US embassy cable - 05NDJAMENA886

UNCLAS  NDJAMENA 000886 
 
SIPDIS 
 
 
DEPARTMENT FOR AF, AF/C, EB, LONDON AND PARIS FOR 
AFRICAWATCHER, DAKAR FOR CYNTHIA 
 
E.O. 12958: N/A 
TAGS: ECON, ENRG, EPET, CD, Economic Trends 
SUBJECT: TOUGH TIMES FOR CHADIAN EXPORTERS 
 
 
 1.  (SBU) Summary:   Oil is spurring international 
investment interest in Chad and the interest of Chadian 
businesses in exporting overseas.  However, Chadian 
businesses in non-oil sectors are facing a number of 
difficulties.  Language barriers, infrastructure problems, 
and high operating costs are restricting the ability of many 
companies to break into U.S. markets and take advantage of 
tariff-reduction benefits from AGOA.  End Summary. 
 
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BACKGROUND 
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2.  (U) The Esso-led oil consortium has brought significant 
benefits for Chadian companies operating as sub-contractors. 
The number of Chadian companies working with Esso on 
production activities is growing, and the number of local 
employees being hired by the consortium has also increased. 
Large oil exports have also meant that Chad is becoming one 
of the largest exporters to the U.S. under AGOA, as Chad's 
exports to the United States are expected to be approximately 
241 million USD in the first three months of 2005.  However, 
trade in other sectors between the two countries has seen 
little improvement.  Discounting oil, total trade between 
Chad and the U.S. is projected to be only 2 million USD for 
next year for products such as gum arabic and sesame. 
 
3.  (SBU) Econoff used meetings with the Ministry of 
Commerce, the International Financial Corporation, and local 
businesses, to uncover a number of variables that restrict 
Chadian companies from exporting products to the U.S.  These 
include language issues, high operating costs, and lack of 
confidence in public institutions. 
 
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LANGUAGE PROBLEMS 
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4.  (SBU) Chadian businesses are extremely interested in 
dealing with American partners, but they find that the lack 
of knowledge of the English language hinders their ability to 
engage with counterparts in the States.  A number of 
businessmen have noted that while their trips to 
International Buyer Programs proved initially successful, the 
language barrier prevented further dialogue between partners. 
 The language problem forces many companies to turn to 
business partners in France.  Many companies have welcomed 
any potential opportunity to take English language courses 
that focus on business vocabulary and etiquette.  However, no 
such courses exist in the country. 
 
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HIGH OPERATING COSTS 
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5.  (SBU) High operating costs are clearly taking their toll 
on the capacity of Chadian companies to internationalize 
their operations.  A primary concern for many Chadian 
businesses is the high transportation cost to export goods to 
trade hubs in Cameroon and Nigeria (the two intermediary 
points for Chadian businesses to deliver their goods).  While 
road conditions within the country are deplorable, the local 
business community complains about the lack of vehicles to 
transport products.  Most large trucks needed for carrying 
finished products are currently used by Esso for oil 
production and international relief organizations to deliver 
humanitarian supplies to camps in eastern Chad.  Chadian 
businesses must wait weeks, or even months, before receiving 
trucks.  In addition, they must also pay extremely high 
overhead fees for using the vehicles due to the high demand. 
Complicating matters is the lack of a transportation company 
that has the capacity to satisfy the demands of local 
businesses. 
 
6.  (SBU) The business community also notes the high costs of 
raw materials necessary to construct and operate facilities. 
They particularly note the high cost of cement and 
electricity.  Currently, Chad lacks a local cement company 
that can provide the material to local companies.  Most of 
the cement is actually imported from Nigeria, at a value that 
is more than two times the cost of cement in the United 
States.  The Secretary General for the Ministry of Commerce 
 
noted on May 25 that the Ministry conducted a study in 2000 
to assess the feasibility of creating and operating a local 
cement plant in eastern Chad, but the study concluded that a 
local parastatal would encounter too many financial problems 
to be viable. 
 
7.  (SBU) High electricity costs add to the difficulties for 
Chadian companies.  Chef Kante, business development 
consultant for the IFC, explained that structural problems 
with the current, and highly out-dated, electricity grid 
result in a constant loss of electricity, which force the 
government to increase overall energy prices to cover their 
costs.  While the IFC has provided technical advisors to 
explore ways to revamp the current system, the overhauling of 
the electricity grid in the country would involve the 
utilization of resources that the Chadian government does not 
have.  All of these costs force these companies to think 
twice before considering exporting overseas, particularly to 
a country as far-removed geographically such as the United 
States. 
 
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LACK OF CONFIDENCE IN PUBLIC INSTITUTIONS 
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8.  (SBU) Chad lacks public institutions that can promote 
trade capacity and protect investment.  Local business 
leaders point to a general lack of concern by the government 
in the area of promoting business activity and trade 
capacity.  Case in point is the rigorous process required to 
register a local business.  Business leaders have complained 
that the process wastes resources that businesses could use 
to invest in their own development.  Kante noted an IFC 
program to help the GOC to create a one-stop shop for 
business registration, but stated that such an endeavor is 
far from being complete.  The lack of such initiatives are 
causing many businesses to question the commitment of the 
government to business promotion and trade development. 
 
9.  (SBU) Many also note their concern over the presence of 
corruption, fraud and the lack of enforcement mechanisms in 
the judicial system.  Kante pointed out that some Chadian 
businessmen complain that the costs associated with bribing 
officials to obtain simple procedural documents place 
significant strains on their operations.  While the Ministry 
of Commerce admitted the presence of corrupt bureaucrats who 
take advantage of local businesses, he noted that the 
government lacks the capacity to crack down on corruption. 
 
10.  (SBU) A strong Chamber of Commerce would normally help 
to initiate dialogue between the public and private sector, 
and chart out plans of action to address problems faced by 
local businesses.  Unfortunately, the Chadian Chamber of 
Commerce is plagued by weak and ineffectual leadership, the 
lack of adequate infrastructure (internet, phones, basic 
office supplies), and a very limited understanding of 
international commerce, particularly in the area of AGOA and 
trade with the United States.  Without a vibrant Chamber of 
Commerce, Chadian businesses also lose a potential advocate 
for improvements in the national business climate and export 
capacity. 
 
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COMMENT 
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11.  (SBU)  Chad is currently benefiting from oil production, 
but needs to diversify its economy to ensure long-term 
growth.  We will seek ways to overcome the language barriers 
encountered by Chadian businesses and find support for 
programs that will bolster the Chamber of Commerce's ability 
to become an effective advocate.  In addition, we will 
continue to work with both government leaders and the private 
sector to identify obstacles and find solutions to enable 
Chadian businesses to increase trade with the U.S. 
WALL 
 
 
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