Mali2005 INVESTMENT CLIMATE STATEMENT -- MALI
Openness to Foreign Investment
The Malian government encourages foreign investment. It treats domestic and foreign direct investment equally. The series of enhanced structural adjustment facility (ESAF) agreements signed by the IMF/World Bank and Mali since 1992 encourages the mobilization of external resources to boost investment. The government’s national strategy to fight poverty presented to the IMF, World Bank and other donors emphasizes the role of the private sector in developing the economy. Despite favorable changes over the last ten years in the Mali’s investment climate, foreign investment remains modest. Domestic partners with a capability to invest are in short supply. Other market challenges exist, and are discussed further in Chapter 1 of the Country Commercial Guide.
In the framework of past structural adjustment programs, the investment, mining, commerce and labor codes encourage investment and seek to attract foreign investors in particular. The Malian government has instituted policies promoting direct investment and export-oriented businesses. Mali guarantees the repatriation of capital and profit.
Foreign investors can own 100 percent of any businesses they create. They can also purchase shares in parastatal companies being privatized or in other local companies. Foreign companies may also start joint-venture operations with Malian enterprises.
Foreign investors go through the same screening process as domestic investors. All investors go through the "guichet unique" (one-stop procedure) to have a business application processed. Criteria for granting authorization under the investment code include the size of capital investment, the potential for value-added, and the level of job creation. Environmental concerns are also considered.
The public has, at times, associated foreign companies (including American) with the government, and accused them of paying bribes to government officials for their backing in business and labor disputes.
Foreign investors sometimes report that tax collectors interpret tax laws to discriminate against foreign companies or companies with foreign capital. The tax system remains complicated in spite of ongoing efforts to improve it.
The investment code gives the same incentives to both domestic and foreign companies for licensing, procurement, tax and customs duty deferrals, export and import policies, and export zone status if all production is to be exported. Export taxes, import duties, and price controls have been reduced or eliminated as part of ongoing economic reforms. Work is proceeding to harmonize the investment for all WAEMU member countries. A new investment guide was drafted by the Ministry of Investment and approved by the Council of Ministers.
Conversion and Transfer Policies
The investment code allows the transfer of funds associated with investments, including profits.
As a WAEMU member, Mali uses the CFA franc currency. Linked to the Euro, the CFA is fully convertible at a rate of Euro 1 = CFA franc 655.957. No parallel conversion market exists because the CFA franc is a fully convertible currency supported by the French treasury, which ensures a fixed rate of exchange.
As of January 2005 the U.S. Embassy purchased local currency at a rate of approximately CFA franc 500 per one U.S. dollar. The U.S. Embassy obtains currency through the Regional Administrative Management Center in Charleston, South Carolina, and a local bank.
The CFA franc was devalued in January 1994 and, according to officials from the central bank BCEAO, another devaluation in the short term is unlikely. In the medium and long term however, the political situation in Côte d’Ivoire and its impact on the economy of the WAEMU countries will affect the stability of the CFA.
There are no limits on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains, etc. In the CFA zone there is no restriction on the export of capital provided that adequate documentation to support a transaction is presented. Most commercial banks have direct investments in western capital markets.
Central bank rules require that all remittances go through its channels, with supporting commercial documents required. Exceptions are occasionally made, as in one case where the government allowed a foreign mining company to have an offshore bank account. No physical transfer of funds is authorized outside the borders of the CFA zone. It takes less than a week (usually 3 working days) to remit funds abroad. Several foreign companies interviewed noted that they had encountered no problems in processing remittances.
Mali is also a member of the larger Economic Community of West African States (ECOWAS). ECOWAS encourages investment between and among member countries to promote economic integration. ECOWAS seeks to eliminate most trade barriers to facilitate such investment. Fair competition, profitability and economic benefits are criteria used to assess eligibility investment incentives.
Expropriation and Compensation
Expropriation of private property for public purposes is very rare. The only known expropriation against a foreign company occurred in the early 1960’s. When it occurs, it is done according to Malian law, which is in accord with established principles in international law. The expropriation process is public and transparent, and compensation based on market value is awarded by court decision. The Malian constitution calls for an independent judiciary, substantially reducing the risk of "creeping expropriation".
The government may expropriate property for public projects (major road or dam construction), or in cases of bankrupt companies that have had a government guarantee for their financing, or in certain cases when a company has not complied with the requirements of an investment agreement with the government. In July 2000 for instance, the government expropriated land in the vicinity of the capital city Bamako airport for air safety reasons. Notifications of the expropriation were made by direct mail to the people involved but also published in public and private media. In 1994, an American company, which had submitted a bid on a government tender, had its deposit confiscated because it allegedly failed to comply with certain agreed terms.
Dispute Settlement
Disputes occasionally arise between the government and foreign companies. Some cases involve wrongdoing on the part of companies; some involve corrupt government officials.
In 1997, a foreign company lost a case at the commercial court for allegedly illegally hiring an engineer who used to work for a domestic company. After various rulings in lower courts, the Supreme Court decided there was no case against the foreign company.
Low salaries and inadequate resources impact negatively on the quality of judicial decisions. In November 1991, an independent commercial court was established with the active participation of the U.S. Government to expedite the handling of business litigation. Since its inception, the commercial court has handled many cases involving foreign companies. Professional magistrates assisted by elected Malian Chamber of Commerce and Industry representatives staff it. Teams composed of one magistrate and two Chamber of Commerce and Industry representatives conduct hearings. The magistrate's role is to ensure that decisions are rendered in accordance with applicable commercial laws, including internationally recognized bankruptcy laws, and that court decisions are enforceable under the law.
The Investment Code allows a foreign company that has signed an agreement with the government to refer to international arbitration any case that the local courts are unable to resolve.
Mali is a member of the African Organization for the Harmonization of Business Law (OHADA). OHADA has a provision for allowing litigation between foreign companies and domestic companies or the government to be tried in an appeal court outside of Mali. Mali is a member of the International Center for the Settlement of Investment Disputes (ICSID - also known as the Washington Convention). Mali is a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitrage awards. Mali is also member of the World Bank Multilateral Investment Guarantee Agency (MIGA).
Performance Requirements/Incentives
The investment code offers incentives to companies that reinvest profits to expand business. The code also encourages the use of locally sourced inputs. Local value added is one criteria used for approving investment projects and in calculating a tax exemption period.
There is no requirement that Malians own shares in a foreign investment or that foreign equity be reduced over time. In the case of joint ventures with the government, the government share may not exceed 20 percent ownership.
Because most businesses are located in the capital city, the investment code encourages the establishment of new businesses in other areas. Incentives include income tax exemptions for 5-8 year periods, reduced-energy prices, and the installation of electric power lines to areas lacking energy.
Title V of the investment code relates to foreign-trade zones. Any company, domestic or foreign that plans to export at least 80 percent of its production is entitled to tax-free status. Production that is not exported would be subject to taxation.
The National Assembly approved the new oil code drafted and submitted by the government in June 2004. The new code is based on incentive, stability and competitiveness concepts. The initial span allowed for oil prospecting is four years renewable for two successive periods. The attribution of prospecting and exploitation permits as well as their renewal is subjected to the payment of fixed taxes ranging from one million to ten million CFA francs (approximately USDOLS 1,900 to 19,000). In addition, permit holders are liable for the payment of charges on the production of hydrocarbons and a tax of 35 percent from the industrial and commercial profits. Yet, they benefit from tax exemption on the petroleum and hardware-based products in compliance with the oil list set by the government of Mali. A permit holder exploits the oil deposit and the government collects a charge varying between 7.5 and 15 percent, from a production of between 50,000 and over 500,000 barrels per day.
On July 14, 2004, the government created the Authority in charge of oil research promotion in Mali. This new agency has been tasked with drafting, planning and implementing oil research promotion programs, and collecting data on oilfields. The agency is also the interface with the government for private sector investors.
The government has identified priority sectors for furthering economic development. Special incentives are offered for investment in the following areas:
--Agribusiness
--Fishing and fish processing
--Livestock and forestry
--Mining and metallurgical industries
--Water and energy production industries
--Tourism and hotel industries
--Communication
--Housing development
--Transportation
--Human and animal health promotion enterprises
--Vocational and technical training enterprises
--Cultural promotion enterprises
Job creation is an important criteria used in determining tax exemptions and other incentives. Employers who hire young graduates can pay reduced rates of social security taxes.
Right to Private Ownership and Establishment
Domestic and foreign investors share equal rights to private ownership and establishment as long as they go through the approval process and abide by relevant regulations.
The government allows the free market to determine prices. Domestic and foreign companies compete on an equal basis with public enterprises. The government’s privatization program for state enterprises creates opportunities for both domestic and foreign private firms to acquire those entities through open international bidding.
In one instance, the government awarded a contract to private telecommunication operators in the mobile telephone business without doing it through the appropriate tender call. Workers of the rival state-owned telecommunication company SOTELMA protested vigorously and went on strike to force the Ministry of Communication officials to launch an open bid. In addition to pressure from SOTELMA workers, the World Bank threatened to freeze its assistance to the reform program of the telecommunication sector in Mali if the government failed to take necessary steps to ensure transparency and fairness in the bidding process. In the end, the government terminated the agreement it had awarded earlier and engaged in a competitive bidding process, which was later completed successfully according to World Bank officials.
Protection of Property Rights
Property rights are protected. The "Direction Nationale des Industries" through its "Division Protection de la Propriété Intellectuelle" is the government agency that implements the legal system of protection, including the World Trade Organization (WTO) trips agreement. This division works with international agencies recognized by UNIDO, which are concerned with these issues. Patents, copyrights, trademarks, etc. are covered.
Transparency of the Regulatory System
As reflected in agreements with the IMF and World Bank, the government of Mali has adopted a transparent regulatory policy and effective laws to foster competition. The commerce and labor codes adopted in 1992 are designed to meet the requirements of fair competition, to ease bureaucratic procedures, and to facilitate the hiring and firing of employees. The investment code shortens the application process to establish a business (maximum 30/45 days turnaround time), and it favors investments that promote handicrafts, exports, and labor-intensive businesses. The mining code encourages investments in medium and small mining enterprises, awards two-year exploration permits free of charge, and does not require a commitment from the exploring firm to lease the area explored thereafter.
Efficient Capital Markets and Portfolio Investment
The statutes of the West-African Economic and Monetary Union (WAEMU) determine the banking system in Mali. The WAEMU central bank, Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), is located in Dakar, Senegal. Commercial banks enjoy considerable liquidity. They tend to prefer investing funds in western capital markets, thereby reducing credit available to local entrepreneurs. The government and WAEMU have engaged in restructuring the banking system to increase the capital available to local investors. The government’s privatization efforts should make more credit available to the private sector. External financing and guarantee programs are alternatives to local bank credit.
Portfolio investment is not a current practice, although the legal and accounting systems are now transparent enough and are similar to the French system. In 1994 the government instituted a system of treasury bonds available for purchase by individuals or companies. The payment of dividends or the repurchase of the bonds may be done through a compensation procedure offsetting corporate income taxes or other sums due to the government.
The WAEMU stock exchange program based in Abidjan opened a branch in each WAEMU country, including Mali. To date, no Malian company is listed on the stock exchange. The privatization program (done for the electric company EDM and ongoing for the telecommunication state-owned entity SOTELMA) offers a good prospect for some state-owned companies to be listed on the WAEMU stock exchange.
The Bamako-based office of the Société de Gestion et d'Intermédiation (SGI) has conducted awareness campaigns to educate the business community. Domestic companies are now looking into the possibility of applying to be on the list of stock exchange.
The government of Mali has agreed to participate in the Sovereign Credit rating Program sponsored by the State Department. The U.S. Treasury Department provided technical assistance to the Malian Ministry of Economy in this endeavor with the support of the U.S. State Department. The firm Fitch completed its rating and awarded a B- to Mali. Parallel to this effort, Standard & Poor’s awarded Mali a B rating through a UNDP-funded program.
Political Violence
Mali’s multi-party democracy, now eleven years old, has consistently encouraged private enterprise and investment. Occasional student and labor strikes and small-scale political demonstrations have sometimes resulted in political vandalism and violence, but not enough to substantially impact the investment climate. President Touré named a government in September 2002 dominated by his close allies and technocrats and also representatives of political parties that hold seats at the National Assembly. The President reshuffled the cabinet in May 2005, appointing a new Prime Minister and several new Ministers coming from both political parties and the civil society. For the first time since 1997, all parties participated in the general elections that took place in the first half of 2002. Many observers considered the 2002 elections to be an important test for the Malian democracy as the first democratically elected President, Konaré, kept his word and turned power over to newly elected President Touré. Likewise, the government organized municipal elections in May 2004 to select city council advisors and mayors for 701 communes. The elections were considered free, fair and transparent.
Northern Mali has traditionally encountered friction between pastoral and sedentary populations. The Malian government has effectively consolidated the peace following the 1990-1995 Tuareg rebellion in the northern regions. The government, along with international donors and United Nations organizations, supports the socioeconomic reintegration of refugees and former combatants. There is little infrastructure and business in the northern desert regions. Past troubles there have had little direct impact on business activities in the rest of the country. There are no elements of insurrection in Mali, and the country maintains good relations with each of its several neighbors.
Corruption
Corruption is considered a crime, and as such is punished by criminal law (penal code). Despite reports in local papers of bribery cases on large contracts and investment projects, corruption is not a significant obstacle to foreign direct investment. A foreign company reported in 1998 cases of government officials (at the lower and middle management level) requesting bribes to facilitate paperwork. The bribes were refused without significant consequence to the company.
In 1996, a foreign construction company videotaped government agents seeking and obtaining bribes in the company's offices. Shortly afterwards, the information was made public and the agents and their supervisors were suspended from their jobs. When found guilty after their trial, some of them were fired.
Corruption seems most pervasive in government procurement and dispute settlement. Paying government procurement agents a five to ten percent commission is common practice. To fight this, the government requires any procurement contract to be inspected by the "Direction Générale des Marchés Publics" that has to determine whether the procedure meets requirements of fairness, price competitiveness, and quality standards. During his swearing in ceremony in June 2002, and in subsequent meetings with the donor community later on, President Touré defined elimination of corruption as one of his highest priorities.
Former Minister of Justice Abdoulaye G. Tapo met with high-ranked officers of his department to outline his vision, and concerns in the justice system. Minister Tapo who was apparently backed by President Touré in his fight against corruption in the judiciary said during the meeting that the framework for future actions from each and every member of the judiciary would have to be legality, effectiveness and accountability.
The President created an Office of the General Auditor in 2004. The Office of the General Auditor is an independent agency tasked by the President to undertake as necessary the audit of any public funding-related operation.
In April 1999, the Council of Ministers passed a decree allowing legal action against any government official and his accomplices when there is evidence of bribery in the course of government procurement. In August 1999, President Konaré fired several high-ranking officers from the Ministry of Finance and state-owned companies, thus launching an anti-corruption crusade. Furthermore, during the swearing in ceremony of the President of the Supreme Court in October 1999, he stated that all investigations done for the past seven years would be reviewed by an independent committee and passed on to the judiciary when evidence of corruption or mismanagement were found. On October 15 1999, President Konaré appointed a seven-member committee to review all investigations. The committee released its interim report in July 2000 and recommended that several cases be brought to court. Seventeen high-ranking government and private sector officials were arrested. Some of them have been charged and tried or are awaiting trial after being released on bail. Others were released as the judges concluded there was no case.
Questionable judgments in commercial cases have occasionally been successfully overturned at the court of appeals. Yet there continue to be complaints from the domestic and foreign business community about the judiciary, including both judges and lawyers. During a televised debate in March 2001, the mayor of Bamako harshly criticized the judiciary, and concluded by saying that: "everybody knows that magistrates are corrupted and one can literally pay-off for a trial when he is rich". As a consequence of his public statement, the magistrate's union brought an action for libel against the Mayor and the public television director who allowed the debate to be broadcast publicly. The Mayor and the Director were convicted and sentenced to pay a symbolic 1 CFA franc. They appealed this decision and eventually the case was settled out of court. In 2002, the Bar Association President stated publicly that: "the judges are independent from everything but dirty money". In 1998, the executive decided to tackle the problem by creating a national commission in charge of reorganizing the judicial system. In February 1999, a national forum on the judiciary made recommendations as to ways of modernizing the judiciary. In December 2001, the National Assembly passed amendments to the penal code criminalizing corruption.
Bilateral Investment Agreements
Mali has signed the CIRDI treaty sponsored by the World Bank group. During the past five years, Mali has signed investment protection agreements with South Africa, Algeria, Senegal, and Libya.
OPIC and Other Investment Insurance Programs
Since October 1997, Mali has been on-cover with the U.S. Exim Bank program for short and medium term financing for the private sector extended to the public sector since 1999 for short term financing. Mali is eligible for certain OPIC programs. Mali has been a member of the World Bank's Multilateral Investment Guarantee Agency (MIGA) since 1990.
Labor
Labor is widely available, albeit at varying skill levels. Many skilled workers have been laid off from state-owned companies and are unemployed or hold jobs well below their skill level. Many recent college and high school graduates seek work. Unfortunately, skilled labor is insufficient in sectors with the highest growth rate such as mining and construction.
Workers have the right to unionize. Relations between labor and management have been difficult for the past four years, especially in new industry sectors such as gold mining. Although a warning notice for strikes is not required in the private sector, mediation procedures are generally followed before resorting to a strike. The government has signed the ILO agreement protecting the rights of workers. Although the labor code adopted in 1992 improved hiring and firing procedures, it still requires simplification. In addition, labor unions are powerful and play an important role in national affairs, which makes compensation plans negotiations and firing procedures still very long and much more scrutinized by the judiciary. Labor has constituted one of the major difficulties encountered recently by employers, both national and foreign. Although not a requirement, it is advisable to have regular contacts with the labor inspectors, especially when concluding new hiring contracts or drafting firing decisions.
Foreign Trade Zones/Free Ports
There is no discrimination between foreign-owned firms and host country entities in terms of investment opportunities. Companies (domestic or foreign) that export at least 80 percent of their production are entitled to the status of “zone franche” (tax-free status). As such, they benefit from duty free-status on all equipment and other input they need for their operations.
Foreign Direct Investment Statistics
Companies from Japan, Australia, Canada, and South Africa have made significant investments in the mining sector. France, Germany, and China have made significant investments in the manufacturing and food processing sectors. Foreign direct investment in Mali in the manufacturing industry sector was estimated at USD 2.3 million in 1994, USD 5 million in 1995, USD 8 million in 1996, and USD 15 million in 1997. Investment slowed in 1998, 1999 and 2000 because of legislative and municipal elections and the shortage of electric power and the high cost of energy in 2000. Investment picked up again in 2001, mostly in relation to the African soccer championship that took place in Mali in February/March 2002. In 2002/2003, more investment was made, especially in the textile, housing and agro-business sectors. In 2004, South African Investors teaming up with other foreign investors have pledged to invest about USD 100 million in agro-business.
Major Foreign Investors:
- Savage Companies (American)
- IPS from the Agha Khan Group (American)
- IAMGold (Canadian)
- Barrick Gold (Canadian)
- Mink Minerals (Canadian)
- Anglo American (South African)
- Transvaal Sugar Limited (TSB) (South African)
- Randgold Resources (South African)
- Kurd, Mercedes (German)
- Air liquide, CFAO, SDV, and Renault (French)
- Covec, CSCEC (Chinese)
- Maerskline (Danish)
- Yoong-poong (South Korean)
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