VZCZCXRO1690
PP RUEHMA RUEHPA
DE RUEHDK #0153/01 0381153
ZNR UUUUU ZZH
P 071153Z FEB 08
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 9990
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 000153 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/IFD, AF/EPS, AND AF/W 
TREASURY FOR OIASA/EBARBER, RHALL 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAID ETRD EINV SG
SUBJECT:  SENEGAL'S ACCELERATED GROWTH STRATEGY - MOVING FORWARD OR 
GETTING BOGGED DOWN? 
 
 
DAKAR 00000153  001.2 OF 002 
 
 
¶1.  SUMMARY:  On December 31, 2007, Senegal's National Assembly 
passed a law to speed up the implementation of one of President 
Wade's cornerstone economic policies, the Accelerated Growth 
Strategy (AGS).  The legislation also combines the AGS' goals into 
Senegal's 2006-2010 Poverty Reduction Strategy Paper's (PRSP) 
priorities, which are designed to achieve the Millennium Development 
Goals by 2015.  The law also called for the introduction of new 
action plans to boost key strategic sectors (agriculture, fishing, 
tourism, textile, and electronic customer support services) and to 
establish Senegal as "a world class business environment."  The AGS 
has faced criticism for being overly optimistic given Senegal's 
history of modest growth and for underestimating current 
difficulties in key strategic sectors.  END SUMMARY. 
 
AGS DESIGNED TO BOOST ECONOMIC GROWTH AND IMPROVE OVERALL BUSINESS 
CLIMATE 
--------------------------------------------- ----- 
¶2.  The AGS was officially "launched" in September 2007 but had been 
a central point of discussion within the GOS and with donors since 
January 2005.  The underlying goal is to establish sustainable real 
annual GDP growth of at least seven percent in a manner that creates 
jobs, increases incomes, and reduces poverty.  The AGS's stated goal 
is to establish the private sector as the engine for growth instead 
of the public sector.  The AGS approaches this goal with two main 
pillars:  the selection and promotion of strategic sectors with high 
potential for economic growth and the establishment of "a world 
class business environment."  Consultations among different 
partners, including donors, researchers, and civil society groups, 
helped formulate AGS's focus on the following sectors: 
agribusiness; fisheries and aquaculture; tourism and artisanal art; 
textiles; and communication and information technologies and 
services. The National Assembly's action was not the final 
bureaucratic step.  Next, a committee will finalize the action plan 
for the key sectors with the plan needing to be approved by a decree 
from President Wade, before the end of February if the program stays 
on track. 
 
¶3.  According to the action plan, the GOS aims to establish "a world 
class business environment" by implementing structural reforms to 
improve the business climate, reduce red tape, combat corruption, 
reinforce the judicial system, improve transportation 
infrastructure, enhance electricity transmission systems, modifythe 
labor code to make it more flexible, improveprivate sector access 
to credit, and update land ownership laws.  Emerging from this 
effort is suposed to be a new dynamic for entrepreneurship (wit a 
focus on women and private investment. 
 
¶4. The same basic package of action items to improveSenegal's 
business climate have been on the GOS'sagenda for more than a 
decade, but they have notbeen implemented, largely due to political 
conflcts of interest.  However, Senegal has taken some positive 
steps lately, including progress on a new special economic zone to 
ease access to land for investors, the reduction in the length of 
time to create a business from 58 days to 2 days, a new focus on 
public-private-partnerships, and the establishment of a regional 
center in Saint Louis to monitor the drag on business of 
administrative procedures. 
 
BURDENED BY A COMPLEX VISION AND UNDERLYING REALITY 
--------------------------------------------- ------ 
¶5.  Actual implementation of the AGS will likely require financial 
and program support from donors, and significant outlays from 
Senegal's budgets, both national and local.  An accommodation of 
government-driven administrative bureaucracy is also assumed.  The 
Prime Minister's office is to create a National Steering Committee, 
to "reinforce and strengthen consensus and communication among the 
civil servants, the civil society, the private sector and all the 
other economic and social development actors" to support the AGS's 
goals.  The strategy promotes a broad range of key principles 
including using the cluster approach for strengthening targeted 
sectors, promoting public-private partnerships, and building a 
national "pact" for economic emergence by partnering with labor 
unions and civil society. 
 
¶6.  Though the AGS objectives are clearly identified, critics and 
observers find the scenarios for real GDP growth very optimistic, 
given the historical trends of real GDP growth in Senegal -- which 
has never reached 6.5 percent since 1994 and is anticipated to be at 
4.8 in 2008 (according to Senegal's Department of Forecasting and 
Economic Studies).  Another concern is that ongoing, massive 
subsidies to the energy sector, which in recent years had 
contributed to a worsening of Senegal's fiscal deficit, could easily 
undermine macroeconomic stability in the years to come.  As noted by 
one opposition leader "in a country with no major sustainable energy 
development policy, the success for the AGS to meet a seven percent 
real GDP growth per year, reduce poverty, create wealth, and attract 
 
DAKAR 00000153  002.2 OF 002 
 
 
new investors, might be seen to be an illusion." 
 
¶7.  Apart from the communication and information technologies and 
services cluster, the main pillars of the AGS (agriculture, fishing, 
tourism, and textile) are all facing deep-rooted structural 
difficulties.  For many, the AGS is not a plan for a more modern 
economy, but rather a continuation of support to sectors which are 
largely uncompetitive in a global economy.  Politically and 
socially, however, the GOS is hoping to keep them afloat since they 
account for a huge portion of employment in the country and are key 
to alleviate poverty in rural areas. 
 
¶8.  USAID/Senegal's economic growth program is designed to support 
the AGS.  Technical assistance and training is provided to develop 
the policy reforms necessary for AGS implementation, promote 
public-private partnerships and increase exports among the clusters 
targeted by the strategy. 
 
AGS TO BE ALIGNED TO PRSP II 
---------------------------- 
¶9.  The law passed by the National Assembly (as drafted by President 
Wade's administration) requires additional complexity for the AGS by 
requiring that it align with the country's development goals found 
in the second Poverty Reduction Strategy Paper (PRSP II).  The GOS 
foresees that this cohesion of the two programs will require 
additional extensive consultations with a broad range of partners 
from the private sector, trade associations, donors, and civil 
society.  Also, the AGS and PRSP II have to be in line with the 
Millennium Development Goals to alleviate poverty, improve 
education, and health conditions. 
 
COMMENT 
------- 
¶10.  We applaud the goals of a program to significantly enhance 
growth rates, and the GOS's engagement with the private sector and 
donors on its implementation. Although ambitious, the framework of 
the AGS appears sound. The risk is that, like many GOS programs, the 
AGS will become overburdened by grand themes and special interests. 
Applying what should be clear-eyed approaches to an economic growth 
action plan to the development guidelines of the PRSP and MDGs risks 
weighing-down both efforts.  Moreover, it remains to be seen if the 
government places sufficient urgency on implementing the necessary 
policy reforms for the AGS to have any affect on growth rates in the 
near future. 
 
SMITH