I. EXECUTIVE SUMMARY

     
This Country Commercial Guide (CCG) presents an overview of
Angola's commercial environment, using economic, political and
market analysis. The CCGs were established by recommendation of
the Trade Promotion Coordinating Committee (TPCC), a multi-agency
task force, to consolidate various reporting documents prepared
for the U.S. business community. Country Commercial Guides are
prepared annually at U.S. Embassies through the combined efforts
of several U.S. Government agencies.

Angola is a large (481,354 sq. miles, - 1,246,700 sq.
kilometers - roughly the size of Texas and California put
together), sparsely populated country in southwest Africa. Angola
is rich in natural resources, but suffered severe social and
political dislocations as a result of a prolonged civil war. Its
10 to 11 million people are among the world's poorest, with per
capita GNP estimated at $320.
     
Angola's economy is sharply divided between the oil sector
and the remainder of the economy. With a daily production of
approximately 720,000 bbls, oil accounts for 93 percent of export
revenues and 56 percent of GDP. Total annual production is
expected to reach 1 million bbl/day by the year 2000. Refined
petroleum, natural gas, and raw timber are Angola's other
principal exports. Diamonds are another major export, with sales
estimated at $400-600 million per year. Most diamond sales have
traditionally taken place through non-official channels.

Angola's foreign investment code addresses how to invest in
Angola depending on the amount invested. Weak and deteriorating
infrastructure (roads, telecommunications, power, and water),
bureaucratic hurdles, corruption, and the current political
situation have generally deterred investors. A considerable
degree of government ownership/control in many sectors also
discourages private investment.  However, Angola's excellent
geographic location and rich resources, combined with three years
of fragile but enduring peace, are increasingly drawing the
attention of international investors. 

The United States, Portugal, France, and South Africa are
Angola's principal trade partners. Angola imports nearly all
finished goods, including consumer goods, capital goods, and
transport equipment.  Exports, principally crude oil, diamonds,
refined petroleum, and natural gas, are sold to the U.S.A. (which
buys up to 75% of Angola's crude oil production), Germany,
Belgium, Luxembourg and Spain. Best export prospects for U.S.
companies are oil-field machinery and equipment, computers and
parts, motors, generators and parts, ships, aircraft,
motor vehicles, and related equipment.

Angola is a member of the World Trade Organization (WTO),
the International Center for Settlement of Investment Disputes
(ICSID), the Southern African Development Community (SADC), the
Common Market for Eastern and Southern Africa (COMESA) and the
Economic Community of Central Africa (CEEAC). The World Bank is
currently involved in economic reform and reconstruction efforts
in Angola. The International Monetary Fund, whose program for
Angola was cancelled in 1995, established a Resident
Representative in Angola in November 1997, but does not have a
structural adjustment program with Angola. OPIC currently has an
Investment Guarantee Agreement with Angola. The U.S.
Export/Import Bank recently authorized its first limited-recourse
(oil-backed) loan to Angola in 11 years, and is now willing to
consider other limited-recourse loans on a case-by-case basis.
Angola is off-cover for non-recourse loans.




II.       ECONOMIC TRENDS AND OUTLOOK


Major Trends and Outlook 


Real gross domestic product (GDP) grew by 5.7 percent in
1997, driven by the expanding petroleum sector. With a daily
production of  proximately 720,000 bbls, oil accounts for 93
percent of export revenues and 56 percent of GDP. Total annual
production is expected to reach 1 million bbl/day by the year
2000. Petroleum refining will play a minor role until
rehabilitation and reconstruction of the economy begins in
earnest. The diamond-mining sector could fuel additional economic
expansion if increased accountability can be introduced in
production and marketing. The majority of stones produced in
Angola are sold outside official channels. In the industrial and
services sectors, a lack of transparency, significant government
ownership and control of production, corruption, and an
overvalued currency all continue to stifle development.
Agricultural production continues to suffer from a degraded
infrastructure, lack of funds for investment, and, in certain
areas, political instability and the presence of minefields. 
Angola's production of cereal grains is unlikely to meet domestic
demand, despite what the UN food program estimates will be an
increase in cereals production from 309,000 tons to 510,000 tons.
In addition, scarcities of managerial, administrative, and
technical talent, plus past failed attempts at collectivist
economic planning, have hampered economic performance.
               
The government's recently adopted economic strategy for 998-2000
is aimed at achieving the following results:
      
*    guaranteeing peace and stability in Angola; 
*    guaranteeing minimum consumption levels for foodstuffs and
     other essentials goods; 
*    ensuring minimum levels of sustained economic growth; 
*    reducing the deficits in the country's domestic and foreign
accounts; 
*    controlling inflation; 
*    decreasing unemployment; 
*    reducing red tape; and 
*    creating the necessary climate to promote foreign
investment;

The 1998 budget, however, contains few programs which will
further those goals. Many of the economic assumptions underlying
the budget are overly optimistic and will likely worsen Angola's
external debt problem. The budget also ignores recommendations to
limit external debt, and instead depends on an additional $700
million in external financing and $400 million in donor finance
to cover its projected revenue shortfall. The anticipated shift
from security spending to enhanced support for social
reconstruction has not occurred. On the revenue side, oil
production will continue to supply at least 70 percent of the
anticipated $3.1 billion receipts. However, the sharp decline in
world oil prices that began in early 1998 jeopardizes these
estimates, and will force the Angolan Government to curtail
outlays by an estimated $700 million to $1 billion. The budget
contains none of the key elements the IMF has established as
pre-requisites for future structural adjustment financing
negotiations. 
The government has implemented fiscal and monetary policies
inconsistently and with varying results. Budget deficits of up to
30 percent have been the norm for several years and the primary
source of disagreement with the IFI's. The Angolan government's
funding of fiscal deficits through monetary expansion has driven
persistently high inflation. An economic program, begun in 1996,
to reduce inflation has been applied inconsistently. The
government-set official exchange rate overvalues the kwanza, and
a parallel foreign exchange market flourishes at rates up to
twice the official exchange rate.

One report estimates that as of 1996, 85 percent of Angolan
long- and medium- term debt was in arrears. As a consequence,
much of the government's external borrowing requirement is now
financed through short-term debt acquired at high rates. These
loans are backed by future oil production, since few banks are
willing to lend to Angola based only on sovereign debt. Because
many of these loans are off-budget, accurate figures of total
debt, and accurate estimations of the extent to which future oil
production has already been leveraged, are unavailable.

Government Role in the Economy

Angola was a Soviet-style centrally planned economy until
1991, but is now making the transition to a more market-based
system.  Nevertheless, the Government continues to intervene in
the markets, including fixing prices, mandating quantity and mix
of imports, setting a fixed exchange rate, and owning or
directing the actions of much of the non-petroleum industrial
sector.

While a privatization program has been established, the
private sector in Angola is generally not prepared
administratively or financially to purchase public corporations.
Smaller state-run enterprises have been sold off, but many proved
to be economically unviable. Most large companies, including
telecommunications, insurance and banks, remain government
monopolies. 
               
Balance of Payments Situation
               
In 1996 total exports were $5.1 billion; total imports were
$2.2 billion, resulting in an overall positive balance of $2.8
billion.  However, when services and transfers ($3.5 billion),
notably interest payments on debt, are included, the current
account registered a deficit of $606 million, or 9.2 percent of
GDP.  

Infrastructure 

Neglect and decades of warfare have ravaged Angola's
infrastructure. Conditions in almost all sectors - including
water, sewer, sanitation, telecommunications, energy, roads,
bridges, airports,and medical care -- have deteriorated in recent
years. Many roads remain impassable. Despite attempts at
improvement, water and electricity distribution networks continue
to have serious problems. Nationwide installed generating
capacity is only 547 MW, a sizeable portion of which is not
functioning due to war damage or lack of repair and maintenance.
According to the National Electric Company, only 130,000 of
Luanda's estimated 3 million residents are connected to the
electrical grid. For those that are, power interruption is so
common that any home or business that can afford one has an
individual generator. The Angolan Government estimates that only
38 percent of the population has access to clean water. Water
service in Luanda can be off for days or weeks at a stretch. The
Government and international financial institutions are trying to
improve the performance of the electricity and water companies
through financing to upgrade equipment and improve operations. 

Telephone service is sporadic due to lack of maintenance and
repair. The cellular telephone system is over-subscribed and
routinely cannot be accessed during business hours. Many large
international companies have installed H.F. trunking systems to
minimize use of the domestic telephone system. Telecommunications
quality is unlikely to improve significantly until the government
relinquishes its monopoly in this sector. There are currently two
local Internet providers in Angola, and service is relatively
good.
               
Angola could benefit from its excellent geographic position
if its infrastructure were repaired and upgraded. The ports of
Luanda, Lobito, and Namibe are all operational, although each
will require significant improvements if they are to become
primary ports of entry for commerce in southern Africa. A rail
line runs east into the interior from each port, though all rail
lines were severely damaged during the conflict. An Italian
consortium has agreed to rehabilitate the line between Benguela
and the border of the DROC, but construction has not begun.
Luanda's international airport handles significant volumes of
traffic, but expanded services will not be possible until
improvements are made, such as the installation of a parallel
taxiway and an instrument landing system. Currently there are no
direct flights from the U.S. to Luanda, and no U.S. flag carrier
serves Luanda. 
             

POLITICAL ENVIRONMENT  
             
Synopsis of Political System               

Angola continues its ongoing transition from a single party state to a multiparty democracy. The Popular Movement for the Liberation of Angola (MPLA) has ruled Angola since its independence from Portugal in 1975. The Constitution was revised in 1991 to provide for elections and for the protection of basic human rights, but the Government does not respect its provisions in practice. In 1992 President Jose Eduardo Dos Santos received a plurality of votes in Angola's first elections, which United Nations observers declared to be free and fair. The second round of the election was not held due to the repudiation of the first round results by the National Union for the Total Independence of Angola (UNITA) and the subsequent return to civil war. In 1994 the Government and UNITA signed the Lusaka Protocol in an effort to formally end 20 years of civil war. In April,1997, UNITA joined with the MPLA and 10 smaller opposition parties to form a Government of Unity and National Reconciliation(GURN). As specified in the Lusaka Protocol, UNITA filled in April 1997 the 70 National Assembly seats won in 1992. The judiciary, where it functions, is not independent of the President and the MPLA.

Political Relationship with the U.S. 
The United States and Angola established diplomatic relations on May 19, 1993. Relations between the two countries have broadened. The United States is one of three observer countries (with Russia and Portugal) that monitor the implementation of the Lusaka Protocol. As such, the U.S. plays an active role in maintaining momentum in the peace process in Angola. This process is taking place under the auspices of the United Nations Observer Mission in Angola (MONUA). 

Major Political Issues Affecting Business Climate              
The unresolved conflict between the Government and UNITA is the most important political issue affecting the business climate. Low intensity conflict and guerilla operations, often under the guise of banditry, continue to plague the countryside. In October 1997 the United Nations Security Council imposed sanctions on UNITA for failing to comply with its Lusaka Protocol obligations. Some progress was made in the following months, but in June 1998 the U.N. Security Council imposed additional sanctions on UNITA for its continuing failure to carry out its responsibilities. That same month MONUA also announced that UNITA continues to have armed forces, contrary to its March 1998declaration of disarmament and in violation of the Lusaka Protocol.  Despite the unsettled political climate, most of the major U.S. petroleum exploration and production companies and oil industry service companies operate in Angola. A few other U.S. multinationals have offices in Luanda, and a number of U.S. businesses have established local subsidiaries or agency relationships. American missionaries and NGO employees are situated in a number of locations throughout the country

MARKETING U.S. PRODUCTS AND SERVICES
Distribution and Sales Channels
Product distribution in Angola can be problematic because of poor transportation infrastructure. Anti-personnel mines are found on some rural roads, and others become unusable during the rainy season.  Banditry, violent crime, and undisciplined police and troops also pose a significant impediment to internal commerce. Some local companies have a network of rural distributors, but many firms opt to reach rural markets through wholesale arrangements with local entrepreneurs.
Use of Agents and Distributors
Subsidiary or affiliate companies of U.S. organizations operate in several areas including computers/office equipment, petroleum products, and agro-industry. Finding partners or agents and distributors for U.S. products is possible, though financial arrangements can be problematic.
Franchising
There are no restrictions on franchising in Angola.
Direct Marketing
The Angolan business community is aware of only a limited selection of the large range of U.S. products. A U.S. company may market directly through an established importer in Angola, by winning a tender, through investment, or by opening an office in Angola. At present over half of all consumer goods are imported from Portugal; other important suppliers include France and South Africa. Competitive pricing and reliability of supply are essential to enter and stay in the Angolan market.          
Joint Ventures/Licensing
The Government of Angola allows joint ventures under the foreign investment law, which also regulates the amount and form of capital invested. If an investment (including setting up a foreign representative office, even if not directly linked to capital importing operations) is valued at more than $250,000 and less than $5 million it is subject to the "Prior Declaration Regime", in which competent authorities (including government ministries and the Foreign Investment Institute) must approve the project. If an investment is valued at more than $5 million and less than $50 million it is subject to the "Prior Approval Regime", in which approval must be granted by both the competent authorities, the Ministry of Planning, the Prime Minister, and, in cases where the investment is over $15 million, the Council of Ministers. If an investment is valued at more than $50 million or involves activities that can only be carried out by concession(such as oil and diamond exploration and production) it is subject to the "Contractual Regime", in which a contract must be established defining project objectives, tax benefits and incentives to be granted, and government monitoring of project development. The contract is subject to the approval of the competent authorities, the Ministry of Planning, the Prime Minister, and the Council of Ministers. Joint ventures must also be licensed by the Ministry of Commerce.
Steps to Establishing an Office
The Government of Angola officially supports foreign businesses interested in establishing agency, franchise, joint venture, or licensing relationships. The Angolan Foreign Investment Institute distributes "A Summary for Investors" upon request. Other Angolan organizations useful in establishing commercial links with Angola are: the Angola Chamber of Commerce and Industry, and the U.S.-Angola Chamber of Commerce. 
Advertising/Trade Promotion Angola has one government-owned television network and several A.M. and F.M. radio stations, as well as a daily newspaper with a circulation of approximately 10,000 copies per day. A small but vocal alternative press is present in Luanda and accepts advertising.  Billboard advertising is also common. Product advertisement can be done through these channels. 
Selling to the Government
The Government of Angola solicits bids for supplies and services in local and international publications 15 to 90 days before the bids are due. Bid documents are normally obtained from a specific government ministry, department or agency at anon-refundable fee. Completed bids, accompanied by a specified security deposit, are usually submitted directly to the ministry in question. Bids are often opened in the presence of bidders or their representatives. The Embassy sends TOP cables on major public bids. The bidding process often does not meet minimal standards of objectivity and transparency. Many U.S. firms engaged in selling goods or services to the government have experienced delays ranging from months to years in receiving payment.
Protecting Your Product From IPR Infringement
In Angola, the attribution of intellectual property rights is regulated by: (a) the Ministry of Industry (trademarks, patents, designs), and (b) the Ministry of Culture (authorship, literary and artistic rights). Intellectual property is protected via the "Industrial Property Law" (3/92). Law 4/90 regulates the attribution and protection of copyrights. To the Embassy's knowledge, no court cases testing the strength of these laws involving U.S. intellectual property have been filed. Results from other legal cases involving U.S. investors suggest that a U.S. firm cannot rely on the Angolan judiciary to protect its rights. Angola is a member of the World International Property Organization (WIPO) and makes use of its international classification of patents and of the international classification of products and services to identify and codify the requests for invention patents and for the registration of trademarks. Each petition for patent that is accepted will be subject to a fee that varies by type of request. 

Need for a Local Attorney
A local attorney is required only when preparing "Articles of Association" before registering a company. The U.S. Embassy can provide a list of lawyers or interested parties may seek a lawyer through referrals or other sources of information. The U.S. Embassy strongly recommends the use of a lawyer and the preparation of a binding contract prior to any business dealing, including rental or lease of real property. The lawyer should also conduct due diligence investigations prior to the conclusion of any purchase or other contractual agreement.  Oral agreements in Angola are not legally enforceable.


LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT     
Best prospects for non-agricultural goods and services
Used Clothing: Given the population's limited purchasing power, used clothing is in great demand. Used Equipment/Vehicles: Used equipment and vehicles --particularly trucks -- are in demand. Computers and Computer Peripherals: U.S. products occupy about one-half the growing Angola market for computers and computer peripherals. Aid Projects: The World Bank, USAID, other donors, and many non-governmental organizations (NGOs) are active in Angola. Traditionally, most donor organizations have engaged in emergency relief, provision of food and medicine, mine clearing and community development. As Angola completes it transition to peace and political stability, development assistance will focus more on rehabilitation and reconstruction and will therefore present greater opportunities for sales and investment. The terms of reference for development projects, such as a recently awarded consulting contract for a major water-distribution system rehabilitation project, are published. All bids are awarded competitively. Telecommunications: Substantial improvements in this sector are required, and as such represent a long-term opportunity for U.S. firms.  Despite Government of Angola support for such schemes, financing of major projects will remain difficult to obtain for the foreseeable future.

Best Prospects for Agricultural Products
Angola has fertile soil and excellent climate for crops as varied as cotton, sugar, and coffee. The near total lack of infrastructure in this sector presents a significant opportunity for U.S. firms. However, related projects, including road building and minefield clearance, must take place before this sector will achieve its potential. Angola has in recent years been a recipient of U.S. Department of Agriculture PL-480 Title I program foodstuffs, including vegetable oil, beans, rice, wheat, and wheat flour. The explosion in urban population combined with the hurdles faced by the agriculture sector mean that Angola will likely continue to be a large potential market for U.S. commodities.