World Trade Organization |
RESTRICTED |
| |
WT/TPR/G/183 7 May 2007 | |
|
(07-1797) |
|
|
Trade Policy Review Body |
Original: French |
TRADE POLICY REVIEW Report by THE CENTRAL AFRICAN REPUBLIC |
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the |
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
CONTENTS
Page
introduction 5
I. ECONOMIC ENVIRONMENT 6
(1) Economic Situation 6
(2) Development of the Productive Sectors 7
(3) Business Environment 7
II. ECONOMIC REFORM 7
(1) Macroeconomic Reform 8
(2) Sectoral Reform 9
III. INTERNATIONAL RELATIONS 13
(1) The WTO Agreements 13
(2) Regional Agreements 14
(3) Bilateral Agreements 15
(4) Technical Assistance Needs 15
CONCLUSION 17
I. introduction
1. Located in the heart of Africa, the
1. Rich and varied flora and fauna;
2. dense forest cover with a variety of species, containing different ecosystems; vast virgin areas; safaris, etc;
3. dense and varied mining potential (diamonds, gold, iron, uranium, limestone, copper, oil, etc.).
2. Numerous constraints are still preventing these sectors from being exploited. In order to overcome these constraints, the
3. The Constitution of 27 December 2004, the 7th since the country's independence, provides for a political regime with a President of the Republic as head of State, elected by direct universal suffrage in two rounds for a five-year term, renewable once; a Prime Minister as head of government appointed by the President of the Republic; a parliament (national assembly); a constitutional court; an economic and social council; a higher council for communication; and a national mediation council.
4. The administrative system is decentralized and the country is divided into regions, prefectures, sub-prefectures, municipalities and villages. Only the regions and the municipalities constitute decentralized communities.
5. Since the beginning of 1986, the
6. The objective of these reforms is to create a favourable environment for the development of economic activity in the
7. Real GDP growth for the period 1994-2006 amounted to only 1.9 per cent, which implies a real deterioration in per capita income, with on estimated population growth rate of 2.5 per cent. Life expectancy has fallen from 50 years in the 1990s to 41.8 in 2006.
8. In the face of this situation, the constitutionally based Government of
9. In the tax area, given the cash flow problems, a heavy fiscal burden seems to be the rule. However, in connection with the ongoing preparation of the Poverty Reduction Strategy Paper (PRSP), the Government intends to reorient its different trade policy instruments on the basis of the WTO Trade Policy Review and the Integrated Framework Diagnostic Trade Integration Study (DTIS).
10. The Ministry of Commerce, Industry, and Small and Medium Enterprises is the main authority in charge of trade policy formulation and implementation; it is assisted by other Ministries and institutions, including the Ministries of the Economy, Planning and International Cooperation; Finance; Agriculture; Mining; Tourism; Transport; and Water and Forests; the Chamber of Commerce; and the non-State actors.
11. The policy relies essentially on the legislative and regulatory framework governing trade activities, the CEMAC integration framework, the Cotonou Agreement, the other regional and bilateral agreements, and WTO rules.
I. ECONOMIC ENVIRONMENT
(1) Economic Situation
12. The considerable deterioration in the socio-political environment over the past few years has had an adverse effect on economic performance. However, since March 2003, efforts have been made to improve the country's overall economic situation.
(a) Economic growth
13. Since independence, economic development has depended on the development of the primary sector, which alone accounted for more than half of GDP (55 per cent) in 2006, followed by the tertiary sector (32 per cent) and the secondary sector (13 per cent).
14. In 2005, driven by a recovery of the diamond industry and the tertiary sector (trade, transport and telecommunications), economic growth reached 2.2 per cent, rising to 3.7 per cent in 2006. For the first time since 1999, real per capita income grew. At the same time, 2006 saw a rise in inflationary pressure, with average inflation reaching 6.5 per cent as opposed to 2.9 per cent in 2005 and -2.1 per cent in 2004.
(b) Public finance
15. State revenue has recovered slightly, rising from 7.7 per cent of GDP in 2003 to 8.2 per cent in 2005. Although in terms of the CEMAC convergence criteria this evolution may be modest, the trend is a favourable one and reflects the impact of the reforms introduced to curb fraud and the sharp decline in the quality of public services.
16. Meanwhile, public expenditure went from 12.3 per cent of GDP in 2003 to 13.5 per cent in 2004, falling back to 12.8 per cent in 2005. These figures reflect expenses linked to the general elections as well as the burden of the wage bill.
(c) Monetary policy
17. Monetary policy is conducted at the regional level by the Bank of Central African States (BEAC), while monetary programming is handled at the national level. The M2/GDP ratio has decreased steadily over the past few years (from 24.45 per cent in 1996 to 14.22 per cent in 2003), reflecting a low level of loans, with liquidities representing a large share of the money supply.
(2) Development of the Productive Sectors
18. Macroeconomic projections target an annual economic growth rate of at least 5 per cent starting in 2007. This is based on a number of hypotheses which assume an increase in public and private investment as a result of domestic and foreign direct private investment as well as official development assistance.
19. Agriculture remains the dominant economic activity, accounting for 40 per cent of GDP and providing employment and income to more than 95 per cent of the rural population. However, it accounts for barely 10 per cent of export revenue, and absorbs an average of 10 to 20 per cent of the public investment programme. In the short term, economic growth will rely on increased dynamism in the export and food crop sectors (cotton, coffee, bananas, plantains, cassava, peanuts, maize, millet, sorghum, sesame, oil palm, sugar cane, fruit and vegetables) and in livestock breeding and industry (agrifood, leather tanneries and cotton spinning). Mining (diamonds and gold), transportation, electricity, telecommunications and tourism will also act as important sources of growth and foreign exchange.
(3) Business Environment
20. Aware of the importance of the private sector in the country's economic reconstruction, the Government has already taken measures to improve the business environment in the
1. Regulating business in accordance with the OHADA Treaty;
2. adopting a national investment charter;
3. introducing a mining code and joining the ETI Initiative and the Kimberly Process;
4. bringing forestry licensing into conformity with the Forest Code;
5. creating and implementing a permanent framework for State/private sector consultations;
6. creating a single window to deal with the administrative formalities for setting up businesses in order to reduce costs and speed up the process;
7. establishment of a trade court both in
II. ECONOMIC REFORM
21. The
1. Security and the consolidation of peace;
2. macroeconomic stabilization and institutional reform;
3. rebuilding of basic infrastructure;
4. good governance.
22. A Poverty Reduction Strategy Paper (PRSP), begun in 2000 with the help of the IMF and the UNDP, is currently being completed (mid 2007).
(1) Macroeconomic Reform
a. Good governance
23. In the area of good governance, the Government has taken the following measures:
1. Effective establishment of the National Financial Investigation Agency (ANIF) within the Ministry of Finance and Budget;
2. ongoing reform of the trade courts: the Organic Law was adopted and the implementing decree is currently being prepared. Two commercial judges will represent the private sector in order to boost the confidence of economic operators;
3. adoption of the laws authorizing ratification of the United Nations Convention against Corruption and the African Union Convention on Preventing and Combating Corruption, and incorporation of these conventions in the country's planned new Code of Criminal Procedure.
b. The Ministry of the Economy launched an ambitious reform plan for the period 2006-2008 aimed at improving the country's economic performance. The Ministry will be restructured to make it possible, among other things, to conduct prospective studies on development issues and sectoral strategies in keeping with the poverty reduction programme, to supply reliable statistical data on a regular basis with the creation of the Central African Institute of Statistics and Economic and Social Studies, and to mobilize and better manage the implementation of the debt forgiveness process.
c. The Ministry of Commerce, Industry and Small and Medium Enterprises implemented an action plan aimed at improving the business environment with a view, inter alia, to strengthening the private sector and improving the legal and regulatory framework. There are plans, in this connection, to study the possibility of setting up industrial estates in
24. The Government has been focussing on the promotion of the manufacturing industries. Its objective is to draw up an industrial development master plan, to prepare an investors' guide, to develop international industrial cooperation, to strengthen local production and processing capacity, and to set up a standards and quality control system.
d. Regarding public finance, fiscal consolidation is an important component of the Government's structural reform programme and its efforts to promote good governance.
25. The ongoing reform of the tax and customs administrations, the broadening of the tax base and the improvement of tax payers' compliance will help to improve State revenue. The Government felt that administrative reforms should be introduced to intensify revenue mobilization and to bring public expenditure under control.
26. Other measures are also being taken, particularly to build the capacity of customs officials, to combat evasion and corruption, to streamline customs clearance procedures and to substantially improve customs revenue.
27. The ASYCUDA++ system, which was recently introduced as a pilot project, will be fully installed as of June 2007. This will make it possible to establish customs value and limit discretionary authority in this area (transaction value system).
e. Government procurement
28. A committee has been set up by the Ministry of Finance and Budget to review the government procurement system and to draw up a new government procurement code in keeping with international standards.
(2) Sectoral Reform
29. The Government has begun to reform certain key sectors of the economy with a view to establishing transparent and predictable rules that safeguard the rights of investors while maximizing State revenue. Special emphasis will have to be placed on the processing and exportation of products in those sectors.
(a) The agricultural and livestock sector
Agriculture
30. Agriculture dominates the country's economy and provides more than half of the sector's value added. It has a good biophysical base, and revolves around two branches: cash crops (cotton, coffee, tobacco) and food crops (including cassava, maize, rice, peanuts, sesame, pumpkins, etc). Of a total of 15 million hectares of arable land, only 600,000 to 700,000 hectares are cultivated each year, i.e. approximately 1 per cent of the national territory.
Livestock
31. The country has natural resources conducive to the development and intensification of livestock breeding. With only nine million of an estimated total of 16 million hectares of pasture and grazing land exploited, there is still considerable untapped potential. Farms were generating close to five billion CFAF a few years ago as compared to three billion today, and the livestock population is estimated at ten million.
32. Cash crops, in particular coffee and cotton, are currently undergoing a crisis following the fall in world prices and the socio-political disturbances that have destroyed the country's productive capital.
33. Reforms and projections target the recovery of the sector through:
- The forthcoming organization of a general stakeholders' meeting on rural development;
- preparation and adoption of a master plan for agriculture;
- establishment of a partnership to revive the cotton sector;
- increase in productivity through operational capacity building of farmers;
- diversification and processing of export products;
- fundraising for the rehabilitation of agricultural support structures;
- restructuring of the Chamber of Agriculture.
(b) The forestry sector
34. The revival and development of the forestry sector is one of the Government's medium term priorities. Indeed, after the rural sector the timber sector is one of the pillars of its strategy of poverty reduction through sustainable growth.
35. A rise in production and export of timber and revival of hunting activities will contribute not only to increasing the national wealth, tax revenue and foreign exchange earnings, but will also act as an important starting point for poverty reduction in forest areas, which will be achieved by improving the income of the populations and boosting investment in the basic social areas (education, health) and in transport infrastructure. Such a rise will only be possible if the following fundamental steps are taken:
1. Promotion of an environment conducive to the establishment of efficient enterprises with a high capacity to create jobs;
2. promotion of good governance, particularly transparency and increased control in the management of natural resources;
3. mobilization and organization of the grassroots communities and increased participation of those communities in the management of the sector's resources.
36. The forestry sector is faced with the following problems:
1. Poor governance;
2. poor management of forestry resources;
3. haphazard granting of permits.
37. Forestry permits were granted on a haphazard basis from 1998 to 2002. The stakeholders' meetings on water and forests held in 2003 identified a number of problems relating to regulatory texts that had lapsed. This led to the revision of the legal and regulatory framework with a view to consolidating sustainable management practices, increasing value added, and adopting competitive and transparent criteria for granting operating and development permits so as to ensure that all revenue from forestry taxes was distributed between the treasury and the earmarked accounts for the development of forestry and tourism.
(c) The mining sector
38. The
39. In order to overcome these constraints, the Government has developed strategies to revitalize and develop the sector, based on a significant and sustainable increase in production by 2008, doubling the sector's share in State revenue and bringing the poverty rate in the mining areas down to 70 per cent from the current 83.6 per cent. The objective is to stimulate mining production as quickly as possible in order to boost export volumes and improve the sector's contribution to fiscal revenue.
40. Accordingly, the Government organized a general stakeholders' meeting for the sector, adopted a new Mining Code and implementation texts which include elements of good practices, such as the streamlining of the formalities for obtaining mining permits and the law on radioactive ores. The country was admitted as a recognized exporter under the Kimberley Process.
(d) The tourism and crafts sector
41. Tourism: The
42. Reforms have involved the strengthening of security and peace in the country, and the transfer of tourist activities from the State to private operators, for example the Oubangui Hotel, the Boali Hotel, the Bayanga site, and now, the Hôtel du Centre.
43. A master plan has been drawn up by the Department of Tourism in order to revive the tourist sector. It calls for a better understanding of the available potential, site development, diversification of products, support for economic operators, and the promotion of the
44. Crafts: This is a growth sector which is promising in terms of raw materials and could contribute significantly to poverty reduction thanks to its capacity to create jobs. However, it is beset with problems relating to poor organization of craftsmen and a lack of equipment and training.
45. The crafts sector is divided into three categories: art (woodcarving, jewellery), production, and services.
46. The development strategy involves drawing up a development plan to identify the needs of craftsmen and offer solutions in the form of micro-financing, micro-subsidization, and the organization of cooperative associations. Only then will the sector be able to help alleviate the dependency on imports and contribute to solving the country's trade balance problems and to combating poverty.
(e) The water and electricity sector
47. The country has a production capacity of barely 20 MW with two hydroelectric plants (Boali 1 and 2 supplying
48. The Societé de distribution d'eau centrafricaine – SODECA (Central African Water Supply Company) supplies drinking water to 23 per cent of the population in eight towns:
49. The Government intends to hand over the management of water and electricity supply to the private sector, while reforming rates and improving collection. Liberalization of the sector is planned for 2007.
(f) The telecommunications sector
50. This sector was partially liberalized in 1996 by Law No. 96.008 of
51. The National Assembly is currently adopting a new code which provides for full liberalization in order to improve territorial coverage in various telecommunications products.
(g) The financial sector
52. The financial sector comprises three commercial banks, a micro-financing institution and a micro-financing project, a postal savings bank and money order centre, two insurance companies, two general insurance agents and a social security institution.
53. The
54. A convention for the establishment of a Community of Sahel-Saharan States (CENSAD) Investment Bank has just been signed. At the same time, efforts are being made to favour the creation and development of micro-financing institutions and the introduction of life insurance and credit insurance.
55. Insurance will follow in the wake of economic development once there has been a revival in economic activity as a result of the various reforms undertaken. However, the problem is that the
(h) Transport
56. Owing to its land-locked status and the distance which separates it from the coastlines, the
57. Land transport has deteriorated, with a decline in the road network, insufficient infrastructure (only 700 km of a total of 9,307 km of classified roads are surfaced), an ageing and insufficient car population, an overloaded network, and no access to loans for renewal.
58. River transport is faced with the problem of the navigability of the Oubangui river (seven to eight out of 12 months), the weir at Zinga, and the lack of beacons on certain segments.
59. In the air transport subsector, there have been problems relating to the deterioration of airport infrastructure and safety, and the security of Bangui M'Poko International Airport.
60. As regards land transport, and in particular the transit of goods between
61. This single platform, coupled with the recent creation of conventional customs corridors for the transit of goods between Douala and Bangui made up of checkpoints and rest areas for truck drivers, is bound to contribute to the combat against fraud by controlling the import flow from Douala to Bangui, while helping to safeguard and optimize customs revenue with a view to facilitating trade. A project involving the construction and outfitting of customs posts is under way.
62. Appropriate policies will be needed for the road and river transport subsectors in view of their impact on the economic and social development of the entire population of the
(i) Investment
63. The National Investment Charter, adopted to implement the CEMAC Community Charter, aims at the development and processing of local raw materials, the creation of value added and employment, and the exportation of finished products, and advocates the freedom of investment, non-discrimination and total freedom in the management and transferability of profits.
64. Reforms in this area involve institutional, human and material capacity building in order to improve the monitoring of approved enterprises while taking account of trade aspects when adapting the National Charter to the Community Charter, already under review.
III. INTERNATIONAL RELATIONS
(1) The WTO Agreements
65. The
- Elimination of the agricultural subsidies granted by the developed countries;
- access to the markets of the industrialized countries for agricultural and non-agricultural products from the developing countries;
- access to medicines for HIV/Aids through incentives offered by the developed countries to their institutions and enterprises to promote and encourage the transfer of technology to the LDCs in accordance with Article 66.2 of the TRIPS Agreement; and offer of preferential tariffs for the importation of medicines, thereby easing the public health problems experienced by the Central African Republic;
- improvement of special and differential treatment;
- implementation of an enhanced Integrated Framework as one of the elements in the promotion of aid for trade;
- trade facilitation;
- requirement for shared commitments of developed countries with respect to Mode 4 and the need for Members to ensure that the GATS architecture is preserved;
- strengthening of technical assistance.
(2) Regional Agreements
(a) The CEMAC integration framework
66. The
67. The implementation of this common trade policy has encountered a number of problems relating, inter alia, to the lack of effective integration within the Community, incoherence in the application of commonly agreed measures between the countries, the application of the CET within the Community by land-locked countries, double taxation of goods traded within the Community, and the failure to observe the intra-Community compensation mechanism.
68. The Central African Republic is committed, within the CEMAC, to effective integration that would facilitate the free movement of persons and goods, to the review of the Investment Charter, to the proper implementation of the intra-Community compensation mechanism and the harmonization of rules of origin so that goods traded within the Community can be identified, and to the introduction of juxtaposed customs posts and the creation of checkpoints to facilitate trade between member countries.
(b) ACP-EU Economic Partnership Agreements
69. The
70. The geographical grouping concerned is made up of the six
71. Although some efforts have been made, much remains to be done before the members of the National Trade Negotiations Committee achieve sufficient ownership of the negotiating process to be able to formulate a proper negotiating mandate for the country as a land-locked LDC.
72. This agreement will complicate the country's trade relations and generate considerable losses in revenue owing to the strong competition from
73. At the same time, the
1. Support for basic infrastructure such as roads, energy and water;
2. support for the production sectors with a view to diversifying supply;
3. support for private sector promotion;
4. measures to offset the losses resulting from the implementation of the EPA.
(3) Bilateral Agreements
(a) Relations with the United States
74. Since 2003, the
(b) Other bilateral agreements
75. Over the years, the
76. These agreements set out the framework for trade and consultation between the contracting parties while respecting the legislation in force in each country.
77. In order to ensure the effective application of the bilateral agreements, the
(4) Technical Assistance Needs
78. The
79. The country's trade-related technical assistance needs with respect to the implementation of the agreements and policy formulation concern, in particular: notifications; harmonization of domestic laws and regulations with the principles and rules of the WTO; human and institutional capacity-building in the trade area; and the development of policies aimed at boosting profits and minimizing potential costs relating to the implementation of the agreements.
80. There is also the elimination of supply-side constraints, namely: the poor state of the roads and the persistent insecurity in the country; the lack of inputs such as electricity, telecommunication services, and a financial system oriented chiefly towards import-export activities, not to mention the additional costs relating to the country's land-locked status. The authorities hope to take better advantage of the country's considerable assets in the agricultural area, and in particular to revitalize cash crops and develop livestock breeding. The integration of trade policy in the Poverty Reduction Strategy Paper (PRSP) could also help to eliminate poverty. In this connection, the
81. Technical assistance needs are also felt in the different production sectors such as:
a. Tourism
- Technical support upon request in formulating the Government's policy and projects in the tourist area;
- fundraising for the Government's planned operational activities;
- assistance in implementing these operational activities;
- human capacity building in the tourism sector.
b. Agriculture
- Technical and institutional support for agricultural research and training;
- support for the professional organizations (groupings, associations, federation) in the technical supervision area.
c. Forestry
- Capacity building with respect to diversification and marketing strategies for timber and non-timber products.
d. Transport
- Revival and implementation of the project to build a flow control dam at Palambo, 66 kilometres upstream from
- capacity building in transport management for ministry officials;
- upgrading of Bangui M'Poko International Airport to bring it into line with international standards;
- rehabilitation of rural dirt roads.
e. Financial services
- Support for the creation of a databank;
- strengthening of the insurance market in connection with fundraising for the establishment of a life insurance company;
- supply of work equipment.
f. Trade and industry
- Technical support for multilateral trade negotiation capacity building;
- support for the drawing up of a masterplan for industrial development;
- support for the creation of a standardization laboratory;
- integrated database capacity building.
g. Private sector
- Creation of a financing structure for SME/SMIs;
- support for the creation of an approved management centre;
- support for the revitalization of the SME/SMI support bodies.
CONCLUSION
82. This statement, which reflects the Government's socio-economic policy, calls for significant growth and self-sustained development aimed at enabling the
83. The
__________