Interview: Nina Abouna
What steps can the government take to foster a more conducive business environment?
NINA ABOUNA: Although Gabon is blessed with natural resources, the country needs to improve its business environment to further develop the private sector, which is central to economic diversification, growth and poverty reduction. Raw materials have encouraged many international firms to enter the market, bringing in a significant amount of foreign direct investment (FDI). As a result, Gabon’s private sector is dominated by multinational firms operating in the mining and oil and gas sectors, and companies with a virtual monopoly in forestry, agribusiness and trade.
Gabon has long implemented a liberal economic policy that has been particularly open to investment and the establishment of companies, which has led to greater contributions from the private sector through public-private partnerships (PPPs). Economic forums and international trade fairs have also significantly increased Gabon’s visibility and attractiveness, offering opportunities across sectors like water, energy, transport and agro-industry. These improvements have reduced the public administration’s weakness in terms of planning, negotiation and PPP project structuring, as public governance is key to attractiveness. Additional steps must now be taken to promote economic diversification, such as addressing cost factors and the institutional environment. In doing so, Gabon can improve its competitiveness and diversify its tradable goods in domestic and global markets.
Gabon’s strategy focuses on piquing foreign firms’ interest in exploration, production and processing of raw materials. Equity participation is not risky for the public sector, as it typically occurs in areas where established foreign firms have already financed the investment costs. However, structural hurdles related to the legal and regulatory framework or the availability of basic services need to be overcome in order to attract private investors to high-value-added sectors.
How can Gabon encourage more foreign firms to invest in raw material processing activities?
ABOUNA: Inaugurated in September 2011, the Nkok Zone is a mix between the Gabon Industrial plan, which promotes processing of locally sourced materials, and the Green Gabon strategy, which seeks to expand the value chain of the wood sector by developing second- and third-generation plants. The Nkok Zone has already helped to diversify projects, attracted numerous investments and created an interaction between the population and local small and medium-sized enterprises, with a view towards fostering sustainable development. The legislation regulating these zones offers incentives, through which the government plans to attract hundreds of millions of euros in FDI and create 9000 direct jobs.
The diversification of local production has been made possible by the development of raw material processing activities – notably wood, which accounts for 40% of activities in the Nkok area. Olam plans to invest $2.5bn up to 2022 to develop the economic zone, for $200m, and four other major projects that are part of the Emerging Gabon strategy, including oil palm production, petrochemical fertilisers, and natural rubber and local wood processing.
The country is aware that significant improvements can always be made, given the size of the project. The main obstacles to the development of the private sector in Gabon are red tape and bureaucracy, complexity of the tax and land systems, transaction costs, deficiencies in the judicial system and weak competitiveness due to the high cost of factors of production. The lack of a qualified workforce or the capacity to promote PPPs are also challenges to development. The execution of all of these projects requires the collaboration of companies with enough human resources and financial means to fulfil their missions on schedule, in accordance with the highest quality standards and for a total cost on par with the budget.
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