R 161041Z JAN 08
FM AMEMBASSY COTONOU
TO SECSTATE WASHDC 0113
INFO DEPT OF TREASURY WASHDC
DEPT OF COMMERCE WASHDC
ECOWAS COLLECTIVE
AMEMBASSY PARIS 
AMEMBASSY DAKAR

UNCLAS COTONOU 000039 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS USTR 
STATE FOR EB/IFD/OIA 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC BN
SUBJECT: BENIN'S 2008 INVESTMENT CLIMATE STATEMENT 
 
REF: 07 STATE 158802 
 
 
¶1. Please find below Embassy Cotonou's submission for Benin's 2008 
Investment Climate Statement keyed to the topics in Reftel. 
 
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Openness to Foreign Investment 
------------------------------ 
 
¶2. President Yayi, in office since April 2006, aims to establish 
double digit economic growth in Benin before the end of his term in 
2011 and is cognizant that he needs foreign investment to reach that 
goal.  In an attempt to attract increased investment President Yayi 
set up the Presidential Investment Council (PIC) in 2006. The 
objectives of this organization are to reinforce dialogue between 
the government and investors and speed the process of identification 
and implementation of reforms in order to improve the business 
environment. The PIC includes local and foreign private investors 
and government representatives. 
 
¶3. The government of Benin officially favors and encourages foreign 
investment. Many opportunities for foreign investment have 
historically been linked to the privatization of state-owned 
enterprises, whose numbers have been reduced from 130 in 1980 to 
only four currently: SONAPRA (cotton), SBEE (electricity), SONEB 
(Water), Benin Telecoms S.A (Telecommunications) and La Poste du 
Benin S.A (Post). Privatization of these final parastatals is 
slow-moving and attempts at privatizing SONAPRA have failed on two 
occasions.  Foreign companies are invited to bid on privatizations 
and the bidding process is open and well-publicized. 
 
¶4. The current investment code, adopted in 1990, establishes the 
conditions to obtain benefits under different investment regimes and 
grants extensive discretionary power to the Investment Control 
Commission at the Ministry of Industry and Commerce (MIC). Tax 
reforms introduced in recent years largely removed the need for 
special incentives to potential investors. The MIC has a "guichet 
unique" or one-stop shop to help dispense with unnecessary and 
time-consuming formalities facing investors. The GOB also set up the 
Business Registration Center in the Cotonou headquarters of the 
Benin Chamber of Commerce and Industry (CCIB) to facilitate the 
registration of new businesses. Using the center, it is possible to 
register a new company within 2 weeks depending on the type of 
company. 
 
¶5. Beninese law guarantees the right to own and transfer private 
property.  The Beninese court system upholds the sanctity of 
contracts but justice is often slow in coming.  Beninese courts 
process, on average, 8 percent of their civil cases each year. 
 
¶6. To ease the company start up 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. 
 
-------------------------------- 
Conversion and Transfer Policies 
-------------------------------- 
 
¶7. Benin is a member of the West African Economic and Monetary Union 
(WAEMU). Benin's currency is the CFA franc, which is issued by the 
Central Bank of West African states (BCEAO). The CFA franc is pegged 
to the euro, and one USD dollar presently equals about CFA 450 
(December 2007). 
¶8. Foreign exchange is readily available. Transfers exceeding 
300,000 FCFA (approximately $667) require approval from the BCEAO 
and the Ministry of Economy and Finance (MEF).  This requirement is 
aimed at preventing money laundering and is not used to prevent 
investors from removing money from Benin.  There are no restrictions 
on the remittance of profit by companies which invest in Benin.  The 
remittance of profits by individual resident investors is restricted 
in certain areas. 
 
------------------------------ 
Expropriation and Compensation 
------------------------------ 
 
¶9. The state guarantees under law that it will make no attempt to 
nationalize enterprises operating in Benin.  The government does 
have the capacity to seize property by eminent domain. If the 
government does seize land, it is required to pay compensation to 
the owners. 
 
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Dispute Settlement 
------------------ 
 
¶10. The government was instrumental in settling a recent investment 
dispute.  There have been few investment disputes and there does not 
seem to be a discernible pattern in the causes of disputes. 
 
¶11. Benin is a member of the Organization for the Harmonization of 
African Business Law, known by its French acronym OHADA, and has 
adopted OHADA's universal commercial code to govern commercial 
disputes and bankruptcies.  Benin is also a member of OHADA's Common 
Court of Justice and Arbitration.  Benin is also a member of the 
International Center for the Settlement of Investment Disputes. 
 
¶12. Benin does not maintain a commercial court system. Its civil 
courts handle commercial cases.  In principle, Benin's courts will 
enforce foreign court judgments.  A profound backlog of civil cases 
often results in a wait of two or more years before matters proceed 
to trial. Corruption, however, remains an 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. 
 
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Performance Requirements and Incentives 
--------------------------------------- 
 
¶13. Benin's government maintains a welcoming posture to foreign 
investors and its 1990 Investment Code contains several incentives, 
in the form of tax reductions, for investors depending on the level 
and type of investment.  Depending on the amount of the investment, 
investors do not have to pay taxes on profits, exports of finished 
products, or imports of industrial equipment.  To obtain these 
benefits investors must meet several criteria including employing a 
minimum number of Beninese nationals, safeguarding the environment, 
and meeting national accepted accounting standards.  The Investment 
Control Commission monitors companies which benefit from these 
incentives to ensure their compliance with the standards required 
for receiving them. 
 
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Right to Private Ownership and Investment 
----------------------------------------- 
 
¶14. 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. 
 
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Protection of Property Rights 
----------------------------- 
 
¶15. 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.  As mentioned above, Benin's judicial 
system moves slowly and it may take a great deal of time to enforce 
a secured interest.  Secured interests in property are registered 
with the Land Office in the Ministry of Finance. 
 
¶16. International intellectual property agreements are not 
adequately enforced.  Illegally reproduced DVDs containing pirated 
television shows and movies are sold openly. 
 
------------------------------------- 
Transparency of the Regulatory System 
------------------------------------- 
 
¶17. While the government has adopted a transparent policy to foster 
free enterprise, red tape is often a problem.  Benin recently 
slipped in the World Bank's Doing Business ranking in "Dealing with 
Licenses" from 120 to 123. According to the same study, it takes a 
typical entrepreneur 332 days to secure the necessary licenses, 
approvals, and water and electricity connections to build a 
warehouse.  The law governing commercial transactions conforms to 
the standards set by OHADA.  Many labor laws remain holdovers from 
Benin's pre-1990 Marxist era and serve as impediments to private 
enterprise. 
 
--------------------------------------------- ----- 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
¶18. Government policy supports free financial markets in Benin, 
subject to regulatory oversight by the Ministry of Finance and the 
Central Bank of West African States (BCEAO). Credit is allocated on 
market terms and foreign investors can get credit on the local 
market. Some observers claim the banking industry is not subject to 
effective mandatory regulation and some banks are not managed in a 
transparent fashion. 
 
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Political Violence 
------------------ 
 
¶19. Benin is a democracy that has not known political violence in 
recent memory. 
 
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Corruption 
---------- 
 
¶20. President Yayi's government has demonstrated a high level of 
political will to combat corruption in Benin and has moved, in 
several high-profile cases, against corrupt government officials. 
Corruption remains a problem in the customs service, with government 
procurement, and in the judicial system.  Investors may encounter 
numerous attempts to solicit bribes as they begin operations in 
Benin. 
 
¶21. While Benin lacks specific anti-corruption legislation both the 
gift and receipt of a bribe are illegal in Benin and punishable by a 
penalty of less than ten years imprisonment.  Benin is a signatory 
to the UN Convention against Corruption.  The newly established 
State Audit Office is responsible for preventing corruption in the 
national government. 
 
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Bilateral Investment Agreements 
------------------------------- 
 
¶22. Benin has a bilateral investment agreement with France, Germany, 
and Great Britain. Benin does not have a bilateral investment 
agreement with the United States. 
 
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OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
¶23. The Overseas Private Investment Corporation (OPIC) offers 
financing programs to assist companies wishing to invest in 
developing countries, including Benin. OPIC insurance could 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. 
 
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Labor 
----- 
 
¶24. 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 labor directorate for employee 
dismissal, and consolidating labor regulations currently dispersed 
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. 
 
¶25. 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 is engaged primarily in 
subsistence agriculture and other primary sector activities. 
Although approximately 75 percent of salaried employees belong to 
labor unions the vast majority of union members are in the public 
sector with a much smaller percentage of workers in the private 
sector unionized. There are several union confederations, and unions 
generally are independent of government and political parties. 
 
¶26. 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. In August 2001, the Government declared 
illegal a strike conducted by customs officers protesting a 
surprise, anti-corruption inspection by the Finance Ministry. 
 
------------------------------ 
Foreign Trade Zones/Free Ports 
------------------------------ 
 
¶27. There is a free trade zone in the Port of Cotonou for imports 
destined to Benin's landlocked neighbors of Burkina Faso and Niger. 
Foreign importers have complained, however, that corruption in the 
Port of Cotonou makes it difficult to benefit from this entity. 
 
¶28. The government plans on constructing an additional free trade 
industrial zone in Seme, located on Benin's coast east of Cotonou. 
Initially, the site will be 200 hectares in size, and then doubled 
during its second phase. 
 
------------------------------------ 
Foreign Direct Investment Statistics 
------------------------------------ 
 
¶29. According to the United Nations Conference on Trade and 
Development (UNCTAD), Benin received 63 million dollars in foreign 
direct investment in 2006 (the latest statistics available). 
 
¶30. 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 and other European countries. 
Chinese companies have also begun making investments in Benin. 
Foreign investors have purchased textile, cigarette, cement, and 
brewing companies in Benin. 
 
¶31. U.S. companies Texaco/Chevron and Kerr-McGee have a substantial 
investment presence in Benin. Texaco/Chevron provides aviation fuel 
for the International Airport in Cotonou and owns local gasoline 
stations. Houston-based oil company, Kerr-McGee has acquired rights 
to a deep-water block off Benin's coast and drilled two exploratory 
wells in March 2003. 
 
BROWN