INVESTMENT CLIMATE STATEMENT 2009 - GABON

UNCLAS LIBREVILLE 000014


DEPT PASS USTR
STATE FOR EB/IFD/OIA

E.O. 12958: N/A
TAGS: EINV OPIC USTR KTDB EFIN ETRD ELAB PGOV GB
SUBJECT: INVESTMENT CLIMATE STATEMENT 2009 - GABON

REF: 08 STATE 123907


1. Per reftel, following is the 2009 Investment Climate Statement
for Gabon.

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Openness to Foreign Investment
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2. Gabon is generally open to foreign investment, with foreign firms
controlling the country's three main sources of income and exports:
petroleum, manganese and timber. However, several factors constrain
foreign investment in the non-extractive industries. These include
a small domestic market, high production costs, a rigid labor
market, limited and deteriorating infrastructure (transportation,
telecommunications, etc.),and an unpredictable judicial system.
Gabon's regulatory and judicial bodies are subject to influence,
creating uncertainty concerning fair treatment and the sanctity of
contracts.


3. The 1998 investment code conforms to the Central African Economic
and Monetary Community (CEMAC) investment regulations, providing the
same rights to foreign companies operating in Gabon as to domestic
firms. Businesses are also protected from expropriation or
nationalization without just prior compensation as determined by an
independent third party. The 1998 code also established the Private
Investment Promotion Agency (APIP),which manages the one-stop-shop
("guichet unique") to facilitate the opening of a business. Certain
sectors have specific investments codes, such as mining, forestry,
petroleum and tourism, which attempt to encourage investment through
customs and tax incentives.


4. Gabon is affiliated to the Organization for Business Law
Harmonization in Africa (OHADA). Legislation allows foreign
investors to choose freely from a wide selection of legal business
structures, such as a private limited liability company or public
limited liability company. The distinctions arise primarily from
the minimum capital requirements and the conditions under which
shares may be re-sold. There are no restrictions on foreign
investment in Gabon, but the state reserves the right to invest in
the equity capital of ventures established in certain sectors (e.g.,
petroleum and mining). There are no other blanket requirements for
local participation in the capital of local corporate entities, nor
any systemic practices by private firms to restrict foreign
investment, participation, or control.

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Conversion and Transfer Policies
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5. Gabon is a member of the Central African Economic and Monetary
Community (CEMAC) and the Bank of Central African States (BEAC).
The other members in these organizations are Cameroon, the Central
African Republic, Congo-Brazzaville, Equatorial Guinea, and Chad.
Gabon's currency is the franc of the Communaute Financiere Africaine
(CFA). The CFA is convertible and tied to the euro; 1 euro equals
656 CFA.


6. Foreign investors have the option of opening local bank accounts
in CFA, dollars, or Euros. There is no difficulty obtaining foreign
exchange, with the three main commercial banks providing currency
exchange services at non-prohibitive rates. Under Gabonese law,
documentation is required to substantiate the need for any foreign
exchange over one million CFA (approximately USD $2,000).


7. There are no legal restrictions on converting or transferring
funds associated with an investment, including the inflow or outflow
of funds for remittances of investment capital, earnings, profits,
etc. CEMAC regulations require banks to record and report the
identity of customers engaging in large transactions.
Additionally, financial institutions must maintain records of large
transactions for five years. CEMAC regulations do not stipulate a
threshold amount for transactions to be reported. Under Gabonese
law, however, documentation is required to substantiate the need for
any foreign exchange over one million CFA (approximately USD
$2,000). Transfers within the CEMAC zone are not restricted.


8. In August 2008, the BVMAC (Bourse des Valeurs Mobilieres de
L'Afrique Centrale),a Central African regional stock exchange
created in 2003, was officially launched in Libreville. However, it
is still in its embryonic stage, and currently operates only one day
per week for a few hours. Overall authority for Gabon's exchange
control system rests with the Department of Economic Control and
External Finance within the Ministry of Finance.

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Expropriation and Compensation
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9. Foreign firms established in Gabon operate on an equal basis with
national firms. Under Gabonese law, business investments that are
expropriated must first be compensated as determined by an
independent third party. The government of Gabon has not exhibited
any recent tendency to discriminate against U.S. investments,
companies, or representatives in expropriation, nor have there been
any indications or reports of incidences of "creeping
expropriation," such as through confiscatory tax regimes.


10. There are no recent examples of property being expropriated, but
there was an instance of a mining permit being re-issued to another
company. According to the Ministry of Natural Resources, a mining
permit for the Belinga iron mine was issued to the Brazilian mining
company, CVRD, in March 2005. The government then requested CVRD to
re-bid for the permit in competition with a Chinese consortium led
by the China National Machinery and Equipment Import and Export
Corporation (CMEC). In June 2006, the government awarded CMEC the
Belinga project.


11. While there is no general requirement for local participation in
investments, many businesses find it useful to have a local partner
who can help navigate the less than objective factors in the
business environment.

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Dispute Settlement
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12. There have been significant instances of disputes with U.S.
firms, but most disputes are resolved before going to outside
arbitration. Both settlements and monetary judgments are usually
made in the currency on which the business contract was based,
whether CFA or the foreign investor's currency.


13. Gabon's legal system is based on the French model, with a
written code of commercial law. The law is not consistently
applied; Gabon's judicial bodies are subject to political influence,
creating uncertainty concerning fair treatment and the sanctity of
contracts. Foreign court and international arbitration decisions
are accepted, but enforcement may be difficult.


14. Gabon is a member of the International Center for the Settlement
of Investment Disputes (ICSID) and the New York Convention of 1958
on the Recognition and Enforcement of Foreign Arbitral Awards.
However, Gabon has not adopted specific legislation to enforce
awards resulting from ICSID or New York Convention decisions. Gabon
is also a party to the World Trade Organization (WTO),the
Multilateral Investment Guarantee Agency (MIGA),and the
Organization for Business Law Harmonization in Africa (OHADA),which
provides an International Court of Justice and Arbitration (CCJA)
common to its 16 member countries for the settlement of conflicts
related to business law implementation.

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Performance Requirements and Incentives
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15. There are no specific performance requirements imposed as a
condition for establishing, maintaining or expanding investment.
There are no requirements for investors to buy local products, to
export a certain percentage of output or to invest in a specific
geographical area. There is no blanket requirement that nationals
own shares in foreign investments in Gabon, that the share of
foreign equity be reduced over time, or that technology be
transferred on certain terms. Nonetheless, many investors find it
useful to have a local partner who can help navigate the less than
objective factors in the business environment.


16. It is expected that foreign investors will recruit and train
Gabonese citizens to gradually take on responsibilities.
Accordingly, hiring foreigners is subject to prior authorization
from the Ministry of Labor. Foreign firms have stated that there is
a lack of qualified Gabonese workers, requiring companies to request
authorization to hire foreigners. Non-Gabonese Africans find it
increasingly difficult to obtain employment authorization;
non-African expatriates have less difficulty.


17. Gabon's main industries, petroleum, mining and timber, encourage
investment through customs and tax incentives. For example, oil and
mining companies are exempt from customs duty on imported working
equipment. The Government has attempted to promote tourism with
the
Tourism Investment Code of 2000, which provides tax exemptions
during the first eight years of operation, tax-free imports, and
other administrative incentives.

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Right to Private Ownership and Establishment
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18. Any legal entity or person wishing to do business in Gabon must
request prior permission from the Ministry of Commerce. Foreign
investors are largely treated in the same manner as their Gabonese
counterparts with regard to the purchase of real estate, negotiation
of licenses, and entering commercial agreements.

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


19. Secured interest in property is recognized, and the recording
system is fairly reliable. Under the 1998 investment code, no
investment can be expropriated without prior just compensation as
determined by an independent third party. As a member of the
Central African Economic and Monetary Community (CEMAC) and the
Economic Community of Central African States (CEEAC),Gabon adheres
to the laws of the African Intellectual Property Office (OAPI).
Based in Yaounde, Cameroon OAPI aims to ensure the publication and
protection of patent rights, encourage creativity and transfer of
technology, and create favorable conditions for research. As a
member of OAPI, Gabon acceded to a number of international
agreements on patents and intellectual property, including the Paris
Convention, the Berne
Convention and the Convention Establishing the World Intellectual
Property Organization.


20. There are no recent examples of property being expropriated, but
there was an instance of a mining permit being re-issued to another
company. According to the Ministry of Natural Resources, a mining
permit for the Belinga iron mine was issued to the Brazilian mining
company, CVRD, in March 2005. The government then requested CVRD to
re-bid for the permit in competition with a Chinese consortium led
by the China National Machinery and Equipment Import and Export
Corporation (CMEC). In June 2006, the government awarded CMEC the
Belinga project.

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Transparency of Regulatory System
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21. Regulatory procedures are streamlined and no laws or policies
are used to impede foreign investment. Nevertheless, some less than
objective factors in the system pose problems at times and
government policies and laws do not establish "clear rules of the
game." Gabon's regulatory bodies are subject to influence, creating
uncertainty concerning fair treatment and the sanctity of contracts.
Additionally, as a former French colony, Gabon maintains strong
economic ties with France, which at times makes foreign investment
by others difficult.


22. Tax, environment, health and safety laws and policies are
transparent and consistent with international norms, and do not
impede investment. Labor laws, on the other hand, are considered by
many investors to be unusually weighted toward workers' interests,
which tends to impede investment.


23. There are no informal or nongovernmental regulatory procedures
in place. Proposed laws and regulations are not published in draft
form for public comment.


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Efficient Capital Markets and Portfolio Investment
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24. The Bank of the Central African States (BEAC),headquartered in
Cameroon, regulates the banking system. Overall authority for
Gabon's exchange control system rests with the Ministry of Finance.
Gabon's banking system includes one development bank (BGD) and five
commercial banks. The BGD normally lends to small and medium sized
companies. One of the five commercial banks is affiliated with a
French bank (Credit Agricole),one is owned by a Moroccan company,
and one is an American bank (Citigroup).


25. Commercial banks offer most corporate banking services, or can
procure them from overseas. Local credit to the private sector is
limited and expensive, but available to both foreign and local
investors on equal terms. The country's main economic actors, the
oil companies, finance themselves outside Gabon. Commercial banks
have transferred excess liquidity to correspondent banks outside the
region.


26. The Central Africa Regional Stock Exchange (BVMAC) began
operation in August 2008, but is still in its embryonic stage.

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Political Violence
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27. There have been no incidents of significant civil disturbance or
political violence in the past few years.
The country peacefully carried
out presidential elections in 2005
and 1998, as well as legislative elections in 2006. In a region
where instability and strife are common, Gabon stands out as a haven
of peace and stability.


28. President Omar Bongo Ondimba has served as Gabon's Head of State
since 1967. In January 2006, he began what most expect to be his
final seven-year term in office. There are uncertainties, however,
concerning whether Gabon can remain free of civil disturbance in a
post-Bongo era.


29. In 1991 and 1993, there were significant (though short and
localized) bouts of civil disturbance and violence associated with
elections. In early 1994, street demonstrations led to the
imposition of a curfew for several weeks. Negotiations between the
majority and opposition parties in October 1994 resulted in
arrangements generally satisfactory to all.

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Corruption
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30. There is a lack of accountability and oversight in the
government's budget process, which can be seen in other areas of the
country's economy. Companies have complained of a lack of
transparency in customs and other government administrative affairs.
In the past, the government's fiscal shortfalls, weak financial
management, and suspected corruption have contributed to significant
arrears in domestic and external debt payments. High oil prices
during 2008 provided a short-lived boost to revenues, and allowed
the government to retire some debt, but questions remain about
fiscal management.


31. In 2004, the government established a new anti-corruption
authority, the Commission to Combat Illicit Enrichment. The
commission was charged with publishing quarterly and annual reports
on its activities, but is widely regarded as ineffectual.


32. Gabon is a participant in the Extractiv Industries Transparency
Initiative (EITI),whic aims to provide more transparency in
accountingfor revenues from petroleum and mining industries. Gabon
published its first EITI report in Decembr 2005 (see
http://www.finances.gouv.ga/eiti.htm) its second report in early
2007, and its third eport in March 2008.


33. During the past year, here has been an increase in
anti-corruption actvity on the part of members of civil society.
Spcifically, several local non-governmental organizations have
targeted alleged corruption on the partof high-level government
officials, including th President and several Ministers.

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Bilateral Investment Agreement
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34. As of January 2009, the US has no bilateral investment or
axation treaty with Gabon, although negotiations twards a
bilateral investment agreement have beenunderway for several years.
Gabon is a beneficiry of the African Growth and Opportunity Act
(AGOA),a framework for US trade, investment and development policy
for sub-Saharan Africa. Gabon has bilateral investment agreements
with the following countries: Belgium, Luxembourg, China, Egypt,
France, Germany, Italy, Lebanon, Mali, Morocco, Portugal, Sao Tome
and Principe, South Africa, and Spain. Also, there is a bilateral
investment agreement among CEMAC member countries.

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OPIC and Other Investment Insurance Programs
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35. The Overseas Private Investment Corporation (OPIC) has provided
services to US investors in Gabon. Gabon is also a member of the
Multilateral Investment Guarantee Agency (MIGA),which guarantees
foreign investment protection in cases of war, strife, disasters, or
expropriation. MIGA is a branch of the World Bank Group. The U.S.
government's Export-Import Bank provides finance facilities to both
the public and private sectors in Gabon.


36. Gabon's currency is the franc of the Central African Communaute
Financiere Africaine (CFA),which is convertible and tied to the
euro; 1 euro equals 656 CFA. (The Central African CFA is also used
in Cameroon, the Central African Republic, Congo-Brazzaville,
Equatorial Guinea and Chad.) The embassy does not anticipate any
inconvertibility problems for the CFA as long as the peg to the euro
remains.

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Labor
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37. Gabon's population is approximately 1.4 million, of which
perhaps as many as 25 percent are foreigners (mostly Africans).
Foreign firms report a shortage of highly skilled Gabonese labor.
Authorization from the Ministry of Labor is required in order to
hire foreigners. Non-Gabonese Africans find it increasingly
difficult to obtain employment authorization; non-African
expatriates have less difficulty. Non-Gabonese Africans take up
most positions requiring unskilled labor. Skilled labor costs are
high and are kept so by a labor code inspired by a French model that
strongly defends the rights of Gabonese workers. Labor unions and
confederations are active.

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


38. In October 2000, a Free Trade Zone project called "Zone Franche
de l'Ile de Mandji" (Mandji Free Trade Zone) was announced near
Port-Gentil for the exportation of processed wood and/or oil field
services. The zone has not progressed beyond the project stage.


39. As a member of CEMAC, Gabon's trade with other member countries
(Cameroon, Central African Republic, Chad, Congo-Brazzaville,
Equatorial Guinea and Gabon) is subject to low or no customs
duties.

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


40. According to the UN Conference on Trade and Development (UNCTAD)
Country Fact Sheet on Gabon for 2008, the total value of foreign
direct investment (FDI) in place in Gabon in 2007 was USD 717
million (compared to USD 448 million in 2006). Annual direct
investment into Gabon in 2007 was USD 269 million (compared to USD
268 million in 2006).


41. The UNCTAD Gabon Fact Sheet for 2008 indicates that the total
value of Gabonese direct investment abroad in 2007 was USD 398
million (compared to 340 USD million in 2006.) Annual direct
investment capital flow out of Gabon in 2007 was USD 57 million
(compared to USD 106 million in 2006).


42. Most foreign investment comes from France and is concentrated in
petroleum (Total) and manganese (COMILOG/ERAMET). According to the
French Ministry of Economy/Commerce, France is the main supplier of
goods to Gabon, and Gabon is the second largest recipient of French
FDI in Africa. Most foreign investment (including that of the US)
is concentrated in the oil sector. Major companies in Gabon include
Total, Shell, Marathon Oil, Perenco, Vaalco, and COMILOG.


43. In June 2006, Gabon signed an agreement with a Chinese
consortium for the development of the Belinga iron ore deposit that
includes the development of the mine, roads, a railway, a
hydroelectric dam and a deep-water port. Total investment for the
Belinga project is estimated at $3 billion over the next 3-5 years.

REDDICK