It is amazing the difference a few years can make. Over the course of 2012, Côte d’Ivoire has seen a significant improvement in both its current performance and its outlook for short-, medium- and long-term growth. While there remains plenty to be done, the improvement marks something of a return to form for the world’s largest cocoa producer.

Once the economic powerhouse of post-colonial West Africa, Côte d’Ivoire was hit by drought and global recession in the 1980s, giving rise to a series of economic crises and increasing political tensions. Since the acute political crisis and consequent economic contraction of 2010-11, Côte d’Ivoire has experienced a recovery, posting strong growth as the security situation stabilised, with 2012 being a breakout year and growth exceeding that posted in every year since 1980, save 1993. The government has put in place an ambitious National Development Plan (Plan National de Développement, PND) to drive investment, deliver sustained double-digit growth and secure emerging economy status by 2020. Currently classified as a “highly indebted poor country” by the IMF, Côte d’Ivoire continues to benefit from concessional borrowing rates from the IMF and significant write-offs of its outstanding debts. If the political climate remains stable and the government can mobilise sufficient private sector investment, there is no reason why the country cannot fulfil its potential.

BY THE NUMBERS: While definitive data is difficult to come by, approximate numbers are available and give a relatively clear picture of the economy. Having averaged 6.2% between 1993 and 1998, real GDP growth slumped to an average of 0.3% over the following 13 years, dropping to a nadir of -4.7% in 2011 as the economy stalled during the months of political turmoil. In 2012 the economy bounced back strongly, posting growth of 9.8%. The year 2013 will be crucial in determining whether this represents solely a recovery effect or the beginnings of a new high-growth trajectory that heralds economic take-off. Following an unexpectedly positive outcome in 2012 and continued momentum into early 2013, it appears that the government’s investment programme is beginning to have an impact. The IMF expects the Ivoirian economy to grow by 8% in real terms in 2013 and for growth to remain relatively steady, averaging 7.7% out to 2018. The government is even more bullish, with the PND projecting an acceleration in growth to around 10% in 2014 and 2015 due to growing investment.

SECTORS DRIVING GROWTH: Given its natural resource endowments, favourable climate and stage of economic development, it is perhaps unsurprising that the primary sector has been central to the country’s economic performance, accounting for 30% of GDP and the vast bulk of employment. Even during the crisis of 2011, the primary sector posted relatively robust growth of 4.8% in real terms compared to a 4.63% contraction in overall GDP. As such, it did not experience the same recovery effect in 2012, with estimated growth of less than 1% for the year. Although the government expects growth in the primary sector to accelerate to 4.7%, 5.9% and 4.2% for the years 2013, 2014 and 2015, respectively, this will lag behind aggregate GDP growth.

While mining accounted for a modest 2.3% of GDP in 2012, it is expected to be the most dynamic segment of the primary sector, with estimates suggesting that it will register growth in excess of 20% per year during 2013 and 2014. The manufacturing and services sectors, accounting for 22% and 35.2% of GDP, respectively, are expected to be the key growth drivers over the medium term. Having fallen back -7.4% in 2011, the secondary sector was forecast to recover strongly to post growth of 14.8% in 2012 before moderating slightly to 12.1%, 13.5% and 14.3% in 2013, 2014 and 2015, respectively.

The construction segment, which accounted for 5.5% of GDP in 2012, is expected to be particularly dynamic, with average growth rates around 30% per year until 2015, on the back of the government’s investment programme and post-crisis rebuilding. The services sector experienced a sharp drop of 12.4% in 2011 before staging a recovery to an estimated 14.1% growth in 2012. The government anticipates the services sector, accounting for more than a third of the entire economy, will grow by 12.9%, 13.5% and 14% in 2013, 2014 and 2015, respectively. The retail and other services segments, accounting for 13.6% and 10.4% of GDP in 2012, are expected to prove particularly dynamic, registering annual growth of up to 15% out to 2015. Overall, the government forecasts the primary, secondary and tertiary sectors will account for approximately one-sixth, one-third and one-half, respectively, of all economic growth over 2013-15.

LIVING CONDITIONS: Having once been a beacon of prosperity in sub-Saharan Africa, Côte d’Ivoire has experienced a steady decline in living standards, first following economic difficulties in the 1980s, and later exacerbated by political turmoil and civil strife. In 1985 only 10.1% of Ivoirians lived below the national poverty line. By 2008, this had reached 42.7%, while 46.3% were deemed to live on less than $2 per day in that year, making the country one of the world’s poorest. Per capita national income remained above the average for sub-Saharan Africa until the mid-2000s, but has since fallen below it and became increasingly divergent with the onset of the 2010-11 political crisis. In the late 1990s life expectancy reached 50 years and has been on the increase in line with the rest of sub-Saharan Africa, reaching 55 by 2010-11.

Abidjan, the commercial capital, is relatively prosperous, with a growing middle class. By contrast, poverty and under-development are acute in rural areas, notably in the north and west, which were particularly affected by past civil unrest. The country was essentially split in two, north and south, for much of the past decade and a half, with many private sector actors withdrawing entirely from the north. It is only recently, for instance, that retail banks and other service providers have begun to rebuild their networks in the northern part of the country in the wake of material damage linked to the conflict.

Many of the country’s poor work in the informal agricultural sector, facing challenges such as restricted market access due to insufficient infrastructure, inability to access credit, limited levels of education, insecure land tenure, and inadequate basic social services. Environmental destruction due to unregulated deforestation, intensive farming and the effects of climate change has served to undermine soil fertility, particularly in northern areas, further exacerbating regional inequalities. These inequalities and challenging living conditions are a source of social tension that has underpinned past political unrest. Despite low official rates of inflation, the price of staple items has been on the rise from late 2012 onwards, unmatched by increases in income.

POPULATION & PER CAPITA: Having averaged 4.1% in the 30 years to 1990, population growth began to slow dramatically thereafter, and has averaged 1.8% since 2000. The national population surpassed 20m for the first time in 2011, and was estimated at 21m in early 2013, of which over a fifth live in Abidjan. Increasing urbanisation is evidenced by the relatively higher population growth there, averaging 3.1% since the turn of the century. The working age population (15-64 years) has remained stable at around 55% during this period. The relatively strong population growth means that real growth in GDP per capita lags economic growth significantly, while economic contractions are exacerbated in severity. Since the turn of the century, for example, GDP per capita grew only slightly, and declined by -4.63% in 2011 to stand at $1789, according to World Bank data. This serves to underline the need for strong, sustained economic growth in order to raise living standards.

FUTURE INVESTMENT-LED GROWTH: In recent years, the Ivoirian economy has been characterised by a relatively low overall investment rate, reaching only 8.2% of GDP in 2011, while consumption accounted for 80% of the economy. Net exports were elevated that year, abnormally, as imports had collapsed after the recession induced by the political crisis, but had narrowed to an estimated 6.2% of GDP by 2012. As the government executes its ambitious PND, it expects the investment rate to surge to 16.2%, 20.2% and 23.4% of GDP in 2013, 2014 and 2015, respectively. Having fallen as low as 2.8% of GDP in 2011, public investment doubled in nominal terms in 2012 with the commencement of the 2012-15 PND. According to the government’s own estimates, public investment is expected to rise progressively to 7.4%, 9.3% and 9.7% of GDP in 2013, 2014 and 2015, respectively. Over time, government investment should have an increasingly catalytic effect in mobilising private sector investment, which is set to rise to 8.8%, 10.9% and 13.7% of GDP in 2013, 2014 and 2015, respectively, having been as low as 5.4% of GDP in 2011. The IMF is more conservative, expecting the investment rate to increase progressively before stabilising at 17.2% by 2015, of which 8.1% would be public and 9.1% private sector.

The government confounded some pessimists in early December 2012 when President Alassane Dramane Ouattara, himself a former IMF deputy managing director, secured pledges totalling $8.6bn from the World Bank and other international partners to support implementation of the 2012-15 PND. While this can certainly be chalked up as a good start, bridging the financing gap by mobilising sufficient private sector resources is likely to prove challenging.

NARROWING TRADE SURPLUS: Unsurprisingly, this investment should see consumption decline marginally in terms of economic importance, while the trade balance is expected to narrow significantly in real terms as import growth, particularly of capital and investment-related goods, outpaces export growth. Net exports were expected to come in at CFA773.7bn (€1.16bn), or 6.2% of GDP, in 2012, according to the government’s estimates, before declining to 3.7%, 1.9% and 0.3% of GDP during 2013, 2014 and 2015, respectively. This compares to a CFA2.06trn (€3.08bn) surplus for 2011, on the back of a bumper cocoa harvest and collapsing imports, and CFA1.03trn (€1.53bn) in 2010. Total exports were CFA5.74trn (€8.61bn) in 2011, of which a third was accounted for by cocoa and a further 29% by crude oil and refined products.

On October 25, 2011 the US granted Côte d’Ivoire re-certification as a beneficiary country under the African Growth and Opportunity Act (AGOA), which is an initiative introduced by the US government in 2000 to encourage African countries to develop their economies though trade with the US. The AGOA has effectively given the stamp of approval for selected African nations to export a range of products to the US without quota or Customs restrictions.

This has greatly expanded the scope for Ivoirian exports to the US, as some 8400 products are now deemed eligible. In 2012 the country exported $1.07bn to the US, nearly 10% of total exports. In addition to cocoa and coffee, cashew nuts, palm oil and rubber are cash crops with significant scope for further growth. Central to the government’s industrial development strategy is to move up the value chain, with transformation of core domestic raw materials being an important first step (see analysis). If this strategy bears fruit, it can be expected that the value of exports will rise significantly in future.

Total imports were CFA3.69trn (€5.53bn) in 2011, of which 35% was accounted for by crude oil. From 2.4% of GDP in 2010, Côte d’Ivoire’s current account surplus spiked to 9.4% of GDP in 2011 before moving into an expected deficit, of 2.8% of GDP, or CFA387.2bn (€580.8m), in 2012. The IMF projects that the current account deficit will continue to widen, reaching -4.5% of GDP by 2017. While this could give rise to concerns over the sustainability of financing, it should be expected that a rapidly developing country experiencing a surge in investment on the scale envisaged in Côte d’Ivoire over the coming years would run a significant current account deficit. This should not be of great concern so long as the corresponding capital inflows are channelled into productive investment, and the IMF remains the ultimate backstop against balance-of-payments challenges. There was evidence by late 2012, moreover, of falling capital outflows, thought to reflect reduced capital flight as confidence in the country’s economic future grows.

FDI: While Côte d’Ivoire is one of the most open countries in the world to foreign equity ownership, across all sectors, inward foreign direct investment (FDI) stocks, at 26.8% of GDP in 2011, lag slightly behind the regional average. Annual inward FDI flows, at 1.44% of GDP in 2011, amount to only a third of the regional average and are far behind Ghana’s 8.4%, for instance. France is the leading source of FDI, followed by other European nations and Lebanon, which has a large, long-standing and commercially active immigrant and expatriate community in Côte d’Ivoire.

Given the country’s openness to foreign investment, its vast natural resources and latent economic potential, it is likely that foreign investors will look increasingly to the country for profitable opportunities. As well as being the largest economy in Francophone West Africa, it also houses the regional stock exchange and provides a common jumping-off point for firms wishing to serve the broader regional market. As the government’s economic strategy is investment-driven, and reliant on mobilising significant foreign, private sector capital, it is not surprising that it is actively working to attract foreign investors. There are no great difficulties for foreign firms in obtaining the necessary operating licences. A newly introduced investment code, as well as concerted government efforts to improve the business environment (see analysis), should ensure that Côte d’Ivoire becomes an ever more welcoming destination for foreign investors. The Investment Promotion Agency of Côte d’Ivoire (Centre de Promotions des Investissements en Côte d’Ivoire, CEPICI) engages with potential foreign investors, providing information and assistance.

SETTING UP: CEPICI has also been active in trying to improve the ease of doing business in the country. At present, it takes 32 days, 10 procedures and a minimum capital requirement of CFA1m (€1500) to establish a foreign-owned limited liability company. If engaged in international trade, the firm will also require a trading licence issued by the Ministry of Commerce as well as an exchange authorisation for transfer of capital from the central bank. Furthermore, authorisation is required, and must be renewed annually, from both the central bank and the Ministry of Economy and Finance to operate a foreign currency bank account. Firms must register with the commercial registry, the Ministry for Economy and Finance, and the National Social Security Fund. There are restrictions on the foreign leasing or ownership of land, and the acquisition process can be lengthy and complex. Historically, the legal system has had a patchy record in arbitrating commercial disputes and enforcing contracts, but a newly installed commercial tribunal is already going some way towards addressing this issue. Otherwise, the legal process can prove slow, costly and opaque for foreign and domestic investors alike.

The creation of a new single window, however, aims to reduce the time necessary to create a company to 48 hours by bringing together all the relevant procedures in one place (see analysis).

DOING BUSINESS: Recognising the urgent need to improve the country’s business environment from its current ranking of 177th out of 185 nations, both to support private sector development and to attract foreign capital, the government has spearheaded efforts aimed at boosting Côte d’Ivoire’s flagging rankings in the World Bank’s Doing Business Index. The prime minister personally chairs a ministerial committee with the sole aim of boosting the country’s listed ranking, initially by focusing on priority areas: starting a business, tax reform, cross-border trade, construction permits and rule of law.

FREE TRADE ZONES: Since 2008, the Information Technology Village of Bassam Free Zone has been in operation in Grand Bassam, not far from Abidjan. It was designed to promote investment in information technology and biotechnology, with the initial aim of attracting 100 firms and creating more than 20,000 jobs by 2015. A number of incentives are on offer, including exemptions from paying duties on imported raw materials and from paying corporation tax for a period of five years, among others.

Only 50 firms having established themselves in the zone, and the authorities are looking for new solutions to raise this number. A second free trade zone was planned for the port of San Pédro, but it has yet to become fully operational. Given the narrow range of sectors for which these zones are currently relevant, it is not expected that they will develop significantly without a fundamental redesign. The authorities are re-appraising the free zone with the intention of expanding the range of sectors that are eligible as well as making it easier for businesses to set up.

COCOA REFORM: One of the most important economic developments in 2012 was the introduction of minimum guaranteed pricing in the cocoa sector, an innovation that is designed to remove uncertainty and insecurity for farmers otherwise dependent on volatile international market prices. The government has also committed to buying 70-80% of the cocoa crop in advance so as to make its own revenue and that of farmers more predictable. The country accounts for approximately one-third of global supply of the crop, which sustains an estimated 900,000 farmers and 3.5m workers in the country.

For the 2012/13 growing season, the price of cocoa was fixed at CFA725 (€1.08) per kg, equivalent to 60% of the price at which the crop is exported, and representing a 9% increase on producers’ average income during the previous growing season. In effect, the government managed to deliver the new minimum guaranteed price by means of a tax cut with a not-insignificant estimated cost of 0.3% of GDP. This lost revenue was offset somewhat by allowing the preferential tax treatment that cocoa grinders had received for the past 20 years to expire.

Previously, the government did set a recommended price, CFA1000 (€1.50) per kg for the 2011/12 season, but buyers rarely respected this. It is hoped that providing cocoa farmers with a degree of certainty via the government’s bulk purchases will incentivise them to invest for the future, and to use more modern growing techniques. Poor infrastructure and extortion remain costly impediments, however, for farmers trying to get their produce to market.

The third pillar of the cocoa reforms was the establishment of a reserve fund at the Central Bank of West African States to guard against any future dramatic drop in world cocoa prices. This should ensure that the new minimum pricing arrangements can be sustained even in the face of wild swings on international markets. This fund is set to eventually reach some CFA70bn (€105m) and, by mid-September 2012, Côte d’Ivoire had paid more than CFA4bn (€6m) into it.

FISCAL POLICY: The public sector accounted for an estimated 12.8% of GDP in 2012, down from 12.9% in 2010 and 13.3% in 2011. The authorities expect this proportion to decline further over the coming years, to 12.1% in 2013, 11.3% in 2014 and 10.6% in 2015, as the private sector recovery gathers momentum. On the back of the 2011 crisis-induced recession, total government expenditure spiked to 25.9% of GDP, from 22% the previous year. Given that revenue grew only marginally over the same period, from 19.7% of GDP to 20.3%, this development saw the budget deficit widen from -2.3% to -5.7%. Fiscal reforms, and particularly the return of robust economic growth, were expected to cause the deficit to fall to -4.3% in 2012 before stabilising around -3% from 2013 onwards. As the country is subject to an IMF programme, its margin for manoeuvre on fiscal policy is somewhat limited. In 2012 the government wage bill accounted for some 42% of the budget, although this was expected to moderate to less than 35%, leaving more room for capital investment and “pro-poor” social spending. High electricity subsidies are also a drain on resources as below-cost provision is compounded by production inefficiencies that heap losses on the state’s books. Most households, for instance, are currently on a low rate social tariff for electricity. The fiscal cost of this subsidy has been rising in recent years, but is expected to moderate somewhat in 2013, albeit to a still-sizeable 0.6% of GDP. Further reforms and a new pricing strategy are envisaged to phase out this burden completely by 2015, including a reduction in the number of consumers benefitting from the social tariff. Recent reforms have already seen a reduction in subsidies for bottled gas for domestic use, reaping a CFA4bn (€6m) gain for the government’s budget, and in April 2013 an automatic pricing mechanism for petroleum products was introduced. These reforms will be evaluated, and perhaps extended, in late 2013. Finally, in order to maintain fiscal discipline, the authorities have committed to postponing any investment for which the necessary external partner or donor financing cannot be identified, and have stated they will further restrain overall spending levels if tax revenues fall short of projections.

DEBT & RELIEF: Central to the country’s recovery and rebuilding efforts is a concerted push by international lenders to reduce the public debt burden to more manageable levels (see analysis).

Having defaulted on its Brady bonds in 2000, and having remained in default for a decade until the bonds were restructured in 2010, Côte d’Ivoire missed interest payments again in early 2011 at the height of the political tensions. In June 2012 it resumed interest payments to commercial creditors and benefitted from the finalisation of a $7.7bn debt relief package that reduced its debt burden by 60% in net present value terms. The IMF projects that the country’s external debt-to-GDP ratio will fall below 30% in 2015 and continue to decline gradually. In addition to adhering to strict limits that were imposed under the terms of the IMF’s Extended Credit Facility (maximum limit on stock of debt, maximum limit on externally financed debt, maximum limit on debt raised on regional and international markets), the Ivoirian government has also made moves to improve the institutional framework for managing national debt. This, it is hoped, will help ensure a greater degree of sustainability. At the same time, internal debt remains high, and the government has difficulty paying national suppliers.

MONETARY REGIME: Côte d’Ivoire is a member of the West African Economic and Monetary Union (Union Economique et Monétaire Ouest Africainé, UEMOA) along with seven other members: Benin, Burkina Faso, Guinea-Bissau, Mali, Niger, Senegal and Togo. The union utilises the West Africa CFA franc, which is pegged to the euro at a fixed rate of €1:CFA655.957.

The French central bank holds the communal international reserves of UEMOA member states. There are no restrictions on money transfers within the UEMOA zone, while designated commercial banks can carry out foreign exchange transactions. Ivoirians and expatriate residents are required to seek approval from the Ministry of Economy and Finance should they wish to carry a sum in excess of CFA2m (€3000) to a nonUEMOA country, and such sums should not be in cash. Government approval is required, and often granted, for inward investment from non-UEMOA countries, and for the remittance of dividends, repatriation of capital or other such transactions. The hard currency peg keeps a lid on inflation somewhat. Despite the recent economic and political turmoil, however, inflation has since remained subdued and stable, registering 5% in 2011 and around 1% in 2012. The medium-term inflation expectations of the authorities and the IMF are stable in the 2-2.5% range.

BORROWING & LENDING: Accessing credit is a perennial challenge in Côte d’Ivoire for all but the largest businesses. While blue chips may be able to borrow at 5-6%, lower even than the government’s own rate of borrowing, rates range from 8% to 13%, and sometimes as high as 17%, for other businesses. This is lower than in neighbouring countries, like Ghana, although it is still prohibitively high. Interest rate margins can be as high as 7-8%. Fewer than 10% of Ivoirians have a bank account, while most businesses finance themselves through internal sources.

Widespread labour market informality, sparse documentation, poor collateral and weak enforcement of contracts all act as brakes on credit growth. Banks also face stringent restrictions on the extent to which they can make long-term loans given their own short-term liabilities (see Banking chapter).

NATIONAL PLAN: The government has detailed plans to rebuild the country and secure emerging market status by 2020 in the PND 2012-15. The plan targets wide-ranging reforms and a sustained public and private sector investment drive to support double-digit economic growth. The country aims to move up the value chain, with the next step being a concerted attempt to ensure primary sector products are transformed domestically prior to export (see analysis). Given the country’s status as a leading cocoa producer, accounting for a third of global supply, it is hardly surprising that this is a priority sector for increased processing activities. The government’s ambitious investment programme is central to the PND. It is envisaged that total investment will come to over CFA11trn (€16.5bn) during the 2012-15 period, of which 41% will come from public sources.

In part, the public sector financing element will be supported by donors and multilateral lenders. As such, much rests on the success of the government’s strategy for public-private partnerships (PPP). This implies the need to mobilise significant private sector resources, totalling nearly CFA6.5trn (€9.75bn) over four years. Transport and infrastructure are clear priorities, together accounting for 25.5% of the overall investment allocation. The energy, mining and hydrocarbons sector accounts for a further 16.6%. Agriculture and industry/small and medium-sized enterprises (SMEs) are other important areas, accounting for 8.5% and 6.1%, respectively. The government has selected 11 priority PPP projects, including waste management in Abidjan, new classrooms and industrial zones around the country, refurbishment of the road to Liberia, and two new container terminals at the Abidjan and San Pédro ports. The framework for the PPP initiatives is detailed under its 15 guiding principles, which emphasise the need for a stable legislative base, clearly delineated policies and institutional responsibilities, and transparency and reliable financial instruments to ensure both project delivery and long-term funding. Transparency, in particular, is key. According to Jean Michel Lavoizard, the general manager of the Advanced Research & Intelligence Services (ARIS), “Increasing transparency in Côte d’Ivoire is necessary to spur investments, as shedding light on market processes plays a significant role in both development and reducing corruption.”

PRIVATISATION: Several efforts to privatise state enterprises have taken place in recent years, particularly the management of the Port of Abidjan. The government has also expressed interest in further asset sales in future. A series of privatisations is envisaged in the banking sector in the context of a forthcoming restructuring, based on the advice of the World Bank. The Banque Nationale d’Investissement de Côte d’Ivoire, Banque Nationale pour le Développement Agricole, Banque de l’Habitat de Côte d’Ivoire, Fonds National de la Solidarité and Versus Bank have all been slated for privatisation, but the timeline is as yet unclear. These sales are expected not only to generate government revenues in the short term, but also to support economic growth through stronger financial sector competition in the medium and long term. It is also seen as an attempt to de-politicise the banking sector and root out corruption. The government has expressed its interest in extending privatisations to other sectors, notably agro-industry, but these plans have not yet been detailed. As of year-end 2009, the state owned or part-owned 82 businesses – 44 of which were profitable, four broke even and 14 recorded losses, while 20 did not prepare financial statements. That same year, the state received CFA23.96bn (€35.94m) in dividends from these enterprises, but paid out CFA87bn (€130.5m) in subsidies, an imbalance cited as one of the motivations for a government privatisation programme.

LABOUR MARKET & HUMAN CAPITAL: Out of an estimated labour force of 10m, there are 600,000 working in the formal private sector, 164,000 civil servants and the security forces, which together comprise the formal workforce. A further 4m-5m are estimated by the government to work in agriculture or in the broader informal sector, and the International Labour Organisation has estimated that the informal sector accounted for 70% of all non-agricultural employment in the country in 2008. Women, those aged 25-54, those with less education and certain ethnic groups are over-represented in the informal sector. It is estimated that nearly 70% work for less than the minimum wage. The informal sector dominates in services, and retail and vehicle maintenance.

All Ivoirians, with the exception of the police and military, have the right to join a trade union, to strike and to engage in collective bargaining. Union density is very low, however, not least due to the pervasiveness of labour market informality. Since 2004, there has been an official policy of prioritising national employment such that a foreigner can only be offered a job if it has been advertised for two months without a suitable Ivoirian applicant being found. This principle is echoed in the new Investment Code.

Many workers lost their jobs during the period of political turmoil and businesses – with the notable exception of those in the construction sector – have been somewhat hesitant about creating new jobs given the lingering sense of uncertainty over the country’s political and economic trajectory.

There are no agreed-upon statistics on unemployment in Côte d’Ivoire. Basic monthly earnings for ordinary workers have been on the increase in recent years, and stood at an average of approximately CFA140,000 (€210) in early 2013. Given the dearth of formal sector employment, it is not uncommon for one worker in the formal sector to financially support several members of their extended family. Neither is it uncommon for businesses to directly provide health care for their employees and dependants. In the case of some larger firms in the formal sector, they may even provide medical facilities on the premises.

Historically, the country could count on a cadre of well-trained and educated workers. Since the onset of the political crisis towards the end of the 1990s, however, the skills shortage has increased. The government has begun to address this issue, but it is not uncommon for Ivoirian businesses to recruit from among nationals living outside the country, particularly for more senior positions. Recent government initiatives include the introduction of the licence-masters-doctorate system that is expected to better match training with labour market demands. Efforts are additionally being undertaken to overhaul the technical education system in order to make these institutions more accessible to the public, because demand for such professions is high.

COMMERCIAL COURT: October 2012 saw the launch of the country’s first specialised commercial court aimed at promoting transparency, contract enforcement and the rule of law more generally. Historically, the legal system in Côte d’Ivoire has proved costly and cumbersome. The new court will not solve all of these problems overnight, particularly as litigants will retain the right to resort to the traditional legal system should commercial arbitration prove unsatisfactory. The early signs are encouraging, however, with broad satisfaction that legal decisions on commercial cases over which the new court has jurisdiction are quicker and more transparent than before.

For the first time, decisions and other relevant legal documentation have been made accessible through the court’s dedicated website. Where once decisions on commercial cases could take anywhere from one day to 10 years, they are now limited to three months. One important innovation is the right granted to the court to launch and pursue a case even in the absence of a litigant filing a complaint. This introduces a novel degree of operational autonomy to the Ivoirian legal system. The court consists of a president and five part-time, volunteer judges. It had presided over some 350 decisions in its first six months, with an annual expected caseload of around 1000. This is likely to increase as the court’s reputation solidifies, though additional resources will be needed to avoid future bottlenecks. Initially introduced as a pilot measure, it is envisaged that it will be rolled out countrywide and in the sub-region if it proves successful, although no timescale has yet been set. Development of the court has been supported and financed by the World Bank.

TAXING TIMES: The value-added tax (VAT) regime presents businesses with cash-flow challenges. The tax is charged at a standard rate of 18%, with a reduced rate for some transactions and a zero rate for others. Typically, a business collects VAT from its clients and pays VAT to its suppliers, with the surplus of the former over the latter representing money owed by the business to the state. As VAT is not charged on exports, a firm cannot collect this money from foreign clients to offset against the VAT charged on those same goods, or their constituent parts, by suppliers. The government requires payment the following month, which can cause cash-flow headaches for businesses.

Outstanding VAT credits are to be limited to CFA10bn (€15m) from 2014, which should go some way towards relieving this burden on businesses. There is ongoing debate on further VAT reform, but it is as yet unclear as to when this may be concluded and executed. VAT receipts are the lowest of all economies in the region. The IMF is providing technical assistance to assist the authorities in developing more robust fiscal administration and tax collection capabilities. As of mid-2013, a bipartisan committee had been established to monitor VAT payments. There was no build-up of new arrears in 2012, while some 44% of arrears were repaid at the end of 2011 in accordance with a payment plan agreed with the private sector. When the tax schedule was revised in 2006, measures were introduced to reduce the corporate tax rate, which was set at 27%, while a three-year exemption and free tax registration were offered to returning companies that had departed the country due to the political crisis.

To boost the economy in 2011 after the most recent bout of political unrest, the road tax was also suspended, trade and land taxes were halved, and pre-2010 income tax arrears were cancelled. Further fiscal incentives for new businesses were introduced in the 2012 Investment Code (see analysis).

OUTLOOK: With the political uncertainty of recent years receding and a raft of planned investments from both government and international donors, Côte d’Ivoire looks set to recover some of the ground it has lost. Indeed, there are already signs that the country is making a comeback, with strong growth posted in 2012 and a new strategy in place for sustaining that expansion. As it is rich in natural resources and a major exporter of cocoa, the country has much to offer international investors. The new government is determined to ensure that Côte d’Ivoire remains on the path to earning emerging economy status by 2020.