Given the country's low levels of income and education - the average wage is about $600 a year while 25% of the country cannot read - and its heavy reliance on agriculture (coffee and cocoa production account for 35% of GDP and 55% of exports), this might seem rather a tall order. But many local bankers remain hopeful. 'If any west African economy can make the transition, then Cote d'Ivoire can,' says one Abidjan-based analyst.

Cote d'Ivoire's reputation as the economic and political jewel of francophone Africa has lost some of its shine in recent years following a decade-long recession during the 1980s, and a dubious piece of political engineering in the 1995 election when Konan Bedie prevented his rival Alassane Ouattara from running for office by introducing a rule insisting that candidates be of 'pure' Ivoirian origin.

But thanks to the devaluation of the CFA franc (the common currency of francophone west Africa) in 1994 and the rise in world commodity prices, the country's economy has bounced back into health. Between 1995 and 1997, GDP grew by more than 24%, making it one of the fastest growing countries in the region. Much of the growth was driven by strong rises in coffee and cocoa production. But gains were also made in the transport, energy and construction sectors, each of which saw increased investment between 1994 and 1997.

Meanwhile, the tight fiscal policies started by prime minister Ouattara in the early 1990s have been continued by his successor Daniel Kablan Duncan. As a result, inflation has fallen from 26% in 1994 to just 3.5% in 1996 while the trade surplus has grown to CFA Fr748 billion ($1.3 billion). Lower government spending and improvements made to the tax collection system have also helped to bring down the budget deficit from 3.7% of GDP in 1995 to 2.4% in 1996. If, as anticipated, coffee and cocoa prices remain strong, growth should be 6% in 1998 and 7% in 1999. 

Politically, the country is also back on an even keel. Konan Bedie's recent decision to allow proportional representation and the establishment of an independent electoral commission seems to have neutered the opposition. He looks well-placed to secure victory in the elections scheduled for the year 2000.

Privatisation picks up speed

The country has also moved much faster on privatisation in the last two years (after much soul-searching in the early 1990s when many within the government feared that it would to lead to Ivoirians becoming 'strangers in their own country'). Last year, over CFA Fr200 billion was raised through the sale of a number of state-owned companies including sugar concern Sodesucre, vegetable oil producer Palmindustrie and a 51% stake in CI Telcom to France Telecom.

According to Lucas Danho, deputy director of the privatisation committee, all of the country's 60 state-owned companies will be privatised by the end of this year. 'The first stage [the sale of non-strategic companies] will be completed by the end of 1998,' Danho says. 'The government has also taken the decision to move ahead with the second phase of the programme, namely the sale of the government's remaining stakes in partly privatised companies and the future privatisation of the media, port and post office.'

Among 15 companies scheduled for sale this year are Air Ivoire, the state airline, Societe Ivoirienne de Raffinage (SIR), the oil refinery, Societe de Gstion des Stocks Petroliers de Cote d'Ivoire (GESTOCI), the petrol storage group, Compagnie Ivoirienne pour le Developpement des Textiles (CIDT), the cotton company, Gaz de Cote d'Ivoire (GDCI) and Societe Ivoirienne de Construction et de Gestion Immobilier (SICOGI), the construction and real estate company.

Not just the French

Historically, the most active overseas investors in Cote d'Ivoire have been the French and the Lebanese, who have a large expatriate population in Abidjan. In 1995, France accounted for more than 18% of all exports and 32% of all imports into the country, and its companies have been eager participants in the privatisation process. Electricity monopoly CEI is now partly owned by Electricite de France, and Bouygues, the construction giant, has large stakes in the water, power, oil and gas industries, and is also involved in a number of build-operate-transfer (BOT) projects such as the CFA Fr50 billion bridge across the Abidjan lagoon. Meanwhile, the contract to refurbish the Abidjan airport has been won by Aeroports de Marseille.

But following an intensive effort to market the country overseas, Cote d'Ivoire has also been able to attract a wide range of other investors in recent years. In 1996, the Commonwealth Development Corporation (CDC) became the first British company to invest in Cote d'Ivoire when it paid CFA Fr2.6 billion for a 7,700 hectare rubber plantation. Not long after, Crocodile Machetes, a British knife manufacturer, set up a factory in Abidjan.

US companies who have long complained of being unable to enter the market because of French domination have also been overcoming their fears. In July 1997, Cargill, the US agro-industry giant, signed an agreement with the main cocoa exporter, Societe Internationale de Cafe-Cacao (SICC), to build a cocoa processing plant. A number of other US multinationals have also moved in, including the Dole Group which now controls more than half the country's banana production. Non-French companies have also featured heavily in the recent development of the oil, gas and mining sectors.

Cote d'Ivoire is particularly keen to develop closer ties with Asia. In May 1997 president Konan Bedie made the first-ever state visit by an Ivoirian leader to China where he met with Jiang Zemin. A number of Chinese firms have since set up operations including Tianjin Garments and the China Yituo group which makes agricultural machinery. A similar state visits has also been made to Singapore.

Government officials hope that as companies in the Asian region move up the value-scale, they will shift some of their low-technology manufacturing to Cote d'Ivoire. 'We have an extremely strong, open economy with enormous opportunities in the agro-industry, mineral and energy sectors,' says Jean Baptiste Aman, secretary to the cabinet. 'There is no reason why we cannot industrialise in the same way that Asian countries did in the 1960s and 1970s.'

To encourage this process, the government has put in place a series of investment incentives such as a six-year tax holiday for manufacturers investing in Abidjan, and an eight-year tax holiday for investments outside the business centre. Companies are also eligible for exemptions on import duties. The investment approval process has also been streamlined with the establishment of the Centre for Investment Promotion (CEPICI). Jean Claude Kouassi, director general of the centre, hopes that investment as a percentage of GDP will rise from 13% today to 20% by the year 2000. 'We have attracted over CFA Fr540 billion since January 1994,' he said in a recent interview. 'I believe we can attract more in coming years.'

Big opportunities

The most attractive opportunities currently lie in energy, mining, agro-industry, transport and finance. Elf, Shell and United Meridian (UMC) are looking to develop off-shore oil fields while Apache, Global Natural Resources, Sante Fe and Korean company Yukong all hold oil exploration rights. Current daily oil production is around 20,000 barrels but analysts believe that the government target of 100,000 barrels is within reach. One Abidjan-based consultant estimated total reserves of 4 billion barrels in the Lion and Panther on-shore fields alone.

Access to cheap, local energy should make it easier for the government to provide more of the country with electricity. According to the World Bank's 1997 African Development Indicators report, 57% of the population still use firewood as their main source of energy. The government hopes to change this by connecting over 300 villages a year to the national grid.

But the government also hopes that the new-found reserves will allow Cote d'Ivoire to become an exporter of energy rather than, as has the case in past decades, an importer. Two gas-fired power stations have been built, and a third is under construction by international engineering group ABB. Once these move into full production, the plan is to begin exporting energy to Ghana, Togo and Benin.

Under president Houphou‘t-Boigny (who led the country for over 30 years until his death in 1993), little emphasis was put on the development of Cote d'Ivoire's mineral reserves. Agriculture, the president insisted, was the country's future, not digging things out of the ground. Even today, despite the known existence of five large gold deposits, there are still only two gold mines - run by the state-owned mining company Societe pour le Developpement Minerale de Cote d'Ivoire (SODEMI), and two foreign firms, Coframines of France and Eden Roc of Canada.

But following the introduction of a new law in 1995 - which aims to make the sector the second pillar of the economy by speeding up the approval process and giving more guarantees - mining activity has increased significantly. Over 55 new exploration licenses have been granted to, among others, Anglo American, Gencor, Ashanti Gold Fields and the British gold mining outfit, Clough Mining. Canadian company Falconbridge, which has been exploring the large nickel deposits in the northwest of the country since 1993, has recently announced plans to invest over $500 milion in a factory near the port of San Pedro. There are also rumours that exploration will soon start on the large iron ore deposits on the Guinea border.

Coffee and cocoa

Blessed with remarkably fertile soil and an excellent climate, Cote d'Ivoire clearly has considerable potential to become one of the region's major agro-processing centres. It is not only the world's largest producer of cocoa and the seventh largest producer of coffee, but also has extensive cotton, timber and rubber plantations.

Moves to develop the processing of these commodities have been held up in the past by the tight grip maintained by the government on the marketing and sale of agricultural products. But following the privatisation of state-owned companies and the gradual liberalisation of the coffee and cocoa sectors, considerable progress has been made over the past two years.

Several cocoa-processing factories have been set up, including by Barry Callebaut, the Swiss-owned cocoa group. In October 1997 Eburcafe, the French coffee company, opened the country's first coffee-roasting plant. Meanwhile, investment in the cotton industry is expected to rise sharply once the state-owned CIDT is sold later this year. Among those rumoured to be interested is the Louis-Dreyfus group, a leading international cotton dealer.

One key factor in the future success of these projects will be the speed with which these goods can be transported to the key export markets in Europe and North America. Cote d'Ivoire already has one the region's largest deepwater ports at Abidjan. But considerable sums have been spent by the government on extending the country's road and rail networks. And with several new schemes currently under development (such as the toll bridge being built by Bouygues), the government hopes the country will soon have one of the best transport networks in the region.

Leaving aside its strategic geographical position within the region, one of Cote d'Ivoire's biggest advantages is the political influence it has in the area. Because of the close links enjoyed by president Felix Houphou‘t-Boigny with successive French governments, Cote d'Ivoire has always played a pivotal role in the region's main economic and trading blocks such as Uemoa, the francophone trade pact (comprising Senegal, Mali, Burkina Faso, Guinea-Bissau, Togo, Benin, Niger and Cote d'Ivoire) and Ecowas, the economic community of west African states.

As a result, Abidjan is now the diplomatic, commercial and financial centre of francophone Africa. The African Development Bank has its headquarters there, as do many commercial banks. Late last year, a regional stock exchange was set up which will list companies from across the region.

Debt burden

But lurking unresolved is the problem of the country's enormous debt which now stands at $19.6 billion, equivalent to about 180% of GDP and 440% of exports. Interest payments on the debt in 1997 alone are estimated at around CFA Fr760 billion.

Following the signing of an agreement with its London Club creditors in May 1997 (under which the commercial banks forgave 78% of the country's $6.8 billion debt), there were hopes that the country would be able to reach a speedy settlement with its other creditors under the World Bank's scheme for debt reduction for heavily indebted countries. Then in mid-1997, the World Bank gave the government a $70 million loan to help with the initial down payment on the London Club debt.

But shortly after, progress was brought to a sharp halt by the IMF's decision to withhold payment of the $385 million Enhanced Structural Adjustment Facility (ESAF) loan. Worse, until the ESAF is paid, no further progress can be made on negotiations to reduce the hefty $5 billion Paris Club debt. 'All the debt negotiations are conditional on the approval of the second ESAF,' explains an IMF official.

The IMF's principal gripe is that the government has not lived up to the promises it made under the first ESAF loan granted in 1994. 'The government has fulfilled many of its conditions relating to the privatisation of state companies. But it has not opened up the cocoa market enough, and there is still no progress on the duties imposed on the import of wheat and jute bags from south Asia,' says an IMF official.

The IMF and World Bank are also concerned by the inequitable distribution of wealth. '[Economic policies] need to become more pro-poor,' the World Bank recently noted. 'Current policies are in the right direction but are seen as too timid by poor Ivoirians.'

The government has put in place a national poverty reduction plan to alleviate low income and unemployment, and has invested heavily in new schools and hospitals. The Chamber of Commerce is also studying plans to develop the rural economy. 'We are considering ways to encourage investment in the north of the country,' says Yves Yao Koaume, head of the chamber. 'At the moment, over 95% of all investment goes to Abidjan.'

However, the World Bank report on poverty in Cote d'Ivoire indicates that further progress needs to be made. The number of households living on less than $290 a year has risen from 11% in 1985 to 36.8% in 1995 (adjusted for inflation). At the same time, welfare indicators such as literacy rates, school enrolment, access to health facilities and clean drinking water, remain well below acceptable standards.

As in many other countries in the region, corruption also remains a significant problem. 'The situation is not as bad as Nigeria,' says one local banker. 'But it is not that good either.' The problems of poverty, corruption and inequitable income distribution will not be solved overnight, as Tdjiane Thiam, director general of the Bureau Nationale d'Etudes Techniques et de Developpement (BNEDT), admits. But he remains hopeful about the country's economic aims. 'We have one of the strongest industrial bases in the region with real supply capacity. We have rehabilitated the existing infrastructure, and since the recession, have seen more and more investment in fixed capital,' he says. 'If Cote d'Ivoire was a stock, I would issue a buy recommendation.'

The biggest challenge will be to increase foreign investment. Certainly, some investors are happy enough. 'We have been very pleased with our investment in Cote d'Ivoire,' says Mike Wood, head of the CDC's office in Abidjan. 'The government has lived up to all its promises, and we plan to invest a further £25 million in 1998.'

But others complain of a gap between the image presented to potential investors and the reality on the ground. 'We were promised exemptions on import duties,' says one businessman. 'We still haven't received them.' He also complains that there is little communication between government departments, rendering decision-making difficult. However, he has been pleased with the ability of local workers. 'We have been very surprised by how quickly we have been able to train our workers, many of whom came straight off the street.'

The rosy future mapped out by the government would seem to depend on four things - further liberalisation, more progress on privatisation, a speedy negotiation of the external debt and, above all, a better dialogue between government and the private sector.

For all the success of its investor forums, Cote d'Ivoire has yet to shrug off its reputation as a difficult place for non-French companies to do business. The government must make an effort to correct this impression by making the the negotiation of contracts and tax exemptions as transparent as possible.

Longer-term view needed

But foreign companies also need to take a longer-term view, says Thiam. 'Companies seem to take a much more flexible attitude to investing in Asia than they do to investing in Africa,' he says. 'If an investment runs into problems in Asia, the head office accepts it as a natural part of doing business in the region. But if the same thing happens in Africa, they ask 'what were we doing there in the first place?'' As a result, he says, many companies miss out. 'Companies have to understand that we are not a French colony any more. We are an open, competitive economy with excellent growth prospects, particularly in energy, mining and agro-business.'