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FM AMEMBASSY ABIDJAN
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RUEATRS/DEPT OF TREASURY WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 05 ABIDJAN 001018 
 
SIPDIS 
 
SIPDIS 
 
State pass to USTR Connie Hamilton 
State pass to NSC 
State pass to EEB Janet Potash 
Commerce pass to Maria Rivero 
 
E.O. 12958:  N/A 
TAGS: ECON ETRD XA IV
SUBJECT: COTE D IVOIRE 2007 AGOA ELIGIBILITY RECOMMENDATION 
 
REF: SECSTATE 132189 
 
 
¶1. Below is the text of Post's Eligibility Recommendation Input as 
emailed to EEB Janet Potash and USTR Connie Hamilton October 2nd: 
 
Country: COTE D'IVOIRE 
 
Current AGOA Status:  Ineligible, Benefits Withdrawn January 1, 
2005 
 
Country Background Summary:  Cote d'Ivoire's economy has struggled 
since the eruption of political crisis in 1999 followed by a failed 
coup attempt in September 2002 that left the country divided between 
government and rebel officers until very recently, although the 
economic conditions have stabilized somewhat in the past two years. 
Despite the economic downturn, the Ivorian economy continues to be 
the driving force behind the region's West African Economic and 
Monetary Union (WAEMU), and it still comprises up to 40 percent of 
WAEMU's GDP.  However, the ongoing Ivorian political crisis has 
undercut investor confidence and hurt regional trade and overall 
output.  According to a mid-2007 IMF/World Bank Article IV 
consultation, real GDP in 2005 grew by 1.2% and .9% rate in 2006, 
propelled by strong oil and gas receipts.  However, the World Bank 
and IMF estimate that GNP per capita has fallen by 15 percent since 
the beginning of the political crisis in 1999, due largely to the 7 
percent fall in GDP from 2000-2003 and the scant 4 percent growth 
from 2004-2006.   The March 4 signing of the Ouagadougou Political 
Accord has led to some improvements in the political situation, most 
notably the installation of a new coalition government and the 
beginning of an identification program designed to address the 
disenfranchisement of potentially millions of Ivorians.  In June of 
2007, the Ivorian Government and the IMF, World Bank and African 
Development Bank reached agreement on clearing Cote d'Ivoire's over 
$400 million in arrears, paving the way for nearly $240 million in 
assistance, ($120 million in IMF budget support and $120 million in 
World Bank post-conflict aid).   According to the latest IMF and 
Ivorian government figures, foreign investment continues to be 
stagnant, standing at $164 million in both 2005 and 2006, and is 
heavily concentrated in the oil and gas sector..  According to the 
Article IV report, inflation remains under control, falling from 
3.9% to 2.5% in 2006.  U.S. exports to the country rose to US$147 
million in 2006, up from $124 million in 2005, according to U.S. 
Census figures, while U.S. imports dropped sharply to $755 million 
in 2006 from $1.198 billion 2005 (largely due to a sharp fall in 
Ivorian oil and gas exports to the U.S.).  Overall, Cote d'Ivoire's 
current account balance remains strongly positive, with US$8.5 
billion in exports and imports of $5.2 billion in 2006, according to 
figures from the 2007 Article IV.    Cote d'Ivoire retains its 
free-market economy.  However, companies doing business continue to 
face a myriad of challenges.  In February 2005, the Department of 
State sent a letter to the Government of Cote d'Ivoire (GOCI) 
informing it of Cote d'Ivoire's loss of AGOA benefits; this status 
has not changed. 
 
Comments on Eligibility Requirements 
 
----------------------- 
¶I. Market-based Economy 
----------------------- 
¶A. Major Strengths Identified 
 
Despite the political crisis, Cote d'Ivoire has retained its 
free-market economy.  The financial and capital markets remain open 
and continue to attract domestic, regional and international 
capital.  Exports of agricultural and other commodities remain 
vibrant, and foreign firms continue to do business in those sectors. 
 The government actively promotes Cote d'Ivoire and is eager to 
receive foreign investment.  However, companies doing business in 
Cote d'Ivoire continue to face difficulties such as glacially-slow 
reimbursement of VAT and other taxes to tax-exempt businesses, and 
shake-downs by security forces for bribes at roadside checkpoints. 
Cote d'Ivoire has removed most non-tariff barriers, including its 
protective tax of US$2 per kg on poultry imports, eliminated during 
the 2006 holiday period as a benefit to consumers.  The ban on sugar 
imports has been lifted, although import tariffs have been set at 
prohibitively high rates.  In January, 2000 Cote d'Ivoire adopted a 
lower Common External Tariff (CET) on imports along with the other 
seven WAEMU member countries.  For non-members, the CET calls for a 
5% tariff on raw materials and inputs for local manufacture, 10% on 
semi-finished goods, and 20% for finished products. 
 
The GOCI announced plans to liberalize the telecommunications sector 
in February 2004.  This includes a telecommunications code 
encompassing new regulations for the sector, e.g. third party 
 
ABIDJAN 00001018  002 OF 005 
 
 
access, universal service, and consolidation of existing regulatory 
bodies.  Draft legislation was sent to the National Assembly in 
December 2004, but to date, no action on this has been taken. (note: 
the National Assembly's constitutionally defined term expired in 
¶2005.  It has not met since September 2006, Due to the political 
situation, no elections have been held since 2001) 
 
Cocoa sector reorganization is a top priority of international 
lending institutions, which have made future engagement here 
contingent on progress in this arena.  Cote d Ivoire has pledged to 
reduce "parafiscal" export taxes on cocoa as part of its 
negotiations with the IMF and World Bank on post-conflict 
assistance, and has also agreed to measures designed to 
substantially boost transparency related to the use of those 
revenues. 
 
-Cote d'Ivoire has several comprehensive investment codes, which 
provide non-discriminatory access to foreign investors. 
 
-Numerous private sector business associations are active, including 
the American Chamber of Commerce (AMCHAM), the larger French Chamber 
of Commerce, and the Ivorian Chamber of Commerce. 
 
-A major benchmark contained in the 2005 notification of 
ineligibility was:  "improve the business environment by promoting 
transparency in rules and regulations, offering nondiscriminatory 
treatment of foreign firms and investments, and resolving 
outstanding investment disputes with U.S. firms."  The Ivorian 
government has made notable strides, settling its long-standing 
investment dispute with ExxonMobil and with Cora de Comstar (Western 
Wireless), both in 2006.  ExxonMobil had been subject to 24 years of 
repeated court challenges by Centaures Routiers, a French-owned 
Ivorian company.  The American company paid a $20 million dollar 
settlement package to end the case.  In late 2006, the Government of 
Cote d'Ivoire and Western Wireless came to an agreement in which the 
GOCI paid $6 million to the company in exchange for a mutual end to 
litigation and a pledge to avoid future litigation over their 
long-running dispute. 
 
¶B. Major Issues/Problems Identified 
 
Another USG benchmark cited in the notice of ineligibility calls for 
GOCI efforts to "institute transparent and consistent rules in the 
cocoa sector and promote fair and non-discriminatory application of 
taxes, fees, and export regulations in the cocoa sector."  Cocoa 
exports generate more than US$2 billion, or nearly 20% of total 
export revenue, according to the 2007 World Bank/IMF Article IV 
study.  While various parastatal cocoa authorities have grown in 
size and burdened cocoa farmers (the vast majority of whom are poor 
smallholders) under President Gbagbo, the government and the 
quasi-governmental cocoa regulatory bodies set up during the 1998 
deregulation have agreed to reduce "parafiscal" levies on exports 
and boost overall  transparency in the management of the industry. 
Negotiations with the IMF and World Bank have been instrumental in 
making these strides. 
 
Since 2006, exports of oil and gas have surpassed export receipts 
from cocoa and coffee, long the country's top export earners. 
International lending institutions and bilateral donors have serious 
concerns related to the lack of transparency in these accounts, 
concerns which have led to the three audits of the sector as part of 
ongoing supervision of Cote d'Ivoire's fiscal controls associated 
with the reengagement of the IFIs and the provision of post-conflict 
assistance packages.  The U.S., along with other large bilateral 
donors and the IFIs, strongly support Cote d'Ivoire's implementation 
of its 2006 pledge to join the Extractive Industries Transparency 
Initiative, as well as adopt other fiscal controls and transparency 
measures to ensure proper accounting for these important and growing 
revenues. 
 
-Multinational firms are subject to surprise audits by tax 
authorities, to a degree they believe firms with close political 
ties and affiliations are not. 
 
-Many firms continue to see corruption as an obstacle to doing 
business in Cote d'Ivoire, with the greatest impact on procurement, 
judicial proceedings, customs and tax bureaucracies and general red 
tape. 
 
-Large-scale investments must be approved at the ministerial level. 
This must be done through a laborious process of document 
preparation and the gathering of stamps of approval from multiple 
departments within the ministries concerned. 
 
--------------------------------------------- ---- 
 
ABIDJAN 00001018  003 OF 005 
 
 
II. Political Reforms/Rule of Law/Anti-Corruption 
--------------------------------------------- ---- 
¶A. Major Strengths Identified 
 
The first benchmark in the notification to the GOCI of ineligibility 
required the Ivorian government to "fully implement the 
Linas-Marcoussis and Accra III agreements."  In addition, it 
required the government to "maintain a cease-fire without 
exception," and "improve the performance of security forces on 
protecting human rights," and that it "hold free and fair elections 
as scheduled in October 2005."  Elections have not yet been held, 
but the belligerent parties in Cote d'Ivoire have signed the 
landmark Ouagadougou Political Accord and entered into a coalition 
government. The former head of the rebel group that carried out a 
coup attempt in 2002 is now the Prime Minister.  In addition, the 
country is moving forward on the critical mass identification 
program aimed at enfranchising the large numbers of persons, 
estimated by different groups to be between 300,000 and 3 million, 
who lack identity documents.   The Ouaga Accord calls for elections 
by early 2008, but most observers do not see this as realistic. 
The President of the Independent Electoral Commission announced in 
September 2007 that elections could be held in or after October 
¶2008. 
 
During the summer of 2005, the Customs authorities launched 
campaigns at the Port of Abidjan to curb non-payment of customs 
duties and to prevent smuggling of counterfeit or illegal products. 
The customs authorities in 2006 installed a small mobile scanner at 
the port to supposedly scan 25% of all containers, and have said 
they will meet new U.S. requirements for 100% scanning for 
U.S.-bound containers.  Despite this anti-smuggling campaign, the 
government admits that there is less than 50% compliance with 
customs duties. 
 
In September 2005, the government's new VAT tax regulations and new 
unified commercial invoice went into effect.  The new regulations 
and new invoice were adopted as measures to prevent non-payment of 
VAT taxes.  Compliance with VAT regulations is not 100%, but 
authorities claim they are making headway.  After initial protests 
over the new regulations, the government in 2006 began a public 
campaign to encourage compliance by small businesses, during which, 
in 2007, authorities made the high-profile arrest and expulsion of a 
prominent foreign-born Ivorian merchant who complained the 
regulations discriminated against businesses owned by foreign-born 
Ivorians (his expulsion from Cote d'Ivoire may be a violation of the 
Constitution). 
 
¶B. Major Issues/Problems Identified 
 
Full implementation of the Linas-Marcoussis and Accra III agreements 
required the disarmament, demobilization and reintegration (DDR) of 
former combatants (including militias) and the creation of 
integrated, national armed forces.  The Ouagadougou Political Accord 
reinforced this DDR mandate.  To date, however, little to no 
disarmament, reintegration or reinsertion has taken place.  Militias 
remain armed and dangerous, particularly in the volatile western 
region of the country. 
 
The third benchmark contained in the notification of ineligibility 
called on the GOCI to "continue to reform and improve the judicial 
system" by establishing anti-corruption measures and training 
judges.  Although the 2000 constitution requires a number of 
judicial reforms, these reforms remain blocked, due in part to the 
inability to pass such legislation through the National Assembly. 
 
Members of security forces operated with relative impunity. They 
frequently resorted to lethal force to combat widespread violent 
crime and sometimes beat detainees and prisoners.  Pro-government 
militias and "youth groups" are equally able to attack the offices 
of civil society without restraint.  The Government generally failed 
to bring to justice most perpetrators of such abuses. 
 
Corruption continues to be a major problem throughout the country, 
affecting both firms and private citizens. The greatest impact on 
investment occurs in the areas of procurement, judicial proceedings, 
customs and tax bureaucracies and general red tape.  Cote d'Ivoire 
ranks 150 on Transparency International's 2007 list, behind Russia, 
Angola, Belarus and Nigeria. 
 
---------------------- 
III. Poverty Reduction 
--------------------------------------- 
 
¶A. Major Strengths Identified 
 
 
ABIDJAN 00001018  004 OF 005 
 
 
Close to a third of the 2006 and 2007 budget was dedicated to 
spending on agriculture, education, infrastructure, health, 
development, the fight against HIV/AIDS and scientific research. 
However, many ministries are only beginning to redeploy to the 
northern half of the country, leaving much of the population 
unserved, despite the formal reunification of the country. 
 
-The GOCI continues to act as an effective partner with the USG's 
PEPFAR initiative. 
 
¶B. Major Issues/Problems Identified 
 
In past years the United Nations had reported that nearly a quarter 
of a million children out of a school-aged population estimated at 
533,000 were being deprived of school.  For the 2004 - 2005 school 
year, the numbers of school-aged children living in the northern, 
Forces Nouvelles-held areas was estimated by the UN at 550,000, and 
379,232 children were enrolled, (up significantly from 2003). 
However, large majorities of government teaching staff assigned to 
schools in the North did not teach classes, and teachers are only 
now slowly beginning to return to their schools.  In February 2006, 
some 90,000 out of 122,000 eligible test takers in the north sat for 
national advancement examinations, as did a similar number in early 
¶2007.  In both instances, results were somewhat lower in the North 
than those in government-controlled regions (these exams are 
essential for children to advance in school and to university). 
 
Additionally, significant numbers of children are denied schooling 
in the remote cocoa farming region in the central region and in the 
West.  Cocoa-growing families often need their children's labor on 
the family farms, or in the case of communities of "foreigners" 
(transplanted Burkinabe, Malian, as well as their kinsmen from the 
northern part of Cote d'Ivoire), lack access to government-provided 
schools in their villages.  The USG, in collaboration with NGOs, 
other donors and the government of Cote d'Ivoire, is implementing 
programs to encourage families of school-aged children in 
cocoa-growing regions to send their children to school and to avoid 
the worst forms of child labor. 
 
The continued deterioration of the overall humanitarian situation in 
northern Cote d'Ivoire, particularly in the area of water sanitation 
and access to health care, raises serious concern.  Most agencies 
agree that renewed open conflict would lead to a critical situation 
affecting an already vulnerable population. 
 
The World Bank estimates that the poverty rate has increased from 38 
percent before the crisis to 44 percent. 
 
-------------------------------------------- 
IV. Workers' Rights/Child Labor/Human Rights 
-------------------------------------------- 
 
¶A. Major Strengths Identified 
 
The Labor Code grants all citizens, except members of the police and 
military services, the right to organize and bargain collectively. 
Formal sector unions play an active role in negotiating with 
employers and in the promotion of worker rights.  Strikes are held 
frequently, by unions representing workers in both public and 
private fields. 
 
Under the Pretoria III Accord, the opposition now has a major role 
in the management of Radio Television Ivoire (RTI), and all 
political parties now have reasonably fair access to the media. 
However, in late 2006, President Gbagbo unilaterally imposed his own 
management on RTI as well as the government-owned newspaper 
Fraternite Matin. 
 
The Ivorian government adopted by ministerial decree a list of 
prohibited "worst forms" of child labor for children under 15 in 
agriculture, mining, trade, transportation, handicrafts, and other 
sectors.  This list closely mirrors the ILO definitions of "worst 
forms" and specifically enumerates the types of work prohibited in 
each sector. 
 
The government of Cote d'Ivoire is making a concerted effort to 
address the concerns surrounding child labor in the cocoa sector in 
order to be compliant with IL0 conventions 182 and 138 which the 
National Assembly ratified in February 2003, as well as the 
guidelines of the Harkin-Engle Protocol, which calls for 50 percent 
of the country's cocoa-growing region to be certified free of the 
worst forms of child labor by July 1, 2008.  To accomplish this 
goal, the Prime Minister created a task force that included public 
and private sector cocoa interests in 2005 to address the problem of 
child labor by implementing a credible certification program in the 
 
ABIDJAN 00001018  005 OF 005 
 
 
cocoa sector.  The task force's efforts were taken up and expanded 
in 2006 by a team led by the Minister of Labor, in collaboration 
with the Ministry of Agriculture.  This organization, working in 
concert with international industry, is making strides towards 
meeting its child labor goals. The GOCI adopted a National Plan on 
Child Labor on September 20, 2007 with the objective of reducing 
child labor by 50 percent in 3 years. 
 
¶B. Major Issues/Problems Identified 
 
-Since the majority of the workforce is engaged in either the 
informal sector or agricultural sector, most workers have few, if 
any rights or effective leverage. 
 
-Although Ivorian law prohibits forced and bonded child labor, 
enforcement institutions remain weak and under-funded. 
 
-In late 2006, pro-government groups attempted to disrupt 
identification courts that had been set up to register and 
enfranchise those without papers.  While opposition youth groups 
responded to these attacks by in turn attacking the attackers, no 
leaders of the pro-government groups were ever prosecuted. 
 
-In the volatile western region near the Liberian border, 
pro-government militias and armed groups associated with the rebel 
"Forces Nouvelles" have until recently clashed regularly, 
undermining security and contributing to lawlessness. Militias 
terrorize local populations, undermining security.  Only recently 
have authorities from the coalition government made modest strides 
in bringing security to the region, and both groups remain heavily 
armed and able to disrupt the nation's peace process. 
 
-Harassment and intimidation of the opposition press and civil 
society continue, although the environment has improved slightly. 
Two prominent human rights groups were attacked and their offices 
ransacked with impunity by youth groups aligned with the President's 
faction, as was an opposition newspaper.  None of the groups' 
leaders were prosecuted for these acts. 
 
-Discrimination and violence against women continues and usually 
goes unpunished. 
 
-Child abuse and exploitation, including sexual exploitation, occur 
often. Trafficking of women and children for the purposes of sexual 
exploitation remains a problem.  While the government and NGOs 
target the practice and work collaboratively to investigate and 
target networks, punishments remain insufficient and the 
infrastructure to help protect and repatriate victims remains weak. 
 
-Female genital mutilation (FGM) is widely practiced on girls and 
young women.  NGOs are active in sensitizing largely rural 
populations as to the health and psychological risks associated with 
the practice. 
 
-Although improved in comparison to past years, the government's 
human rights record remains poor. 
 
-Although improved in comparison to past years, the rebel "Forces 
Nouvelles" human rights record remains poor. 
 
-Prison and detention center conditions were deplorable. 
 
--------------------------------------------- ---- 
¶V. International Terrorism/U.S. National Security 
--------------------------------------------- ---- 
 
¶A. Major Strengths Identified 
 
-The GOCI has cooperated with the United States since September 11 
to combat terrorism.  The GOCI has beefed up its civil aviation 
authority, and implemented the International Maritime Organization's 
new standards for port security.  It has also pledged support on 
implementation of relevant Security Council resolutions on terrorism 
and terrorist financing.  For example, GOCI authorities state that 
when they receive notification of a terrorist listing, they conduct 
investigations and, if terrorists are found, they act to seize all 
assets associated with terrorists or terrorist groups. 
 
¶B. Major Issues/Problems Identified 
 
-None 
 
NESBITT