VZCZCXRO2199
RR RUEHMA RUEHPA
DE RUEHCO #0136/01 0511259
ZNR UUUUU ZZH
R 201259Z FEB 07
FM AMEMBASSY COTONOU
TO RUEHC/SECSTATE WASHDC 9270
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUEHZK/ECOWAS COLLECTIVE
RUEHLMC/MILLENIUM CHALLENGE CORP WASHDC
RUEHFR/AMEMBASSY PARIS 1043
RUEHLO/AMEMBASSY LONDON 0286

UNCLAS SECTION 01 OF 04 COTONOU 000136 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR AF/W (DBANKS) AND OCS (SEYE) 
LONDON FOR HAHN 
 
E.O. 12958: N/A 
TAGS: EINV ECON ETRD EFIN ELAB KTDB OPIC USTR PGOV BN
SUBJECT: BENIN: 2007 INVESTMENT CLIMATE STATEMENT 
 
REF: 06 STATE 178303 
 
COTONOU 00000136  001.2 OF 004 
 
 
¶1. Per reftel, below is the 2007 Investment Climate Statement for 
Benin. 
 
¶2. Investment Climate Statement 
 
A.1. Openness to Foreign Investment 
 
Beninese law guarantees the right to own and transfer private 
property. The government of Benin officially favors and encourages 
foreign investment. Historically, many opportunities for foreign 
investment were linked to the privatization of former state-owned 
enterprises, but now only a handful remain, including: SONAPRA 
(cotton), SBEE (electricity), SONEB (water), Benin Telecoms, and 
SOBEMAP (stevedoring services). The Port of Cotonou (Port Autonome 
de Cotonou) and postal service (La Poste du Benin S.A.) are also 
government-owned. In 2006, following privatization and subsequent 
allegations of mismanagement, the Government appointed an 
Administrator to run former parastatal SONACOP (distribution of 
gasoline and petroleum products), and has effectively reassumed 
control of that enterprise. Privatization of the remaining 
state-owned entities is slow-moving. The government requires that 
Beninese nationals partly own privatized companies. Privatization of 
debt-ridden SONAPRA (begun in 2003) has stalled several times. 
Despite the GOB's renewed commitments to privatization, the GOB's 
plans for privatizing the cotton sector remain unclear. The World 
Bank, the European Union, other international development banks, and 
the Millennium Challenge Account fund many infrastructure renovation 
contracts with grants or loans. 
 
The current investment code establishes the conditions to obtain 
benefits under different investment regimes and grants extensive 
discretionary power to the Investment Control Commission at the 
Ministry of Commerce and Industry. Tax reforms introduced in recent 
years largely removed the need for special incentives to potential 
investors. The 1990 investment code was promulgated in order to 
establish a simplified system readily accessible to all investors. 
The government has established a so-called "guichet unique" or 
one-stop shop at the Trade Ministry to help dispense with 
unnecessary and time-consuming formalities facing investors. Many 
investors complain that the investment code remains difficult to 
implement in practice, however, because of an inefficient and 
corrupt bureaucracy. 
 
The GOB established the Business Registration Center at the 
Cotonou headquarters of the Benin Chamber of Commerce and Industry 
(CCIB) to facilitate the registration of new businesses. Thanks to 
this Center, it is possible to register a new company within 2 weeks 
depending on the type of company. To ease the startup process, 
investors are strongly encouraged to hire a local notary for the 
required assistance. Any American firm establishing an office in 
Benin should work with an established local partner of solid 
reputation and retain a competent Beninese attorney. A list of 
English-speaking lawyers and notaries public is available from the 
Embassy's Commercial section. 
 
A.2. Conversion and Transfer Policies 
 
Benin is a member of the West African Economic and Monetary Union 
(WAEMU). Its currency is the CFA franc, which is issued by the 
Central Bank of West African States (BCEAO). 
In order to stimulate economic recovery, an adjustment of the 
exchange rate was implemented and the CFA franc was devalued by 50 
percent on January 11, 1994. The CFA franc is fixed against the 
euro, and one USD dollar presently equals about CFA 510 (December 
2006). The conversion system does not set restrictions on 
international transfers. However, in order to transfer a significant 
amount of money internationally, the investor needs to obtain 
authorization from the Ministry of Finance and Economy by completing 
a form called the "Formulaire d'Autorisation de Change".  Continued 
political instability or armed conflict in Cote d'Ivoire may have an 
impact on the stability of the CFA, but there are no plans to 
devalue at present. As a member of WAEMU, any company established in 
Benin can export goods to the other member states under the External 
Common tariff (TEC or "Tariff Exterieur Commun") regime if the goods 
are locally produced. TEC promotes sub-regional trade by eliminating 
trade barriers and combating unnecessary competition between the 
member states. 
 
A.3. Expropriation and Compensation 
 
The state guarantees under law that it will make no attempt to 
 
COTONOU 00000136  002.2 OF 004 
 
 
nationalize enterprises operating in Benin. The government at this 
time is focused on continuing to privatize its state-owned 
industries and has shown no indication of returning to the policy of 
expropriation carried out prior to the establishment of democracy in 
¶1990. The President of Benin has spoken publicly and often about the 
importance of attracting foreign investment. Though there are no 
laws that force local ownership of most businesses, the Government 
of Benin requires that investors buying state companies being 
privatized have some Beninese participation. 
 
A.4. Dispute Settlement 
 
The settlement of disputes pertaining to breach of contract, 
contract enforcement, claims, land titles, and related issues must 
be adjudicated in the civil courts. There is no separate commercial 
court system.  The backlog of civil cases often results in a wait of 
two or more years before matters proceed to trial. In recent years, 
judges have shown increasing independence in ruling against 
government interests. Corruption, however, remains a serious 
impediment to the administration of justice. Businesses and other 
litigants routinely complain that corruption is particularly 
widespread at the trial court level, as well as at administrative 
hearings.  Reforms to the court system are part of Benin's 
Millennium Challenge Account (MCA) Compact, which entered into force 
in October 2006. 
 
A.5. Performance Requirements and Incentives 
 
Benin's government maintains a welcoming posture to foreign 
investors but Embassy Cotonou is unaware of performance incentives 
specifically targeting foreign investors. Foreign investors and 
workers are not subjected to onerous visa or residency permit 
requirements. Foreign investors have generally not complained of 
discriminatory or preferential export or import policies, although 
foreign businesses complain that they are held to higher standards 
than Beninese businesses. For example, foreign companies are 
required to adhere to social security and labor regulations, which 
are routinely ignored or minimally followed by Beninese companies. 
One long established American company has complained, for example, 
of discriminatory treatment in being refused permission to establish 
a bonded warehouse for goods in transit. 
 
A.6. Right to Private Ownership and Investment 
 
The right to private ownership and investment exists in both theory 
and practice. Beninese law guarantees freedom of trade; choice of 
customers and suppliers; the right to move freely throughout the 
country; the right of foreign employees and their family members to 
leave the country; and freedom from government interference in the 
management of private enterprises. 
 
A.7. Protection of Property Rights 
 
Secured interests in real and personal property are recognized and 
enforced. Benin's legal system protects and facilitates acquisition 
and disposition of all property rights, including land, buildings 
and mortgages. In theory, the government respects intellectual 
property rights. In practice, however, bootlegged musical cassettes 
and CDs are widely available, despite government interdiction 
efforts. 
However, in the last quarter of 2005 thousands of counterfeit items 
were seized and burnt by the officials of the Ministry of Culture 
and Tourism. Land tenure remains a complicated question in many 
areas and it is often difficult to transfer clear title to real 
property. Land title reform is another important element of Benin's 
Millennium Challenge Account (MCA) Compact. 
 
A.8. Transparency of the Regulatory System 
 
Although the government has adopted a transparent policy to foster 
free enterprise, red tape is often a problem. Bureaucratic 
procedures are insufficiently streamlined and are rarely transparent 
in practice.  However, the new business law called OHADA, signed by 
the member states of the Organization for the Harmonization of 
Business Law in 
Africa, including Benin, has solved a number of difficulties an 
international enterprise might encounter in trying to establish a 
business in Benin. OHADA is a legal regime that covers trade and 
business in the organization's member states including Benin, 
Cameroon, Congo, Gabon, Bissau Guinea, Niger, Chad, Burkina-Faso, 
the Central Africa Republic, Guinea, Mali, Senegal, and Togo. In the 
early 1990's, the government enacted a series of reforms aimed at 
modernizing trade regulations. Many labor laws, however, remain 
 
COTONOU 00000136  003.2 OF 004 
 
 
holdovers from the Marxist era and serve as impediments to private 
enterprise, despite a revamping of the labor code in 1998. 
 
A.9. Efficient Capital Markets and Portfolio Investment 
 
Benin's government policy supports free financial markets in Benin, 
subject to regulatory oversight by the Ministry of Development, 
Economy, and Finance and the Benin country office of the Central 
Bank of West African States (BCEAO). Credit is allocated on market 
terms and foreign investors can get credit on the local market. 
However, legal, regulatory and accounting practices are often 
unwieldy. Some observers claim the banking industry is not subject 
to effective mandatory regulation and some banks are not managed in 
a transparent fashion. There are only about a dozen banks operating 
in Benin. 
 
A.10. Political Violence 
 
Benin is a democracy that functions reasonably well, particularly in 
comparison to other countries in Sub-Saharan Africa. Benin conducted 
its fourth presidential election in March 2006 peacefully, and with 
widespread voter participation. Political violence is rare. There 
are no nascent insurrections or other politically motivated violent 
activities.  People in all regions of the country feel free to 
express their political views without fear of reprisal from the 
government. 
 
Benin enjoys friendly relations with its neighbors. It has a 
tradition of religious tolerance. Ordinary crime is moderate, even 
in urban areas, although rising crime is a national concern. The 
next legislative election will be held in March 2007 and the 
"pre-campaign" has already begun.  Election activity will probably 
eclipse all other endeavors from now until the election.  There are 
some concerns about how efficiently the elections will be organized, 
but expectations are that a newly-elected parliament should be in 
place by April 2007, representing yet another step in consolidating 
Benin's democratic tradition. 
 
A.11. Corruption 
 
Benin has laws, regulations and penalties aimed at combating 
corruption, but the problem is endemic. Actual prosecution and 
punishment for corruption is rare but, encouragingly, in 2006 the 
GOB has charged several prominent businessmen and former politicians 
with embezzlement in high profile cases. Efforts to battle 
corruption by civil society have had some positive effects in 
influencing public attitudes. The GOB set up an Anti-Corruption 
Observatory in 2004 to combat all forms of corruption and bribery in 
the private and public sectors and established a State Inspectorate 
General to investigate corruption allegations. In April 2006, the 
incoming President ordered audits of all government ministries and 
state-owned enterprises.  The results of these audits, while not 
public, have led to some investigations, and demands for repayment 
of many unjustified expenditures. 
 
The High Court of Justice prosecutes high-ranking GOB officials 
involved in corruption or bribery. Foreign businessmen who want to 
establish a business may encounter numerous attempts to solicit 
bribes.  Hiring a notary public who understands the country's 
business laws is advisable. Examples of bribe solicitation include 
civil servants at the state-owned telecommunications parastatal 
(Benin Telecoms SA, formerly OPT), who demand a bribe before 
granting a phone line. Labor ministry inspectors reportedly demand 
bribes to monitor union elections. Bribery of foreign officials is 
forbidden under the Foreign Corrupt Practices Act. An American 
company recently paid the largest U.S. Securities and Exchange 
Commission (SEC) fine in history under the FCPA for its activities 
in Benin. 
 
¶B. Bilateral Investment Agreements 
 
Benin has a bilateral investment agreement with France but none with 
the United States. With respect to investment protection, Benin has 
concluded agreements with several European countries including: 
 
- Germany: October 10, 1993 Agreement Pertaining to the Mutual 
Encouragement and Protection of Investment Capital. 
 
- Great Britain: November 27, 1987 Agreement for the Protection of 
British Investments in Benin. 
 
Benin is also a signatory to various multilateral agreements for 
investment protection, including the Multilateral Security Agency 
 
COTONOU 00000136  004.2 OF 004 
 
 
Agreement and Convention for the International Settlement of 
Investment Disputes. 
 
¶C. OPIC and Other Investment Insurance Programs: 
 
The Overseas Private Investment Corporation (OPIC) offers financing 
programs to assist companies wishing to invest in developing 
countries, including Benin. OPIC insurance may be available to 
companies wishing to invest in Benin depending on the nature and 
extent of the investment. Potential investors should contact OPIC 
directly for further information at info@opic.gov. 
 
¶D. Labor 
 
The government adheres to international labor standards and fully 
recognizes the right to form unions and engage in collective 
bargaining. The government adopted a new labor code in 1998 aimed at 
increasing flexibility in hiring decisions, eliminating the need for 
prior authorization from the government's Labor Office for employee 
dismissal, and consolidating labor regulations currently previously 
scattered among various texts. As a practical matter, however, 
Benin's labor practices contain many inefficient features 
reminiscent of the Marxist era. Foreign companies who dismiss 
employees for unsatisfactory performance are routinely sued. Child 
labor is widespread and, although it is making efforts, the GOB 
still needs to do more to suppress it. The Constitution provides 
workers with the freedom to organize, join unions, meet, and strike, 
and the Government usually respects these rights in practice. The 
labor force of approximately 2 million is engaged primarily in 
subsistence agriculture and other primary sector activities, with 
less than two percent of the population engaged in the modern (wage) 
sector. Although approximately 75 percent of the wage earners belong 
to labor unions, a much smaller percentage of workers in the private 
sector are union members. There are several union confederations, 
and unions generally are independent of government and political 
parties. Strikes are permitted; however, the authorities can declare 
strikes illegal for stated causes (for example, threatening to 
disrupt social peace and order), and can require strikers to 
maintain minimum services. 
 
¶E. Foreign Trade Zones/Free Ports 
 
There is a free trade zone in the port of Cotonou for Benin's 
landlocked neighbors (Burkina Faso and Niger). 
Foreign importers have complained, however, that corruption at the 
port makes it difficult to benefit from this entity.  The GOB plans 
to construct one industrial zone in each of Benin's 12 Departments 
in order to attract investment, but only one has become operational. 
Work has begun on zones in Bohicon and Ouidah. The GOB plans to 
provide tax breaks for prospective investors as well as 
infrastructure for water, electricity and telephone service. The 
most promising zone, in Seme on the coast near the Nigerian border, 
is also a free trade zone. The site is 200 hectares in size, and 
there are plans to double it during its second phase. 
 
¶F. Foreign Direct Investment Statistics 
 
Much of the foreign investment that has entered Benin since 
1990 has been through the acquisition of interests in privatized 
companies. The principal foreign investors in Benin are from 
Lebanon, India, Germany, France, China, and South Africa. The 
following are examples of companies sold in part to foreign 
investors, listed by name, activity, price and buyer: 
 
- British/American Tobacco Company- approx. $2.6 million - by 
Rothmans International; 
- SIMBENIN (cement company) - approx. $8.4 million - by ScanCem 
(Scandinavian group with minority investors; large share later 
purchased by German company); and 
- La Beninoise (brewery) approx. $15.6 million - by Castel-BGI 
(French Group) 
- Libercom (GSM provider) - approx. $60 million - by state-owned 
Chinese telecommunications firm ZTE. 
 
American firms Texaco/Chevron and Kerr-McGee have substantial 
investments in Benin. Texaco/Chevron provides aviation fuel for the 
International Airport in Cotonou, has completed its fifth service 
station in Benin, and has plans to open more service stations 
throughout the country. Houston-based oil independent Kerr-McGee has 
acquired rights to a deep-water block off Benin's coast and drilled 
two exploratory wells in March 2003. 
 
BROWN