SITUATION IN GABON

GABON IN FOCUS
Issue 21, February - May 2005 Antoine Lawson
Date de parution : dimanche 23 octobre 2005.

Gabon is a small equatorial country with a population of just over 1.2 million, located on Central Africa’s Atlantic coast. Gabon became independent in 1960 and, reflecting its colonial heritage, economic, linguistic and cultural ties with France remain strong.
LIBREVILLE, 23 octobre (Infosplusgabon) - President Omar Bongo Ondimba, in office since 1967, was re-elected in December 1998 with 66 % of the vote. President Bongo’s party and coalition partners hold a large parliamentary majority and have held almost all ministerial appointments in recent governments. The nation boasts a stable history.
Gabon’s economy is dominated by oil. Oil revenues comprise 65% of government budget, 43% of gross domestic product (GDP), and 81% of exports. Gabon’s oil revenues have given it a strong per capita GDP of more than $4,500, extremely high for the region, but the income distribution is highly skewed and poor social indicators are evident.
Approximately 5% of the population receives over 90% of the income/wealth. The economy is highly dependent on the extraction of abundant primary materials. After oil, logging and manganese mining are the other economic drivers.
Timber exports in 1998 were 1.8 million cubic meters (worth $282 million) and about 2.4 million cubic meters in 1999. Manganese exports were just over 2 million metric tons in 1998 and 1999 (worth $139 million).
Gabon remains highly dependent on imports and France remains the leading supplier, with 39% of total imports. The United States accounted for only 6% of Gabon’s imports. The United States sells oil field and other heavy equipment to Gabon and is becoming more active in provision of telecommunications and information technology products.
Targeted privatisation of the telecommunications and other parastatal companies may provide other opportunities. Two new cell phone licenses have been awarded, but interconnectivity with the existing network has still not been established.
Internet access has in principle been opened, but in practice the state telecom company (OPT) still controls access. The United States was the main destination for Gabon’s exports (about 68 % of the total) in 1998, because of oil purchases.
Observers have consistently lamented the lack of transformation of primary materials in the Gabonese economy. Various factors have stymied more diversification of the economy. These include a small market of 1,2 million people, dependence on French imports, inability to capitalise on regional markets, lack of “entrepreneurial zeal” amongst the Gabonese population, and the fairly regular stream of oil “rent”.
Oil production has however declined rapidly in recent years. Output has decreased from its high point of 370 000 barrels per day in 1997 to around 250 000 barrels per day and the country’s status as the continent’s third biggest oil producer has been taken by neighbouring Equatorial Guinea, which only discovered oil in 1995.
Gabon’s increasing modest economic prospects are owing to falling oil production, and despite the fact that the output from the Rabi-Kounga oilfield has stabilised, oil prices have gone up, and a rising US interest in African oil has encouraged the exploitation of Gabon’s marginal oilfields.
Based on existing discoveries and announced development programmes, it is estimated that oil production edged down to 260 000 barrels/day in 2004, and that production will only reach 239 000 barrels/day in 2005. Gabon thus seeks to encourage and increase its openness to foreign investment and diversify its economic activity.
Gabon and its Central African neighbours are seeking increased trade and integration through the Economic and Monetary Community of Central Africa (CEMAC). Gabon has significant potential as a regional hub for services, distribution and marketing and also offers a wealth of agricultural and fishery resources, which have been largely neglected and, as a result, are underdeveloped.
The majority of the population relies on subsistence farming, although complications such as tsetse flies make farming difficult in some areas. The small processing and service sectors are largely dominated by a few prominent local investors.
In an effort to diversify its economic activity away from oil, government is hoping to encourage investment in fisheries, port development and transport, timber processing and light industry. The government of Gabon has attempted various structural reforms, the most significant of which is the adoption of new labour and forestry codes.
Improvements in governance and to the civil service have also been made. Although revision and simplification of the investment charter were completed in late 1998 however, they have not been fully implemented, and revisions of the mining, forestry, and labour codes have also been written, but not fully adopted by the national assembly. The country’s investment code contains incentives similar to those found in other Francophone African countries. For instance, there are no restrictions on introducing foreign capital into Gabon, and funds may be transferred freely for commercial transactions within the zone and abroad through regular banking channels overseen by the regional Central Bank.
Unfortunately poor fiscal management has hindered the economy in the past. Government overspending in 1998 in the face of falling oil revenues and weak timber prices caused a government budget crisis and economic recession in 1999.
Overspending on the Transgabonais railroad, the oil price shock of 1986, the CFA franc devaluation of 1994, and low oil prices in the late 1990s also caused serious debt problems. Gabon thus earned a poor reputation with the Paris Club and the International Monetary Fund (IMF) for the management of its debt and revenues.
Successive IMF missions have criticised the government for overspending on off-budget items, over-borrowing from the Central Bank, and slipping on the schedule for privatisation and administrative reform. Following the January 1994 devaluation of the CFA Franc, used by Gabon and 12 other primarily French-speaking African countries, Gabon qualified for a three-year Extended Financing Facility (EFF) with the IMF and reschedulings at the Paris and London Clubs.
Key requirements of the IMF/World Bank economic adjustment programme were the privatisation of commercially viable parastatal firms, administrative reform and audits of government revenue and arrears. The public utilities firm, Société d’énergie et d’eau du Gabon (SEEG), was privatised by long-term concession in 1997, but Gabon has since slipped against other targets, and the IMF programme lapsed in 1999.
A 15-month Stand-By Arrangement between the government and the IMF was negotiated in June 2004.
At present therefore, opportunities in the petroleum sector still remain the most attractive for US and French companies, particularly in exploration, oil field services and drilling, and the oil industry remains key to the economy of the country and is its most important natural resource.
In particular, the upstream oil industry is its major source of foreign exchange, accounting for the majority of all exports. The downstream oil industry is also well-developed with an oil refinery at Port Gentil (economic capital) and a number of international oil companies active in the distribution and marketing of petroleum products.
The government has realised that the oil sector needs a new regulatory framework, and is at pains to reassure oil companies that revisions will be done in close consultation with them. Gabon’s oil industry predates many of those in the Gulf of Guinea and senior oil officials concede there are areas of legislation that would benefit from updating.
Former General manager of Hydrocarbon Roger Sickout comments that “A number of Gabon’s oil fields are approaching the end of their productive life and would be abandoned. Big fields have lower exploitation and production costs than the smaller fields, which means that the decline of Rabi (Gabon’s most important oil field) will have a disproportionately negative effect on state revenues”.
In early February 2004, Chinese President Hu Jintao visited Gabon and signed key bilateral trade accords on oil exploration.