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FY 1999: Cote d'Ivoire |
VII. INVESTMENT CLIMATE 1. Openness to Foreign Investment Cote d'Ivoire actively encourages foreign investment. The National Assembly approved a new Ivorian Investment Code in the spring of 1995, containing provisions that modify the Code of June, 1985 which are designed to encourage additional private sector investment in the economy. For all practical purposes, there are no significant limits on foreign investment -- or difference in the treatment of foreign and national investors -- either in terms of levels of foreign ownership or sector of investment. The former investment code was aimed at helping small and medium-sized firms; the new code provides incentives for larger investments as well. Additional incentives are offered to those who choose to invest outside of Abidjan and other established urban industrial areas. An important, new feature of Cote d'Ivoire's investment promotion efforts was the establishment, in February, 1995, of the Ivorian Investment Promotion Center, or "CEPICI," to use its French acronym. CEPICI is designed to provide investment information and assistance for entrepreneurs interested in starting a business or investing in Cote d'Ivoire. CEPICI operates three basic programs: a "one-stop-shop" for investors; an outreach program, designed to match opportunities with potential investors; and a liaison program between the public and private sectors. Investments from outside the Franc Zone must be approved by the external finance and credit office of the Ministry of Economy and Finance, but this is essentially a foreign exchange control/monitoring measure. For limited partnerships, one or more shareholders must be resident in Cote d'Ivoire. Though regulations exist to control land speculation by foreigners, foreigners in fact own significant amounts of land in Cote d'Ivoire. 2. Right to Private Ownership and Establishment Generally speaking, foreign investors have access to all forms of remunerative activity on terms equal to those granted private Ivorians. Foreign investment in privatization of parastatal firms is encouraged, though some shares have been reserved shares for Ivorian citizens in certain key sectors. 3. Protection of Property Rights The acquisition and disposition of property rights, including intellectual property, is covered by the Ivorian Civil Code. Căte d'Ivoire is a party to the Paris Convention, its 1958 revision, and the 1977 Bangui Agreement grouping thirteen Francophone African countries in the African Intellectual Property Organization (OAPI). In OAPI, rights registered in one member country are valid in all. Patent validity is ten years, with two five year extensions possible. Trademarks are valid for ten years and are renewable indefinitely. Literary copyrights are protected for fifty years following the author's death (or posthumous publication). Other intellectual property rights are valid for five years with various renewal periods; we are not, however, aware of domestic legislation specifically covering semiconductor chip layout design. Though in theory prohibited, counterfeit clothing, textiles, footwear, watches, and audio and video tapes can be found, particularly among street vendors. 4. Foreign Trade Zones/Free Ports Bonded warehouses exist, and bonded zones within factories are allowed. High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no foreign trade zones. Bonded warehouses serve mostly for transhipment of goods to Mali and Burkina-Faso. (Refer to paragraph 11 on pages 41-42). 5. Performance Requirements/Incentives There are no general performance requirements or incentives applied to investments, though benefits accorded to an investor under one of the investment regimes may vary depending on the nature of the investment made. Preferences may be granted to investors seeking to establish themselves outside of Abidjan. Those investors will benefit from a 8 year tax exemption compared to 5 years while investing in the Abidjan area. Should a company seek designation as a priority enterprise eligible for the tax and other benefits provided in the investment code, Ivorian participation becomes negotiable and the firm may be required to purchase Ivorian products. Under the old investment code, designation as a priority enterprise was available to investors in agriculture, livestock and fishing, storage and treatment of agricultural and food product, low-cost housing construction, extractive industries, power production, and manufacturing and assembling. It is unclear how the new code will treat so-called priority investments. 6. Transparency of the Regulatory System The Ivorian government, working with the IMF and the World Bank, has taken a number of steps to encourage a more transparent and competitive economic environment. (See Chapter II, Economic Trends and Outlook.) Nevertheless, much remains to be done. Corruption is widely assumed to exist in all branches of government and, despite considerable progress, the marketing of the country's key export crops remains subject to control by vested interests. Tax and duty rates have been significantly lowered, yet they remain, on balance, high as the government seeks to earn revenues with which to clear its large arrears; until those rates come down further, they will continue to distort the allocation of resources and encourage corruption. Bureaucratic procedures have also been simplified in a number of cases, but they remain cumbersome. The government has shown a laudable interest in streamlining the regulatory system, and its programs with the IMF and World Bank address most of the problems identified above. Among objectives that have been set by the government are: a lowering of tax and duty rates along with a broadening of the tax base; the drafting of new investment, labor, and mining codes; establishment of a one-stop investment registration bureau; and audits of a number of parastatal entities. As these plans are pursued, the regulatory environment should improve significantly. 7. Corruption Corruption in Cote d'Ivoire is a major deterrent to new foreign investment and a persistent burden for businesses which are already established here. It is widely-reported to pervade all levels of the Ivorian government and yet it is invisible and difficult to prove. Though U.S. firms have not explicitly identified corruption as an obstacle to foreign investment, there is strong evidence that corruption affects U.S. corporate behavior vis-·-vis Cote d'Ivoire. Corruption has the greatest impact with regard to contract awards, the judiciary, customs and tax enforcement. Contracts have occasionally been awarded to patently less qualified bidders; judges are widely-assumed to be subject to influence; and customs and tax officials pursue the most minor technicality in the hopes of being bribed to desist. Though the legal framework with which to prosecute corruption exists, the pattern in Cote d'Ivoire has been only to remove officials tainted by corruption scandals rather than to prosecute them. In several high-profile cases in the 1970's and 1980's, officials accused of large-scale corruption were initially removed from office but later rehabilitated. More recently, in 1996, the head of the national oil company was removed from office after detailed accusations of corruption appeared in the press. The official was removed, and not long after President Bedie launched an appeal for the "moralization of public life." 8. Labor By regional standards, Cote d'Ivoire has a highly-trained and highly-capable work force. The government has traditionally encouraged the hiring of Ivorian nationals, and work permits for expatriates from outside of the franc zone have sometimes been hard to obtain. The Ivorian labor market is segmented. Unskilled and day labor is readily available, while clerical, technical, managerial, and professional talent is more difficult to find. Wage rates are relatively high by regional standards, but costs of capital goods, transport, and energy are also high; it is therefore not obvious that high labor costs provoke overspending on labor-saving technology. Previous labor laws were relatively rigid, and made it hard to terminate workers for just cause. The adoption of a new labor code in January 1995 has introduced greater flexibility into the functioning of the labor market, with less restrictions on recruitment and dismissal, for example. With the aim of promoting employment, the government has also eliminated or reduced taxes effecting wage costs. 9. Efficiency of Capital Markets and Portfolio Investment Cote d'Ivoire's financial system, while limited in scope, is sound and functional. Government policies generally encourage the free flow of capital. With the government only retaining a small minority share in the large banks, and no share in some of the smaller banks, credit decisions are made on classic banking criteria. There are only limited varieties of financial instruments, particularly long-term savings instruments. But bonds and stocks have been issued and traded on the Abidjan stock exchange since its inception in the 1970's. The Abidjan stock exchange (BVA) will soon be replaced by the regional stock exchange (BRVM), also based in Abidjan which is intended to be the securities market for all eight UEMOA countries. The new regional exchange, which has majority private ownership, has been delayed by the many challenges of establishing a completely new exchange, with new software and telecommunications systems, a new regulatory framework and book-entry instead of paper securities. Regulatory and accounting systems in Cote d'Ivoire are relatively transparent and approach international norms. A new UEMOA-wide accounting system came into effect January 1, 1998, called SYSCOA. This means that all eight UEMOA countries will follow a single set of accounting rules. The legal system, while well- developed, is not completely transparent, and banks have experienced difficulties realizing their security interests. Total assets of the country's banking system are over CFA 1.8 trillion (approximately USD 3 billion). Generally speaking there are no private sector and/or government efforts to restrict foreign investment, participation or control of local industry. 10. Conversion and Transfer Policies Cote d'Ivoire is a member of the CFA Franc Zone, which means that the convertibility of the CFA franc is guaranteed by the French Treasury. From 1948 until January 1994, the exchange rate was fixed at 50 CFA francs for one French franc; the rate is now 100 CFA francs for one French franc. Remittances within the Franc Zone are freely permitted; otherwise, prior permission is required. For investments coming into the zone from outside, prior permission is required and routinely granted. Once an investment is established and documented, remittances of dividends or repatriation of capital must also be approved, and routinely are. The same holds true, in general, for requests for other sorts of routine transactions -- e.g., imports, license and royalty fees, etc. Occasionally, delays have arisen as a result of temporary liquidity shortfalls in the banking system. 11. Expropriation and Compensation Cote d'Ivoire has a general purpose public expropriation law, with built-in compensation provisions, similar to that in the United States. The embassy is not aware of any specific cases of expropriation of private property by the government. 12. Dispute Settlement Enforcement of contract rights can be a time consuming and expensive process. Not all cases are decided quickly, and some do not appear to be judged on their legal or contractual merits. This has led to a widely-held view within the business community that there are elements within the judiciary which can be corrupted. The government is attempting to improve the judicial system: by having more cases decided by three-judge panels instead of by a single judge; by computerization and swift publication of decisions; and by training judges in commercial law. A new Arbitration Tribunal has been established, under the auspices of the Chamber of Commerce, where businesses may go to settle their commercial disputes. This is designed as a reform measure to avoid the backlogged and inefficient court system. Only time will tell whether dispute settlement will become less of a problem under the new system. Subject to the vagaries of the legal enforcement system, property rights do exist and are respected. Enforcement of real property, however, can be complicated by the clash between the traditional property rights of a village or ethnic group and the more modern system of long-term leaseholds (freehold tenure is generally not granted to private individuals or entities). There is no specific Ivorian legislation providing for arbitration for investment disputes, though the use of arbitration provisions was upheld in a 1989 Supreme Court decision. Cote d'Ivoire is a member of the International Center for the Settlement of Investment Disputes (ICSID). 13. Political Violence There have been a few incidents of civil disturbances over the past several years, but they have generally taken place in the context of the newly introduced system of multiparty democracy or of student demands for better conditions and more financial support. One exception was a brief mutiny by the Presidential guard over pay and benefits issues in March 1993. Another exception, and the most severe incident, involved violence following a soccer match against a Ghanaian team in November 1993. Notably, the fifty percent devaluation of the CFA franc in 1994 was not accompanied by disturbances, despite the government's decision to hold average wage increases to only 10 percent. As the 1995 elections approach, there is some possibility of further civil disturbances, but violence has not characterized Ivorian political life in the past and is not expected to do so in the foreseeable future. When there have been incidents, private investment has not been targeted by those involved. 14. Bilateral Investment Agreements The U.S. has neither investment nor tax treaties but does have an OPIC agreement in force. A revised OPIC agreement is likely to be signed in 1998. Cote d'Ivoire is bringing its intellectual property regime up to World Trade Organization standards as a preliminary step to begin negotiations with the U.S. on a Bilateral Investment Treaty. Cote d'Ivoire's government also intends to begin negotiations on a double-taxation treaty with the U.S. Cote d'Ivoire has double taxation treaties (based on the OECD model treaty) in force with France, Belgium, Germany, Great Britain, Norway, Canada, Italy, and in Africa with Benin, Burkina Faso, Congo, the Central African Republic, Gabon, Mauritius, Mali, Mauritania, Niger, Rwanda, Senegal and Togo. These treaties relate to both personal and corporate income taxes. 15. OPIC and Other Investment Insurance Programs OPIC insures a number of U.S. investments in Cote d'Ivoire; it became part owner of a hotel that had gone bankrupt, and is involved in a gold mine which began production in 1992. Nevertheless, its exposure is relatively small. In addition to OPIC, the African Project Development Facility (APDF) and the African Investment Program of the International Finance Corporation and the Africa Growth Fund are sources of information for interested investors. Cote d'Ivoire is a member of the Multilateral Investment Guarantee Agency (MIGA). 16. Capital Outflow Policy Although foreign investment data for the overall economy is not available, a series of high-profile projects suggest that Cote d'Ivoire has been enjoying a boom in foreign direct investment. These projects include France Telecom's major investment (see below), a wave of cocoa-processing investments, increased oil exploration and development (see below), and a second independent power generation project. 17. Major Foreign Investors France continues to be the most important foreign investor in Cote d'Ivoire, providing well over half of the total stock of direct foreign investment. Important French investors include the major French banks, Total and Elf (petroleum distribution), Delmas (shipping), SGB (agriculture-bananas), and Saur/Bouygues (public utilities and construction). Values of Ivorian subsidiaries or operations of foreign investors generally are not publicly available. British investment, largely in commerce and agriculture, has traditionally been the second largest in Cote d'Ivoire, following France. Swiss investment is concentrated in banking and food processing. Canadian investment in mining will make that country a significant investor here. The biggest U.S. investment is by the Houston-based petroleum exploration and development company Ocean Energy. The consortium has invested over US 300 million over the past four years, with about half of this being American investment, and will invest substantially more over the coming years to develop offshore gas and oil fields. Apache Petroleum's current development of its Foxtrot gas field is expected to require about US 90 million of investment in 1998 and 1999, mostly from the U.S. American investments in offshore oil and gas developments, by Ocean Energy and by other U.S. oil companies could move the U.S. into second place as an investing nation, behind France. Potential U.S. cellular investments in the Ivorian telecommunications sector may also add to the U.S. investment presence in Cote d'Ivoire. Cote d'Ivoire actively encourages foreign investment. The National Assembly adopted a revised Ivorian Investment Code in the spring of 1995, containing provisions that modify the Code of June, 1985 which are designed to encourage additional private sector investment in the economy. For all practical purposes, there are no significant limits on foreign investment -- or difference in the treatment of foreign and national investors -- either in terms of levels of foreign ownership or sector of investment. The former investment code was aimed at helping small and medium-sized firms; the new code provides incentives for larger investments as well. Additional incentives are offered to those who choose to invest outside of Abidjan. An important feature of Cote d'Ivoire's investment promotion efforts was the establishment, in February, 1995, of the Ivorian Investment Promotion Center, or "CEPICI," to use its French acronym. CEPICI is designed to provide investment information and assistance for entrepreneurs and corporations interested in starting a business or investing in Cote d'Ivoire. CEPICI operates three basic programs: a "one-stop-shop" for investors; an outreach program, designed to match opportunities with potential investors; and a liaison program between the public and private sectors. Though clearly a positive step for foreign investors, the creation of CEPICI has yet to translate into a meaningful Government-wide effort to minimize the problems foreign investors face in Cote d'Ivoire. Most US-based companies in Cote d'Ivoire have experienced harassment by tax, customs, and judicial officials, as well as unfair competition from well-connected competitors in contract awards and regulatory matters. Though CEPICI has been designated to serve as a sort of Ombudsman to existing investors, to assist them with these kinds of problems, thus far CEPICI's outreach and investment-promotion activities and its lack of political clout have prevented it from providing much help to companies that have already invested in the country. Investments from outside the franc zone must be approved by the external finance and credit office of the Ministry of Economy and Finance, but this is essentially a routine foreign exchange monitoring measure. For limited partnerships, one or more shareholders must be resident in Cote d'Ivoire. Though regulations exist to control land speculation by foreigners, foreigners in fact own significant amounts of land in Cote d'Ivoire. Foreign investors have been encouraged to participate in Cote d'Ivoire's ongoing privatization program and have purchased many of the parastatals put up for sale. There is no pattern of discrimination against foreign investors bidding for privatized companies.[end of document]Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.