Chad

Oxford Economic Country Briefings, Sep 9, 2008

Highlights and Key Issues

* After two years in a 0-1% range, GDP growth is expected to accelerate modestly to about 2.5% this year and 3.5% in 2009. But although more oil has been found and a number of investment projects, to be financed by China, may boost longer-term prospects, the outlook is overshadowed by internal and external instability and weak administration.

* The sporadic war by proxy between Chad and Sudan continues and rebel forces attacked the capitals of both countries earlier this year. Internal strife and banditry also persist. French troops stationed in the country are propping up the regime of the autocratic President Deby to avoid Chad falling into the hands of Sudan-supported rebels.

* A 3,700-strong EU peacekeeping force is now stationed in Chad to protect large numbers of refugees, civilians and aid workers, but with no mandate to intervene in internal affairs or in relations with Sudan.

* A UN mission is also training the Chadian police force and assisting in an attempt to re-establish a functioning legal system to stem the pervasive lawlessness.

Overview

Policy insecurity endures...

* A coup attempt in February almost forced long-reigning President ldriss Deby out of office. French troops permanently stationed in the country were once again crucial in repelling the rebels, who had advanced to the gates of the presidential palace in N'Djamena. Of the many coup attempts, this latest was one of the most violent, allegedly supported by Sudan. France justifies propping up the Deby regime in the belief that any alternative would be worse.

* In May, mirroring the attack on N'Djamena, a rebel group from Darfur, allegedly supported by Chad, mounted an attack on Khartoum. Although beaten back by government troops, the attack shocked by its audacity and ease with which it came close to the Sudanese capital.

* A peace deal signed between Chad and Sudan in March in Senegal has, as previous deals, remained a dead letter. And rebel groups in August announced renewed attacks on the Deby regime after the end of the rainy season in October.

* There are now over 250,000 Darfuri refugees in eastern Chad and 60,000 refugees on the southern border with the Central African Republic fleeing fighting there. Internally displaced Chadians now amount to some 200,000. They are being cared for by UN and other humanitarian organisations.

...despite UN, EU intervention

* The deployment over recent months of a well-equipped 3,700 EU peacekeeping force (Eufor) should ensure a measure of stability. But their remit is to protect the refugee camps, civilians and aid workers, not to interfere in the internal political affairs of Chad or its relations with Sudan. Troops are drawn from numerous European countries, but French predominate. In September, the force is to be joined by 200 Russian troops equipped with helicopters, essential during the rainy season when the roads are impassable.

* In addition a UN mission entitled MINURCAT, which got under way in April, is to train up to 850 Chadian policemen to guard the refugee camps and ensure internal safety. Moreover, teams of lawyers and human rights experts are to re-establish a functioning legal system and assist in establishing law and order in the country riddled by banditry.

Oil discovery in Bongor basin...

* Exploitation of oil has been the main economic driver since 2000, when the development of the Doba field commenced. From 36,100 b/d in 2003, output rose to 176,700 b/d in 2005 but then fell back to 157,900 b/d in 2006 as water seepage into the wells prevented full capacity of 225,000 b/d being reached. Last year was another disappointing one, with production declining further to 144,200 b/d. Much of the oil revenues have been spent on military equipment rather than poverty reduction as prescribed by the World Bank.

* But the country is still under-explored and oil production may rise in the future. Early in 2007, EnCana sold its exploration interests to the China National Petroleum Corp (CNPC). Chad's petroleum ministry reported in August this year that the Chinese company had discovered light oil in the Bongor basin. Agreement was also reached in August with China over the construction of an oil refinery in N'Djamena, which would make Chad self-sufficient in petrol. Currently Chad still imports all its refined products from neighbouring Cameroon and Nigeria.

* Government hopes that other exploitable mineral resources will be found in the country have so far not been realised.

Modest recovery in GDP growth

* After the exceptional growth recorded earlier in the decade, resulting from the development and then exploitation of the Doba oil field, subsequent production problems at Doba reduced GDP growth to just 0.2% in 2006 and 0.6% in 2007. We forecast a modest pick-up in growth to 2.5% this year and 3.5% in 2009. Growth could be boosted over the medium term by higher oil production, but prospects remain clouded by the uncertain political outlook.

* Weighed down by political turmoil, the country may thus remain one of the poorest, most chaotic and under-developed in the world. It ranks 170th out of 177 countries in the UN Human Development Index and 172nd out of 179 in Transparency International's Corruption Perceptions Index.