Benin has been a stable democracy since 1990, enjoying until recently a reputation for regular, peaceful, and inclusive elections. In 2019, the government held legislative elections for which no opposition party qualified to participate and which were neither fully competitive nor inclusive. Elections-related unrest in 2019 left several people dead
Benin’s overall macroeconomic conditions were positive in 2019. According to IMF estimates, GDP growth increased from 6.7 percent in 2018 to 6.9 percent in 2019. The COVID-19 pandemic and Nigeria’s partial closure of its borders beginning in August 2019 are expected to slow GDP growth to 3.2 percent in 2020. Port activity and the cotton sector are the largest drivers of economic growth. Telecommunications, agriculture, energy, cement production, and construction are other significant components of the economy. Benin also has a large informal sector. The country’s GDP is roughly 51.1 percent services, 26.1 percent agriculture, and 22.8 percent manufacturing.
President Patrice Talon launched an ambitious $15 billion five-year Government Action Plan (PAG) in 2016. The PAG lays out a development plan structured around 45 major projects, 95 sector-based projects, and 19 institutional reforms. With the goals of strengthening the administration of justice, fostering a structural transformation of the economy, and improving living conditions, the projects are concentrated in infrastructure, agriculture and agribusiness, tourism, health, and education. The government estimates that full implementation of the PAG will result in the creation of 500,000 new jobs and a leap in national economic and social conditions. The government intended that 61 percent of the PAG be funded through public-private partnerships (PPPs), but through the end of 2019 no such partnerships had been secured. Government critics allege that the Talon administration is using the PAG in part to channel resources and contracts to administration insiders.
Benin continues efforts to attract private investment in support of economic growth. The Investment and Exports Promotion Agency (APIEX) is a one-stop-shop for promoting new investments, business startups, and foreign trade. In 2019, APIEX worked with foreign companies to facilitate new investments, though some companies reported that the agency was under-resourced and hamstrung by bureaucratic red tape in other agencies and ministries.
In June 2017, a five-year, $375 million Millennium Challenge Corporation (MCC) compact with Benin entered into force. The Benin Power Compact is advancing policy reforms to bolster financing for the electricity sector, attract private capital into power generation, and strengthen regulation and utility management. Through the compact MCC is expanding the capacity and increasing the reliability of Benin’s power grid in southern and northern Benin. As two thirds of Benin’s population does not have access to electricity, the compact also includes a significant off-grid electrification project via a clean energy grant facility that supports private sector investment in off-grid power systems. This follows Benin’s 2006-2011 compact, which modernized the country’s port – the principal source of government revenue – and improved land administration, the justice sector, and access to credit.
Since its independence in 1991, Kazakhstan has made significant progress toward creating a market economy and has achieved considerable results in its efforts to attract foreign investment. As of January 1, 2020, the stock of foreign direct investment in Kazakhstan totaled USD 161.2 billion, including USD 36.5 billion from the United States, according to official statistics from the Kazakhstani government.
While Kazakhstan’s vast hydrocarbon and mineral reserves remain the backbone of the economy, the government continues to make incremental progress toward its goal of diversifying the country’s economy by improving the investment climate. Kazakhstan’s efforts to remove bureaucratic barriers have been moderately successful, and in 2020 Kazakhstan ranked 25 out of 190 in the World Bank’s annual Doing BusinessReport.
The government maintains an active dialogue with foreign investors, through the President’s Foreign Investors Council and the Prime Minister’s Council for Improvement of the Investment Climate.
Kazakhstan joined the World Trade Organization (WTO) in 2015. In June 2017 Kazakhstan joined the Organization for Economic Co-operation and Development (OECD) Declaration on International Investment and Multinational Enterprises and became an associated member of the OECD Investment Committee.
Despite institutional and legal reforms, concerns remain about corruption, bureaucracy, arbitrary law enforcement, and limited access to a skilled workforce in certain regions. The government’s tendency to legislate preferences for domestic companies, to favor an import-substitution policy, to challenge contractual rights and the use of foreign labor, and to intervene in companies’ operations continues to concern foreign investors. Foreign firms cite the need for better rule of law, deeper investment in human capital, improved transport and logistics infrastructure, a more open and flexible trade policy, a more favorable work-permit regime and a more customer-friendly tax administration.
In July 2018 the government of Kazakhstan officially opened the Astana International Financial Center (AIFC), an ambitious project modelled on the Dubai International Financial Center, which aims to offer foreign investors an alternative jurisdiction for operations, with tax holidays, flexible labor rules, a Common Law-based legal system, a separate court and arbitration center, and flexibility to carry out transactions in any currency. In April 2019 the government announced its intention to use the AIFC as a regional investment hub to attract foreign investment to Kazakhstan. The government recommended foreign investors use the law of the AIFC as applicable law for contracts with Kazakhstan.
Senegal’s stable political environment, favorable geographic position, strong and sustained growth, and generally open economy offer attractive opportunities for foreign investment. The Government of Senegal welcomes foreign investment and has prioritized efforts to improve the business climate, although significant challenges remain. Senegal’s macroeconomic environment is stable. The currency – the CFA franc used in eight West African countries – is pegged to the euro. Repatriation of capital and income is relatively straightforward, although the regional central bank has recently tightened restrictions on the use of “offshore accounts” in project finance transactions. Investors cite cumbersome and unpredictable tax administration, bureaucratic hurdles, opaque public procurement, a weak and inefficient judicial system, inadequate access to financing, and a rigid labor market as obstacles. High real estate and energy costs, as well as high factor costs driven by tariffs, undermine Senegal’s competitiveness. The government is working to address these barriers.
Since 2012, Senegal has pursued an ambitious development program, the Plan Senegal Emergent (Emerging Senegal Plan, or “PSE”), to improve infrastructure, achieve economic reforms, increase investment in strategic sectors, and strengthen the competitiveness of the private sector. Under the PSE, Senegal has enjoyed sustained economic growth rates, averaging 6.5 percent from 2014 through 2019. With good air transportation links, a modern and functional international airport, planned port expansion projects, and improving ground transportation, Senegal also aims to become a regional center for logistics, services, and industry. Special Economic Zones offer investors tax exemptions and other benefits that have led to increased foreign investment in the manufacturing sector over the past several years.
The GOS continues to improve Senegal’s investment climate. Since 2007, Senegal has dramatically reduced the average number of days it takes to start a business. The government continues to expand its “single window” system offering one-stop government services for businesses, opening a new service centers in various locations and projecting to have at least one service center in each of the country’s 45 regional departments by 2021. Property owners can apply for construction permits online. In 2019, the GOS made tax information and some payment options available online. Senegal’s state information agency ADIE has an ambitious SMART Senegal plan to increase access to WiFi and digitize more services onto a national hub. Senegal’s ranking in the World Bank’s Doing Business index improved from 141 in 2018 to 123 in 2019, spurred by improvements in the ease of paying taxes and access to credit information.
The government made progress in operationalizing the new Commercial Court, prioritizing the resolution of business disputes. Although companies continue to report problems with corruption and opacity, Senegal compares favorably with many countries in the region in corruption indicators. The Millennium Challenge Corporation (MCC) compact, signed in December 2018 and currently in pre-implementation prior to entry-into-force in 2021, aims to decrease energy costs by modernizing the power sector, increasing access to electricity in rural Senegal, strengthening the electrical transmission network in Dakar, and improving governance of the power sector.
Despite these improvements, business climate challenges remain. Because the informal sector dominates Senegal’s economy, legitimate companies bear a heavy tax burden, although Senegal is making progress in broadening the tax base. Some U.S. companies complain about delays and uncertainty in the project development process.
A U.S.-Senegal Bilateral Investment Treaty has been in effect since 1990. According to UNCTAD data, Senegal’s stock of foreign direct investment (FDI) increased from $3.4 billion in 2015 to $6.4 billion in 2019. France is historically Senegal’s largest source of foreign direct investment, but the government wants more diversity in its sources of investment. U.S. investment in Senegal has expanded since 2014, including investments in power generation, industry, and the offshore oil and gas sector. Although the IMF reports (see table below) U.S. FDI stock in Senegal was approximately $91 million in 2018 (up from $25 million reported in 2017), anecdotal information suggests the amount is significantly more. China has also become a significant foreign investment partner. Other important investment partners include the United Kingdom, Mauritius, Indonesia, Morocco, Turkey, and the Gulf States. In addition to the developing petroleum industry, other sectors that have attracted substantial investment are agribusiness, mining, tourism, manufacturing, and fisheries.
Investors may consult the website of Senegal’s investment promotion agency (APIX) at www.investinsenegal.com for information on opportunities, incentives and procedures for foreign investment, including a copy of Senegal’s investment code.
The 2020 COVID-19 epidemic heavily impacted Senegal’s economy. According to June 2020 government estimates, GDP growth for 2020, initially projected to reach 6.8 percent, will fall to 1.1 percent or less. Major oil and gas projects may be delayed at least a year. Although economy-wide employment figures are unreliable, it is clear the slowdown, combined with the GOS’s initial stringent outbreak containment measures, led to significant job losses, primarily in Senegal’s dominant informal sector. A May 2020 survey of 800 Senegalese businesses found that 65 percent had suffered a significant negative impact from COVID-19 and 40 percent had ceased operations. Diaspora remittances, representing 10 percent of GDP, have fallen sharply due to the pandemic’s effects on the world economy.
In the wake of the COVID-19 crisis, the GOS enacted one of the region’s most ambitious fiscal stimulus and social assistance packages. Dubbed “Force COVID-19,” the initiative sought to inject $1.7 billion – about 6 percent of GDP – into the economy. The GOS acknowledged the program will result in an increase in Senegal’s fiscal deficit, which is expected to grow from just above 3 percent (nearing the country’s target under ECOWAS convergence criteria) to more than 6 percent. According to the African Development Bank, Senegal’s public debt will rise from 65 percent to 68 percent of GDP, pushing the limits of the 70 percent threshold established by the Economic Community of West African States (ECOWAS). Nevertheless, in June 2020, the IMF assessed Senegal’s risk of debt distress as “moderate,” and the government continued to access regional credit markets at competitive rates.
Although the government won praise for its aggressive fiscal response, some have expressed concern over its intervention in labor markets, including a decree prohibiting employers from laying off or reducing salaries of workers during the COVID-19 crisis. The government’s efforts to implement the stimulus plan have drawn mixed reviews. While the government successfully increased funding to shore up its health care system, the rollout of social assistance programs was plagued by allegations of inefficiency, insider dealing, and corruption. Long delays plagued the implementation of programs to assist businesses and preserve employment, with many firms reporting they had still not received promised grants and loans months after the program launch. As of July 2020, the outbreak was still progressing in Senegal, with cases, deaths, and positivity rates still rising. Long-term effects of COVID-19 on Senegal’s economy and investment environment will depend on how long the outbreak lasts and how deeply the regional and world economies are affected.