CHAD'S BESIEGED PRIVATE SECTOR

UNCLAS NDJAMENA 001003

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF, EB, USTR FOR WILLIAM JACKSON, LONDON AND
PARIS FOR AFRICA WATCHERS

E.O. 12958: N/A
TAGS: ECON BEXP EFIN ETRD CD
SUBJECT: CHAD'S BESIEGED PRIVATE SECTOR


1. (SBU) SUMMARY: The recent publication of a "white
paper" by a leading Chadian business union spells out
in detail the Government of Chad's failure to sustain
a minimally enabling environment conducive to
national and foreign investment. Chad's besieged
private sector increasingly believes doing business-
by-the book only makes them an easier prey for rent-
seeking government officials. END SUMMARY.

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CHADIAN BUSINESS UNION SPEAKS OUT
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2. (U) On July 17, Rakhis Manany, president of the
country's largest business union "Patronat," handed
Ambassador Wall a "white paper" recently written by
the organization. The document, which was also
delivered to President Deby, outlined a number of
concerns by local operators in the current business
environment. The "white paper" highlighted the
country's weak critical infrastructure, including
poor roads, unreliable electricity, and inefficient
telecommunications, as a significant problem that has
seen little improvement in recent years. It also
noted the lack of a qualified labor force and the
weak educational system. But above all, the paper
underscored the scant confidence that Chadian
operators had in the tax administration and judicial
system. The document emphasized that companies in
the formal sector repeatedly faced (and inevitably
lost) cripplingly expensive law suits from aggrieved
ex-employees and sub-contractors in the national
courts. The paper characterized most of the suits as
frivolous. Furthermore, those few above-the-board
companies which actually kept financial records were
preyed upon by government officials seeking to obtain
additional rents from alleged shortcomings in tax or
social security payments.


3. (U) As a result of the strong disincentive to
join the formal sector, the country's informal sector
had ballooned, which had in turn undermined the
ability of the formal sector to compete. Patronat's
membership, for instance, includes only fifty
companies that can officially be considered part of
the formal sector, and only a handful of those
companies are Chadian-owned and operated.


4. (U) The "white paper" concludes that significant
reform would require a concerted effort from the GOC
to improve the business environment, not only to
allow Chadian entrepreneurs to operate freely, but
also to expand possibilities for foreign investment.
To achieve this, the document proposes that Chadian
authorities reform the current tax administration,
reinforce the legal system, and develop the country's
infrastructure.

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A CONVERSATION WITH LEADING COMMERCIAL OPERATOR
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5. (U) After delivering the "white paper" to the
Ambassador, Manany stated that the piece reflects the
overall frustrations felt by many Chadian commercial
operators. He argued that the current commercial
environment was badly in need of governmental
support. He admitted that current security concerns
in Eastern Chad had drained much of the GOC's
resources. However, a failure to address the current
woes in the business environment would only lead to
further instability. "We need justice, security and
governors that can read and write," explained Manany.


6. (SBU) Manany also noted that President Deby's
plans for developing a political dialogue and
reforming the electoral process were important
variables that would affect the economic sector.
Manany, who himself was a supporter of President
Deby's Movement for Patriotic Salvation (MPS) party,
said that the President should take measures to
reform the electoral process to ensure that future
legislative and communal elections were legitimate
and based on an accurate national census. He
supported appointing a Prime minister "with power"
and letting him assume greater responsibility for
governing. He also said that Deby must reform the
judicial process, to make sure that those responsible
for promoting insecurity are held accountable (this
included prosecuting members of Deby's Zaghawa tribe,
who were often not prosecuted for crimes). Manany
pointed out that one of Deby's wives was notorious
for not paying any customs fees for products she
would purchase from trips to Northern Cameroon. This
blatant disregard for rules and regulations was
symbolic of the corruption at the heart of the
regime, and disheartening for Chadians. Manany said
that if Deby were able to make the necessary reforms,
business operators would benefit from a more secure
and transparent political environment.


8. (SBU) Manany warned that a solution needed to be
found while oil riches provided Chad "it's best
chance" to develop economically. If this chance was
missed, he warned, the consequences would be
catastrophic, with Chad descending to a scenario
where rebel elements infiltrated throughout the
country made the region ungovernable.

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COMMENT
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9. (SBU) Patronat's publication and Manany's
comments reflect a common viewpoint that we have
heard repeatedly from most commercial operators in
the past year: doing business in Chad is tough,
primarily because the government isn't doing its job
of providing a safe and transparent environment that
encourages commercial development. Insecurity,
inefficient tax and judicial administrations, and
endemic corruption within the regime handicaps
businesses, and drains their financial and material
resources. Operators have, in the past, taken their
concerns directly to President Deby, with little
result. The recent agreement between the GOC and the
World Bank calls for a mutual commitment to assist
the development of the commercial sector. The
question is how much Deby will take note of the calls
of commercial operators to improve security, the
justice system, the tax structure, basic
infrastructure, etc. To date, the regime has done
little, and business operators continue to operate in
an environment that is anything but conducive to
commercial growth and positive economic development.


WALL