Identifier
Created
Classification
Origin
08COTONOU39
2008-01-16 10:41:00
UNCLASSIFIED
Embassy Cotonou
Cable title:  

BENIN'S 2008 INVESTMENT CLIMATE STATEMENT

Tags:  EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC BN 
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R 161041Z JAN 08
FM AMEMBASSY COTONOU
TO SECSTATE WASHDC 0113
INFO DEPT OF TREASURY WASHDC
DEPT OF COMMERCE WASHDC
ECOWAS COLLECTIVE
AMEMBASSY PARIS 
AMEMBASSY DAKAR
UNCLAS COTONOU 000039 

SIPDIS

SIPDIS

STATE PLEASE PASS USTR
STATE FOR EB/IFD/OIA

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC BN
SUBJECT: BENIN'S 2008 INVESTMENT CLIMATE STATEMENT

REF: 07 STATE 158802


UNCLAS COTONOU 000039

SIPDIS

SIPDIS

STATE PLEASE PASS USTR
STATE FOR EB/IFD/OIA

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC BN
SUBJECT: BENIN'S 2008 INVESTMENT CLIMATE STATEMENT

REF: 07 STATE 158802



1. Please find below Embassy Cotonou's submission for Benin's 2008
Investment Climate Statement keyed to the topics in Reftel.

--------------
Openness to Foreign Investment
--------------


2. President Yayi, in office since April 2006, aims to establish
double digit economic growth in Benin before the end of his term in
2011 and is cognizant that he needs foreign investment to reach that
goal. In an attempt to attract increased investment President Yayi
set up the Presidential Investment Council (PIC) in 2006. The
objectives of this organization are to reinforce dialogue between
the government and investors and speed the process of identification
and implementation of reforms in order to improve the business
environment. The PIC includes local and foreign private investors
and government representatives.


3. The government of Benin officially favors and encourages foreign
investment. Many opportunities for foreign investment have
historically been linked to the privatization of state-owned
enterprises, whose numbers have been reduced from 130 in 1980 to
only four currently: SONAPRA (cotton),SBEE (electricity),SONEB
(Water),Benin Telecoms S.A (Telecommunications) and La Poste du
Benin S.A (Post). Privatization of these final parastatals is
slow-moving and attempts at privatizing SONAPRA have failed on two
occasions. Foreign companies are invited to bid on privatizations
and the bidding process is open and well-publicized.


4. The current investment code, adopted in 1990, establishes the
conditions to obtain benefits under different investment regimes and
grants extensive discretionary power to the Investment Control
Commission at the Ministry of Industry and Commerce (MIC). Tax
reforms introduced in recent years largely removed the need for
special incentives to potential investors. The MIC has a "guichet

unique" or one-stop shop to help dispense with unnecessary and
time-consuming formalities facing investors. The GOB also set up the
Business Registration Center in the Cotonou headquarters of the
Benin Chamber of Commerce and Industry (CCIB) to facilitate the
registration of new businesses. Using the center, it is possible to
register a new company within 2 weeks depending on the type of
company.


5. Beninese law guarantees the right to own and transfer private
property. The Beninese court system upholds the sanctity of
contracts but justice is often slow in coming. Beninese courts
process, on average, 8 percent of their civil cases each year.


6. To ease the company start up process, investors are strongly
encouraged to hire a local notary for the required assistance. Any
American firm establishing an office in Benin should work with an
established local partner of solid reputation and retain a competent
Beninese attorney. A list of English-speaking lawyers and Notaries
public is available from the Embassy's Commercial section.

--------------
Conversion and Transfer Policies
--------------


7. Benin is a member of the West African Economic and Monetary Union
(WAEMU). Benin's currency is the CFA franc, which is issued by the
Central Bank of West African states (BCEAO). The CFA franc is pegged
to the euro, and one USD dollar presently equals about CFA 450
(December 2007).

8. Foreign exchange is readily available. Transfers exceeding
300,000 FCFA (approximately $667) require approval from the BCEAO
and the Ministry of Economy and Finance (MEF). This requirement is
aimed at preventing money laundering and is not used to prevent
investors from removing money from Benin. There are no restrictions
on the remittance of profit by companies which invest in Benin. The
remittance of profits by individual resident investors is restricted
in certain areas.

--------------
Expropriation and Compensation
--------------


9. The state guarantees under law that it will make no attempt to
nationalize enterprises operating in Benin. The government does
have the capacity to seize property by eminent domain. If the
government does seize land, it is required to pay compensation to
the owners.

--------------

Dispute Settlement
--------------


10. The government was instrumental in settling a recent investment
dispute. There have been few investment disputes and there does not
seem to be a discernible pattern in the causes of disputes.


11. Benin is a member of the Organization for the Harmonization of
African Business Law, known by its French acronym OHADA, and has
adopted OHADA's universal commercial code to govern commercial
disputes and bankruptcies. Benin is also a member of OHADA's Common
Court of Justice and Arbitration. Benin is also a member of the
International Center for the Settlement of Investment Disputes.


12. Benin does not maintain a commercial court system. Its civil
courts handle commercial cases. In principle, Benin's courts will
enforce foreign court judgments. A profound backlog of civil cases
often results in a wait of two or more years before matters proceed
to trial. Corruption, however, remains an impediment to the
administration of justice. Businesses and other litigants routinely
complain that corruption is particularly widespread at the trial
court level, as well as at administrative hearings.

--------------
Performance Requirements and Incentives
--------------


13. Benin's government maintains a welcoming posture to foreign
investors and its 1990 Investment Code contains several incentives,
in the form of tax reductions, for investors depending on the level
and type of investment. Depending on the amount of the investment,
investors do not have to pay taxes on profits, exports of finished
products, or imports of industrial equipment. To obtain these
benefits investors must meet several criteria including employing a
minimum number of Beninese nationals, safeguarding the environment,
and meeting national accepted accounting standards. The Investment
Control Commission monitors companies which benefit from these
incentives to ensure their compliance with the standards required
for receiving them.

--------------
Right to Private Ownership and Investment
--------------


14. The right to private ownership and investment exists in both
theory and practice. Beninese law guarantees freedom of trade;
choice of customers and suppliers; the right to move freely
throughout the country; the right of foreign employees and their
family members to leave the country; and freedom from government
interference in the management of private enterprises.

--------------
Protection of Property Rights
--------------


15. Secured interests in real and personal property are recognized
and enforced. Benin's legal system protects and facilitates
acquisition and disposition of all property rights, including land,
buildings and mortgages. As mentioned above, Benin's judicial
system moves slowly and it may take a great deal of time to enforce
a secured interest. Secured interests in property are registered
with the Land Office in the Ministry of Finance.


16. International intellectual property agreements are not
adequately enforced. Illegally reproduced DVDs containing pirated
television shows and movies are sold openly.

--------------
Transparency of the Regulatory System
--------------


17. While the government has adopted a transparent policy to foster
free enterprise, red tape is often a problem. Benin recently
slipped in the World Bank's Doing Business ranking in "Dealing with
Licenses" from 120 to 123. According to the same study, it takes a
typical entrepreneur 332 days to secure the necessary licenses,
approvals, and water and electricity connections to build a
warehouse. The law governing commercial transactions conforms to
the standards set by OHADA. Many labor laws remain holdovers from
Benin's pre-1990 Marxist era and serve as impediments to private
enterprise.

-------------- --------------
Efficient Capital Markets and Portfolio Investment
-------------- --------------


18. Government policy supports free financial markets in Benin,
subject to regulatory oversight by the Ministry of Finance and the
Central Bank of West African States (BCEAO). Credit is allocated on
market terms and foreign investors can get credit on the local
market. Some observers claim the banking industry is not subject to
effective mandatory regulation and some banks are not managed in a
transparent fashion.

--------------
Political Violence
--------------


19. Benin is a democracy that has not known political violence in
recent memory.

--------------
Corruption
--------------


20. President Yayi's government has demonstrated a high level of
political will to combat corruption in Benin and has moved, in
several high-profile cases, against corrupt government officials.
Corruption remains a problem in the customs service, with government
procurement, and in the judicial system. Investors may encounter
numerous attempts to solicit bribes as they begin operations in
Benin.


21. While Benin lacks specific anti-corruption legislation both the
gift and receipt of a bribe are illegal in Benin and punishable by a
penalty of less than ten years imprisonment. Benin is a signatory
to the UN Convention against Corruption. The newly established
State Audit Office is responsible for preventing corruption in the
national government.

--------------
Bilateral Investment Agreements
--------------


22. Benin has a bilateral investment agreement with France, Germany,
and Great Britain. Benin does not have a bilateral investment
agreement with the United States.

--------------
OPIC and Other Investment Insurance Programs
--------------


23. The Overseas Private Investment Corporation (OPIC) offers
financing programs to assist companies wishing to invest in
developing countries, including Benin. OPIC insurance could be
available to companies wishing to invest in Benin depending on the
nature and extent of the investment. Potential investors should
contact OPIC directly for further information at info@opic.gov.

--------------
Labor
--------------


24. The government adheres to international labor standards and
fully recognizes the right to form unions and engage in collective
bargaining. The government adopted a new labor code in 1998 aimed at
increasing flexibility in hiring decisions, eliminating the need for
prior authorization from the labor directorate for employee
dismissal, and consolidating labor regulations currently dispersed
among various texts. As a practical matter, however, Benin's labor
practices contain many inefficient features reminiscent of the
Marxist era. Foreign companies who dismiss employees for
unsatisfactory performance are routinely sued. Child labor is
widespread and, although it is making efforts, the GOB still needs
to do more to suppress it.


25. The Constitution provides workers with the freedom to organize,
join unions, meet, and strike, and the Government usually respects
these rights in practice. The labor force is engaged primarily in
subsistence agriculture and other primary sector activities.
Although approximately 75 percent of salaried employees belong to
labor unions the vast majority of union members are in the public
sector with a much smaller percentage of workers in the private
sector unionized. There are several union confederations, and unions
generally are independent of government and political parties.


26. Strikes are permitted; however, the authorities can declare
strikes illegal for stated causes (for example, threatening to
disrupt social peace and order),and can require strikers to
maintain minimum services. In August 2001, the Government declared
illegal a strike conducted by customs officers protesting a
surprise, anti-corruption inspection by the Finance Ministry.

--------------
Foreign Trade Zones/Free Ports
--------------


27. There is a free trade zone in the Port of Cotonou for imports
destined to Benin's landlocked neighbors of Burkina Faso and Niger.
Foreign importers have complained, however, that corruption in the
Port of Cotonou makes it difficult to benefit from this entity.


28. The government plans on constructing an additional free trade
industrial zone in Seme, located on Benin's coast east of Cotonou.
Initially, the site will be 200 hectares in size, and then doubled
during its second phase.

--------------
Foreign Direct Investment Statistics
--------------


29. According to the United Nations Conference on Trade and
Development (UNCTAD),Benin received 63 million dollars in foreign
direct investment in 2006 (the latest statistics available).


30. Much of the foreign investment that has entered Benin since 1990
has been through the acquisition of interests in privatized
companies. The principal foreign investors in Benin are from
Lebanon, India, Germany, France and other European countries.
Chinese companies have also begun making investments in Benin.
Foreign investors have purchased textile, cigarette, cement, and
brewing companies in Benin.


31. U.S. companies Texaco/Chevron and Kerr-McGee have a substantial
investment presence in Benin. Texaco/Chevron provides aviation fuel
for the International Airport in Cotonou and owns local gasoline
stations. Houston-based oil company, Kerr-McGee has acquired rights
to a deep-water block off Benin's coast and drilled two exploratory
wells in March 2003.

BROWN