Gabon

2008 Investment Climate Statement - Gabon

Openness to Foreign Investment

Gabon is generally open to foreign investment, with foreign firms controlling the country's three main sources of income and exports: petroleum, manganese, and timber. However, several factors constrain foreign investment in the non-extractive industries. These include a small domestic market, high production costs, a rigid labor market, and an unpredictable judicial system. Gabon's regulatory and judicial bodies are subject to influence, creating uncertainty concerning fair treatment and the sanctity of contracts.

The 1998 investment code conforms to the Central African Economic and Monetary Community (CEMAC) investment regulations, providing the same rights to foreign companies operating in Gabon as to domestic firms. Businesses are also protected from expropriation or nationalization without just prior compensation as determined by an independent third party. The 1998 code also established the Private Investment Promotion Agency (APIP), which manages the one-stop-shop ("guichet unique") designed to facilitate the opening of a business. Certain sectors have specific investments codes, such as mining, forestry, petroleum, and tourism, which attempt to encourage investment through customs and tax incentives.

Gabon is affiliated to the Organization for Business Law Harmonization in Africa (OHADA). Legislation allows foreign investors to choose freely from a wide selection of legal business structures, such as a private limited liability company or public limited liability company. The distinctions arise primarily from the minimum capital requirements and the conditions under which shares may be re-sold. There are no restrictions on foreign investment in Gabon, but the state reserves the right to invest in the equity capital of ventures established in certain sectors (e.g., petroleum and mining). There are no other blanket requirements for local participation in the capital of local corporate entities.

Conversion and Transfer Policies

Gabon is a member of the CFA (Communaute Financiere Africaine) franc zone, the Central African Economic and Monetary Community (CEMAC), and the Bank of Central African States (BEAC). The other members in these organizations are Cameroon, the Central African Republic, Congo-Brazzaville, Equatorial Guinea, and Chad. The CFA is convertible and tied to the Euro; 1 Euro equals 656 CFA; 1 USD equals about 450 CFA.

CEMAC regulations require banks to record and report the identity of customers engaging in large transactions. Additionally, financial institutions must maintain records of large transactions for five years. CEMAC regulations do not stipulate a threshold amount for transactions to be reported. Under Gabonese law, documentation is required to substantiate the need for any foreign exchange over one million CFA (approximately USD $2,222). Transfers within the CEMAC zone are not restricted.

There are plans to develop a stock exchange in the region, but it is not yet operational. Overall authority for Gabon's exchange control system rests with the Department of Economic Control and External Finance within the Ministry of Finance, and the BEAC.

Expropriation and Compensation

Foreign firms established in Gabon operate on an equal basis with national firms. Under Gabonese law, business investments that are expropriated must first be compensated as determined by an independent third party.

There are no recent examples of property being expropriated, but there was an instance of a mining permit being re-issued to another company. According to the Ministry of Natural Resources, a mining permit for the Belinga iron mine was issued to the Brazilian mining company, CVRD, in March 2005. The government then requested CVRD to re-bid for the permit in competition with a Chinese consortium led by the China National Machinery and Equipment Import and Export Corporation (CMEC). In June 2006, the government awarded CMEC the Belinga project.

While there is no general requirement for local participation in investments, many businesses find it useful to have a local partner who can help navigate the less than objective factors in the business environment.

Dispute Settlement

There have been significant instances of disputes with US firms, but most disputes are resolved before going to outside arbitration. Gabon's legal system is based on the French model. Foreign court and international arbitration decisions are accepted, but enforcement may be difficult. Gabon's judicial bodies are subject to influence, creating uncertainty concerning fair treatment and the sanctity of contracts.

Gabon is a party to the World Trade Organization (WTO), the Multilateral Investment Guarantee Agency (MIGA), the International Center for the Settlement of Investment Disputes (CIRDI), and the New York Convention on the Recognition of International Arbitral Sentences. It is also a member of the Organization for Business Law Harmonization in Africa (OHADA), which provides an International Court of Justice and Arbitration (CCJA) common to its 16 member countries for the settlement of conflicts related to business law implementation.

Performance Requirements and Incentives

There are no specific performance requirements imposed as a condition for establishing, maintaining or expanding investment. There are no requirements for investors to buy local products, to export a certain percentage of output, or to invest in a specific geographical area. There is no blanket requirement that nationals own shares in foreign investments in Gabon. However, many investors find it useful to have a local partner who can help navigate the less than objective factors in the business environment.

It is expected that foreign investors will recruit and train Gabonese citizens to gradually take on responsibilities. Accordingly, hiring foreigners is subject to prior authorization from the Ministry of Labor. Foreign firms have stated that there is a lack of qualified Gabonese workers, requiring companies to request authorization to hire foreigners. Non-Gabonese Africans find it increasingly difficult to obtain employment authorization; non-African expatriates have less difficulty.

Gabon's main industries (petroleum, mining, and timber) encourage investment through customs and tax incentives. For example, oil and mining companies are exempt from customs duty on imported working equipment. The Government has attempted to promote tourism with theTourism Investment Code of 2000, which provides tax exemptions during the first eight years of operation, tax-free imports, and other administrative incentives.

Right to Private Ownership and Establishment

Any legal entity or person wishing to do business in Gabon must request prior permission from the Ministry of Commerce. Foreign investors are largely treated in the same manner as their Gabonese counterparts with regard to the purchase of real estate, negotiation of licenses, and entering into commercial agreements.

Protection of Property Rights

Secured interest in property is recognized, and the recording system is fairly reliable. Under the 1998 investment code, no investment can be expropriated without prior just compensation as determined by an independent third party. As a member of the Central African Economic and Monetary Community (CEMAC) and the Economic Community of Central African States (CEEAC), Gabon adheres to the laws of the African Intellectual Property Office (OAPI). OAPI aims to ensure the publication and protection of patent rights, encourage creativity and transfer of technology, and create favorable conditions for research. As a member of OAPI, Gabon acceded to a number of international agreements on patents and intellectual property, including the Paris Convention, the Berne Convention, and the Convention Establishing the World Intellectual Property Organization.

There are no recent examples of property being expropriated, but there was an instance of a mining permit being re-issued to another company. According to the Ministry of Natural Resources, a mining permit for the Belinga iron mine was issued to the Brazilian mining company, CVRD, in March 2005. The government then requested CVRD to re-bid for the permit in competition with a Chinese consortium led by the China National Machinery and Equipment Import and Export Corporation (CMEC). In June 2006, the government awarded CMEC the Belinga project.

Transparency of Regulatory System

Regulatory procedures are streamlined and no laws or policies are used to impede foreign investment. Nevertheless, some less than objective factors in the system pose problems at times, and government policies and laws do not establish "clear rules of the game." Gabon's regulatory bodies are subject to influence, creating uncertainty concerning fair treatment and the sanctity of contracts. Additionally, as a former French colony, Gabon maintains strong economic ties with France, which at times discourages foreign investment by nationals and firms from other countries.

There are no informal or nongovernmental regulatory procedures in place. Proposed laws and regulations are not published in draft form for public comment.

Efficient Capital Markets and Portfolio Investment

The Bank of the Central African States (BEAC), headquartered in Cameroon, regulates the banking system. Overall authority for Gabon's exchange control system rests with the Ministry of Finance and the BEAC. Gabon's banking system includes one development bank (Banque Gabonaise de Developpement - BGD) and five commercial banks. The BGD is meant to lend to small and medium sized companies. Two of the five commercial banks are affiliated with French banks (BNP Paribas and Credit Agricole) and one is an American bank (Citigroup).

Commercial banks offer most corporate banking services or can procure them from overseas. Local credit to the private sector is limited and expensive, but available to both foreign and local investors on equal terms. The country's main economic actors, the oil companies, finance themselves outside Gabon. Commercial banks have transferred excess liquidity to correspondent banks outside the region.

The Central Africa Regional Stock Exchange (BVMAC) is not yet operational.

Political Violence

There have been no incidents of significant civil disturbance or political violence in the past few years.

The country peacefully carried out presidential elections in 2005 and 1998, as well as legislative elections in 2006. In a region where instability and strife are common, Gabon stands out as a haven of peace and stability.

President Omar Bongo Ondimba has served as Gabon's Head of State since 1967. In January 2006, he began what most expect to be his final seven-year term in office. There are uncertainties concerning whether Gabon can remain free of civil disturbance in a post-Bongo era.

In 1991 and 1993, there were significant (though short and localized) bouts of civil disturbance and violence associated with elections. In early 1994, street demonstrations led to the imposition of a curfew during a period of several weeks. Negotiations between the majority and opposition parties in October 1994 resulted in arrangements generally satisfactory to all.

Corruption

There is a lack of accountability and oversight in the government's budget process, which can be seen in other areas of the country's economy. Companies have complained of a lack of transparency in customs and other government administrative affairs. In the past, the government's fiscal shortfalls, weak financial management, and suspected corruption have contributed to significant arrears in domestic and external debt payments. High oil prices have boosted revenue, and allowed the government to retire some debt, but questions remain about fiscal management. Gabon is currently operating under a three-year arrangement with the IMF, which will require some improvement in financial transparency.

In 2004, the government established a new anti-corruption authority, the Commission to Combat Illicit Enrichment. The commission was charged with publishing quarterly and annual reports on its activities. To date, no reports have been published.

Gabon is a participant in the Extractive Industries Transparency Initiative (EITI), which aims to provide more transparency in accounting for revenues from petroleum and mining industries. Gabon published its first EITI report in December 2005 (see http://www.finances.gouv.ga/eiti.htm) and its second report (generally regarded as an improvement on the first one) in early 2007.

Bilateral Investment Agreements

As of January 2008, the US has no Bilateral Investment Treaty (BIT) or taxation treaty with Gabon, though discussions on a BIT have been underway for several years and are continuing. Gabon is a beneficiary of the African Growth and Opportunity Act (AGOA), a framework for US trade, investment, and development policy for sub-Saharan Africa. Gabon has bilateral investment agreements with the following countries: Belgium and Luxembourg, China, Egypt, France, Germany, Italy, Lebanon, Mali, Morocco, Portugal, Sao Tome and Principe, South Africa, and Spain. There is also a bilateral investment agreement among CEMAC member countries.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) has provided services to US investors in Gabon. Gabon is also a member of the Multilateral Investment Guarantee Agency (MIGA), which guarantees foreign investment protection in cases of war, strife, disasters, or expropriation. MIGA is a branch of the World Bank Group. The U.S. government's Export-Import Bank provides finance facilities to both the public and private sectors in Gabon.

Labor

Gabon's population is approximately 1.4 million, of which perhaps as many as 25 percent are foreigners (mostly Africans). Foreign firms report a shortage of highly skilled Gabonese labor. Authorization from the Ministry of Labor is required in order to hire foreigners. Non-Gabonese Africans find it increasingly difficult to obtain employment authorization; non-African expatriates have less difficulty. Non-Gabonese Africans take up most positions requiring unskilled labor. Skilled labor costs are high and are kept so by a labor code inspired by a French model that strongly defends the rights of Gabonese workers. Labor unions and confederations are active.

Foreign Trade Zones / Free Ports

In October 2000, a Free Trade Zone project called "Zone Franche de l'Ile de Mandji," (Mandji Island Free Trade Zone) was announced near Port Gentil for the exportation of processed wood and/or oil field services. The zone has not progressed beyond the project stage.

As a member of the Central African Customs Union (UDEAC), Gabon's trade with other member countries (Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea, and Gabon) is subject to low or no customs duties.

Foreign Direct Investment Statistics

Detailed statistics are unavailable, but the UN Conference on Trade and Development stated that Foreign Direct Investment (FDI) into Gabon in 2005 was $300 million (compared to $323 million in 2004). It is believed that most foreign investment comes from France and is concentrated in the petroleum and manganese industries. According to the French Ministry of Economy/Commerce, France is the main supplier of goods to Gabon and Gabon is the second largest recipient of French FDI in Africa. Most foreign investment (including that of the U.S.) is concentrated in the oil sector. Major companies in Gabon include Total, Shell, Marathon Oil, Perenco, Vaalco, and COMILOG.

In June 2006, Gabon signed an agreement with a Chinese consortium for the development of the Belinga iron ore deposit that includes the development of the mine, a railway, a hydroelectric dam, and a deep-water port. Total planned investment for the Belinga project is estimated at $3 billion over the next four years.