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Cablegate: Burkina Faso Investment Policy Review 2009

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UNCLAS SECTION 01 OF 04 GENEVA 000682

SIPDIS

DEPARTMENT FOR IO/T, IO/EDA, AF, EB/OIA

E.O. 12958: N/A
TAGS: EINV ECON UNCTAD EAID XA

SUBJECT: Burkina Faso Investment Policy Review 2009

GENEVA 00000682 001.2 OF 004


1. SUMMARY: UNCTAD held an Investment Policy Review (IPR) for
Burkina Faso on
June 23, 2009, attended by about 40 delegates, including a number of
LDCs and
African delegations. Policy Review Section Chief Chantal Dupasquier

recommended that Burkina Faso accelerate legal and fiscal reforms to
attract
more foreign direct investment (FDI). Director General of Industrial

Development, Minister of Commerce and the Promotion of Enterprise
and Arts in
Burkina Faso Adama Traore, reported that GOBF has instituted many
reforms
following the World Bank's negative review of Burkina Faso's
investment
environment. Meeting participants, especially neighboring African
nations,
expressed support for Burkina Faso's reforms, and described
favorably their
recent experiences investing in Burkina Faso. END SUMMARY

UNCTAD IPR PRESENTATION AND RECOMMENDATIONS
-------------------------------------------
2. According to Dupasquier, FDI in Burkina Faso has been largely
undiversified, focusing mainly on existing markets in mining and
telecommunications.

3. UNCTAD recommended further regulatory reforms in the legal
framework for investment and in business, customs, corporate
taxation, and administrative procedures, as well as reforms to
GOBF's
fiscal framework and governance. UNCTAD also encouraged the
Government of Burkina Faso (GOBF) to support greater regional
integration to expand its market size and opportunities.

4. The review recommended the creation of an investment promotion
agency and a Presidential Council for Investment, and provided
proposals on how to fit these new bodies into Burkina Faso's
existing
institutions.

5. The UNCTAD secretariat was optimistic about the future of Burkina

Faso and its ability to attract more FDI, if the GOBF continues with

the structural reforms begun the 1990s.

6. BACKGROUND: According to World Bank statistics, Burkina Faso's

GDP was USD 6.8 billion in 2007 and it had a per capita Gross
National Income (GNI) of USD 430. The largest foreign investor in
Burkina
Faso is the French firm Bollore with several agencies in the country

including SDV Bobo-Dioulasso, BLMS Ouagadougou, SNTB/SAGA
Bobo-Dioulasso, SDV
Ouagadougou, SITARAIL Ouagadougou and SNTB Burkina Faso. French
investment accounts for more than 70 percent of all FDI. According
to the

GENEVA 00000682 002 OF 004


World Bank's Doing Business 2008 Report, Burkina Faso ranks 148th
out of 181
countries in terms of an attractive business environment. The CIA
World Factbook cites Burkina Faso as one of the poorest countries in

the world. END BACKGROUND.

BURKINA FASO RESPONSE TO THE IPR
---------------------------------
7. The GOBF has heavily promoted investment since the 1990s
reforms.
Burkina Faso now has 15 investment promotion and protection
agreements with other nations. Bureaucracies involved with
investment
have been restructured to encourage the development of a private
sector. A trade point called The Business House was created in 2003

as a hub for information and to regulate disputes. However, Burkina
Faso's
strong agricultural potential remains under-utilized, with only 12
percent
of arable land in use. The country also boasts significant mineral
deposits,
including gold, zinc, manganese, and phosphates, resources for which
mining
and market infrastructures have not been developed.

8. Burkina Faso welcomed the recommendations contained in the IPR
and plans
to implement them as soon as possible.

9. According to Traore, Burkina Faso, faces 3 major challenges to
encouraging investment, but has made efforts to turn these
challenges into
opportunities. First, it is a landlocked country, but this can be
turned into
an advantage if Burkina Faso positions itself as a linking country.
To this
end, it prefers to now call itself (quote) land linked (end quote),
noting
that it is only a one hour flight from all major capitals in western
Africa,
and could potentially become the center of transport for these
nations.
Second, the nation's economy is undiversified, working primarily in
the
tertiary sector (services), but again sees this as an opportunity to
move
into the secondary sector (manufacturing finished goods). Finally,
Burkina
Faso has very little international trade, but hopes that future
opening will
enable it to penetrate new markets.

10. However, there are still many challenges for investors in
Burkina
Faso. According to participating business executives, the high cost
and low
availability of electricity is a major issue. Corruption is still a


GENEVA 00000682 003 OF 004


prevalent issue, though both the government and NGOs are combating
it. Lack of infrastructure, high tax rates, and the unsatisfactory
administration of justice were also raised as major issues.
Representatives
from Canada cited the new investment and labor codes specifically as
recent
reforms that have made Burkina Faso a more attractive place to
invest. The
nation's political stability, social peace, and the commitment of
public
authorities to open dialogue and cooperation with the private sector
have
been very encouraging to all investors.

11. Finally, domestic private sector representatives from Burkina
Faso
welcomed the review, but pointed out that still only 1% of all FDI
in Africa
comes to Burkina Faso, and opined increases in FDI are necessary.
The
representatives felt that their own recommendations, which had been
made with
officials in a domestic workshop, were not taken into account.
However, the
private sector still felt that the IPR recommendations were moving
in the
right direction, and made clear that they were available to help
with the
implementation of the document's recommendations.

COMMENTS
--------
12. Comment: Investment Policy Reviews (IPRs) continue to be one of
UNCTAD's
best technical assistance products. The IPRs are useful not only for
the
recommendations they contain but for the process required to develop
those
recommendations. UNCTAD only does IPRs at a government's request
and on the
condition that the government intends to implement recommended
reforms and
will participate in a five-year follow-up review to monitor that
implementation. Launching of the IPR, such as was done for Burkina
Faso, is
intended to publicly highlight the government's commitment and
create
momentum in support of a multi-stakeholder reform process. The IPRs
also
encourage transparency among nations on issues beyond investment, as
related
issues such as corruption, infrastructure development, and labor
codes are
inevitably discussed.

13. Since 2000, UNCTAD has completed 26 IPRs. UNCTAD has another
25
requests for IPRs, which it will undertake as funding and staff time
become
available. The 25 countries with unmet requests for IPRS are: seven

GENEVA 00000682 004 OF 004


LDCs
(Bangladesh, Central African Republic, Chad, Democratic Republic of
Congo,
Guinea-Bissau, Madagascar and Mali; three other African countries
(Gabon,
Republic of the Congo, Swaziland); five Central Asian countries
(Azerbaijan,
Kazakhstan, Kyrgyzstan, Republic of Macedonia, Mongolia); six Latin
American
and Caribbean countries (Bolivia, Chile, Nicaragua, St. Lucia,
Suriname,
Trinidad and Tobago); two Middle Eastern countries (Bahrain,
Kuwait); the
Philippines; and Moldova. UNCTAD has just begun work on IPRS for El
Salvador
and Guatemala. El Salvador self-funded its IPR. UNCTAD actively
raises
funds for IPRs for LDCs and African countries and works with UNDP to
secure
some UNDP funding for IPRs of middle income countries. Middle
income
countries that want their IPRS completed in the near term often
self-fund
them. The typical budget for an IPR is USD 150,000, which pays for
the
research and analysis necessary to write the IPR, publication and
launching
of the IPR, and initial follow-up activities to implement the IPR.
The USG
may wish to consider funding some of the unfunded IPRs.

14. Representatives from Burkina Faso fully embraced the changes
recommended
by UNCTAD to open Burkina Faso up to greater FDI. End Comment.

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