Chad

Oxford Economic Country Briefings, Sep 9, 2008

Background

* Since independence from France in 1960, Chad has experienced near-constant conflict between the north, mainly inhabited by Muslims, and the south, inhabited by Christians and animists. Chad's first two rulers were southerners and aroused the hostility of the Muslim north, which escalated into prolonged guerrilla warfare. In 1979 a northerner, backed by neighbouring Libya, came to power. At one stage the Libyan president even proposed a merger of Chad and Libya. Fighting continued with French involvement and for a while a rival government was formed in the north. A semblance of unity was finally restored in 1990 when Libyan-backed ldriss Deby ltno came to power and he has been in power ever since. His rule has been marked by repression and corruption. Elections were held in 1996, which were won by Deby and he was re-elected in 2001 and, after a change in the constitution, for a third term in 2006, the latter election being boycotted by the main opposition parties. Hostilities continued throughout these years. The situation was additionally complicated from 2002 when unrest in neighbouring Darfur spilled over into Chad, bringing in many thousands of refugees. Chad accuses Sudan of supporting Chad's rebels and Sudan accuses Chad of supporting Sudanese rebels. Diplomatic relations between the two countries were cut off in 2006. In March 2006 another coup attempt was launched against the Deby government and rebels attacked the capital. The coup was averted with the assistance of French troops stationed in the country. Efforts to form a government of national unity failed.

* A harsh climate, geographical remoteness, apparent poor resource endowment and lack of infrastructure are formidable restraints on the economy. The country suffers from chronic drought, few and badly maintained roads and a severe shortage of trained technicians and capable administrators. Only 3% of the land is arable. The north is desert, the centre consists of broad arid plains and the south is tropical lowlands. Before oil, the main exports were cotton, livestock and gum arabic. The country also has gold and uranium deposits. But 80% of the population is engaged in subsistence farming and stock raising. During the civil wars much of the modest manufacturing sector was destroyed and the few foreign investors left. The financial system is poorly developed with only two commercial banks out of six rated as "good" by the Banking Commission of Central Africa. Chad ranks close to the bottom of the UN Human Development Index. The discovery of oil was hailed as a saviour of the country, reducing its heavy dependence on foreign aid. After averaging just 0.4% p.a. in the 1990s, real GDP growth accelerated steeply from 2000, averaging 14% p.a. in 2001-05.

* A consortium led by Exxon/Mobile and including Chevron and Petronas started in 2000 to develop the oil fields near Doba in the south, with the World Bank playing a catalytic role and contributing financially. Reserves are estimated at 1 bn barrels. Small natural gas fields have also been found near the oil fields and further reserves of oil have been found elsewhere in the country, estimated to amount to perhaps another 1 bn barrels. oil started flowing in 2003 on completion of the 665-mile pipeline across Cameroon linking the oil fields in the south of Chad to terminals on the Atlantic coast. At 53m barrels a year, Chad is the sixth largest oil producer in sub-Saharan Africa. In August 2006 the government accused Chevron and Petronas of not paying their taxes and ordered them out of the country. Chevron agreed subsequently to pay additional taxes to maintain its presence in the country, but a new Chadian national oil company was set up to become a partner in the consortium. The government has broken off relations with Taiwan but is to receive considerable investment from China.