Gabon Investment Guides - Gabon investment climate

Gabon's economy is dependent on the export of crude oil, which accounts for over 40 percent of GDP, about 60 percent of government revenue, and about 80 percent of exports. Despite significant oil, timber, and mineral resources (producing a per capita GDP greater than USD 4,000), Gabon has accumulated significant debt.

Economic and financial difficulties encountered during the past 12 years have rocked the economy, and have forced the government to repeatedly reschedule its external debt. Since 1990, stabilization efforts have been impeded by political developments as Gabon moved toward multiparty democracy.

Multilateral financial institutions have gained commitments from the government of Gabon for privatization of parastatals and economic and administrative reform, but Gabon has slipped against many of the agreed upon target dates. The Gabonese economy is heavily dependent on world petroleum prices. In 1997, the combined effect of a strong dollar, higher oil prices and an increased oil production (from 18.3 million tons in the prior year to 18.5 million tons) stimulated a minor economic rebound. Real growth exceeded three per cent and inflation was under four per cent.

In 1998 a significant drop in oil prices and the onset of the Asian financial crisis (Asia purchases over sixty per cent of Gabon's timber) have forced the Government to decrease its budget for 1998 by 15 percent. This may slow Gabon's economy in 1998 and 1999. Although production from known reserves are expected to remain flat and slowly decline, the petroleum sector will continue to dominate Gabonese exports and foreign, especially U.S. interests in the five coming years. A number of factors have restrained broader development in general and broader U.S. involvement in particular. Gabon's strong ties with France are an important element of the commercial setting. France furnishes half of Gabon's imports, French firms and subsidiaries dominate the local formal private sector, and over 11,000 French citizens live in the country.

France's ability to offer concessional financing through the Agence Francaise de Developpement (A.F.D.) is a serious hurdle to U.S. competitors. Other key factors of the economy which have limited broad-based development include a lack of infrastructure and communications outside Libreville and Port Gentil; Gabon's small market (about one million inhabitants); lack of an entrepreneurial tradition; and high labor costs, which make the manufacturing sector uncompetitive compared to other African states. There are no restrictions on the introduction of foreign capital into Gabon, and funds may be freely transferred within the franc zone. Once proof is furnished to the Ministry of Finance that funds to be repatriated come from either wages, salaries or profits and that all local taxes have been paid, funds may be transferred outside the franc zone and there is no difficulty in obtaining foreign exchange.

Gabon has been a member of the French Franc Zone since independence in 1960 and is a member of the Bank of the Central African states ("Banque des Etats de l'Afrique Centrale") or BEAC. The BEAC acts as the Central Bank for Gabon, Cameroon, Central African Republic, Congo, Chad and Equatorial Guinea. Although the BEAC s rules of intervention are common to all six countries, each country's account is maintained separately and each country's international reserves are pooled in an account held at the French treasury. The convertibility of the CFA franc is guaranteed by France through an operation account which links the BEAC and the French treasury.

The French Treasury provides an exchange rate guarantee expressed in terms of special drawing rights corresponding to reserves held in French francs for each country. The interest rate structure is common to all member countries of the zone. The BEAC also controls the liquidity within the zone and within each country by granting rediscounting facilities and money market advances. Management of most of the direct or guaranteed public debt is the responsibility of the public accounts department (former Caisse Autonome d'Amortissement), an organization controlled by the Ministry of Finance. Since 1987, Gabon has been compelled in a number of occasions to reschedule its debt either by the Paris.

Foreign firms established in Gabon operate on an equal basis with national firms. Under Gabonese law, business investments that are expropriated must first be compensated as determined by an independent third party. The government of Gabon has not exhibited any recent tendency to discriminate against U.S. investments, companies, or representatives in expropriation, nor have there been any indications or reports of incidences of “creeping expropriation,” such as through confiscatory tax regimes.

There are no recent examples of property being expropriated, but there was an instance of a mining permit being re-issued to another company. According to the Ministry of Natural Resources, a mining permit for the Belinga iron mine was issued to the Brazilian mining company, CVRD, in March 2005. The government then requested CVRD to re-bid for the permit in competition with a Chinese consortium led by the China National Machinery and Equipment Import and Export Corporation (CMEC). In June 2006, the government awarded CMEC the Belinga project.

While there is no general requirement for local participation in investments, many businesses find it useful to have a local partner who can help navigate the less than objective factors in the business environment.

Secured interest in property is recognized, and the recording system is fairly reliable. Under the 1998 investment code, no investment can be expropriated without prior just compensation as determined by an independent third party. As a member of the Central African Economic and Monetary Community (CEMAC) and the Economic Community of Central African States (CEEAC), Gabon adheres to the laws of the African Intellectual Property Office (OAPI). Based in Yaounde, Cameroon OAPI aims to ensure the publication and protection of patent rights, encourage creativity and transfer of technology, and create favorable conditions for research. As a member of OAPI, Gabon acceded to a number of international agreements on patents and intellectual property, including the Paris Convention, the Berne

Convention and the Convention Establishing the World Intellectual Property Organization.

There are no recent examples of property being expropriated, but there was an instance of a mining permit being re-issued to another company. According to the Ministry of Natural Resources, a mining permit for the Belinga iron mine was issued to the Brazilian mining company, CVRD, in March 2005. The government then requested CVRD to re-bid for the permit in competition with a Chinese consortium led by the China National Machinery and Equipment Import and Export Corporation (CMEC). In June 2006, the government awarded CMEC the Belinga project.

There is a lack of accountability and oversight in the government's budget process, which can be seen in other areas of the country's economy. Companies have complained of a lack of transparency in customs and other government administrative affairs. In the past, the government's fiscal shortfalls, weak financial management, and suspected corruption have contributed to significant arrears in domestic and external debt payments. High oil prices during 2008 provided a short-lived boost to revenues, and allowed the government to retire some debt, but questions remain about fiscal management.

In 2004, the government established a new anti-corruption authority, the Commission to Combat Illicit Enrichment. The commission was charged with publishing quarterly and annual reports on its activities, but is widely regarded as ineffectual.

Gabon is a participant in the Extractive Industries Transparency Initiative (EITI), which aims to provide more transparency in accounting for revenues from petroleum and mining industries. Gabon published its first EITI report in December 2005, its second report in early 2007, and its third report in March 2008.

During the past year, there has been an increase in anti-corruption activity on the part of members of civil society. Specifically, several local non-governmental organizations have targeted alleged corruption on the part of high-level government officials, including the President and several Ministers.

As of January 2009, the US has no bilateral investment or taxation treaty with Gabon, although negotiations towards a bilateral investment agreement have been underway for several years. Gabon is a beneficiary of the African Growth and Opportunity Act (AGOA), a framework for US trade, investment and development policy for sub-Saharan Africa. Gabon has bilateral investment agreements with the following countries: Belgium, Luxembourg, China, Egypt, France, Germany, Italy, Lebanon, Mali, Morocco, Portugal, Sao Tome and Principe, South Africa, and Spain. Also, there is a bilateral investment agreement among CEMAC member countries.

In October 2000, a Free Trade Zone project called "Zone Franche de l'Ile de Mandji" (Mandji Free Trade Zone) was announced near Port-Gentil for the exportation of processed wood and/or oil field services. The zone has not progressed beyond the project stage.

As a member of CEMAC, Gabon's trade with other member countries (Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea and Gabon) is subject to low or no customs duties.

According to the UN Conference on Trade and Development (UNCTAD) Country Fact Sheet on Gabon for 2008, the total value of foreign direct investment (FDI) in place in Gabon in 2007 was USD 717 million (compared to USD 448 million in 2006). Annual direct investment into Gabon in 2007 was USD 269 million (compared to USD 268 million in 2006).

The UNCTAD Gabon Fact Sheet for 2008 indicates that the total value of Gabonese direct investment abroad in 2007 was USD 398 million (compared to 340 USD million in 2006.) Annual direct investment capital flow out of Gabon in 2007 was USD 57 million (compared to USD 106 million in 2006).

Most foreign investment comes from France and is concentrated in petroleum (Total) and manganese (COMILOG/ERAMET). According to the French Ministry of Economy/Commerce, France is the main supplier of goods to Gabon, and Gabon is the second largest recipient of French FDI in Africa. Most foreign investment (including that of the US) is concentrated in the oil sector. Major companies in Gabon include Total, Shell, Marathon Oil, Perenco, Vaalco, and COMILOG.

In June 2006, Gabon signed an agreement with a Chinese consortium for the development of the Belinga iron ore deposit that includes the development of the mine, roads, a railway, a hydroelectric dam and a deep-water port. Total investment for the Belinga project is estimated at $3 billion over the next 3-5 years.

Last Updated on Monday 14th December 2009