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Cablegate: North-Central Cote D'ivoire Awaits Economic

VZCZCXYZ0004
PP RUEHWEB

DE RUEHAB #0716/01 3310908
ZNR UUUUU ZZH (CCY TEXT ADX: E2DDDA MSI7563 TMC)
P 270908Z NOV 09 ZDK
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC PRIORITY 5555
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY

UNCLAS ABIDJAN 000716

SENSITIVE
SIPDIS

C O R R E C T E D C O P Y (ADDING PARA 7)

E.O. 12958: N/A
TAGS: ECON EAGR EFIN PGOV IV
SUBJECT: NORTH-CENTRAL COTE D'IVOIRE AWAITS ECONOMIC
TRANSITION
1. (SBU) Summary. Poverty in northern Cote d'Ivoire has
worsened during the seven-year political/military crisis.
The Forces Nouvelles (FN) still exert substantial control over
the northern economy, levying significant taxes on some

sectors. Additionally, businesses in the north have
experienced increased transportation costs resulting from FN
barricades and poor road conditions. Bank presence has
increased, but bankers remain wary of extending credit until
elections take place. After a long hiatus, northerners are
now required to pay for water and electricity. Some elements
of the GOCI administration are now carrying out their
functions in the north; but in some cases official taxes
duplicate--rather than replace--unofficial FN levies. Other
GOCI agencies have not yet resumed activity (e.g., customs
enforcement). Businesspeople in the region hope for quick
elections and completion of the reunification process so
business projects can get underway. While the end of the crisis
will almost certainly help the economy of the north, many in
the region will lose their source of income as the GOCI
resumes more of its official functions. End summary.

--------------------
POVERTY IN THE NORTH
--------------------

2. (SBU) On a week-long trip to north-central Cote d'Ivoire
in mid-November, econoff and economic assistant observed
first-hand the high level of poverty. At almost every
barricade, men dressed in plain clothes stopped the embassy
vehicle and asked for money even though the car bore
diplomatic license plates--a practice that is quite rare in
Abidjan. A relatively undeveloped region of the country,
north-central Cote d'Ivoire has experienced economic
deterioration over the past seven years. According to Cote
d'Ivoire's 2008 Poverty Reduction Strategy Paper, poverty
rates in Bouake and Korhogo are 57 percent and 77 percent,
respectively, compared to 21 percent in Abidjan.

3. (SBU) The fact that Cote d'Ivoire's real GDP has
continued to grow (on average 1.0 percent per year from 2002

to 2009) during a time when the entire northern half of the country
has been isolated from the official economy is one indication
of the relative lack of economic development in the north.
The nation's revenue-generating products are largely found in
the south: hydrocarbons (all offshore), cocoa (some 85
percent in the south), coffee, timber, tuna, pineapples,
bananas, rubber, and palm oil. Key services such as port
operations and telecommunication services are almost
exclusively located in the south.

-------------------------------------------
DIFFICULTIES OF DOING BUSINESS IN THE NORTH
-------------------------------------------

4. (SBU) The FN still exerts significant control over the
northern economy. According to Bright Kone, assistant to the
president of the Confederation of National Federations of
Livestock and Meat Sectors of West African Economic and
Monetary Union Member States, the FN charges livestock
dealers 111,000 CFA (USD 253) for each rail car of cattle and
125,000 CFA (USD 285) for each rail car of sheep that passes
through the FN-controlled region (typically en route from
Burkina Faso to Abidjan). Each month approximately 60
trainloads of livestock, with 10 to 20 cars on each train,
pass through the FN zone. Kone also reported that similar
fees paid for livestock shipments by truck total
approximately USD 165,000 per month.

5. (U) Roads in the north-central region are generally in
poor condition. On the stretch between Ferkessedougou and
Ouangolodougou, portions of the road that at one point were
paved appeared to be nothing more than dirt roads. The state
of the roads and the proliferation of barricades have
increased the cost of doing business in the north--especially
for perishable commodities such as mangos and corn. They
also make the region's exports--such as cotton--less
competitive on world markets.

6. (SBU) While at least six banks operate in Bouake and
Korhogo (BIAO, BICICI, BCI, SGBCI, Ecobank, BOA), they are leery
of extending credit before elections take place. Managers of
Filiature et Tissage de Gonfreville (FTG), a cotton spinning
and weaving company, complain that because of the
political/security climate, the company has not been able to
secure financing for replacement parts and new equipment for
several years. Branches of the Central Bank of West African

States (BCEAO) in Bouake and Korhogo have not yet re-opened.

7. (SBU) While customQpersonnel hQe returned to the
region, they have not been able to perform their duties. The
lacy of customs enforcement has made it difficult for officially
protected sectors, such as cotton, to compete with cheaper
imports. In fact, a senior manager at FTG said counterfeit
goods and lack of enforcement of import duties represented
his greatest challenge. FTG, which employed approximately
1,500 workers in 2002, now employs only 400.

---------------------------------------
BREAKS OR NORTHERNERS COMING TO AN END
---------------------------------------

8. (SBU) Northerners have enjoyed some economic advantages
over southerners during the crisis. With no official GOCI
presence there, they have paid no taxes on autos (a 17
percent tax) or motorcycles (a tax ranging from USD 160 to
USD 200 per motorcycle). That savings came to an end in
February 2009, however. Residents of the north have not paid
for electricity or water during the crisis. Those benefits
have also ended, as the national utility companies (SODECI
and CIE, both owned by the French industrial group Bouygues)
began billing northerners in April 2009.

9. (SBU) Fuel remains less expensive in the north. Unleaded
gasoline in Korhogo was selling for 600 CFA (USD 1.36) per
liter, compared to the official price of 694 CFA (USD 1.58)
per liter in GOCI-controlled areas. The price of diesel in
Korhogo was 500 CFA (USD 1.14) per liter, versus 571 CFA (USD
1.30) in GOCI-controlled areas. Fuel smuggled from Burkina
Faso--albeit of poor quality--escapes official taxes,
allowing for lower prices at the pump.

-----------------------------
RETURN OF GOVERNMENT SERVICES
-----------------------------

10. (SBU) Prefecture officials resumed their positions in
Bouake, Korhogo, and Ferkessedougou in 2007. In meetings
with embassy staff they reported that public schools and
hospitals were open and operating, although schools in
Korhogo were still using many volunteer teachers. In Bouake,
a local official maintained that his city is now more secure
than Abidjan, citing the fact that Bouake pharmacies are open
through the night without protection--a practice unheard of
in Abidjan. Nevertheless, the official noted that rural
areas and villages are much less secure, with uncontrolled FN
members committing violent acts against the population. He
said judges were present but did not have full operational
powers due to the lack of police and gendarmes.


11. (SBU) Prefecture officials reported that the consolidation
of the national treasury ("unite de caisse" in French) had not
taken full effect, though the GOCI had begun to collect taxes
on cars and motorcycles in Bouake (but not Korhogo). FN
members, who demand a portion of customs revenue and
ultimately aspire to become regular customs officials,
continued to prevent regular customs officials from
performing their duties.

12. (SBU) In Bouake, the secretary general of the prefecture
and a local bank executive reported that businesses were
paying taxes to GOCI treasury officers while still paying
unofficial taxes to the FN. Thus, the return of the GOCI has
generally resulted in more costs (electricity, water, and
taxes) but little help for businesses (in the form of customs
enforcement, relief from unofficial FN taxes, or better
credit terms).

-------
COMMENT
-------

13. (SBU) There is clearly a greater urgency to move to
elections among businesspeople in the north than in the
south. This is understandable as they currently experience
both the disadvantages of the crisis and some of the costs of
the return of government. While elections are likely to
bring a more secure environment, increasing credit flows and
economic growth, the area has been historically
disadvantaged, and a robust recovery capable of providing
income to former FN soldiers and others will take time.

14. (SBU) The ragged, gaunt FN members at barricades
virtually begged emboffs for food or cash. Though some

reinsertion programs are in place, it is clear that there
will be a difficult transition for those who have profited
from the crisis, once the return of the government is
complete, since even now there are many who are barely
managing to survive.
NESBITT

© Scoop Media

 
 
 
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