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. - - - - - - - - - - - - - - - - - CHADIAN BUSINESS UNION SPEAKS OUT - - - - - - - - - - - - - - - - - ¶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. - - - - - - - - - - - - - - - - - - - - - - - - A CONVERSATION WITH LEADING COMMERCIAL OPERATOR - - - - - - - - - - - - - - - - - - - - - - - - ¶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. - - - - COMMENT - - - - ¶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