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TITLE:  GABON ECONOMIC POLICY AND TRADE PRACTICES                              
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE
                              
                              
                              
                              
                              GABON

                     Key Economic Indicators
         (Millions of CFA francs unless otherwise noted)


                                  1991      1992  1/  1993
Income, Production,
 and Employment

GDP (current prices, bn. CFA)     1,451.5   1,471.9     n/a
Nominal GDP (pct. change)           0.5       1.4       n/a
GDP by Sector (pct.):
  Primary                           9.2      12.2       n/a
  Secondary                        50.5      50.8       n/a
    of which Extractive            39.4      40.2       n/a
  Tertiary                         35.0      37.0       n/a
    of which Public Admin.         12.3      13.2       n/a
Labor Force (000's)               300.0     300.0       n/a


Money and Prices

M2 (bn. CFA)                        308.0     298.3     n/a
Commercial Lending Rate (pct.)     18.2      18.0       n/a
Savings Rate (pct.)                24.4      24.0       n/a
Investment Rate (pct.)             19.0      26.0       n/a
Exchange Rate
 (CFA franc per $, avg.)          282.5     264.5     285.0 (e)


Trade and Balance of Payments
(in millions of U.S. dollars)

Total Exports (FOB)               2,284.0   2,315.1     n/a
  Exports to U.S.                   763.5     968.0     n/a
Total Imports (CIF)                 702.0     867.9     n/a
  Imports from U.S.                  79.8      75.7     n/a
Aid From U.S. (thousand US$)        185.0     163.0     n/a
External Public Debt              3,500       n/a       n/a
 Payments Made /2                   130       n/a       n/a
  Debt Service Ratio (pct.)          40.5     36.4      n/a
Foreign Exchange Reserves
 Gross                               36.0      5.8      n/a
 Gold                                 4.1      n/a      n/a
Balance of Payments
 on Current Account                 290.7     n/a       n/a
 on Capital Account                -370.2     n/a       n/a
 Basic Balance                      -79.4     n/a       n/a


Notes:

n/a = not available.
1/  The figures reported for 1992 are estimates, drawn in most
    cases from Central Bank/IMF data.
2/  Gabon has only serviced its debt selectively since the
    middle of 1989, and virtually discontinued debt service
    starting in 1990.  Although a new Standby Arrangement was
    signed in September 1991, the government has found its
    terms unmanageable.  Barely half of the $307.7 million in
    arrears to be paid under that agreement were paid.  As a
    result, the Paris Club rescheduling has been "pulled
    back", effectively rendering the Standby Arrangement null
    and void.



1.  General Policy Framework

    The Gabonese economy is dominated by mining and petroleum
production, which together contribute nearly 40 percent of
gross domestic product (GDP).  Oil is the key variable, as the
petroleum industry generates 80 percent of Gabon's export
earnings and nearly half of government revenues.  Although most
finished goods are imported, there is some manufacturing in
Gabon including factories which produce plywood, plastics, and
cigarettes; a brewery; and an oil refinery.  The limited
manufacturing which exists is concentrated in initial
transformation of Gabon's raw materials (e.g., a uranium
"yellowcake" plant located adjacent to the uranium mine at
Mounana, in southeastern Gabon, and a petroleum refinery
located at Port Gentil).  On the other hand, like many
developing economies, there is an important services sector,
comprising the civil service, which accounts for over 10
percent of GDP by itself, and a wide range of tertiary
activities ranging from banking to legal and accounting
services and business consulting.

    Since oil prices weakened sharply in 1986, the Gabonese
Government has been in fiscal crisis.  The large deficits since
then - they hit a high of over 14 percent of GDP in 1987,
dipped to under five percent in 1990, and have since climbed
again past six percent - forced Gabon to turn to foreign
creditors for financing, drawing on its International Monetary
Fund (IMF) allotment and then seeking project finance from the
World Bank and the African Development Bank (AFDB).  Commercial
banks, which had financed a number of large projects in Gabon
in the seventies and early eighties, lost their enthusiasm when
Gabon turned to the London Club in 1987 for a rescheduling.

    Gabon's persistent budget deficits are rooted primarily in
the government's inability to manage its expenditures.  Public
employment rolls remain swollen and attempts to institute
layoffs or even hiring freezes have been unsuccessful.  Major
tax collection problems continue.

    Monetary policy is exercised through adjustments in the
central bank discount rate and through adjustments in bank
reserve requirements.  Under the Franc Zone mechanism, however,
the Bank of France exercises tight control over the monetary
policies of the member states, who must observe money supply
growth targets set in consultation with the French authorities.  
Given the constraints of the Franc Zone, monetary policy is not 
used as a tool for sectoral policies and is largely neutral in 
its effect on the competitiveness of U.S. exports.


2.  Exchange Rate Policies

    As a member of the Franc Zone, Gabon has relatively little
flexibility where monetary and exchange rate policies are
concerned.  The value of the currency, the CFA franc (CFA is
the French acronym for African Financial Community), is pegged
at 50 CFA per French franc.  While this mechanism assures
exporters and importers of the convertibility of the currency,
it ensures a fixed exchange rate vis-a-vis the French Franc
only.  Thus, it has the side effect of discriminating against
imports from outside France in that prices for French goods can
be more readily anticipated and transactions with France are
simpler than with other countries.

    Although the CFA franc is fully convertible, the Gabonese
Central Bank exercises administrative control over foreign
exchange transactions.  Outflows of foreign exchange must be
justified with an invoice or other contractual document, which
must be accepted by the Central Bank before the commercial
banks may complete the transaction.  However, these controls
appear to be little more than an administrative formality, and
there are no known no instances where exchange controls have
been used to impede the operations of U.S. firms.


3.  Structural Policies

    The Gabonese Government levies a personal income tax, a
corporate income tax, a value-added tax, and customs duties on
imports.  The government draws a major component of its
revenues from oil royalties.  Small and medium businesses
(SMBs) routinely receive tax holidays of up to five years, and
the government uses a similar incentive to attract oil
exploration companies without discrimination by nationality. 
The personal income tax is widely evaded and the government is
relatively powerless to collect it.  Customs duties are high -
85 percent on luxury cars, for example - but here, too, evasion
is the rule.  Some observers estimate the loss in revenues is
as high as $100 million, though a French aid project is
currently computerizing the Customs system in an effort to
improve collection.

    The government exercises price controls on staples at the
retail level, primarily to ensure that retailers do not gouge
unsophisticated consumers.  Prices thus tend to vary within a
narrow range, fluctuating over time with changes in
international market conditions and local demand.  Due in large
measure to the monetary discipline imposed by the Franc Zone
mechanism, price controls are not needed to control inflation.


4.  Debt Management Policies

    Gabon has experienced a sharp increase in its foreign
indebtedness since the international oil price drop of 1986. 
External debt rose from about one billion dollars in 1985 to
$3.5 billion in 1991.  During this period, debt service rose
from seven percent of GDP to over eleven percent, while debt
service as a share of export earnings has oscillated around 30
percent.  As a result of the fiscal crisis of the late 1980s,
Gabon has rescheduled its private debts in the London Club in
1987, and has been to the Paris Club four times, most recently
in October 1991.

    Faced with a domestic political crisis since late 1989, the
government attempted to shift the adjustment burden onto its
foreign creditors, and suspended debt payments on most foreign
obligations in early 1990.  Its repeated requests for
reschedulings, both in the London Club and the Paris Club, were
denied pending signature of a new stand-by arrangement.  This
finally occurred in September 1991, after a drawn-out
negotiation in which the key stumbling blocks were the
government's lack of fiscal discipline, parastatal reforms, and
questions surrounding the disposition of a share of the
country's oil revenues.

    The 1991 standby arrangement subsequently led to
reschedulings at the London Club and the Paris Club.  The
official creditors took a relatively hard line, however, and
imposed a rescheduling which required repayment of all
outstanding arrears by May 1992.  The Gabonese Government was
unable to meet this commitment, and the Paris Club arrangement
was "pulled back" in September 1992.  As of late October, 1992,
the Government of Gabon was preparing for its annual Article IV
consultation with the IMF staff, which it hoped to use as an
opening to begin discussions on a new standby arrangement.


5.  Significant Barriers to U.S. Exports

    Gabon protects its local producers of mineral water,
household soap, cooking oil, cement, and sugar.  These products
may not be imported into Gabon.  In addition, imports of wheat
and rice are subject to license.  The wheat market is under the
control of a French firm, SETUCAF, which is principal
shareholder in Gabon's only flour mill and which has an
exclusive right to import wheat.  The rice market is more open,
with several Asian brands available.  U.S. rice has been
imported successfully, but faces a price disadvantage which
excludes it from the mass market.

    Technical and other standards tend to be drawn directly
from the relevant French standards.  Telecommunications
equipment, for example, has in the past been restricted to
French brands due to a perception in the Telecommunications
Ministry - diligently cultivated by the French technical
counselors - that only French equipment could be used in
Gabon.  A Gabonese entrepreneur who wanted to import AT&T
equipment has successfully challenged this barrier and began
importing and installing U.S.-made telephones and private
branch exchanges in 1991.

    The Gabonese Government has not imposed intrusive or
discriminatory measures on foreign investors, which are the
mainstay of the petroleum industry.  During the height of the
fiscal crisis, in the late 1980's, the government resorted to a
"solidarity bond" which it required all private firms to post
with the Ministry of Finance.  Under the terms of the
"solidarity bond," the monies could not be transferred out of
Gabon, but local investments could be credited against it. 
This mechanism was abolished in 1990 and investors, both
foreign and domestic, have been able to use the "bonds" as a
tax credit.

    The Gabonese Government often does not adhere to
competitive bidding practices, and the French technical
advisers throughout the government are well placed to steer
contracts to French firms.  In the petroleum sector, the
government has organized six bidding rounds for exploration
leases since the mid-1980's, but continues to sign contracts
outside the rounds.  Off-round deals are not, however, reserved
to French firms, and U.S. companies have recently struck
off-round exploration agreements.

    Customs procedures are slow and cumbersome, particularly
since the introduction of a new computer system.  The burden,
however, affects all suppliers equally, regardless of
nationality, unless they are willing to make illegal payments
for special treatment.


6.  Export Subsidies Policies

    Since Gabon's exports are almost exclusively raw materials,
the government does not offer subsidies to exporters.  To the
contrary, another side effect of membership in the CFA
mechanism is an overvaluation of the currency, which is a
disincentive to exports.


7.  Protection of U.S. Intellectual Property

    The Gabonese Government is not active in GATT or other
international trade fora, and has not taken a position on the
intellectual property aspects of the Uruguay Round.  Largely
for lack of enforcement capability, the government turns a
blind eye to trademark violations.  For example, U.S. ethnic
cosmetic brands are sought after in Gabon.  However, many of
those available in Gabon are in fact "remanufactured" (i.e.,
diluted) versions which have transited Nigeria en route to
Gabon.


8.  Worker Rights

    a.  Right of Association

    Since the abolition of the unique status of the former sole
political party, the Democratic Party of Gabon (PDG), in 1990
the Gabonese Union Confederation (COSYGA) has had to give up
its exclusive right to represent workers.  Since that time,
unions throughout the economy have proliferated;  in some cases
more than one union compete for members in the same industry. 
In addition, two other trade union federations have been formed
to compete with COSYGA, and one has made significant inroads as
a collective bargainer for industrial employers.
   
    b.  Right to Organize and Bargain Collectively

    With the promulgation of the Constitution of 1991 the right
to collective bargaining is secured (Article I, Paragraph 13). 
Even before its formal passage, however, Gabonese workers had
begun to bargain with management outside the COSYGA framework
as early as mid-1990.

    c.  Prohibition of Forced or Compulsory Labor

    The Constitution of 1991 guarantees the right to employment
(Article I, Paragraph 7).  The Labor Code of 1978 forbids
forced labor (Article 4).

    d.  Minimum Age of Employment for Children

    The Labor Code of 1978 (Article 121) sets a minimum age of
sixteen years for employment.

    e.  Acceptable Conditions of Work

    Conditions of work in much of in the formal sector in Gabon
are reasonably good.  Health and safety standards are in place
but are not always observed:  it is not uncommon to see workers
without hard hats or protective footwear in some industrial
plants.  Most of the firms operating production facilities in
Gabon are subsidiaries of or otherwise associated with European
or U.S. companies and tend to follow their home-country
standards.  Conditions in the informal sector and in Gabonese
SMBs are less uniform and less acceptable for the workers.  The
Gabonese authorities, primarily for lack of enforcement
capability, do not exercise positive control over working
conditions.

    f.  Rights in Sectors with U.S. Investment

    U.S. investment is almost exclusively in the petroleum
sector.  Worker rights and working conditions are in general
better than those elsewhere in the economy, with more careful
adherence to safety standards, accident prevention procedures,
and proper use of protective gear.


         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (millions of U.S. dollars)

Category                                    Amount

Petroleum                                               196
Total Manufacturing                                       D
    Food & Kindred Products                     0
    Chemicals and Allied Products               D
    Metals, Primary & Fabricated                0
    Machinery, except Electrical                0
    Electric & Electronic Equipment             0
    Transportation Equipment                    0
    Other Manufacturing                         0
Wholesale Trade                                           D
Banking                                                   *
Finance and Insurance                                     0
Services                                                  4
Other Industries                                           

TOTAL ALL INDUSTRIES                                    244

(D)-Suppressed to avoid disclosing data of individual companies
(*)-Less than $500,000.

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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