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Country Commercial Guides for FY 2000: Cote D' Ivoire Report prepared by U.S. Embassy Abidjan, released July 1999

CHAPTER VII:   INVESTMENT CLIMATE

1.   Openness to Foreign Investment

Côte d'Ivoire actively encourages foreign investment. The National Assembly approved a new Ivoirian 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.

Beginning in 1995, the Ivoirian government stepped up its investmment promotion campaign through the establishment of an 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 Côte 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 Côte d'Ivoire. Though regulations exist to control land speculation by foreigners, foreigners in fact own significant amounts of land in Côte d'Ivoire.

2.   Conversion and Transfer Policies

Côte 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. For 1948 until January 1994, the exchange rate was fixed at 50 CFA francs to one French franc; the rate is now 100 CFA francs to 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. At the end of 1998, for example, there were delays in foreign exchange transfers amid rumors of a CFA franc devaluation January 1, 1999 when the French Franc would be merged into the Euro.

In 1998 the West African Economic and Monetary Union adopted unified foreign exchange regulations which allow a slightly more liberal foreign exchange regime. All restrictions on transfers among the eight WAEMU countries have been eliminated. Foreign Exchange bureaus have been allowed to open. The Government will be able to delegate to commercial banks its authority to approve routine foreign exchange transactions. The transfer abroad of the proceeds of liquidation of foreign direct investments no longer requires prior government approval.

3.   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.

4.   Dispute Settlement

Enforcement of contract rights can be a time-consuming and expensive process. Court cases move slowly and some do not appear to be judged on their legal or contractual merits. This has led to a widely-held view in the business community that there are corrupt magistrates. 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. The government is also increasing the number of appeals courts to decrease the backlog of cases. 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 inefficient and corruptible 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 rights, 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 tenur is generally not granted to private individuals or entities). Banks have experienced difficulties realizing their security interests on real estate loans.

There is no specific Ivoirian 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).

5.   Performance Requirements/Incentives

There are no general performance requirements applied to investments. Incentives available to new investments in Côte d'Ivoire are described in section VI. 6, above.

6.   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 for the parastatal's employees and some have been issued on the Abidjan stock market..

7.   Protection of Property Rights

The acquisition and disposition of property rights, including intellectual property, is covered by the Ivorian Civil Code.

Côte 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.

In February 1999, the member states of OAPI, now expanded to 15 countries, adopted revisions to the Bangui Accords to bring them into conformity with the World Trade Organziation's agreement on trade-related intellectual property issues (the TRIPS agreement). Cote d'Ivoire has approved these revisions in its Council of Ministers and will submit the Accords to the National Assembly for ratification by the end of 1999. Cote d'Ivoire has committed in the WTO to be conformity with the TRIPS agreement by January 1, 2000. Under TRIPS, Cote d'Ivoire's intellectual property regime will be strengthened.

Though in theory prohibited, counterfeit clothing, textiles, footwear, watches, computer software and audio and video tapes can be found, particularly among street vendors.

In January 1999, the Ivoirian Government established a new Office of Intellectual Property within the Ministry of Small and Medium Enterprises and Industrial Development. The new office will prepare Cote d'Ivoire for the entry into force of TRIPS, serve as a liaison with OAPI and work to sensitize public opinion to intellectual property issues. In order to protect their trademarks and patents, American firms must take into account the above regulations and apply to the OAPI.

8.   Transparency of the Regulatory System

The Ivoirian Government, working with the IMF and the World bank, has taken a number of steps to encourage a more transparent and competitive economic environment. Among these steps are: the creation of a centralized Office of Public Bids in the Ministry of Finance in an effort to ensure compliance with international bidding practices; the use of external financial advisors to work with the privatization committee on the sale of parastatals; the establishment of an Inspector General's office for the Government; the dissolution of the non-transparent cocoa and coffee marketing board; and the creation of regulatory bodies for the increasingly-liberalized telecommunications and electricity sectors.

9.   Efficient 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 stock exchange since its inception in the 1970's. In 1998 the Abidjan stock exchange (BVA) was replaced by the Regional Stock Exchange (la Bourse Régionale des Valeurs Mobilières, or BRVM), also based in Abidjan. The BRVM is intended to be the securities market for all eight UEMOA countries. Simultaneous to the opening of the regional exchange, the UEMOA countries established a regional securities regulatory body, the Regional Council for Savings and Investment.

Accounting systems in Cote d'Ivoire are well-developed 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 are following a single set of accounting rules.

Total assets of the country's banking system were CFA 1.9 trillion (approximately USD 3.2 billion) at year-end 1997, the most recent year for which data are available.

Generally speaking there are no private sector and/or government efforts to restrict foreign investment, participation or control of local industry.

10.   Political Violence

There have been incidents of civil disturbances over the past several years, but they have generally taken place in the context of national elections or of student demands for better conditions and more financial support. Occasional exceptions to this general pattern have been a presidential guard mutiny in 1993 and anti-Ghanaian violence after a soccer match that year. More recently, early in 1999 a riot over increased bus and taxi fares in a poor section of Abidjan resulted in looting, including the looting of a large clothing store which is part of a French-owned chain.

All these events are exceptions to the rule of relative stability. Cote d'Ivoire has never had a coup d'etat, a military government or a rebel movement. In 1994, for example, the fifty percent devaluation of the CFA franc failed to ignite popular unrest, despite the government's decision to hold average wage increases to only 10 percent. As the 2000 elections approach, further civil disturbances are likely but serious violence has not characterized Ivoirian political life in the past and is not expected to do so in the foreseeable future. Historically, private investment has not been targeted, with the notable exception of the above-mentioned bus fare riots.

11.   Corruption

Many U.S. companies view corruption as an obstacle to investing and doing business in developing countries. Though Côte d'Ivoire has the legal framework in place to prosecute corruption, the pattern has been only to remove officials tainted by corruption scandals rather than to prosecute them. Corruption has the greatest impact with regard to the judiciary, contract awards, customs, and tax enforcement. The opposition press is active in seeking to expose any occurrence of high-level corruption. The diminished role of government in the economy, a result of the recent privatization of many public services, should also help to reduce the incidence of corruption in Côte d'Ivoire.

12.   Labor

By regional standards, Côte 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. Expatriate managers nevertheless dominate the upper ranks of the business community, which may explain Government sensitivity on this issue. Recently-established Ivoirian subsidiaries of foreign companies continue to obtain permits for expatriate managers.

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 fewer restrictions on recruitment and dismissal, for example. With the aim of promoting employment, the government has also eliminated or reduced taxes effecting wage costs.

13.   Bilateral Investment Agreements

The U.S. has neither investment nor tax treaties but has had an OPIC agreement in force since 1963. A revised OPIC agreement was signed in July 1998. Cote d'Ivoire and the United States have had a preliminary exchange of views regarding both a bilateral investment treaty and a tax treaty however significant differences have stalled progress on both.

Côte 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.

14.   OPIC and Other Investment Insurance Programs

OPIC insures a number of U.S. investments in Côte 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.

Côte d'Ivoire is a member of the Multilateral Investment Guarantee Agency (MIGA).

15.   Major Foreign Investors

Although foreign investment data for the overall economy is not available, a series of high-profile projects suggest that Côte d'Ivoire has been enjoying a boom in foreign direct investment. These projects include France Telecom's major investment in 1997 (see below), a wave of cocoa-processing investments, continued oil and gas exploration and development (see below), a second independent power generation project, a privately-run toll bridge, and a port expansion.

France continues to be the most important foreign investor in Côte d'Ivoire, providing well over half of the total stock of foreign direct investment. Important French investors include the major French banks and insurance companies, Total and Elf (petroleum distribution), Bollore (shipping and rail), Mimran (flour), BGI (beer and soft drinks) and Saur/Bouygues (public utilities and construction). It is hard to overstate the role of the Bouygues group: it dominates the local construction industry, holds both the water and electricity distribution concessions, owns the first independent power producer, and it is a shareholder in the largest natural gas field. British investment, largely in commerce and agriculture, has traditionally been the second largest in Côte d'Ivoire, following France. Swiss investment was concentrated in banking and food processing however Asea-Brown Boveri, the Swiss-Swedish engineering giant has made a major investment in the second independent power producer, which was inaugurated in January 1999. Except for one oilfield redevelopment project by Ranger Oil, Canadian investment has largely been in the mining sector but has yet to move beyond the exploration phase.

Although the Government investment statistics below, based on historical accounting data, show Lebanese and Syrian investment ranking fourth after Switzerland, these figures undoubtedly understate the Lebanese role in the economy. The Lebanese dominate commerce: everything from general stores in up-country towns to modern supermarkets in Abidjan. Some of the larger, well-established Lebanese families are virtual conglomerates, owning hotels, a tuna-canning plant, movie theaters and paper goods factories. Unlike European or American investment, Lebanese-owned companies are usually privately-held by long-time Lebanese residents of Cote d'Ivoire rather than subsidiaries of foreign-based corporations.

The biggest U.S. investment is by the Houston-based petroleum exploration and development company Ocean Energy. The consortium has invested over USD 300 million over the past five years, with about half of this being American investment. Houston-based Apache Petroleum's development of its Foxtrot gas field has required USD 146 million of investment from Apache and its partners, mostly in 1998 and 1999.

In January 1999, U.S.-based Cargill announced a USD 60 million investment in a new cocoa processing plant. With the liberalization of cocoa and coffee exports in 1998-99, Cargill and other commodity trading multinationals have invested both in local cocoa processing and in exporting raw cocoa beans. Whereas this market was traditionally dominated by Ivoirian companies, multinationals like Cargill will take on a larger role with the liberalization.

Potential U.S. investments in the Ivorian telecommunications sector may also add to the U.S. investment presence in Côte d'Ivoire, as at least one, and possibly two, U.S. investments in this sector are likely to be finalized.