NORTH-CENTRAL COTE D'IVOIRE AWAITS ECONOMIC

UNCLAS ABIDJAN 000716 SENSITIVE SIPDIS C O R R E C T E D C O P Y (ADDING PARA 7) E.O. 12958: N/A TAGS: ECON EAGR EFIN PGOV IV SUBJECT: NORTH-CENTRAL COTE D'IVOIRE AWAITS ECONOMIC TRANSITION ¶1. (SBU) Summary. Poverty in northern Cote d'Ivoire has worsened during the seven-year political/military crisis. The Forces Nouvelles (FN) still exert substantial control over the northern economy, levying significant taxes on some sectors. Additionally, businesses in the north have experienced increased transportation costs resulting from FN barricades and poor road conditions. Bank presence has increased, but bankers remain wary of extending credit until elections take place. After a long hiatus, northerners are now required to pay for water and electricity. Some elements of the GOCI administration are now carrying out their functions in the north; but in some cases official taxes duplicate--rather than replace--unofficial FN levies. Other GOCI agencies have not yet resumed activity (e.g., customs enforcement). Businesspeople in the region hope for quick elections and completion of the reunification process so business projects can get underway. While the end of the crisis will almost certainly help the economy of the north, many in the region will lose their source of income as the GOCI resumes more of its official functions. End summary. -------------- POVERTY IN THE NORTH -------------- ¶2. (SBU) On a week-long trip to north-central Cote d'Ivoire in mid-November, econoff and economic assistant observed first-hand the high level of poverty. At almost every barricade, men dressed in plain clothes stopped the embassy vehicle and asked for money even though the car bore diplomatic license plates--a practice that is quite rare in Abidjan. A relatively undeveloped region of the country, north-central Cote d'Ivoire has experienced economic deterioration over the past seven years. According to Cote d'Ivoire's 2008 Poverty Reduction Strategy Paper, poverty rates in Bouake and Korhogo are 57 percent and 77 percent, respectively, compared to 21 percent in Abidjan. ¶3. (SBU) The fact that Cote d'Ivoire's real GDP has continued to grow (on average 1.0 percent per year from 2002 to 2009) during a time when the entire northern half of the country has been isolated from the official economy is one indication of the relative lack of economic development in the north. The nation's revenue-generating products are largely found in the south: hydrocarbons (all offshore),cocoa (some 85 
percent in the south),coffee, timber, tuna, pineapples, bananas, rubber, and palm oil. Key services such as port operations and telecommunication services are almost exclusively located in the south. -------------- DIFFICULTIES OF DOING BUSINESS IN THE NORTH -------------- ¶4. (SBU) The FN still exerts significant control over the northern economy. According to Bright Kone, assistant to the president of the Confederation of National Federations of Livestock and Meat Sectors of West African Economic and Monetary Union Member States, the FN charges livestock dealers 111,000 CFA (USD 253) for each rail car of cattle and 125,000 CFA (USD 285) for each rail car of sheep that passes through the FN-controlled region (typically en route from Burkina Faso to Abidjan). Each month approximately 60 trainloads of livestock, with 10 to 20 cars on each train, pass through the FN zone. Kone also reported that similar fees paid for livestock shipments by truck total approximately USD 165,000 per month. ¶5. (U) Roads in the north-central region are generally in poor condition. On the stretch between Ferkessedougou and Ouangolodougou, portions of the road that at one point were paved appeared to be nothing more than dirt roads. The state of the roads and the proliferation of barricades have increased the cost of doing business in the north--especially for perishable commodities such as mangos and corn. They also make the region's exports--such as cotton--less competitive on world markets. ¶6. (SBU) While at least six banks operate in Bouake and Korhogo (BIAO, BICICI, BCI, SGBCI, Ecobank, BOA),they are leery of extending credit before elections take place. Managers of Filiature et Tissage de Gonfreville (FTG),a cotton spinning and weaving company, complain that because of the political/security climate, the company has not been able to secure financing for replacement parts and new equipment for several years. Branches of the Central Bank of West African States (BCEAO) in Bouake and Korhogo have not yet re-opened. ¶7. (SBU) While customQpersonnel hQe returned to the region, they have not been able to perform their duties. The lacy of customs enforcement has made it difficult for officially protected sectors, such as cotton, to compete with cheaper imports. In fact, a senior manager at FTG said counterfeit goods and lack of enforcement of import duties represented his greatest challenge. FTG, which employed approximately 1,500 workers in 2002, now employs only 400. -------------- BREAKS OR NORTHERNERS COMING TO AN END -------------- ¶8. (SBU) Northerners have enjoyed some economic advantages over southerners during the crisis. With no official GOCI presence there, they have paid no taxes on autos (a 17 percent tax) or motorcycles (a tax ranging from USD 160 to USD 200 per motorcycle). That savings came to an end in February 2009, however. Residents of the north have not paid for electricity or water during the crisis. Those benefits have also ended, as the national utility companies (SODECI and CIE, both owned by the French industrial group Bouygues) began billing northerners in April 2009. ¶9. (SBU) Fuel remains less expensive in the north. Unleaded gasoline in Korhogo was selling for 600 CFA (USD 1.36) per liter, compared to the official price of 694 CFA (USD 1.58) per liter in GOCI-controlled areas. The price of diesel in Korhogo was 500 CFA (USD 1.14) per liter, versus 571 CFA (USD 1.30) in GOCI-controlled areas. Fuel smuggled from Burkina Faso--albeit of poor quality--escapes official taxes, allowing for lower prices at the pump. -------------- RETURN OF GOVERNMENT SERVICES -------------- ¶10. (SBU) Prefecture officials resumed their positions in Bouake, Korhogo, and Ferkessedougou in 2007. In meetings with embassy staff they reported that public schools and hospitals were open and operating, although schools in Korhogo were still using many volunteer teachers. In Bouake, a local official maintained that his city is now more secure than Abidjan, citing the fact that Bouake pharmacies are open through the night without protection--a practice unheard of in Abidjan. Nevertheless, the official noted that rural areas and villages are much less secure, with uncontrolled FN members committing violent acts against the population. He said judges were present but did not have full operational powers due to the lack of police and gendarmes. ¶11. (SBU) Prefecture officials reported that the consolidation of the national treasury ("unite de caisse" in French) had not taken full effect, though the GOCI had begun to collect taxes on cars and motorcycles in Bouake (but not Korhogo). FN members, who demand a portion of customs revenue and ultimately aspire to become regular customs officials, continued to prevent regular customs officials from performing their duties. ¶12. (SBU) In Bouake, the secretary general of the prefecture and a local bank executive reported that businesses were paying taxes to GOCI treasury officers while still paying unofficial taxes to the FN. Thus, the return of the GOCI has generally resulted in more costs (electricity, water, and taxes) but little help for businesses (in the form of customs enforcement, relief from unofficial FN taxes, or better credit terms). -------------- COMMENT -------------- ¶13. (SBU) There is clearly a greater urgency to move to elections among businesspeople in the north than in the south. This is understandable as they currently experience both the disadvantages of the crisis and some of the costs of the return of government. While elections are likely to bring a more secure environment, increasing credit flows and economic growth, the area has been historically disadvantaged, and a robust recovery capable of providing income to former FN soldiers and others will take time. ¶14. (SBU) The ragged, gaunt FN members at barricades virtually begged emboffs for food or cash. Though some reinsertion programs are in place, it is clear that there will be a difficult transition for those who have profited from the crisis, once the return of the government is complete, since even now there are many who are barely managing to survive. NESBITT