Reforms aimed at reversing downward turn in economy - Cote d'Ivoire - Business Outlook Abroad

Business America, June 1, 1992

Reforms Aimed At Reversing Downward Turn in Economy

Cote d'Ivoire's post-independence record of economic development is one of the best in Africa. In spite of a recent downturn, the country's gross domestic product accounts for about half of the output of the West African franc zone. While there is a strong French influence, American products and services are desired. This, combined with recent economic restructuring, makes Cote d'Ivoire a good prospect for U.S. business. This report was filed by the American Embassy in Abidjan.

In recent years Cote d'Ivoire's remarkable economic growth has turned to decline, leading to increasing unemployment and the growth of political opposition. In 1990, in response to public pressure, President Houphouet opened the political system to other parties and authorized multiparty presidential, legislative, and local elections. At the same time, he renewed the government's commitment to structural reform of the economy by appointing Alassane Ouattara to lead the economic reform program and then to head the government as Cote d'Ivoire's first prime minister. Prime Minister Ouattara assembled a well-qualified economic team and, in coordination with the IMF and World Bank, embarked on a fundamental reform of the country's economic institutions and policies. There is much to be done, however, and Cote d'Ivoire faces difficult circumstances brought on by a sharp decline in export earnings.

Under Prime Minister Ouattara, a program of stabilization and structural adjustment has been implemented with the IMF and World Bank. The government has worked with foreign lenders-- notably the World Bank and the French government--to clear up domestic arrears of the public sector and revitalize the country's illiquid banking system. Despite these efforts, Cote d'Ivoire suffers from high production costs and a corresponding lack of competitiveness in international markets. While some call for a devaluation of the currency, membership in the French-supported West African Monetary Union complicates the issue.

Despite a decade of reform programs, the public sector continues to dominate the economy. In 1990, government and parastatal investment still accounted for 61 percent of total investment. The business sector continues to operate under rigid job security and wage regulations and faces unfavorable fixed prices on a number of import and export commodities. Contracts and entrance to many activities, including importing certain key goods, logging, air and sea transport, as well as government jobs, have at times been accorded on political, rather than economic, criteria.

About 50 U.S. companies have offices in Abidjan, many of them serving the West African area. Another 200 firms distribute American equipment, goods, and services. U.S. manufacturers and traders might find favorable business prospects in the following sectors: paper products; telecommunications equipment; petroleum refinery products; plastic materials and resins; computer hardware and software; agricultural and irrigation equipment; mining equipment; earthmoving and construction equipment; security equipment; forestry and woodworking machinery; cosmetics; toiletries and health care products; food processing and packaging equipment; drugs and pharmaceuticals; medical equipment; consumer electronics; aircraft equipment; textile machinery; air conditioning and refrigeration equipment; pumps, valves, and compressors; industrial and agricultural chemicals; circular knit fabrics; broad woven fabrics; used clothing; chewing and smoking tobacco; rice; wheat; corn; milk; and vegetable oils.

The Commerce Department's USA-West Africa EXPO '92 in Abidjan in April attracted 7,000 visitors, including official delegations from 20 African countries and the state of California.

U.S. assets and investments are concentrated in petroleum, hotels, computers, and service industries. Activity is limited because of Cote d'Ivoire's financial difficulties, but American accounting firms, consultants, insurance companies, a bank, and a law firm have offices in Abidjan to assist the exporter or investor.

The Ivorian government continues to voice its interest in attracting investment, and it offers as legal options a foreign investment or tax code regime (revised in 1985), a new factory regime, or the general regime applicable to local investors. Most investors use one of the latter two, judging the benefits in the investment code to be less attractive than might be expected from its title. Investors need not have an Ivorian partner. Investments in areas outside Abidjan are favored, as are those which promote employment, especially in agribusiness, light industry, and low-income housing. Best investment prospects are in mining, energy, agriculture, and food processing. Opportunities also exist in telecommunications and waste management. An OPIC-financed and insured gold mine recently opened at Afema. A U.S. consortium was awarded in April a $500 million, 15-year contract for solid waste management services around Abidjan. The immediate procurement of U.S. goods and services is estimated at $18 million.