonian law does not require local ownership of land.
The 1990 Investment Code states that, at the time of incorporation or application for Investment Code benefits, a firm may choose one of several procedures: adjudication by local courts, arbitration by the international courts of justice, and international arbitration centers, according to Cameroonian law and the arbitration regimes of which Cameroon is a member (described below). Arbitration as a form of dispute settlement is gaining ground in Cameroon and should be considered by prospective foreign investors who wish to avoid entanglement in the court system. Under the 2002 Charter, petitions for redress or non-compliance with the provisions of the Charter should be forwarded to a Regulation and Competition Board, which was created in September 2004. Cameroon accepts binding international arbitration on investment disputes between foreign investors and the government.
Difficulty in resolving commercial disputes, particularly the enforcement of contractual rights, remains one of the serious obstacles in promoting investment in Cameroon. Foreign corporate plaintiffs are often frustrated with the slow pace of the Cameroon legal system. Local businesses routinely exert pressure on the courts, which may be swayed by large bribes or by the clout of a political heavyweight. Some foreign companies have alleged that judgments against them were obtained fraudulently or as the result of frivolous lawsuits. The enforcement of judicial decisions is also slow and fraught with administrative and legal bottlenecks.
Cameroon's bankruptcy law is an integral part of its commercial law. In case of bankruptcy, negotiable, enforceable guarantee instruments cover creditors.
Cameroon is a member of the International Center for the Settlement of Investment Disputes (ICSID, also known as the Washington Convention), and is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention). In May 1997, Cameroon’s Council of Business Managers and Professional Associations (GICAM), an association of 207 companies and 15 professional associations representing 70 percent of all formal sector business activity in the country, created its own arbitration center to handle business disputes. In early 2001, CEMAC also established a court in N’djamena to adjudicate regional commercial disputes. Cameroon is a signatory to the Organization for the Harmonization of Corporate Law in Africa Treaty (OHADA in French). Among other things, OHADA provides for common corporate law and arbitration procedures in the 16-member signatory states: (Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Mali, Niger, Senegal and Togo). Cameroon is a signatory to the 1985 Seoul Convention that established the Multilateral Investment Guarantee Agency (MIGA), aimed at safeguarding non-commercial risks. Cameroon is also a signatory to the Lome Convention (as revised in Mauritius in 1995), which created an arbitration mechanism to settle disputes between African, Caribbean, and Pacific states (ACP) and contractors, suppliers, and service providers financed by the European Development Fund (EDF).
In July 2008, Cameroon adopted a law on public-private partnership (PPP) agreements, providing more clarity for the administrative, financial, and judicial framework for such arrangements.
Performance Requirements and Incentives
Investment incentives are likely to change when the 2002 Investment Charter is enacted, until which time the relevant incentives for the 1990 Investment Code remain in effect. Depending on the size and nature of the investment, investment will fall under one of the following regimes of the 1990 Code, each of which has specific eligibility and performance requirements.
Under the “basic” regime, firms must export at least 25 percent of their annual production, use natural resources for at least 25 percent of the value of their inputs, and create at least one local job for every 10 million CFA francs invested (approximately $20,000).
Benefits from the regime include an initial three-year, 15 percent reduction on many establishment taxes and customs fees as well as an exemption on purchase taxes relating to production and operational equipment. Eligible companies are entitled to a number of exonerations and other exemptions for the next five years of the operational phase.
Under the small- and medium-scale enterprise (SME) regime, which applies to firms having total assets of less than 1.5 million CFA francs ($3,000), there is no requirement for job creation. SME enterprises will receive the same benefits as listed above if they fulfill the SME regime.
Under the “strategic” regime, firms must export at least 50 percent of their annual production, use natural resources of at least 50 percent of the value of their inputs, and create at least one local job for every 20 million CFA francs invested (approximately $40,000). The strategic companies will enjoy the same benefits as above for the first five years.
The reform of the taxation system in 1994 revoked almost all of the 1990 Investment Code’s tax incentives. Today, an investor can still apply for these tax breaks, but in practice receiving exonerations from the tax and customs administrations is difficult.
Additionally, the Industrial Free Zone regime, which can apply at any location, grants broad exemptions from taxation and regulation, so long as 80 percent of production is exported. This provision of the 1990 Code is still in force, though it is unclear how the awaited implementation of the 2002 Investment Charter will affect it.
Procedures for enforcing the 1990 Investment Code’s performance requirements are not clearly defined. The government has not made any public statements concerning performance requirements. It is not yet clear how the provisions of the 2002 Investment Charter, once implemented, will increase clarity on this issue.
No requirements for technology transfer or location in specific geographic areas exist. Foreign participation in government-financed and/or -subsidized programs is restricted to research and development programs that are beyond the technical capacity of Cameroonian firms. Visa, residence, and work permit requirements do not inhibit foreign investors.
Quantitative restrictions on imports, non-tariff protection, and many import licensing requirements were lifted by 1994 Tariff Code to conform to CEMAC regional customs regulations. In addition, many other price controls were abolished in 1998, and now remain only on “strategic” goods and services such as electricity, water, public transportation (roads), telecommunications, cooking gas, palm oil, imported fresh fish, pharmaceuticals, school books, and port-side activities (such as stevedoring).
Right to Private Ownership and Establishment
The government recognizes the right of private ownership, but a dysfunctional judiciary, inadequate definitions of property rights, and widespread inconsistencies in government decision-making limit property rights in practice. The Ministry for State Property and Land tenure governs land property issues. The procedures for obtaining land titles have been simplified and the authority decentralized. These documents can now be obtained at Divisional levels within a timeframe of one to six months. Foreign and domestic individuals and firms are legally entitled to establish and own firms; engage in remunerative activities; and establish, acquire and dispose of interests in business enterprises. Investors are permitted to dispose of their property via sale, transfer, or physical repatriation of moveable property.
Protection of Property Rights
Secured interests in property are recognized and usually enforced. The concept of mortgage exists in Cameroonian law, and the title is the legal instrument for registering such security interests, but in practice some lenders have experienced extensive delays in obtaining court rulings to enforce their claims on assets given as collateral. Cameroonian law provides foreign and domestic investors with property rights protections that substantially comply with international norms and do not discriminate between foreign and domestic firms. In practice, however, Cameroonian courts and administrative agencies often issue rulings favorable to domestic firms and have been suspected of corrupt practices.
Cameroon is a member of the 16-nation African Intellectual Property Organization (OAPI in French), which is a member of the World Intellectual Property Organization and offers patent and trademark registration in cooperation with member states. Patents in Cameroon have an initial validity of 10 years. They can be renewed every 5 years upon submission of proof that the patent was used in at least one of the OAPI member countries. Without continued use, compulsory licensing is possible after 3 years. Trademark protection is initially valid for 20 years with renewal possibilities every 10 years.
Cameroon is also a party to the Paris Convention on Industrial Property and the Universal Copyright Convention.
In 2008, Cameroon’s copyright registration system changed from a single body accepting registrations to multiple bodies divided according to field. One such organization, the Cameroon Music Corporation (CMC), charged with registering musical works, was liquidated by the Minister of Culture. A new structure, SOCAM (Societe Civile Camerounaise de l’Art Musicale), has been announced to replace CMC but is yet to begin functioning. Other registration bodies include the Copyright Corporation for Literature and Dramatic Arts (in French, SOCILADRA) for literature and software production; the Copyright Corporation for Visual Arts (in French, SOCADAP) for paintings; and the Copyright Corporation for Audio-Visual and Photographic Arts (in French, SCAAP) for audiovisual and photographic production.
IPR enforcement is challenging due to the small size of the market, the cost of enforcement, the high percentage of smugglers, rudimentary understanding of IPR among government officials and a lack of copyright culture among the populace. U.S. industry complains that software piracy is widespread; pirated DVDs are common. Cameroon is taking steps to implement the World Trade Organization’s TRIPs agreement. Trademarks and copyrights are routinely violated. With the assistance of the United States Patent and Trade Office (USPTO), Cameroonian officials (including custom officers, magistrates, civil servants from the relevant ministries) received training in the domains of intellectual property, copyrights, and other intellectual property rights protection.
Transparency of Regulatory System
While Cameroonian business laws exist, implementation of these laws can be challenging. Under the current judicial system, local and foreign investors (including some U.S. firms) have found it complicated, time-consuming, and costly to enforce contractual rights, protect property rights, obtain a fair and expeditious hearing before the courts, or defend themselves against frivolous lawsuits. Implementation of the OHADA law -- in force since 2000 -- in French-speaking Cameroon has proven to be reassuringly satisfactory for some investors. The Anglophone regions of Cameroon, with business law inspired from common law, have sometimes shown some resistance to implementing OHADA.
American, Cameroonian, and third-country firms complain that tax audits and enforcement are predatory and prejudiced against the private sector, especially government efforts to compel companies to compromise on tax assessments, including freezing bank accounts for temporary periods. Under the 2002 Investment Charter, taxation and customs enforcement mechanisms apply equally to all taxpayers. The government has long planned to simplify tax assessment and collection procedures and to ensure that they are transparent and clear to investors, but has not yet followed through.
Efficient Capital Markets and Portfolio Investment
Interest rates in the financial market are seen as being inflated. The BEAC has been working to lower benchmark interest rates from 11 percent in the 1990s to 4.5 percent in 2008. However, commercial banks charge a range between eight and 16.5 percent interest, depending on the risk, in 2010, with a three-year repayment term maximum. Some large loans to major companies have been able to extend the term beyond five years. Access to foreign capital markets is very limited, as commercial banks do not provide loan guarantees to local borrowers contemplating foreign loans. BEAC is closely monitored and regulated by the French treasury. Foreign investors are able to obtain loans on the local market, but usually prefer to borrow offshore due to very high domestic interest rates and the unavailability of long-term capital in the domestic market.
The Douala Stock Exchange (DSX) opened in April 2003, offering firms the opportunity to raise capital directly from domestic investors. Three companies have been listed on the DSX as of January 2010: water bottling company SEMC, agro-forestry company SAFACAM, and agro-industrial company SOCAPALM. SOCAPALM’s offering in 2009 was overbid. In late 2009, the World Bank’s Investment Finance Corporation issued bonds worth USD 40 million, one third of which will be traded on the DSX.
Cameroon has 12 fully operational commercial banks and a state owned mortgage company, which provides long term loans to home buyers. Aggregate assets of commercial banks are over 1,800 billion CFA francs (approximately USD 3.6 billion). Commercial banks and a wide network of micro-finance institutions constitute the largest part of the financial sector. The amount of non-performing assets they hold is unknown. Cameroon has a number of successful micro-finance institutions, with 436 operational countrywide, grossing around 500 billion CFA (approximately USD 1 billion) in deposits. In 2009, the Central African Banking Commission (COBAC) granted a banking license to the West Africa financial group, Banque Atlantique.
Mergers and acquisitions are undertaken through discreet negotiations. Private firms are free to associate with any partner they choose and are free to organize industry associations. Cameroon’s six privatization laws are complete, but have onerous bureaucratic requirements.
Cameroon's legal and regulatory systems are solid but enforcement is inconsistent and often arbitrary, and the government has not yet established a dedicated court system to protect and encourage investments. Cameroonian minority partners of foreign firms have occasionally attempted – in most cases unsuccessfully - to take over the operations of joint companies via court action or through harassment and intimidation by government officials.
Competition from State-Owned Enterprises
Private enterprises are allowed to compete with public enterprises when marketing products and services in Cameroon. Public companies are not eligible to participate in the bidding process when it comes to public tenders. However, if the government is certain that one of its companies can provide the service, it will typically not call for a tender.
State-owned companies are active in a number of areas:
Telecommunications service (CAMTEL), social security (CNPS), oil refinery (SONARA), oil and gas exploration (SNH), both upstream and downstream petroleum product distribution (TRADEX), mail delivery (CAMPOST), mortgage finance (Credit Foncier), real estate (SIC), land development and management (MAETURE), cotton production and exportation (SODECOTON), textile manufacturing (CICAM), cocoa production (SODECAO), and tea and vegetable oil production (CDC). Cameroon also ran a national airline, now defunct, called CAMAIR. Recently, the government of Cameroon has begun the process of resurrecting the airline under the name CAMAIRCO.
Each state-owned company has an appointed board of directors and a parent ministry. The most prestigious state-owned company, National Hydrocarbons Corporation (SNH in its French acronym), operates in the field of oil and gas exploration, mainly by taking production-sharing agreements with private companies. The president of the board of directors is appointed by the President of the Republic.
Cameroon does not have a sovereign wealth fund.
Corporate Social Responsibility
There is a general awareness of corporate social responsibility (CSR) among both producers and consumers. On a case by case basis, the government of Cameroon requires elements of corporate responsibility as part of the permit and project development process. For example, some mining companies invest in social infrastructure, such as health centers or schools, and other projects to benefit the local populations in the areas of their mining operations. While not always mandatory, mining and other projects have increasingly been required to take environmental and social impacts into consideration. A common practice for many companies is to build bridges and classrooms in villages where their work site is located.
In February 2008, Cameroon experienced its worst unrest in fifteen years, as a transportation strike expanded into a more general protest against rising food and oil prices and President Biya’s plan to amend the constitution to allow him to eliminate presidential term limits and extend his rule. The current political climate is fairly calm and peaceful.
Thanks to UN mediation and the June 2006 Greentree Agreement, the International Court of Justice (ICJ) ruling on the Bakassi Penninsula territorial dispute with Nigeria has been implemented; Cameroon resumed full control of the region on August 14, 2008. Relations with Nigeria are increasingly friendly. On December 14, delegations from both countries travelled to the Far North Region to lay the first boundary pillar to demarcate the Cameroon-Nigeria land border.
Corruption is endemic in Cameroon. In 2009, Cameroon ranked 146 out of 180 on Transparency International’s Corruption Perceptions index. The government signed the U.N. Convention Against Corruption (UNCAC) in April 2004 and ratified it in 2006. In November 2004 it published new anti-corruption measures on public contracts. With the assistance of international organizations and financial institutions, Cameroon has undertaken several anti-corruption and good governance initiatives. There have been some high profile corruption-trials and convictions, and President Biya continues an aggressive campaign of corruption arrests dubbed “Operation Sparrowhawk.” However, the legal loopholes and legislative gaps allowing corruption have not been eliminated. The constitutional provision voted in 1996 requiring government officials to declare their assets has not yet been implemented.
Government reforms in the public procurement process began in 2002 when observers were installed to perform systematically ex-post-facto audits on valuable procurements. Nonetheless, governance of the public procurement process remains problematic.
Corruption is a criminal offense in Cameroon, and carries jail time (5 years to life) and a fine ($400 to $4,000). Sectors with high corruption potential include government procurement, customs, and public health facilities.
Bilateral Investment Agreements
Cameroon has bilateral investment and/or commercial agreements with the following countries: Austria, Belgium, Canada, China, Denmark, France, Germany, Greece, Italy, Japan, Russia, South Korea, Spain, Switzerland, the United Kingdom, and the United States. Similar agreements also exist with other countries in Africa, Asia, Latin America, and Eastern Europe. A Bilateral Investment Treaty (BIT) between Cameroon and the United States was ratified in 1986 and entered into force in 1989. While the original time frame for the agreement was 10 years, it was renewed automatically under the terms of the treaty. The U.S. invoked the BIT both in 1997 and 2004, and Cameroon acquiesced in both cases, agreeing not to implement legislation contrary to the treaty.
OPIC and Other Investment Insurance Programs
The U.S. Government signed an Investment Guarantee Agreement with Cameroon in 1967. OPIC has been receptive to American firms seeking war, expropriation, and inconvertibility insurance, and has guaranteed several ventures in Cameroon. The 1990 Investment Code guarantees protection from non-commercial risk, and Cameroon is a signatory of the Multilateral Investment Guarantee Agreement (MIGA).
Cameroon’s labor-management relations are governed by the 1992 Labor Code, which restored collective bargaining in wage negotiations, eliminated fixed wage scales, abolished employment-based requirements on education levels, eliminated government control over layoffs and firings, and reduced the government’s role in the management of labor unions. The Labor Code does not apply to civil servants, employees of the judiciary, and workers responsible for national security. Though the government passed implementation decrees in 1993, the decrees remain open to legal interpretation and labor disputes are still common. In theory, the Labor Code provides a legal framework for the emergence of a flexible and efficient labor market, but such a market has not emerged.
After a long period of dissension between the government and labor unions, a new tripartite approach is being used to address labor issues. The tripartite approach includes worker and employer unions as well as government representatives. This method has substantially improved relations between the parties for the benefit of both the workers and the employers, and the government intends to improve further workers’ rights and establish a new concept of internal discussions within companies before workers resort to strikes. The Minister of Labor and Social Security refers to this policy as “Social Dialogue.” The Ministry of Labor has taken an increasingly broad view of certain aspects of the Labor Code, especially regarding payment of “legal rights” to employees in the event of a restructuring or sale.
Cameroon has a high literacy rate and offers a relatively well-educated labor force alongside a surplus of unskilled and non-technical labor. According to a 2005 survey conducted by the National Institute of Statistics in the two major cities, Yaounde and Douala, the unemployment rates (ILO criteria) in these cities are 14.7 percent and 12.5 percent, respectively. (The ILO defines an unemployed person as one who fulfills three conditions: a) be without work, i.e. not having worked a single hour in a reference week; b) be available for work in the coming 15 days; c) be actively seeking employment or having found one that will start later). No new unemployment statistics have been released since that survey was conducted. About 50 percent of adult Cameroonians speak both French and English. Due to inadequate vocational and technical training, however, some industries have experienced difficulties in recruiting skilled labor in the domestic market. Also, the ready availability of unskilled labor means that technology used in many sectors, especially construction, remains basic.
Cameroon is a party to the ILO Conventions 87 and 98 permitting the freedom to form unions and the right to collective bargaining.
An individual raising a discrimination case against an employer may elect to bring the case either in the town where he resides or where he works. In practice most of these cases are filed in the complainant’s place of residence. This compels the company to dispatch officials to sometimes distant places where the individual might have better local contacts than the company.
In recent years, Section 42 of the Cameroon Labor Code has posed some challenges to foreign companies selling their assets in Cameroon, notably to Shell and Mobil as they sold their service station chains. Section 42(2)(b) allows employees or their labor organizations to demand compensation from the selling entity in advance of the sale of the asset. They may ask for termination of their contract and severance pay prior to the transfer, knowing that the new acquirer would still hire them or would need their acquired experience and service. This is seen as detrimental to foreign investment, especially in sectors where human resources costs are high, as it can make it difficult to divest.
Foreign Trade Zones/Free Ports
While Cameroon presently has no designated foreign trade zones or free ports, it has an Industrial Free Zone (IFZ) regime applicable at any location through “industrial parks” or “single-factory” zones. Created in 1990 to promote internationally competitive export industries, the IFZ regime creates certain broad regulatory and tax exemptions for investors. It is unclear how the 2002 Investment Charter will affect the IFZ regime privileges.
To qualify for IFZ status, the goods or services produced by an enterprise must not have detrimental effects on the environment, and 80 percent of production must be exported. IFZ firms receive a 10-year exemption from taxes and are subject only to a flat tax of 15 percent on corporate profits beginning in the eleventh year. They have a right to tax-free repatriation of all funds earned and invested in Cameroon and are exempt from foreign exchange regulations. They are also exempt from existing and future customs duties and taxes, including those on locally purchased production inputs. The National Agency for Industrial Free Zones is the non-profit regulatory body established to oversee and administer Cameroon’s IFZ program.
Though well-intentioned, the IFZ regime has never really been implemented since its original sponsor (the USAID mission in Cameroon) closed in 1994. At inception there was strong opposition to the program from one major European partner that feared the IFZ would cut into its trade with Cameroon. Attempts to apply the IFZ to timber mills prompted strong opposition from the World Bank and an audit to determine whether timber mills are eligible for such preferential tax treatment. (The results are not yet known.)
Foreign Direct Investment Statistics
Though Foreign Direct Investment (FDI) clearly plays a key role in the Cameroonian economy, reliable FDI statistics are not available. Neither the government nor the Chamber of Commerce has compiled a comprehensive list of foreign investments in Cameroon or estimates of current values. While France is commonly seen as the main economic player in Cameroon, French foreign direct investment inflows are smaller than those of the United States, in large part thanks to big ticket U.S. investments in the Chad-Cameroon oil pipeline and national power company AES-SONEL. However a large majority of capital formation is carried by local affiliates of French transnational companies.
The role of American investors is particularly strong in the energy sector, as noted below.U.S. trade with Cameroon is heavily influenced by oil prices. According to U.S. International Trade Commission statistics, U.S. imports from Cameroon in 2009 were down almost 50%, due largely to the high price of oil in 2008. On the other hand, U.S. exports to Cameroon in 2009 were the highest they have been in the last three years, up 23% over 2008. Total trade between the two countries totaled approximately $400 million in 2009, down from approximately $730 million in 2008. Cameroon is currently the 130th* largest export market for U.S. goods.
The majority of American business activity is in Cameroon's petroleum sector. The Chad-Cameroon pipeline, which runs over 1,000 kilometers from Chad’s Doba oil fields to the sea at Kribi, is the largest U.S. investment in sub-Saharan Africa, estimated at USD 4.4 billion. Exxon/Mobil and Chevron/Texaco jointly hold a majority interest in the pipeline company, with Petronas of Malaysia as their partner; this single project accounts for the lion’s share of American investment in Cameroon. Exxon-Mobil has sold its retail network to TAMOIL of Libya.
Outside of the petroleum sector, U.S.-based AES Corporation owns a majority stake in SONEL, the privatized national power producer and distributor. In 2009, AES launched “African Power Development Corporation,” headquartered in Douala, as a holding and investment vehicle for both its operations in Cameroon and planned activities elsewhere in Cameroon, Nigeria and possibly the Democratic Republic of Congo. Del Monte, which has a U.S. equity stake, runs a banana production sharing contract with the country’s leading agro-industrial corporation, CDC. Colgate-Palmolive manufactures oral care/hygiene products for the local and regional markets at its Douala plant. In April 2003, the government awarded a permit to Geovic, a U.S. mining firm, to extract rich deposits of cobalt and nickel in Cameroon’s East Province. Cameroon Alumina Ltd. (CAL), an American-led project development consortium, is planning to develop bauxite resources in Cameroon’s Adamoua region in a multibillion dollar project that will entail investments in the rail, port and power sectors. Additionally, several dozen U.S. companies are currently represented in Cameroon either directly or through agents or distributors.Despite its declining investment, France is still a major economic partner in Cameroon. In the banking sector, out of twelve operating banks, three are majority French-owned. French interests are present in sugar production plants and in the French telecommunications firm Orange, which operates one of Cameroon’s three GSM mobile telephone companies. French interests are also dominant in logistics and transportation ventures, ranging from the railway network operator to the port terminal operator. French exports of pharmaceuticals make up 70% of the Cameroonian market share. In all, there are more than 100 French branch companies in Cameroon employing some 30,000 people, and more than 200 enterprises owned by French nationals.