TOGO - 2009 INVESTMENT CLIMATE STATEMENT

UNCLAS LOME 000017


DEPT FOR EB/IFD/OIA (HATCHER),USTR, DEPT OF TREASURY, OPIC
E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB OPIC USTR TO
SUBJECT: TOGO - 2009 INVESTMENT CLIMATE STATEMENT

REF: 08 STATE 123907



1. The following is Togo's 2009 Investment Climate Statement as
requested in reftel:

OPENNESS TO FOREIGN INVESTMENT


2. Togo has traditionally provided a hospitable environment for
foreign investment. However, political instability has diminished
both opportunities and investor confidence. The government
distinguished itself through the 1980's as a western-oriented,
entrepreneurial hub in the region. However, in the early 1990's,
investor interest fell sharply due to overt political unrest in
Togo. As the country emerges from the negative economic impact of
that period and its poor political and human rights record, foreign
investment is even more welcome than it was previously. The
government continues to seek high-profile fora in which to promote
its investment opportunities, particularly in the free trade zone.


3. Following years of political stalemate and economic stagnation,
important progress was achieved in 2007 and the latter half of 2006
toward a return to stability and dialogue. Free and fair legislative
elections in October 2007 were followed by the formation of a new
government in December 2007. Many challenges remain for improving
the climate for private sector activity, particularly in such areas
as administrative and judicial transparency, and banking.
International donor programs are supporting these efforts; the
European Union pledged financial support for Togo after the
legislative elections. The World Bank and the African Development
Bank both forgave Togo's arrears in 2008, and it was determined that
Togo now qualifies for Heavily Indebted Poor Country (HIPC) debt
relief.


4. The current investment code was enacted in April 1990. The code
and related regulations were designed to encourage foreign
investment, and they are a marked improvement over the previous
code. Foreign investment could be an important element in achieving
the government's goals of diversification from traditional exports
(agricultural cash crops, phosphates),and in suspended
privatization programs (phosphates, telecommunications, tourism, and
cotton).


5. It is anticipated that the investment code will be further
improved in the short- to medium-term. Revisions have already been
made, particularly with regard to incentives. As a member of the
West African Economic and Monetary Union (WAEMU),Togo is
participating in zone-wide plans to harmonize and rationalize
regulations governing economic activity within OHADA (Organization
for the Harmonization of Commercial Law in Africa),which includes
the 14 CFA zone countries and the Comoros and Guinea. A common
charter on investment is one of the projected elements of that
effort. The resulting national investment code will be greatly
simplified and is expected to be limited to general dispositions
related to non-discrimination, guarantees, and arbitration.


6. The 1990 code permits investment in the following sectors: (a)
agriculture, animal husbandry, fishing, forestry, and activities
related to the transformation of vegetable and animal products; (b)
manufacturing; (c) exploration, extraction, and conversion of
minerals; (d) low-cost housing; (e) hotels and tourist
infrastructure; (f) agricultural storage; (g) applied research
laboratories; and (h) socio-cultural activities. Investment under
the code is limited to new investments of at least FCFA 25 million
(about $50,000) for foreign companies and FCFA five million (about
$10,000) for Togolese companies. The Togolese corporation charter
covers investments of less than FCFA five million. The investment
code covers the expansion of existing enterprises if the cost of the
expansion is at least half the value of the existing enterprise.
Investors must provide at least 25 percent of the value of a new
investment. At least 60 percent of the payroll must go to Togolese
citizens. Applications for approval under the law must be submitted
to the planning ministry, which, in consultation with the national
investment commission, approves or rejects the applications within
30 days. The approval can take as little as 14 days to obtain. The
government decree granting approval spells out the conditions of the
investment.

CONVERSION AND TRANSFER POLICIES


7. Togo uses the CFA franc (FCFA),which is the common currency of
most of the Francophone countries of West Africa. The FCFA is fixed
at a rate of FCFA 656 to 1 Euro. The exchange system is free of
restrictions for payments and transfers for international
transactions. The investment code provides for the free transfer of
revenues derived from investments, including the liquidation of
investments, by non-residents. There are no restrictions on the
transfer of funds to other West African franc zone countries or to
France. The transfer of more than FCFA 500,000 (about $1000)
outside the franc zone requires Finance Ministry approval.
Approvals are routinely granted for foreign companies and
individuals; the law stipulates that the process should be completed
in two days, but delays are not uncommon. Togolese citizens and
companies are not generally allowed to hold bank accounts outside of
the franc zone. With its WAEMU partners, Togo is examining removing
the remaining restrictions on capital transfers. Financial
transactions within the franc zone can be more complicated than
might be expected, due to country-specific administrative obstacles
to inter-country banking activities.

EXPROPRIATION AND COMPENSATION


8. The only expropriation of property in Togo was the 1974
nationalization of the French-owned phosphate mine. The government
paid sufficient compensation.

DISPUTE SETTLEMENT


9. The investment code provides for the resolution of investment
disputes involving foreigners through one of several means: (a) the
provisions of bilateral agreements between the government of Togo
and the investor's government; (b) arbitration procedures agreed to
between the interested parties; or (c) through the offices of the
Convention on the Settlement of Investment Disputes Between States
and Nationals of Other States, of which Togo became a member in

1967. Togo has adopted and implemented regional business
legislation through the Organization for the Harmonization in Africa
of Commercial Law (OHADA); while its enforcement is limited by the
weak legal and judicial systems, the government is currently
implementing a justice modernization project to improve
transparency. Lack of transparency and predictability of the
judiciary is a serious obstacle to enforcing property and judgment
rights, and similar difficulties apply to administrative procedures.


10. There are no current bilateral trade policy disputes between
Togo and the United States. The government accepts international
arbitration of investment disputes.

PERFORMANCE REQUIREMENTS/INCENTIVES


11. The various tax advantages that were previously bestowed under
both special conventions and the 1990 investment code were
eliminated. A 1995 finance law terminated all incentives that had
been maintained beyond their legal duration. Remaining regulations
granting incentives will not be renewed, and no new exceptions will
be granted. To the extent that some incentives are retained, they
are expected to occur within the tax code and address depreciation,
treatment of losses, taxation of capital goods, and relief on
intermediate inputs for exports goods.


12. Togo has adopted the WAEMU policy framework, including the
common external tariff. This has led to a low average external
tariff and to the absence of significant non-tariff barriers and
major export restrictions.


13. Price control and profit margin regulations have been largely
eliminated in the only sectors still subject to administrative price
controls: electricity, water, and telecommunications. Private
competition in telecommunications was introduced in 1999, allowing
better market-oriented pricing in that area.


14. While the steps for receiving residence permits are in theory
well-defined, in practice foreigners seeking to legalize their
status for long-term work and residence purposes have encountered
significant administrative obstacles and delays. Issuance of such
permits is the responsibility of the national police.

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT


15. The Chamber of Commerce recently implemented a new system for
business registration. The entire process has been streamlined into
one office. While delays still occur due to the need for several
ministries to approve the application, the process has been
simplified and is more efficient than in the past.


16. The government of Togo is under pressure from the international
banking community to privatize parastatal enterprises, but thus far
little progress has been made.

PROTECTION OF PROPERTY RIGHTS


17. Togo is a member of the World Intellectual Property Organization
and the Cameroon-based African Intellectual Property Organization.
For specific information on IPR matters, please contact BP 831,
Lome, Togo; Tel (228) 222-10-08; Fax: (228) 222-44-70. Protection
of physical property is frequently contentious in Togo, as
inheritance laws are poorly defined and property transmission
outcomes are frequently challenged. Only Togolese citizens or those
granted citizenship by court decision, French citizens, or foreign
governments are allowed to possess real property in Togo. Real and
chattel property disputes are further complicated by judicial
non-transparency, which will often favor national over foreign
entities.

TRANSPARENCY OF THE REGULATORY SYSTEM


18. Lack of judicial and regulatory transparency is a significant
obstacle to business development. Togo needs to implement a
large-scale overhaul of the legal and regulatory framework to
address these shortcomings. Measures include regional initiatives
regarding business and investment law, such as the common WAEMU
investment charter mentioned above. The common business law treaty
(OHADA),which entered into force on 1 January 1998, should
theoretically reduce judicial uncertainty across the region;
however, in actual practice it will only function well after an
overhaul of theQational judicial system. In December 2006, the
government passed a revised labor code that provides for improved
treatment of workers. The new code also forbids the worst forms of
child labor and prohibits discrimination against women, disabled
persons, and those with HIV/AIDS. A new Child Code was passed in
July 2007 which further protects the rights of children.


19. Togo made a great deal of progress in 1997 with plans to
rationalize the tax system and its administration, bringing about
both simplification and revenue enhancement. The value-added tax
has been unified at 18 percent (as opposed to the previous two-rate
structure of 7 percent and 18 percent). The World Bank continues to
encourage revisions to the tax code.


20. New Customs administrative processes entered in effect on
January 1, 2008 and will significantly improve import and export
procedures and will establish more transparency. The new process
includes an online one-stop clearing system.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT


21. Togo's political upheavals have severely weakened the banking
system. While there was some improvement beginning in 1995-1996,
particularly among the smaller banks, Togo still has not regained
its previous reputation or position as a regional banking center.
The larger banks, which are either wholly or partially state-owned,
hold shaky loan portfolios characterized by very high exposure
(about one-third of total bank credit) to the government and the
phosphates and cotton parastatals. While the government, in order to
comply with an IMF Staff-Monitored Program, paid back arrears to the
cotton sector in 2007, other domestic payment arrears remain a
constraint. In these circumstances, commercial banks have been
hampered in financing renewed economic expansion. A
bank-restructuring program designed in coordination with the World
Bank is defining recapitalization needs and investigating possible
sales of government-held shares to private investors. Togo's
monetary policy is managed by the Central Bank of West African
States (BCEAO),which also keeps the accounts of the member states
treasuries.

POLITICAL VIOLENCE


22. The most significant issue affecting Togo's commercial climate
during the past decade and a half has been the political
instability, division, and unrest that have characterized the
country's uneven democratic transition. The instability affected
economic and political activity within Togo as well as the nation's
relations with the international community. Until the legislative
elections of October 2007, national elections throughout this period
were marked by turmoil and violence. Although anti-foreigner
sentiment intensified during periods of civil unrest, Americans have
never been specific targets of violence.


23. Togo is a republic headed by President Faure Gnassingbe, son of
the late General Gnassingbe Eyadema. Eyadema was president from
1967, when he assumed power in a military coup, until his death in
early 2005. Eyadema and his political party, with the strong backing
of the armed forces, dominated politics and maintained control over
all levels of the country's highly centralized government. Eyadema's
death in 2005 triggered a new wave of unrest that resulted in many
deaths and the further division of Togolese society. Controversial
presidential elections in April 2005 brought Faure to power. Since
his accession, Faure has based his leadership on ending Togo's long
political crisis and isolation from the donor community by engaging
the opposition in a wide-reaching political reform process.


24. The "22 Commitments" agreed by the Government of Togo and the
European Union in mid-2004 have helped to provide a framework for
efforts to end Togo's long political impasse. One of the commitments
called for a national dialogue involving all major political actors.
This dialogue began in April 2006 and produced a road map for
further reforms, including the appointment of a national unity
government whose primary task would be the organization of free and
fair legislative elections. The legislative elections were held on
October 14, 2007. Although there were some irregularities, they were
declared free and fair by the EU, the Africa Union, ECOWAS, and
other international and domestic observers. As a result of the
successful conduct of these elections, the international community
has re-engaged with the country.

CORRUPTION


25. Although Togo has laws on the books that make corruption a
crime, it has spread as a business practice in recent years.
Government procurement contracts and dispute settlements are more
likely to go forward after palms are greased. Giving a bribe,
whether to private or government officials, is considered a crime
but is often expected. The police, gendarmes, and courts are
charged with combating corruption in Togo. Some Togolese officials
have been charged and convicted of corruption-related charges, but
these cases are relatively rare and appear to involve mostly those
who have in some way lost official favor.

BILATERAL INVESTMENT AGREEMENTS


26. The United States and Togo signed a warranty of private
investments and amity and economic relations treaty in 1962, the
Togo Amity and Economic Relations Agreement. The Togolese government
has, in the past, expressed an interest in a bilateral investment
treaty with the United States government, but negotiations started
in 1991 were never concluded. Togo has signed many economic,
commercial, cooperation, and cultural agreements with its foreign
aid donor countries, including France, Germany, Canada, the
Netherlands, Belgium, Japan, and more recently with China, India,
Iran, and Saudi Arabia.

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS


27. OPIC once played an active role in promoting foreign investment
in Togo and has recently started to again play a role with its
provision of political risk insurance for a natural gas project. It
co-sponsored (with USAID) the visit of 15 potential investors to
Togo in 1990, and it helped establish the Togolese investment
promotion center and free trade zone. The French government agency
COFACE provides investment insurance in Togo under programs similar
to those offered by OPIC. Investment insurance is also available
through the Multilateral Investment Guarantee Agency (MIGA).
Insurance mechanisms involving a government guarantee of debt may
carry implications for Togo's commitments to international financial
institutions.

LABOR


28. Togo has a small pool of qualified university graduates and a
sizeable population of unskilled workers, although there are
shortages of workers with intermediate technical skills and
practical experience. Generally, unemployment and underemployment
are high, and young Togolese trying to enter the formal sector job
market have difficulty finding work. The adult literacy rate is
about 57 percent. Most Togolese speak French (the official
language). Few people speak English, though many have a rudimentary
knowledge.


29. The minimum wage is FCFA 28,000 (approx. $62) a month for
unskilled industrial workers. There are separate wage scales
negotiated by employers, workers, and the government for industry,
construction, public works, commerce, and banking. Non-wage costs
(e.g., social security and medical costs) run about 40 percent of
wages. Togo was unique among the CFA countries in not introducing a
general wage increase after the CFA devaluation in 1994. Private
sector employers generally follow government wage movements.


30. After a period of vigorous labor activity in the early 1990's,
mostly in support of the stillborn democratic political transition
and capped off by a nine-month general strike in 1992-93, labor
union activity has been muted. Strikes have not been common in Togo.
Several of the independent confederations banded together to form a
syndicate to negotiate more effectively with the government and
business management in the wake of the CFA devaluation. They have
not been notably successful. However, for the first time in over
fifteen years, unions negotiated a settlement with the government at
the end of November 2006. A threatened 24-hour strike was called
off after the government agreed to meet union demands. The
government has since fulfilled all commitments made in the
agreement, including a five percent salary increase to government
workers and payment of salary arrears. In January, health workers
went on strike to protest work conditions; the minister of health
promised to meet their conditions. However, nothing was done, and
the health workers went on strike again in September. In July, 9
phosphate workers were fired after going on strike for five and a
half hours.

FOREIGN TRADES ZONES/FREE TRADE ZONES


31. Togo has had a free port for many years. It serves as a
transshipment facility for goods passing through the port of Lome to
neighboring countries.


32. In 1989, the Togolese government approved an export processing
zone (EPZ) law. Advantages of the EPZ include a less restrictive
labor code and the authorization to hold foreign
currency-denominated accounts. The law requires EPZ firms to employ
Togolese on a priority basis, and after five years foreign workers
cannot account for more than 20 percent of the total workforce or of
any professional category. EPZ firms may, with government
permission, sell not more than 20 percent of their production in
Togo. While there are two physical EPZ sites, investors may locate
outside of these areas and still enjoy EPZ status. Approximately 58
firms are operating in the EPZ as of January 2009, with an
additional 30 preparing to open.. However, severe electricity
shortages in Togo continually cause great difficulty for
manufacture-oriented companies in the zone. The destruction of
bridges by flooding during the rainy season in 2008 made some firms
shut down temporarily due to an inability to move their goods.

FOREIGN DIRECT INVESTMENT STATISTICS


33. Major foreign investors:

United States
Contour Global: Constructing a 100-megawatt power plant in Lome.
Signed a $146 million non-recourse financing agreement with OPIC.
There are also a few individual U.S. citizens operating small
businesses in sectors such as import-export and retailing.

France
AGS Togo- Frasers International: French-owned international moving
and storage company.
Air France: Subsidiary of French airline.
Air Liquide: majority French-owned medical gas company.
Allo Hygiene: majority French-owned cleaning company.
Assurances Generales du Togo (AGF): French-owned insurance company.
Cica Togo: Distributor of Toyota and Mazda vehicles. Also involved
in household equipment and general trading. Working capital CFA 1.2
billion, investment CFA 145 million. Owned 70 percent by the French
Group Pinaut.
CFAO Togo: French-owned commercial company.
Groupement d'Entreprises de Transports Maritimes et Aeriens (GETMA):
French-owned maritime and air transportation agency.
Mercure Hotel Sarakawa and Ibis Hotel Lome: The French Group Accor
took over and renovated Hotel Sarakawa, now known as the Hotel
Mercure-Sarakawa and Hotel Le Benin, now known as Ibis Hotel Lome
Centre.
Nouvelle Industrie des Oleagineux du Togo (NIOTO): Manufacturer of
edible oils (primarily cottonseed oil). The company bought two
former government-owned oil plants under the privatization program.
NIOTO's initial capital of CFA 1 billion was owned principally by
the French company CFDT (Compagnie Francaise pour le Developpement
des Fibres Textiles).
Societe Togolaise de Produits Marins S.A. (STPM S.A.): Majority
French-owned seafood processor/exporter that sells fish, shrimp, and
lobster. Investment of CFA 430 million.
Satom-Togo: Public works/construction company. Capital CFA 5
million. Subsidiary of French company Satom.
Societe Togolaise de Boissons (STB): Soft drink distributor.
Previously a parastatal venture with German participation, the
French group Castel bought controlling shares in both STB and the
Brasseries du Benin (BB),the beer brewery and soft drink processor,
under the privatization program.
Societe Togolaise des Gaz Industriels (Togogaz): Fabrication and
sale of industrial and medical gasses and equipment. Capital CFA
1.1 billion. Owned 60 percent by the French company Air Liquide,
but the government's shares are sold on the Abidjan stock exchange.
Togocrus Sarl: French-owned processor/exporter of seafood.
Investment of CFA 545 million.
UAC Togo: Import-export company. Capital CFA 853.2 million, owned
78 percent by French company UAC.
Udecto: Construction and public works. Capital CFA 160 million.
Owned 73 percent by French company Campenon Benard.
Total Togo: Petroleum products distribution. Capital CFA 511
million. Has 45 service stations in Togo and about 47 percent of
the market. Total took over Mobil Oil's retail distribution in Togo
in 2006 (29 service stations, about a 30 percent market share,
capital of CFA 376 million).

Germany
BENA Development/Marox: Agriculture and livestock raising,
delicatessen, restaurant. German family-owned business. Capital
CFA 200 million.
Hoechst Togo: Chemical and agricultural product sales. Company is 75
percent owned by Hoechst AG, Germany. Capital CFA 5 million.
Denmark
Fanmilk: The Danish dairy company Emedan has a long-term lease on
the former government-owned dairy products company as part of the
privatization program.
Industrie Togolaise des Plastiques (ITP): Joint investment by the
Danish company FMO, the Danish development agency IFU, and the Dutch
company Wavin. Total capital of new company CFA 735 million.
Atlantic Produce: Exporter of tropical houseplants. Investment of
CFA 260 million.

Norway/Germany
Societe des Ciments du Togo (Cimtogo): Cement production company.
Previously 50 percent owned by the Scandinavian company Scancem,
Cimtogo bought out the government's shares in 1996. Scancem was
recently purchased by a German multinational, but continues to
operate locally under Norwegian management.

Ethiopia
ITT Co. Sarl: Majority Ethiopian-owned manufacturer of automotive
seat covers and shoes. Investment of CFA 103 million.
South Korea
Amina Togo S.A.: Producer of synthetic hair. Investment of CFA 342
million.
Sofina Sarl: Manufacturer of fishing nets and ropes. Investment of
CFA 13 million.
Nina: Producer of synthetic hair. Investment of CFA 115 million.

India
Boncomm International Togo: Indian-owned clothing manufacturer.
Exports to Europe and USA.
Ramco: The largest and most profitable chain of supermarkets and
electronic stores.
Wacem (West Africa cement company): Originally developed as a joint
Togolese-Ivoirian-Ghanaian cement production venture, the factory
floundered due to management dissention and losses on
Cedi-denominated sales in Ghana. An Indian firm has resurrected the
company, which produces clinker (limestone) for Cimtogo and is
beginning to manufacture and market cement itself.

Belgium
Umco Sarl: Belgian-owned manufacturer of leather watchbands and
other leather goods. Investment of CFA 32 million.

United Kingdom
Garage Hellel: BMW dealer. Also local representative for Jeep
vehicles.
Shell Togo: Owned by British subsidiary of Royal Dutch Shell.

Armenia
Societe Generale des Grands Moulins du Togo (SGMT): The only flour
mill in Togo. Capital CFA 1.1 billion. The company became Armenian
in 1997.


Hawkins