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Crisis in Gabon, Africa Gabon, being among the richest countries in Africa with annual per capita income of USD 4, 675 in 2003 and GDP growth of 2. 1 percent in 2003, is now recovering after a serious economic crisis, connected with drops in production of oil industry, which makes the largest contribution into the countrys economy. Gabon has very affluent natural recourses, like timber and various minerals, but oil industry remains dominant, it provides 44 % of GDP, 65 % of Governmental budget and 79 % of export earnings. Powerful companies like Shell or Elf, operating at the market, are very concerned about the situation, because there are expectations about further falls in oil production, which is expected to decrease twice by 2005. Nevertheless, recently some optimistic reports about discovering of new oil deposits appeared, Shell Gabon and US-based oil company Pan Ocean announced their successful development of new oil wells. But the roots of such crisis can be found much deeper in the realities of economical and social life of the country. The secondary industries (timber and mining sector) can not contribute more than 5 % of GDP.
Industrial sector in general is weak; it is not being well developed in favor of oil and other raw material refining branches. Agricultural sector is slightly rising. Production of cocoa, coffee and oils is slightly developing with the support of the government, intending to export those products. Social level of welfare does not correspond to relatively high index of per capita income. More than 70 % of the population resides in rural territories, where frequently the only way to make ends meet is to rely on yields from own fields and gardens. Level of poverty and unemployment is impressive.
And, in general, due to poor development of domestic manufacturing, the needs of population in food or related products can be mostly satisfied only from import, expenses of which are being covered by costs of oil exports. The situation with rendering of social and communal services is extremely critical. Besides, the country has a great amount of external debt, even despite of debt service reductions. Decreasing of oil incomes and tax revenues, bad performance of state-property enterprises, delays in privatization of agro-industrial sectors, forecasts of growing unemployment and poverty required more subsidies from the government. As a result, in 2002 it faced a huge external debt (USD 840 million), the necessity of bank repayments, and covering of the expenses of parliamentary elections. Administrative infringements, budgetary overrun and late economical reformations also caused failure to meet the terms of the stand-by program offered by IMF and signed in October 2000, which contained some financial advantages and the conditions of paying of extra tranches for the country.
The banking system of Gabon can not receive proper development because of hard dependence on governmental control and it is sensitive to changes in budget which are being strengthened by one-sided direction of investments. The Gabonese Development Bank (BGD) can not gain its debts back from the governmental structures. Only 3 % of the Gabonese have own bank account, but even among this little amount of population the liability of banks is low and people prefer to invest their money into other informal ventures. There is also evident political stagnation in the country. The head of the country, President Omar Bongo, came to the power 35 years ago. He follows democratic way of governing, keeping friendly relations with France, but making disputable decisions in his policy with neighboring countries.
During the civil war in Congo, Gabonese side offered its participation and the ideas of ending the conflict through mediation. In the end of 90 th Bongo was accused in receiving of unofficial money from American oil companies, and US senate initiated hearings on cases of corruption and illegal financial transfers made by members of Gabonese government. Statistically, 5 % of population receives 90 % of countrys income. Moreover, recently a special constitutional revision took place, which created additional freedoms for Bongo and opened a way for him to be a candidate for 2005 elections. As it is estimated by foreign specialists, government is not doing proper product or cost planning, especially regarding to non-oil sectors. Budget overspending's brought to serious problem of debts in the country.
Because of inefficient distribution of incomes and growing debts, the reputation of Gabon with the IMF is poor. There is a lot of criticism from the authorities of IMF directed to ineffectiveness of economic, administrative and fiscal reformations, together with poor social indicators. As a reaction on the country's economical crisis, Gabonese government undertakes some steps to support economic development by diversifying the structure of exports and privatizing the enterprises of governmental industries. Such diversification can bring to success due to many factors: relatively small market of the country, domination of some key investors in the majority of developing sectors of industry, dependence on French import, limited financial resources of local markets, low business activity of the population and extreme profitability of dominating oil industry. Encouraged by IMF and World Bank, the government started working over the project of privatization of its enterprises, and also over trade reforms, aimed to reach some market equilibrium. Administrative reorganizations will lower employment in public sector and limit the growth of incomes of individuals.
In June 2004 a Stand-By Arrangement had been discussed between the countrys authorities and the IMF officials. Privatization of state enterprises is one of the instruments, with the help of which Gabonese government intends to attract available external investments and to achieve its strategic goals on industrial development. To receive better progress for non-oil sectors, the government relies on growing and more efficient performance of industry of logging, with a better quality of wood processing, which will allow the country to receive long-term advantages. The government also envisages some economical reformations and improvements in agricultural sector with further development of fisheries and tourism. Bibliography: Gabon. County Analysis Briefs: Africa.
National Iranian Gas Company. May 2001 < web > Gabon. Country Brief. The World Bank Group. Sep. 2004 < web > Gabon: June 2001. Trade Policy Review.
World Trade Organization. June 2001 < web >
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Research essay sample on Crisis In Gabon Africa
