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 Cameroon.

CONTENTS

                                                                                                                                                                                                Page

SUMMARY OBSERVATIONS                                                                                                                                               vii

                (1)           Economic Environment                                                                                                                      vii

                (2)           Trade and Investment Regimes                                                                                                     viii

                (3)           Trade Policy Instruments                                                                                                                 ix

                (4)           Sectoral Policies                                                                                                                                   x

                (5)           Trade Policy and Trading Partners                                                                                             xi

I.              Economic environment                                                                                                                                   1

                (1)           Main Features of the Economy                                                                                                       1

                (2)           Recent Economic Developments                                                                                                     4

                (3)           Trade and Investment Performance                                                                                             7

                (i)        Trade in goods and services                                                                                                         7

                (ii)       Direct investment                                                                                                                            9

                (4)           Outlook                                                                                                                                                   11

II.            trade AND INVESTMENT regimeS                                                                                                               12

                (1)           Overall Framework                                                                                                                           12

                (2)           Policy Objectives                                                                                                                                  15

                (3)           Trade Agreements and Arrangements                                                                                      16

                (i)        World Trade Organization                                                                                                           16

                (ii)       Regional agreements                                                                                                                     17

(4)           Investment Regime                                                                                                                               22

ANNEX II.1:  TRADE-RELATED TECHNICAL ASSISTANCE                                                                                      26

                (1)           Implementation of the Agreements and Policy Formulation                                      26

                (2)           Supply Constraints                                                                                                                             27

                (3)           Integration of Trade into Development Strategies                                                          28

III.           trade policies and practices by measure                                                                                        29

                (1)           Introduction                                                                                                                                         29

                (2)           Measures Directly Affecting Imports                                                                                       30

                (i)        Registration and preshipment inspection                                                                                  30

                (ii)       Customs procedures                                                                                                                     31

                (iii)      Customs levies                                                                                                                               33

                (iv)      Rules of origin                                                                                                                                42

                (v)       Import licensing, prohibitions, and other restrictions                                                             42

                (vi)      Contingency measures                                                                                                                 43

Page

                (vii)     Standards and technical requirements                                                                                       44

                (viii)    Other measures                                                                                                                              48

                (3)           Measures Directly Affecting Exports                                                                                       49

                (i)        Procedures                                                                                                                                      49

                (ii)       Export taxes                                                                                                                                    50

                (iii)      Minimum export prices                                                                                                                 51

                (iv)      Export prohibitions, restrictions, and licensing                                                                        51

                (v)       Export subsidies, promotion and assistance                                                                             52

                (vi)      Industrial free-zone regime                                                                                                           52

                (vii)     Other provisions                                                                                                                            54

                (4)           Measures Affecting Production and Trade                                                                            54

                (i)        State trading, State-owned enterprises and privatizations                                                     54

                (ii)       Incentives                                                                                                                                       57

                (iii)      Competition policy and price regulation                                                                                    57

                (iv)      Government procurement                                                                                                             60

                (v)       Intellectual property rights                                                                                                          63

IV.           trade policy and practice by sector                                                                                                  68

                (1)           Introduction                                                                                                                                         68

                (2)           Agriculture, Livestock, Fisheries and Forestry                                                                    68

                (i)        Overview                                                                                                                                         68

                (ii)       Agricultural policy                                                                                                                        71

                (iii)      Policy by sector                                                                                                                             72

                (3)           Mining, Energy and Water                                                                                                               80

                (i)        Petroleum and gas products                                                                                                        80

                (ii)       Mining products                                                                                                                            83

                (iii)      Electricity                                                                                                                                        84

                (iv)      Water                                                                                                                                               85

                (4)           Manufacturing Sector                                                                                                                     85

                (5)           Services                                                                                                                                                     89

                (i)        Overview                                                                                                                                         89

                (ii)       Transport                                                                                                                                        90

                (iii)      Tourism                                                                                                                                           96

                (iv)      Telecommunications                                                                                                                     98

                (v)       Postal services                                                                                                                             100

                (vi)      Financial services                                                                                                                        102

                (vii)     Professional and business services                                                                                         106

REFERENCES                                                                                                                                                                          111

APPENDIX TABLES                                                                                                                                                             117

CHARTS

Page

I.              ECONOMIC ENVIRONMENT

I.1            Structure of trade in goods, 1995-2005                                                                                                                    3

I.2            Direction of trade in goods, 1995-2005                                                                                                                  10

III.           TRADE POLICIES AND PRACTICES BY MEASURE

III.1         Tariff escalation, 2007                                                                                                                                              38

IV.           TRADE POLICY AND PRACTICE BY SECTOR

IV.1         Indices of world wood, cocoa and coffee prices, 1993/2002 and 2001-2006                                                    71

IV.2         Average customs duties for the main ISIC Rev.2 groups, 2006                                                                        87

IV.3         Traffic in the Autonomous Port of Douala, 2001-2006                                                                                       95

TABLES

I.              ECONOMIC ENVIRONMENT

I.1            Cameroon in figures, 1995-2006                                                                                                                                1

I.2            Main economic and financial indicators, 1999/2001 and 2001-2006                                                                    4

I.3            Balance of payments, 2000-2005                                                                                                                              8

II.            TRADE AND INVESTMENT REGIMES

II.1          Principal trade- and investment-related legislative text in force, June 2007                                                   14

II.2          General company taxation, 2007                                                                                                                             25

III.           TRADE POLICIES AND PRACTICES BY MEASURE

III.1         Key components of government revenues, 2002-2006                                                                                       34

III.2         Structure of customs duties, 2007                                                                                                                          36

III.3         Summary analysis of MFN tariff, 2007                                                                                                                  36

III.4         Some of the benefits provided under the Industrial Free Zone Regime (ZFI)                                                53

III.5         Privatizations under way, May 2007                                                                                                                      56

III.6         Enterprises with public capital, July 2006                                                                                                             56

III.7         Status of Cameroon with regard to certain intellectual property protection treaties administered by WIPO and UPOV, May 2007                                                                                                                               63

III.8         Subjects and terms of protection under the Bangui Agreement (1977) and

its revision (1999)                                                                                                                                                      64

III.9         Fines and prison sentences under the Bangui Agreement (1977) and its revision (1999)                            67

IV.           TRADE POLICY AND PRACTICE BY SECTOR

IV.1         Main agricultural products, 2000-2005                                                                                                                  69

IV.2         Wood exports, 2001-2005                                                                                                                                        78

IV.3         Taxes on tourist activities, 2003                                                                                                                             96

IV.4         Indicators of telecommunication services, 2000-2006                                                                                         98

IV.5        Leading banks and credit institutions, July 2007                                                                                              102

IV.6         Premiums issued and profitability by type of insurance, 2003-2005                                                               105

APPENDIX TABLES

Page

I.              ECONOMIC ENVIRONMENT

AI.1        Structure of exports, 1995-2005                                                                                                                            119

AI.2        Structure of imports, 1995-2005                                                                                                                            120

AI.3        Destination of exports, 1995-2005                                                                                                                        121

AI.4        Origin of imports, 1995-2005                                                                                                                                 122

III.           TRADE POLICIES AND PRACTICES BY MEASURE

AIII.1      Semi-public corporations, July 2006                                                                                                                    123

IV.           TRADE POLICY AND PRACTICE BY SECTOR

AIV.1      Applied tariffs by ISIC Rev.2 category, 2007                                                                                                     125

SUMMARY OBSERVATIONS

(1)               Economic Environment

1.                   From 2001 to 2006, Cameroon's economy experienced sustained growth, with an average annual growth rate of 3.6 per cent.  This was higher than the population growth rate, thus providing the means to alleviate poverty.  Various structural reforms, including the liberalization of mobile telephone services and the privatization or putting out to concession of enterprises in sectors such as electricity, agribusiness, port services and rail transport, have contributed to this growth.  This performance has allowed Cameroon to become a middle-income country with a per capita gross domestic product (GDP) estimated at US$1,077 in 2006 (compared to US$621.5 in 2001).  In October 2005, a new agreement was signed under the Poverty Reduction and Growth Facility (PRGF) framework for the period 2005-2008.  The economic and social targets of the PRGF are consistent with the priorities of the Poverty Reduction Strategy Paper (PRSP) adopted in 2003.

2.                   The globally restrictive monetary policy of the Bank of Central African States (BEAC) has made it possible to control inflation.  The resumption of growth in Cameroon in 2005 was, however, accompanied by a resurgence of inflationary pressures as a result of the automatic adjustment of the price of petroleum products at the pump.  Consequently, in 2006, inflation reached its highest level (5.4 per cent) during the period under review.  Public finances have benefited from the rise in oil prices, with fiscal revenue increasing from 17.7 per cent of GDP in 2001 to 19.2 per cent in 2006.  Nevertheless, public finances also face a number of structural problems, such as the dependence of income on oil revenues, even though the wells in operation are gradually being exhausted, or the narrowness of the tax base, which is mainly due to the size of the informal sector. Moreover, current expenditure accounts for a large proportion of budget outlays, with staff costs alone absorbing over one quarter of total budgetary expenditure.

3.                   Measures taken to improve the transparency and management of the tax system, and governance finally made it possible for Cameroon to reach the completion point of the Heavily Indebted Poor Countries Initiative (HIPC) in April 2006, after having missed the 2004 deadline.  This should allow the country to reduce the net present value of its debt by 27 per cent.  Other creditors are also expected to write off slightly over CFAF 100 billion.  According to the forecast for 2006, the stock of the external debt should reach 32.4 per cent of the GDP and external debt servicing should fall from 6.7 per cent of total exports (of goods and services) in 2005 to 0.1 per cent in 2007.  Despite its legislative efforts, Cameroon still finds it difficult to attract foreign direct investment (FDI).  In 2005, investment inflows were estimated at US$18 million, i.e. only 0.4 per cent of FDI in Central Africa.

4.                   Cameroon's economy has a number of assets, including favourable conditions for agriculture, forestry resources, and petroleum.  Services dominate the economy, contributing around 50 per cent of GDP, followed (in descending order) by agriculture, manufacturing and mining.  Agriculture (including fishing and forestry) plays a central role, employing just over 60 per cent of the labour force.  The manufacturing sector is largely based on local inputs, hence the low level of imported products and the relatively strong degree of sectoral integration.  The informal sector continues to be very important in Cameroon (accounting for around 50 per cent of GDP).  The strength of the informal sector and the relatively high level of sectoral integration partly explain the moderate average ratio of trade in goods and non-factor services to nominal GDP of around 44.3 per cent during the period 2001-2006.

5.                   Petroleum exports have kept the trade balance in surplus; food products (particularly

cocoa) and timber occupy second and third place.  Nevertheless, with the exception of 2003, the current account balance has remained negative due to the deficit in the balance of services, of which Cameroon is traditionally a net importer.  The main destination for Cameroon's exports is the European Union (particularly Spain, Italy and France).  Imports, on the other hand, are much more diversified in product terms, even though petroleum, here again, is the market leader.  The principal sources of imports are the European Union (mainly France), Nigeria and China. Trade with other CEMAC members remains marginal (around 3.4 per cent of trade). These figures do not, however, take into account informal regional trade.

(2)               Trade and Investment Regimes

6.                   The Ministry of Trade is responsible for formulating, implementing and monitoring Cameroon's trade policy.  To this end, it receives ad hoc opinions from the Chamber of Commerce, Industry and Mines, which acts as a liaison body with private business circles.  The Ministry of the Economy and Finance handles fiscal matters, including those relating to customs.  Investment-related matters are handled by various ministries, in particular the Ministry of Industry, Mines and Technological Development and the Ministry of the Economy and Finance.

7.                   Cameroon is a founding Member of the WTO and participates in its ministerial meetings.  It gives at least most-favoured-nation (MFN) treatment to all its trading partners. It has not signed any of the plurilateral agreements negotiated within the WTO framework; it does, however, have observer status in the Committee on the Agreement on Government Procurement.  Under the WTO Dispute Settlement Mechanism, in December 2006, Cameroon requested to join the consultations relating to the dispute concerning the European Community's regime for the importation, sale and distribution of bananas from ACP countries.

8.                   Nevertheless, Cameroon's parti-cipation in the multilateral trading system remains limited.  It has submitted only five WTO notifications since 2001.  The areas in which technical assistance is requested, apart from notifications, include the following: implementation of the WTO Agreements; customs valuation; sanitary and phytosanitary measures (SPS); harmonization of national laws and regulations with the WTO's principles and rules; formulation of policies to enhance the benefits and minimize the potential costs of implementing the Agreements; capacity-building with a view to participating in the WTO's regular activities and in trade negotiations; supply constraints; and integration of trade policies into development strategies.  It is vitally important to improve competitiveness and upgrade infrastructure (including electricity, roads, water resources, laboratories, and metrology instruments).

9.                   Cameroon and its neighbours have a long common history of regional integration.  Cameroon 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 setting up a customs union.  The CEMAC and associated countries are negotiating an Economic Partnership Agreement (EPA) with the EU, which is scheduled to enter into force in January 2008.  The implementation of the CET adopted by the Economic Community of Central African States (ECCAS/CEEAC), an economic area larger than the CEMAC, but which includes the CEMAC, has not yet begun.

10.               A new Investment Charter was adopted in 2002 to define a more attractive regulatory framework for investment.  The Charter allows for a period of five years (from its enactment) for the adoption of sectoral codes and regulations on the operation of the institutions envisaged. According to the authorities, this period has been extended by

two years. During this period, the regimes already existing under the repealed legislation remain in place.

(3)               Trade Policy Instruments

11.               Cameroon generally applies CEMAC decisions with regard to customs.  Barring a few exceptions, its customs tariffs are based on the CEMAC CET;  all the rates are ad valorem.  The simple average tariff is 19.1 per cent.  Agricultural products (WTO definition) are subject to higher taxation (simple average of 22.6 per cent) than non-agricultural products (simple average of 18.6 per cent).  Overall, the tariff shows mixed escalation, which does not encourage the setting up of certain industries or favour the competitiveness of certain locally manufactured products on international markets.  Moreover, the strong positive escalation of duties in a number of industries conceals a relatively high level of actual protection, which does not encourage the international competitiveness of the local products concerned.  Cameroon grants duty-free entry for products from other CEMAC countries, provided that the rules of origin are respected.

12.               During the Uruguay Round, Cameroon bound its tariffs at a ceiling rate of 80 per cent for all agricultural products and 50 per cent for three non-agricultural products.  Consequently, only 14.0 per cent of its tariff lines are bound, with an average bound rate of 79.9 per cent.  Other duties and taxes are bound at 80, 150 or 230 per cent according to product category and are applied at substantially lower rates – 1 per cent for the community integration tax (TCI) and 0.05 per cent for the OHADA tax, both of which are applied to imports from outside the CEMAC, and 0.45 per cent for the computer fee, which is levied on imports irrespective of origin.  The average level of protection at the border (all duties and taxes) is therefore 20.6 per cent.  During the period under review, Cameroon did not make use of any contingency measures.

13.               Domestic taxes, such as VAT (17.5 per cent) and excise duties, are levied on imports and local products.  A communal tax, the "additional centime", equivalent to 10 per cent of VAT, is also levied, bringing the overall VAT plus tax rate to 19.25 per cent.  However, unlike local goods, the taxable base for VAT on imports also includes excise duties, which poses a problem of consistency in respect of the principle of national treatment.  Excise duties are 25 per cent for the following (imported and local) products:  beverages (including certain non-alcoholic drinks), tobacco products, foie gras, caviar and its substitutes, salmon, precious stones and metals, and jewellery.  A reduced rate of 12.5 per cent was introduced in 2006 for private one-cylinder motor vehicles.

14.               The Single Window for Foreign Trade Operations (GUCE) has been operational since December 2000. In 2002, Cameroon decided gradually to replace the semi-computerized customs operations management system (PAGODE) with the Automated Customs System (ASYCUDA ++) which came on stream in January 2007 in the Autonomous Port of Douala (PAD) and in other customs offices.  Imports of CFAF 2 million or more are subject to the programme of enhanced security for customs revenue, and as such must be inspected by the Société Générale de Surveillance before shipment.  However, the inspection fees paid by the importer may, in practice, increase beyond the standard rate of 0.95 per cent of the c.i.f. value of imports because of the flat rate of taxation.  For some products, including those from Asia, Cameroon uses minimum values, which shows that it has difficulties in implementing the WTO Customs Valuation Agreement.

15.               Cameroon has no import licensing regimes.  For reasons of health or security, imports of a number of products are subject to various forms of authorization.  Cameroon has not notified any sanitary or phytosanitary measures, or technical regulations to the WTO.  Some products and services are still subject to


price approval.  In two cases, approval only applies to imported products.  New temporary price control measures were also introduced in 2006.  The National Commission on Competition (CNC), which was originally due to be founded in 1998, finally became operational in 2007.  The Cameroon Oil Storage Company (SCDP) has a de facto monopoly on imports of oil products.  The privatization programme is stagnating, with only one company privatized since 2001.

16.               Export duties are levied on exports of all products.  Exports of cocoa and coffee are also subject to various fees.  Prohibitions apply to exports of logs of certain species for economic reasons.  With a view to encouraging exports, different regimes allow importation with suspension of duties and taxes.  Tax benefits for exports are granted under the Industrial Free Zone (ZFI) regime.  However, according to the new Investment Charter, the ZFI regime should be terminated by the end of 2009 at the latest.

17.               The Cameroonian intellectual property regime was harmonized with the TRIPS Agreement when the revised Bangui Agreement came into force in 2002.  Several new copyright collective management societies were set up in 2003.  However, various products are often counterfeited.  A new Government Procurement Regulatory Agency was set up in 2001 and a new Government Procurement Code adopted in 2004.  National preference margins of 10 per cent for works procurement and 15 per cent for supplies procurement are provided for in the new legislation.

(4)               Sectoral Policies

18.               Cameroonian agriculture has a number of natural assets such as the richness of its soil, a favourable climate and crop diversity.  Cameroon is one of the few African countries approaching food security.  Agriculture is the most important sector in the poverty reduction strategy, because of its contribution to employment and its role in supplying inputs to local industries.  The Government intends to attract private investment, particularly through privatizations, with the aim of doubling production in order to raise rural incomes between now and 2015.  The average tariff in the agricultural sector (according to the ISIC Rev.2 definition) is 25.2 per cent.  Poultry imports are currently subject to authorization and quantitative restrictions; temporary price control measures are applied to local and imported poultry.  Various support measures and reforms have recently been implemented to stabilize the coffee and cocoa sectors.

19.               The main manufacturing segments are foodstuffs, petroleum products, beverages and forestry products.  The principal trade measures applied in the sector are relatively high tariff rates (on average 18.6 per cent); some of the major branches operate with 30 per cent tariff protection levels.  The tariff structure does nothing to encourage investment in certain industries or to improve competitiveness in others.  As a fillip to the wood processing industry, a number of restrictions in the form of prohibitions or taxes and surcharges are applied to exports of unprocessed logs.

20.               Cameroon has several types of mineral resources, including energy resources.  Petroleum products are an essential element of the economy and government resources, accounting for almost 60 per cent of export revenue in 2005.  Oil production, in decline as deposits become depleted, has picked up thanks to a number of new oilfields which have recently come on stream.  The adoption of the Petroleum Code in 1999, and accession to the Extractive Industries Transparency Initiative (EITI) in 2005 are among the actions undertaken to attract new investors to the sector.  Following the liberalization of trade in petroleum products in Cameroon in 2002, sales prices have been regulated by the Hydrocarbon Price Stabilization Fund (CSPH), but are still subject to automatic adjustment.  Cameroonian gas remains unexploited mainly for reasons of profitability.  The delay in exploiting bauxite reserves is mainly explained by the geographic location of the deposits and a lack of interest among partners;  the first company to file a request for a bauxite exploitation permit has only recently done so.  An ad valorem duty is levied on the taxable value of products ready for exploitation at the pithead.  The average tariff in the mining sector is 11.3 per cent.

21.               The electric power operator AES SONEL, which is of mixed public-private ownership, has been operating since July 2001 under a 20-year concession contract with the State. Although the sector has been liberalized, AES SONEL holds a de facto monopoly on the production, transportation and distribution of electricity. The insufficient supply of electric energy (and gas) caused a major crisis between 2001 and 2003; new investments in electricity generation, transmission and distribution have allowed for an improvement in the subsector's performance, particularly in terms of fewer power cuts, and for improved transparency within the pricing structure, which, once established by AES SONEL, must be approved by ARSEL.

22.               The services sector's share of GDP has grown steadily since 1999, thus indicating a degree of the buoyancy in this sector.  Restrictions on foreign trade in services mainly affect activities that are still State monopolies such as water distribution, fixed telephony, and certain postal services.  Telecommunications services in Cameroon have developed considerably since the liberalization of the sector and the growth of mobile telephony, bringing benefits to the economy as a whole.  However, the provision of certain services, such as transport, access to credit, and electricity, handicap the performance of the rest of the economy.  In fact, the delay in the implementation of the transport sector programme, the relatively high cost of road transport, the restrictions on the provision of road transport services between Cameroon and Chad or the Central African Republic, the port fees levied at Douala and transit times all have a negative impact on the competitiveness of goods and certain services, including tourism.  The country's enormous tourism potential remains underexploited, despite the preparation of a tourism strategy.

23.               The banking subsector remains concentrated, with the three leading banks in terms of deposits accounting for some two thirds of lending to the economy and private deposits.  Over 80 per cent of funds concern short-term operations (customer deposits and savings).  Banks only lend to a small number of highly creditworthy customers, which is a key factor constraining the development particularly of small and medium-sized businesses.  The Cameroon insurance market, characterized by low coverage of industrial risks, low household coverage, and a life insurance sector that is still underdeveloped, has experienced strong growth, despite restrictions on the provision of services by non-residents.  Within the GATS framework, Cameroon has only made specific commitments in a small number of services sectors, i.e. certain business services and tourism and travel.

(5)               Trade Policy and Trading Partners

24.               The structural reforms implemented by Cameroon have allowed the country to reduce its debt and achieve sustained economic growth.  This, together with growing oil revenue, provides Cameroon with the means to tackle some of its main problems.  However, the economic growth experienced so far is not enough to ensure the total fulfilment of the Millennium Development Goals by 2015.  To this end, continued reform (including structural reform) is necessary in order to improve the business environment, in particular infrastructure, access to credit, and governance.  Despite the discovery of new oil deposits, it is vital to further the diversification of the economy, particularly by enhancing the competitiveness of export sectors (reducing the costs of trade transactions and distortion through trade reforms, including tariff reforms, at the CEMAC level).

25.        The CEMAC CET rates are higher than those of other countries in the region, which does not encourage investment or enable the member countries to exploit their comparative advantages fully.  Cameroon could use its position as a natural leader within the CEMAC to push the Community to liberalize its trade regime, thus stimulating growth throughout the region.  By improving its multilateral commitments, through the extension of its tariff bindings to more non-agricultural products, the reduction of bound rates and the strengthening of its commitments under the GATS, Cameroon would make its trade regime more transparent, more credible and more predictable.  This, in turn, would help the country to attract the capital needed to exploit its vast potential and to profit more fully from its participation in the multilateral trading system. The international community could do more to help Cameroon in its reform efforts by responding favourably to its requests for technical assistance.