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WEEKLY NEWSLETTER
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Ivory Coast
Index
Market at Treichville, in Abidjan
Courtesy Eszti Votaw
By the end of the first decade of independence, the
government's strategy for economic growth and development
appeared
remarkably successful (see
table 2, Appendix).
Agricultural output
of cash crops expanded, and, as evidence of
diversification, the
relative importance of unprocessed coffee, cocoa, and
timber
diminished as that of bananas, cotton, rubber, palm oil,
and sugar
grew. Using revenues from commodity sales, the government
upgraded
roads, improved communications, and raised the educational
level of
the work force. Local factories were replacing some
imports by
producing a wide variety of light consumer goods.
During the 1970s, the government's economic objective
of growth
remained unchanged. Agriculture--coffee and cocoa in
particular--
remained the mainstay of the export economy and the
largest
component of GDP until it was overtaken by the service
sector in
1978. But while agriculture provided about 75 percent of
export
earnings in 1965, that total had shrunk by 20 percent by
1975.
Between 1965 and 1975, agriculture's share of GDP also
declined by
almost 20 percent. Industrial GDP, derived primarily from
import
substitution manufacturing and agricultural processing,
increased
by 275 percent from 1970 to 1975, while industry's share
of export
earnings increased from 20 percent in 1965 to 35 percent
in 1975.
The fastest-growing sector of the economy was services,
which as a
share of GDP increased by more than 325 percent from 1965
to 1975.
At the same time, problems that arose during the
previous
decade required adjustments. To reduce production costs of
manufactured goods, the government encouraged local
production of
intermediate inputs, such as chemicals and textiles. The
government
also shifted some public investment from infrastructure to
crop
diversification and agricultural processing industries to
improve
export earnings. Meanwhile, work on such major projects as
the Buyo
hydroelectric generating station continued. Foreign
donors,
attracted by Côte d'Ivoire's stable political climate and
profitable investment opportunities, provided capital for
these
endeavors. Until 1979, when coffee and cocoa prices
plummeted and
the cost of petroleum products rose sharply a second time,
virtually every economic indicator was favorable.
Over the same twenty years, however, structural
contradictions
in Côte d'Ivoire's economic strategy became apparent and
presaged
the serious problems that became manifest in the 1980s.
First, the
emergence of a domestic market large enough to allow
manufacturers
of import substitutes to benefit from economies of scale
required
a wage for agricultural workers--the largest segment of
the labor
force--that was high enough to support mass consumption.
But
because the government relied on agricultural exports to
finance
improvements to infrastructure, commodity prices and wages
could
not be allowed to rise too high. Second, the government's
focus on
import substitution increased demand for intermediate
inputs, the
cost of which often exceeded that of the previously
imported
consumer goods. Moreover, Côte d'Ivoire's liberal
investment code
encouraged capital-intensive rather than labor-intensive
industrial
development. Consequently, industrial growth contributed
little to
the growth of an industrial labor force or a domestic
market, and
prices for consumer goods remained high, reflecting the
high costs
of production and protection. The investment code also
permitted
vast funds to leave Côte d'Ivoire in the form of tax-free
profits,
salary remittances, and repatriated capital.
Decapitalization, or
the outflow of capital, led to balance of payments
problems and the
need to export more commodities and limit agricultural
wages. (As
a result, the domestic market remained small, and consumer
goods
remained expensive.) By the start of the 1980s, as
surpluses from
commodity sales dwindled, the government continued to
depend on
foreign borrowing to stimulate the economy. Inexorably,
the
external debt and the burden of debt service grew.
In the 1980s, a combination of drought, low commodity
prices,
and rapidly rising debt costs exacerbated the structural
weakness
of the Ivoirian economy. Between 1977 and 1981, both cocoa
and
coffee prices fell on world markets, the current accounts
balance
dropped precipitously, and debt servicing costs rose,
compelling
the government to implement stabilization policies imposed
by the
IMF (see
table 3, Appendix). The economy sagged even more
when a
drought during the 1983-84 growing season cut agricultural
and
hydroelectric output at the same time that rising interest
rates on
international markets increased the debt burden. No sector
of the
economy was untouched. Between 1981 and 1984, GDP from
industry
dropped by 33 percent, GDP from services dropped by 9
percent, and
GDP from agriculture dropped by 12.2 percent.
Between 1984 and 1986, a surge in commodity prices and
output,
coupled with increased support from Western financial
institutions,
provided a momentary economic boost. The record 1985 cocoa
crop of
580,000 tons, combined with improved prices for coffee and
cotton,
bolstered export earnings and confidence in the economy.
Following
both the 1984-85 and the 1985-86 growing seasons, the
government
again increased producer prices for cocoa and coffee,
resumed
hiring civil servants, and raised some salaries, all of
which led
to a rise in consumption. Food production also increased
during
this period, allowing food imports to drop. Similarly, a
reduction
in the cost of oil imports helped the country to attain a
large
commercial surplus by the end of 1986, thus considerably
easing the
balance of payments difficulties experienced earlier in
the decade.
These factors, combined with the rescheduling of foreign
debt
payments, gave the government some flexibility in handling
its debt
crisis and allowed it to begin paying its arrears to
domestic
creditors, including major construction and public works
firms,
supply companies, and local banks.
The economic resurgence turned out to be short lived,
however.
In 1987 the economy again declined. Compared with the
first six
months of the previous year, sales of raw cocoa fell by 33
percent,
and coffee exports plummeted by 62 percent. GDP declined
by 5.8 per
cent in real terms, reflecting the slide in local currency
earnings
from exports. The trade surplus fell by 49 percent,
plunging the
current account into deficit. Trade figures for the first
half of
1987 revealed a 35 percent drop in the value of exports in
comparison with the same period in 1986.
In May 1987, the government suspended payments on its
massive
foreign debt and appealed to official government lenders
(the Paris Club--see Glossary) and commercial
lenders (the London Club--see Glossary) to
reschedule debt payments. The Paris Club
acceded in
December 1987; the London Club, in March 1988.
As negotiations were proceeding, lenders pressured the
government to introduce fiscal reforms. In January 1988,
the
government implemented a series of revenue-raising
measures, which
extended the value-added tax to the wholesale and retail
trades and
increased import tariffs, stamp duties, and tobacco taxes.
In
addition, the government initiated programs to privatize
most state
enterprises and parastatals (companies under joint
government and
private ownership) and to give a "new orientation" to
industry.
Privatization was not a new measure. In 1980 the state
made
divestment an official policy and offered for sale many
state
corporations and the state's shares in jointly owned
enterprises.
Because the response to divestment was sluggish, the
government
proposed innovative alternatives to outright
denationalization,
such as leasing arrangements and self-managing
cooperatives. By
1987, however, only twenty-eight of the targeted
enterprises (in
agribusiness, trading and distribution, public works, and
tourism)
had been sold. Moreover, the state still accounted for 55
percent
of direct investment in the country.
The structural adjustments required by the
World Bank (see Glossary) in 1987
gave a new impetus to the divestment
process. The
government placed 103 industries in which it had holdings
up for
sale, although several companies considered to be of
strategic
importance to the country were later taken off the market.
Included
in this category were the Commodity Marketing and Price
Control
Board (Caisse de Stabilisation et de Soutien des Prix de
Production
Agricole--CSSPPA), the Petroleum Operations Company of
Côte
d'Ivoire (Petrole de Côte d'Ivoire--PETROCI), the Ivoirian
Maritime
Transport Company (Société Ivoirienne de Transport
Maritime--
SITRAM), and the Ivoirian Mining Company (Société pour le
Développement Minier de Côte d'Ivoire--SODEMI).
Divestment was a mixed success at best. Although
Ivoirians took
over more than half of the companies, those enterprises in
which
Ivoirians held a majority of the capital were very
small--three-
quarters were capitalized at less than CFA F50 million
(for value
of the
CFAF--see Glossary)--and their rate of return was
substantially lower than that of foreign-owned and state
enterprises. In general, the larger the capital of an
enterprise,
the smaller the proportion owned by Ivoirians.
Data as of November 1988
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