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World Trade Organization |
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WT/TPR/S/169 23 August 2006 | |
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(06-3911) |
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Trade Policy Review Body |
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TRADE POLICY REVIEW Report by the Secretariat REPUBLIC OF THE CONGO |
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This report, prepared for the first Trade Policy Review of the Republic of the Congo, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the Republic of the Congo on its trade policies and practices. Any technical questions arising from this report may be addressed to Mr Jacques Degbelo (022 739 5583). Document WT/TPR/G/169 contains the policy statement submitted by the Republic of the Congo. |
Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on the Republic of the Congo.
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SUMMARY OBSERVATIONS vii
(1) Economic Environment vii
(2) Trade and Investment Regimes vii
(3) Trade Policy Instruments viii
(4) Sectoral Policies ix
(5) Trade Policy and Trading Partners x
I. Economic environment 1
(1) Main Features of the Economy 1
(2) Recent Economic Trends 3
(3) Trade and Investment Trends 6
(4) Outlook 7
II. trade and investment regime 11
(1) General Context 11
(2) Policy Objectives 14
(3) Trade Agreements and Arrangements 15
(i) The WTO 15
(ii) Regional Agreements 16
(4) Investment 20
ANNEX II.1: TRADE-RELATED TECHNICAL ASSISTANCE 23
(1) Implementation of Agreements and Policy Formulation 23
(2) Supply-Side Constraints 24
(3) Integration of Trade into Development Strategies 24
III. trade policies and practices by measure 26
(1) Introduction 26
(2) Measures Directly Affecting Imports 26
(i) Registration 26
(ii) Customs procedures 27
(iii) Rules of origin 28
(iv) Customs levies 29
(v) Prohibitions, quantitative restrictions and licences 35
(vi) Sanitary and phytosanitary (SPS) measures 36
(vii) Standardization, accreditation and certification 37
(viii) Rules on packaging, marking and labelling 37
(ix) Contingency measures 37
(x) Other measures 37
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(3) Measures Directly Affecting Exports 38
(i) Customs procedures 38
(ii) Export duties and taxes 38
(iii) Export prohibitions, restrictions, controls and licences 39
(iv) Export subsidies, promotion and assistance 39
(4) Measures Affecting Production and Trade 40
(i) Protection of intellectual property rights 40
(ii) Competition policy 44
(iii) Incentives 45
(iv) State trading, State-owned enterprises and privatization 45
(v) Government procurement 46
IV. trade policy and practice by sector 47
(1) Introduction 47
(2) Agriculture, Livestock, Fishing and Forestry 47
(i) Overview 47
(ii) Agricultural policy 48
(iii) Policy by subsector 50
(3) Mining, Energy and Water 55
(i) Mining products 55
(ii) Petroleum products and natural gas 56
(iii) Electricity 60
(iv) Water 61
(4) Manufacturing 61
(5) Services 62
(i) Overview 62
(ii) Transport 62
(iii) Tourism 65
(iv) Telecommunications and posts 65
(v) Financial services 67
REFERENCES 69
APPENDIX TABLES 73
CHARTS
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I. Economic environment
I.1 Structure of trade in goods, 1995-2004 8
I.2 Destination and origin of trade in goods, 1995-2004 9
III. trade policies and practices by measure
III.1 Distribution of applied MFN duties, 2006 32
III.2 Escalation of applied MFN tariff rates, 2006 33
IV. trade policy and practice by sector
IV.1 Exports of logs by principal species, 2003 54
IV.2 Exports of sawn wood by principal species, 2003 55
TABLES
I. Economic environment
I.1 The Republic of the Congo in figures, 1998-2005 2
I.2 Main economic indicators, 1998-2005 3
I.3 Balance of payments, 1998-2005 6
II. trade and investment regime
II.1 The Congo's principal trade-related laws and regulations, May 2006 12
II.2 Investment Charter – advantages under the preferential regimes 21
III. trade policies and practices by measure
III.1 Revenue from the taxation of international trade, 2000-2004 29
III.2 MFN tariff structure, 2006 30
III.3 Customs tariff according to degree of processing, 2006 32
III.4 Exemptions from various duties and taxes, 2000-2005 35
III.5 Fines and terms of imprisonment under the Bangui Agreement (1977)
and its revision (1999) 41
III.6 Subjects and terms of protection under the Bangui Agreement (1977)
and its revision (1999) 42
III.7 Congo and the intellectual property protection treaties administered by WIPO, 2006 43
IV. trade policy and practice by sector
IV.1 Fisheries production, 1999-2004 51
IV.2 Trend in production of forest woods, 1999-2005 54
IV.3 Structure of the oil industry, 2004 56
IV.4 Trend in oil production, 2001-2006 58
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IV.5 Basic telecommunications indicators, 2002-2005 66
IV.6 Micro-finance indicators, 2002-2004 67
IV.7 Turnover in the insurance services market, 2000-2005 68
APPENDIX TABLES
I. Economic environment
AI.1 Structure of exports, 1995-2004 75
AI.2 Destination of exports, 1995-2004 77
AI.3 Structure of imports, 1995-2004 78
AI.4 Origin of imports, 1995-2004 80
III. trade policies and practices by measure
AIII.1 Import duties by HS chapter, 2006 81
AIII.2 Excise duties (ED) on imported products, 2006 84
AIII.3 Products not subject to supplementary exit duty (droit accessoire de sortie – DAS), 2006 87
IV. trade policy and practice by sector
AIV.1 Applied MFN tariffs by ISIC Rev.2 branch of activity, 2006 90
Economic Environment
Since its political stabilization in 2002 following a decade of civil war, the Republic of the Congo has begun its reconstruction with the support of the international community. Under the presidential plan for society entitled "La Nouvelle Espérance", the Congo is pursuing its macroeconomic stabilization and structural reform programme. This programme, coupled with the surge in world prices and domestic production of hydrocarbons, paved the way for a return to growth, with real GDP increasing at an average annual rate of 4.2 per cent during the period 2002-2005. The restrictive monetary policy of the Bank of Central African States (BEAC) helped to contain inflation, despite recent pressures due to the price of petroleum products at the pump and of foodstuffs. Thanks to the spectacular increase in State revenue from oil, the financial balance on the basis of commitments (excluding grants) achieved a surplus of 16 per cent of GDP in 2005. A number of initiatives were taken to enhance transparency in the management of financial resources earned from petroleum activities, and progress was made towards joining the "Extractive Industries Transparency Initiative" (EITI).
The Congo benefited from a first reduction of its external debt in 2004 under the auspices of the Paris Club, and in March 2006 it was able to reach the decision point under the enhanced Heavily Indebted Poor Countries (HIPC) initiative. It could possibly be granted a reduction of some 20 per cent of its external debt of US$9 billion (118 per cent of its GDP in 2005). The authorities therefore plan to finalize the Poverty Reduction Strategy Paper (PRSP), which is currently in its interim version. This paper is particularly important in that although the Congo is rich in natural resources, approximately half of its population lives below the poverty line. According to the UNDP, in 2003 the Congo ranked 142nd (out of 177 countries) in the human development index.
The economy relies essentially on offshore oil exploitation, which accounted for more than half of GDP in 2005 and for 90 per cent of export revenue in 2004. Services, including trade and transportation, accounted for approximately 28 per cent of the country's GDP in 2005. In spite of the Congo's potential for agricultural production, the sector represented only 5 per cent of GDP in 2005. Manufacturing remains embryonic as well, accounting for approximately 6 per cent of GDP in 2005. One of the main objectives of the country's poverty reduction strategy is to diversify the economic base by stimulating agriculture, mining and processing.
The ratio of 118 per cent (in 2004) of trade in goods to the GDP underlines the importance of trade for the Congo's economy, particularly in view of oil exports and the country's dependence on imports to cover a large portion of its food and equipment needs. Oil exports have traditionally accounted for a surplus in the Congo's trade balance, with wood ranking second, far behind hydrocarbons. The main destinations of the country's exports are China; the United States; and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu. Imports consist of machinery and transport equipment as well as medicines and food products. The European Union (EU) is the Congo's main supplier. The share of African countries in Congo's total trade remains small.
Trade and Investment Regimes
In the Congo, the ministry in charge of trade is responsible for formulating trade policy with the assistance of an inter-ministerial administrative structure in which the private sector is formally involved. Customs matters as well as matters relating to investment and government procurement come under the purview of the Ministry of the Economy, Finance and Budget (MEFB).
The Congo took over the status of GATT contracting party on 3 May 1963, and became a Member of the WTO on 27 March 1997. It has signed neither the plurilateral agreements concluded within the WTO, nor the agreements reached since the end of the Uruguay Round. It grants most-favoured-nation (MFN) treatment as a minimum to all of its trading partners. The Congo participates in the WTO ministerial meetings, and generally supports the positions expressed by the developing countries and the African Group.
The Congo's participation in the multilateral trading system remains limited. It has been able to submit only one notification to the WTO, in 2001. Among the priority areas where further technical assistance has been requested is capacity-building to enhance understanding of the WTO Agreements; notifications; trade policy formulation and integration thereof in its development strategy; dismantling of supply-side constraints; and participation in trade negotiations, inter alia in the context of the Doha Development Agenda. The Congo does not have access to the Integrated Framework, since it is not among the least developed countries, and it does not participate in JITAP.
The Congo and its neighbours have a long common history of regional integration. The Congo is a member of the Central African Economic and Monetary Community (CEMAC), whose common currency is pegged to the Euro. Having adopted a common external tariff (CET) in 1993, CEMAC members are currently establishing a customs union. CEMAC and associated countries (Sao Tome and Principe, Angola, and the Democratic Republic of the Congo) are negotiating an Economic Partnership Agreement (EPA) with the European Union which is set for implementation in January 2008. The implementation of the CET adopted by the Economic Community of Central African States (CEEAC), which covers a larger area than CEMAC and to which the Congo also belongs, has not yet begun.
The Congo's new Investment Charter entered into force in 2004, and seeks to promote various activities, in particular manufacturing. About half of the projects agreed in 2004 involved wood processing, a key objective of the Forestry Code adopted in 2000.
Trade Policy Instruments
The Congo applies the acts of the CEMAC with regard to the CET, the general preferential tariff (GPT), and internal taxes. The simple average applied MFN tariff is 18.7 per cent, and the tariff protection for agricultural products (WTO definition) is considerably higher (23 per cent). The tariff displays mixed escalation owing to the fairly high degree of protection afforded to unprocessed agricultural products. The Congo allows local (unprocessed) and handicrafts products, as well as manufactures that have received the necessary approval and originate in CEMAC member countries, to enter completely free of duty.
During the Uruguay Round, the Congo bound its tariffs on all agricultural products (like the other Members) at the ceiling rate of 30 per cent, and on some one hundred non-agricultural tariff lines, generally at their applied rates. However, the 30 per cent rate applied to imports of cool boxes is above the bound rate of 10 per cent. Moreover, other duties and taxes are applied to imports even though the Congo has bound them at zero. These include: the automation fee of 2 per cent; the CEMAC Community integration tax or levy of 1 per cent; the statistical tax of 0.2 per cent; the OHADA levy of 0.05 per cent; and the Community integration contribution of 0.04 per cent for CEEAC. These different charges bring the simple average rate of import duties and charges (including customs duties) to approximately 22 per cent. The Congo has never resorted to contingency measures.
Internal taxes, such as the value added tax (VAT) of 18 per cent and the excise duty (on certain products, including alcoholic beverages and tobacco) are levied on imports and local products. However, unlike imports, local products, such as mineral water (produced by the private company PLASCO – Mayo) and wheat flour (produced by the private company MINOCO) are exempted from VAT. At the same time, unlike for local products, the tax base for VAT on imports also includes the excise duty.
Customs procedures for the great majority of imports have been computerized. Pre-shipment inspection by the company COTECNA is required for most imports of at least CFAF 3 million - the fee (0.9 per cent of the f.o.b. value) is charged to the importer. The Congo applies the WTO Agreement on Customs Valuation, but is experiencing difficulties in that respect.
The Congo has an import licensing regime for ten food products for mass consumption, whose prices are also subject to approval on the basis of margins established by regulation. The aim is to control the volume and price of the products concerned on the domestic market. The importation of wheat flour is subject to quotas at 12,000 tonnes per quarter. As part of its effort to combat avian influenza, the Congo has a general prohibition on the importation of live animals of avian species and all products deriving therefrom.
The Congo has launched an ambitious privatization programme which has led, inter alia, to the opening up of its activities downstream of the hydrocarbon subsector (distribution and marketing) to competition. Most of the hotels, the banks, and the various manufacturing enterprises have also been privatized. However, electricity and water supply and fixed telecommunications, which are still the monopoly of State enterprises, remain inefficient. There is also a monopoly on sugar. Intellectual property is protected, inter alia by the revised Bangui Agreement. Domestic legislation on copyright and related rights is obsolete, and needs to be brought up to date. The same applies to competition legislation. The Congo does not have any regulatory framework for standardization, although it needs one in order to improve the quality of its products. The government procurement regime is being revised.
Sectoral Policies
The Congolese economy is dominated by petroleum exploitation, service activities and forestry. Among its mining products, only petroleum is exploited on an industrial scale under the Hydrocarbons Code of 1994. The Congo has proven reserves of 1.5 billion barrels and is the fifth largest oil producer in sub-Saharan Africa. With the start-up of new oil fields, total production averaged 250,000 barrels per day in 2006, up by approximately 14 per cent in comparison to 2005. The Société nationale des pétroles du Congo – SNPC (Congolese National Oil Company) manages the share of hydrocarbons production accruing to the State (approximately one third) under production-sharing agreements. Domestic petroleum product prices at the pump are occasionally adjusted to take account of the evolution of world prices. The new Mining Code of 2005 was introduced with a view to promoting exploration and prospecting for mineral substances, and possibly their exploitation. The Congo is involved in trading, inter alia re-exporting precious materials - including raw diamonds, despite its suspension from the Kimberly Process.
The forestry subsector is still the non-petroleum activity favoured by foreign investors. Timber and its products are subject to a number of taxes levied either on exports or on imports. Under the Forestry Code of 2000, companies are expected to process 85 per cent of their logging output. Companies that fail to attain that quota are subjected to a 15 per cent surcharge on their exports of logs above the quota. As an indication of the limitations of this policy, an average of approximately 15 per cent of the volume of exported timber is processed. According to the International Tropical Timber Organization (ITTO) the Congo is among the first countries in the world to establish a regulatory framework that provides a basis for sustainable forestry management. Thus, at the end of 2005, a concession of 280,000 hectares was granted eco-certification by the NGO Forest Stewardship Council (FSC).
In spite of the considerable amounts of arable (unexploited) land and the moderate density of its population, it will be difficult for the Congo to achieve the objectives of its fairly protectionist agricultural policy. The cost of importing staple foods is pushed upwards by tariff barriers (about 24 per cent on average) and non-tariff barriers (prohibitions, quotas, licensing and price controls). Where there is sufficient local production, lack of adequate transport infrastructure hampers the shipment of the protected produce from the countryside to the cities where there is a strong demand. Consequently, food prices are very low in the countryside at harvest time, and fairly high during the gap periods owing to a lack of storage capacity. For all of these different reasons, the price of these products is generally quite high in the cities. In the circumstances, this kind of policy can only aggravate poverty.
High protection in the agricultural sector is not conducive to the development of the agri-food industries, since the current policy pushes up production costs. In addition to the tariff structure, the high prices and shortages of basic inputs stand in the way of the development of the manufacturing sector, which is still confined to producing basic products for the local market or (more rarely) for countries with a similar policy. Tariff protection in the sector averages about 18 per cent.
Owing to the poor state of its land transport infrastructure, the Congo is unable to draw maximum advantage from its role as a transit country for its neighbours by fully exploiting its major asset, the Pointe-Noire Autonomous Port (PAPN), a State enterprise and the only deep-water port in the subregion. The deficiencies in the transport network, particularly land transport, also hamper the development of tourism, an area in which the Congo has considerable potential and the only services category in which it has made commitments under the GATS. Teledensity has progressed considerably in the Congo since the introduction of mobile telephony in 1999. However, the availability, quality, and cost of basic fixed telecommunications services (including Internet access and international communications) remain unsatisfactory. The privatization of the historical operator, the Société de télécommunications du Congo – SOTELCO (Congolese telecommunications company), which still has a monopoly on basic services, is currently under consideration.
Banking and microfinance activities in the Congo are subject to the common banking regulations of the CEMAC. The banking institutions handle, inter alia, import and export transactions including the purchase of vehicles, but their involvement in financing production activities is very limited. Some of the financing needs of craftsmen, farmers and small businessmen are covered by microcredit, which has considerably expanded thanks to the introduction of a subregional regulatory framework in 2002. Insurance services are not very developed, with the exception of compulsory insurance for imports and motor vehicles.
Trade Policy and Trading Partners
The Congo's reconstruction efforts with the support of the international community have been facilitated to a certain extent by the surge in prices and domestic production of hydrocarbons (the backbone of the economy). Aware of the risks involved in this heavy dependence, the authorities are seeking to diversify their economy and create jobs in the ultimate aim of reducing poverty. Clearly, however, the success of this strategy will depend first and foremost on the initiatives taken by the Congo to dismantle its numerous supply-side constraints on the domestic front. Continued reform, in particular structural reform, should contribute to this effect by bringing down the costs of inputs.
The Congo needs major investment to build or improve its transport network, in particular land transport.
These efforts should help the Congo to adhere more closely to the principles of the WTO, to create a more business-friendly environment, and to make its trade regime more transparent, more credible and more predictable in order to profit more fully from its participation in the multilateral trading system and better exploit the trade preferences it has been granted. The international community could do more to help the Congo in its reconstruction and economic diversification efforts by opening up its markets, on a stable basis, to products and services of interest to the Congo, and by responding favourably to its requests for technical assistance, particularly in the area of capacity-building.
