VZCZCXRO6108
RR RUEHGI
DE RUEHNJ #0237/01 0741025
ZNR UUUUU ZZH
R 151025Z MAR 07
FM AMEMBASSY NDJAMENA
TO RUEHC/SECSTATE WASHDC 5047
INFO RUEHBP/AMEMBASSY BAMAKO 0803
RUEHGI/AMEMBASSY BANGUI 1328
RUEHNM/AMEMBASSY NIAMEY 2924
RUEHYD/AMEMBASSY YAOUNDE 1495

UNCLAS SECTION 01 OF 02 NDJAMENA 000237 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR AF/EPS JANET POTASH 
 
E.O. 12958: N/A 
TAGS: ETRD AGOA ECON CD
SUBJECT: CHAD: INPUT FOR ANNUAL AGOA REPORT 
 
REF: STATE 022438 
 
¶1. (U) Summary: Per reftel, Embassy provides the following 
input on Chad for the President,s 2007 Report on AGOA.  End 
Summary 
 
--------------------------------------------- --------------- 
Market Economy/Economic Reform/Elimination of Trade Barriers 
--------------------------------------------- --------------- 
 
¶2. (U) According to the UN Conference on Trade and 
Development (UNCTAD), flows of foreign direct investment into 
Chad ) concentrated almost entirely in the petroleum sector 
-- rose to $705 million in 2005, from $478 million in 2004. 
Eclipsed by petroleum, Chad,s other major exports are 
cotton, cattle, and gum arabic.  Chad has a small formal 
sector and a large informal import/export sector.  Over the 
past decade, the Government of Chad (GOC) has made some 
progress in privatizing state enterprises, eliminating price 
controls and liberalizing the economy.  This process is 
expected to continue with the long overdue privatization of 
the cotton parastatal, CottonTchad.  Although Chad continues 
to express interest in encouraging foreign direct investment, 
foreign and domestic investors alike report that the business 
climate could be significantly improved.  Additionally, 
escalating violence in the East and widespread corruption 
discourages foreign investment. 
 
-------------------- 
Trade Liberalization 
-------------------- 
 
¶3. (U) Chad has no discriminatory rules to deter foreign 
investors.  As a member of CEMAC (the Central African 
Economic and Monetary Community) and a signatory to OHADA 
(the Organization for the Harmonization of African Business 
Law), Chad participates in regional efforts to standardize 
tax policies and commercial law, but limits investment in 
sectors deemed sensitive such as cotton, electricity 
production, and telecommunication in order to protect 
enterprises.  Chad has made little progress in reducing 
impediments to investment such as weak infrastructure, 
chronic energy shortages, high-energy costs, scarcity of 
skilled labor, a high tax burden, and corruption.  French 
commercial interests are not a serious barrier to U.S. 
investors. 
 
--------------------------------------------- -- 
Political Pluralism/Rule of Law/Anti-Corruption 
--------------------------------------------- -- 
 
¶4. (U) The Government of Chad continues to have a weak record 
on rule of law, political pluralism, and the safeguarding of 
due process rights.  The May 2006 presidential election was 
flawed and the major political opposition groups did not 
participate.  Corruption is universally acknowledged as one 
of most serious problems in Chad.  The Ministry of 
Moralization was established in 2004 to combat corruption. 
It uncovered several cases of fraud and embezzlement in 2006, 
but Chad,s weak judicial system has not brought the accused 
to justice.  Chad is a candidate for U.S. Millennium 
Challenge Account assistance. 
 
----------------- 
Poverty Reduction 
----------------- 
 
¶5. (U) Chad has one of the lowest per capita GDPs in the 
world.  Under an agreement with the World Bank for oil sector 
infrastructure financing, 70 percent of government revenue is 
to be allocated to health, education, rural development, and 
other social services. Chad also committed to work with the 
World Bank on preparation of a Poverty Reduction Strategy 
Paper in 2007. While the government has ramped up its 
infrastructure projects, oil earnings of some $1.3 billion 
since project start-up in 2000 have yet to noticeably reduce 
poverty.  Expenditure on security and defense continues to be 
high, reflecting threats from rebel groups based in Sudan. 
In early 2007, the International Monetary Fund (IMF) will 
begin a review of Chad,s progress to receive debt relief 
under the Heavily Indebted Poor Country program.  The IMF is 
also considering a renewal of Chad,s Poverty Reduction and 
Growth Facility, which failed to take place in late 2005, 
owing to Chad,s deteriorating fiscal performance. 
 
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Labor/Child Labor: 
------------------ 
 
NDJAMENA 00000237  002 OF 002 
 
 
 
¶6. (U) Chadian law allows all employees except members of the 
armed forces to join or form unions of their choice without 
excessive requirements, and the government generally respects 
this right.  Chad ratified ILO Convention 29 in 1969 and ILO 
Convention 105 in 1961.  Unions may organize and bargain 
collectively; however, the law permits imprisonment with 
forced labor for participation in illegal strikes.  The 
Chadian Government,s efforts to combat the worst forms of 
child labor have been centered on laying the legal foundation 
to meet its commitments to international labor conventions 
aimed at protecting children.  Although the labor code 
stipulates that the minimum age for employment in the formal 
sector is 14, the government does not enforce the law.  Few 
children have the opportunity for education beyond the 
primary level.  An estimated 20 percent of children between 
the ages of six and 18 work in abusive, exploitive labor 
conditions in the urban informal sector as street vendors, 
manual laborers, domestic servants and helpers in small 
shops.  Children throughout the country work in agriculture 
and herding.  Chad has ratified ILO Convention 182, but a 
comprehensive executive decree harmonizing Chad,s legal code 
with ILO 182 and 138 submitted to the Council of Ministers in 
2005 has yet to be approved. 
 
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Comment 
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¶7. (U) Chad,s eligibility for AGOA trade privileges bears 
careful scrutiny in the coming years.  In particular 
democracy and good governance remain serious concerns.  That 
said, the Embassy, through its Economic and Commercial 
Section and Democracy and Development Section, continues to 
assist the Government of Chad and local businesses to benefit 
from AGOA opportunities. 
TAMLYN