Cameroon: Measures Taken By The Government To Revamp The Cameroon Economy

MEASURES TAKEN BY THE GOVERNMENT TO REVAMP THE CAMEROON ECONOMY

The cycle of boom and slump is a familiar term to political economists. But the average Cameroonian only came to know the idea of economic crisis and also get to grips with its attendant challenges in 1987 when the prices of our cash crops and other export products crashed in the World market. For Cameroon this was going to be the beginning of a period when business would be bad, sales would be low and the balance of trade would know a steady deficit for the years to come.

At home the audit account of public and para - public entreprises would be revealing great negative balances, meaning that they were operating at a loss. Some would be simply living on Capital. Foreign investors would withdraw their share capital from such entreprises and be chary of reinvesting in the same country even if in a different sector. State subventions would only be sinking into what looked like an abyss and the government would become economically upset.

The government would arrest employment and stay salary increments for civil servants. Public, para - public and private entreprises would not only arrest employment and slash salaries, they would also reduce staff levels. Indeed, some companies closed their doors outright.

The rate of unemployment would rise and this was to be the beginning of mass poverty and general social malaise for the populace.

The one-party system was not helping the situation. The government realised that the economy needed to be liberalized and that this can only work with a multiparty democracy. At the same time the government approached the Bretton Woods institutions (International Monetary Fund and International Bank for Reconstruction and Development) and other multilateral /bilateral lenders such as the Paris club and they posed polico - economic democracy as a sine qua non for them to work together with Cameroon. In other words, the government of Cameroon and the International money lenders and donors were ad idem.

This is how His Excellency Paul Biya released Multiparty politics (which had been arrested in 1966 with the birth of the umbrella party, CNU) in Cameroon when in the CPDM Congress of June 1990 he announced in a spell-binding speech, l quote, "we should be ready for competition". This is also how politico-economic liberties came to be enhanced in Cameroon with the 1990 liberty laws. Thus on the political plane 16 laws and 3 decrees were passed covering various facets of political life. On the economic plane 25 laws and 23 decrees were passed across the board.

On political liberties these laws and decrees include, among others, laws N° 90/043 to N° 90/061 on the conditions of entry into, residence in and exit from the Cameroonian territory, the simplification of criminal procedure for certain offences, the repression of subversion, the State of emergency, the freedom of social communication, the freedom of association, the maintenance of law and order, the regime of political meetings and manifestations, political parties, judicial organisation and decrees N° 90/1245 N° 90/1459 on the conditions of establishing passports and foreign trips by nationals, the conditions of entry into, residence in and exit of foreigners and, the creation of a national commission for human rights.

On economic liberties these laws and decrees include, laws N° 90/019 to N°90/071 on the exercise of the activities of credit institutions, the creation of the Free Trade Industrial Zone, the practice of insurance activities, the metric system and the control of weights and measures, the conditions of practice of the profession of road transporters, the regulation of commercial practice in Cameroon, the practice and organisation of the veterinary profession, the practice and organization of the profession of technical experts, the practice and organization of the profession of chartered accountants, authorising the President of the Republic to organize a restructuring of the cocoa and coffee sector, the privatisation of public and para-public entreprises, the investment code and, decrees N° 90/1357 N° 90/1483 on the facilitation of the entry of tourists into, stay in and exit from Cameroon, the conditions for the granting of the licence to practice cinematographic activities, the conditions for the granng of transporter's licence, the conditions for the construction and running of touristic establishments, the conditions for the creation of touristic agencies, the condition for the granting of licence to run credit institutions, the homologation of prices, the modalities for exploiting quarries, inter alia.

These Political liberties have gone a long way to set a safe and sane political environment for business to thrive. There are more than 150 authorized and fully operative political parties in Cameroon today. In the last seven years five multiparty elections have been organized : two presidential, two legislative and one municipal. Foreign investors show a penchant for countries with institutions having plural opinions such as the present national assembly and municipal councils in Cameroon. There is freedom of conscience and the press is approaching western standards.

The 1996 revised constitution of Cameroon is a great leap toward the ideal of democracy.

On their part the economic liberties have affected trade and industry in a most positive way.

THE REVISED INVESTMENT CODE

The investment code was revised in 1990 to encourage productive investment in Cameroon. Thus it offers alluring conditions to investors in the form of incentives and guarantees. It is a liberal law in which the legislator calls on all natural persons or corporate bodies of Cameroonian or foreign nationality, irrespective of their place of residence, to undertake economic activity in Cameroon. The Code goes further to operationalize this charter of rights in the following feel-at-home terms.

Foreign nationals have the right to enjoy the same liberties and protection of the law as those granted Cameroonian natural persons or corporate bodies.

Foreign nationals have the right to enjoy the manifold rights governing property ownership, concessions and administrative authorizations.

Foreign nationals have a right to compensation in the case of expropriation after evaluation by an independent third party.

Foreign nationals have the right to enter into and execute any contract that they deem to be in their interest.

Foreign nationals have the freedom to enter, reside in, travel around and leave the national territory. This includes corporate bodies duly established in Cameroon, their partners and managers and foreign staff with approved contracts of employment as well as members of their legitimate families.

Foreign nationals have the right to hire and fire labour in compliance with the labour and social insurance legislation in force.

Finally and most importantly, foreign investors resident in Cameroon are guaranteed the right to freely transfer proceeds of all kind from invested capital and in case they cease to operate, the balance of the liquidation. They are also free to transfer funds representing normal and current payments for supplies and service effectively performed, particularly in the form of royalties and sundry remuneration.

Needless to say that all these attractive conditions can only fall into shape when the foreign national has a residence permit.

This code also encourages export trade by granting considerable exemptions on export charges.

This code has widened the scope of production in the sense that there is no longer any particular protection amongst national business sectors. The wood sector has been liberalized such that it is now easier to obtain the licence to exploit timber. As from 1st January this year all timber must be processed, however the degree, before export. The petroleum sector has also been liberalized and oil research, meaning exploration, production and distribution, is open to all who can venture. Moreover a 1998 law instituted special fiscal measures to promote hydrocarbons exploration activities in Cameroon. This law is a charter of rights and benefits to be enjoyed by holders of hydrocarbons exploration permits and concessions.

There is the fiscalo-customs reforms which put every business, whether industrial or commercial, on the same plane.

THE FREE TRADE ZONE LEGISLATION

In 1990 the government of Cameroon enacted the free trade zone legislation to further encourage industry. This law is to the effect that industrial concerns exporting at least 80% of their products qualify for an extensive package of fiscal, regulatory and customs incentives. There are also administrative incentives such as the one-stop shop facility. Industrial estate developers and operators in Cameroon are equally eligible for this same package of benefits.

The Free Trade Zone programme is a concept applicable to locations throughout the country, although with headquarters in Douala. It provides the opportunity for the setting up of "Industrial Park" free trade zones and "single factory" or "special" free trade zones. The opportunity for the latter is granted to agro-industrial firms to enable them locate near their source of raw material.

The scope of activities in the free trade zone ranges from pure manufacturing, through assembly operations to financial and information processing services.

PRIVATIZATION

In 1990 the government of Cameroon passed a law on the privatization of public and parapublic entreprises. This economic booster law came after it was realized that privatization is the one way to economic salvation. It had just dawned on the government that the state has no business in business for, it is the private entreprises which practices shrewd management and accountability is as though it were in the nature of things. It is this spirit of private entreprise that is the dynamo of the economy.

So by a decree of 1994 certain state-owned entreprises were admitted to the procedure of privatization. Those that have already been privatized include: CAMAIR, CAMSHIP, HEVECAM, etc. The following are in the process: REGIFERCAM, SOCAPALM, SODECOTON, SONEL, SNEC, CDC, etc. Indeed the General Manager of C.D.C. recently made a mission to all CDC estates to clear the doubts and guarantee the rights of the natives about the imminent privatization of the C.D.C.

With privatization, shares in these companies are available to local business magnates, civil servants and State agents, personnel of the public and para public entreprises, small investors, as well as foreign investors.

The Privatization process is going on steadily and surely. Hopes of a brighter economic future are rising as the number of persons shunning the civil service and other salaried employments to embrace private ventures is increasing with every new day.

TRADE

In this sector the government, in an attempt to ease procedures, began by elevating the department of Trade of the defunct Ministry of Economy and Plan to a Ministry in its own right, the Ministry of Industrial and Commercial Development that is. The Trade schedule, a blueprint of this Ministry, sets out liberal trade rules and procedures. These procedures have been simplified such that the conditions for obtaining the import-export licence are now easier. And once one fulfils them it is valid for two years renewable.

Formerly there were only a handful of importers/exporters and even when having had the privilege to become one many products required special authorization. These are such as Portland cement, salt, rice, coffee, cocoa, wheat flour, cash crops in general... There had been a heavy government intervention and interference in the flow of commercial practice through the so called "regulation" thereby creating monopolies and oligarchies.

SOCIAL

In August 1992 the Cameroon Labour Code was revised to meet the exigencies of an ambitious economic plan. In this new code the liberalization of the economy is further sanctified by the freedom of contract between the employer and the employee. Here the balance of favour is titled to the greater advantage of the employer. At the same time, foreign business operators and foreign employees are greatly protected.

In 1998 the President of the Republic ratified a 1973 ILO convention concerning minimum age for admission to employment. Thus the minimum age for admission to employment through-out the national territory is now fixed at 14 years ; this in accordance with the revised labour code. It will result in increase in the supply of labour and its attendant benefits to the employer.

BANKING AND INSURANCE

Under the BIYA regime the banking sector in Cameroon has been restructured to favour the growth of business. This has been achieved through legislation which is designed to ensure the stability of the sector. Since the enactment of the 1995 ordinance, there is no restriction as to ownership. Hence we find the existence of 100% privately owned banks and other sorts of financial institutions in Cameroon today. There is also the possibility of operating offshore banking in this country.

The government adopted the crossed cheque system with restricted endorsement in 1996. This limits the drawing and issuing of cheques and breaks the circulation of money. It indirectly coerces otherwise non-challant business persons to operate bank accounts. On the whole this system guarantees security in monetary transactions.

Moreover, Cameroon is a member of the Multilateral Investment Guarantee Agency for the promotion of the flow of private foreign direct investment to developing countries. This agency provides political risk insurance coverage against the major non-commercial risks of war and civil upheavals, currency transfer and expropriation. It also provides technical assistance to member countries to enable them attract foreign investment.

With respect to the insurance sector, the Cameroon government ratified the CIMA code in 1995. This code standardizes insurance claims, and encourages out-of-court settlements by allowing a threshold of impatience of up to one calendar year. Above all, since the code puts a limitation on colossal claims against insurance companies, it in this way favours the growth of the insurance industry.

SETTLEMENT OF COMMERCIAL DISPUTES

The OHADA treaty was ratified by the Cameroon government in 1996. This is a harmonized law which enhances the avoidance of legislative anarchy in the business sector. It encourages the jury system as against the single judge system in the settlement of business disputes. In this way the proclivity for impartiality is much reduced. In a bid to avoid the long, onerous and costly nature of legal proceedings in economic litigation, the treaty encourages arbitration.

THE MILLENNIUM BUG

A software time bomb is ticking away in computer machines around the world. As the clock edges past mid-night on December 31 this year millions of computers will start pumping out erroneous data. Others will simply crash, writes Marina Bodilo. This computer defect will affect every aspect of modern life, from telecommunications to banking, insurance, pensions, transport schedules, air traffic movements ... ; things which bear all too heavily on economic operations. Corporate executives would not sleep properly at night if they understood the significance of the problem.

Thank God, the Cameroon government started reacting positively to the potential catastrophe by 1998. The Ministry incharge of Scientific research last year organized seminars and workshops on the millennium bug. In these seminars resource persons were advising computer users to make sure that new computer acquisitions must conform to the Pentium model which uses all four digits to designate the year. That users owning older computer programmes using the last two digits to designate the year should embark on the first stage of rectification which involves identifying the extent of the organizations risk explosive. And that they should subsequently, not later than the immovable deadline" anyway, embark on the next stage involving programming and testing. Other Seminars have been slated for the end of March 1999 in all the 10 Provinces of the Republic. At this rate it is expected that year 2000 litigations will not be as rife and rank as it would have otherwise been had the government nonchalantly dec ded to be lukewarm about the Millennium bug.

SETTING CAMEROON ON THE INFORMATION SUPER HIGHWAY

The government made sure Cameroon was hooked up with the INTERNET in 1997. This event put the country on the fast lane of the information highway. With this Cameroon becomes part of the approximately 60 Millions network of users present in 150 countries on 5 continents.

Now, services such as the Electronic mail, World-wide Web, File Transfer Protocol, etc., are available to business operators. Most especially, INTERNET by way of COMMERCE NET enables subscribers to buy, sell and otherwise exchange commercial information with utmost speed. This can only go to enhance international trade and foreign investment in Cameroon, knowing that in the modern context of business, time is of the essence.

In addition, a 1998 law encourages and facilitates private sector involvement in telecommunications development within a competitive environment.

It aims at enhancing the harmonious development of telecommunications network and services with a view to ensuring the contribution of this sector to national economic development and satisfying the numerous needs of users and the population. In effect, the Telecommunications sectors has been liberalized.

MARITIME TRANSPORT

Cameroon has the natural advantage of having a coast-line. For the foreign investor in Cameroon, the bulk of transportation of goods is by sea so it is trite to mention here that the Hamburg Rules of 1978 (a UN convention on the carriage of goods by sea) ratified by the Cameroon government in 1993 and entering into force in 1994 shall apply.

This convention put back the whole issue of Maritime transportation on a scale which tips heavily in favour of the shipper as against the transporter. In the case of dispute the presumption of responsibility is on the transporter on whom the onus of proof lies.

OTHER TRANSPORT LEGISLATIONs

A 1998 Law instituted minimum service in the public transport sector. Thus, public or private undertakings providing public transport by air, sea, road or rail or otherwise managing transport facilities shall be bound to provide minimum services in the event of strikes, riots, mutinies, and other similar contingencies. The competent local administrative authority may, if need be, resort to collective or individual requisitions to ensure the provision of the minimum service, which service shall be renewable as and when necessary until negotiations are done with.

Another law of 1998 set up a road fund to finance programmes for the protection of the national road network, for road safety and for road maintenance. Given that in economic terms transportation is a process in production this law will go a long way to speedup economic activity.

More and more roads are presently being tarred. CAMAIR has just acquired two new aircrafts and the Limbe deep sea port is being extended by Chantier Naval.

COMPETITION AND DUMPING

In an attempt to break monopolies, a 1998 law on competition stipulates that all practices whose aim is to check, distort or significantly restrict competition on the domestic market shall be forbidden. Yet economic operators may freely engage in mergers and acquisition of entreprises in order to improve on the competitiveness of goods and services sold on the domestic and foreign markets.

Another law in the same series governing dumping practices lays down the rules of trade in subsidized products imported in increased quantities likely to cause serious injury to domestic industry of like or directly competitive products.

PROTECTION OF TOURISTS

In the light of the legislation on commercial activities an early last year law fixes the special rules applicable to touristic activities with a view to enhancing economic development, promoting the national culture, encouraging national integration and the mixing of peoples, protecting and safeguarding touristic values and the development of the national touristic patrimony. This law sees tourism as a major preoccupation of the state. This is why in its S. 4(3) "The State guarantees the security of tourists in the whole national territory". The law liberalizes the tourism sector by encouraging free competition in the industry subject to the respect of the regulations in force and the exigencies of professionalism in the trade. The State makes fiscal, customs and land concessions to tourism operators ; this in order to render the national touristic product more competitive.

TAXATION

Taxes which were formerly dormant are now being more and more enforced. These are such as the real estate tax, rental tax and the 1.1% advance deduction from company capital.

The tax rate has steadily increase in the last 10 years from 10.99% to 11.9%, 16.5% and 18.7%. The 1998/99 finance law re-organised the tax regime by increasing the tax base. Since 01/01/99 Turnover Tax has been replaced by Value Added Tax. The latter is a tax deductible either by the producer or the distributor. The general idea at the origin of the Value Added Tax is that each time a product changes hands it adds in value either through transformation, or simply through warehousing. From the producer to the final consumer therefore the product is transported with an added value at each stage. The value added Tax seems to be more equitable since it is neutral and will surely bring more money to the State treasury.

CONCLUSIONS

The economy crash of the late 80s took both Cameroonians and the government unawares. However since then the latter has taken the foregoing politico-economic steps to booster the economy and achieve the present growth rate of about 5%.The President of the Republic has made economic missions abroad which have paid off.

The Prime Minister been doing same both at home and abroad. We remember his last April economic mission to Paris during which he made the époque-making speech including the assertion that "Cameroon is the best risk in the central African Sub-region". The last January accord with the French granting Cameroon 4 billions francs CFA for rural development is a direct consequence of these missions. Last January still he made a similar trip to Douala to chat with economic operators. Indeed economic operators became reassured after this hope-inspiring mission. This trip was closely followed by the customs day, an open day for business persons to get more acquainted with customs procedures at the port of Douala.

The admission of Cameroon into the commonwealth of nations is bearing bountiful economic and cultural fruits.

The liquidity situation of the public treasury has improved. The proof of this is that the government is systematically clearing internal debts. Part of civil servants arrears of salary were paid in January 1999. At the same time business persons, creditors of the state, were being called up to come and collect cheques. More of these signs of economic good health are in the pipeline.

We must say that if you require expert / professional Counselling on any issues raised in this cursory view of Cameroonian economic recovery feel free to get back to us.