GABON Toward More Inclusive and Greener Growth COUNTRY ECONOMIC MEMORANDUM MAY 2022 GABON Toward More Inclusive and Greener Growth ACKNOWLEDGEMENTS This Country Economic Memorandum (CEM) was Trade: Pierre Sauvé (Senior Private Sector Specialist, prepared by a multisectoral World Bank team led by ETIRI), Israel Osorio-Rodarte (Economist, ETIRI), Cindy Audiguier (Economist, EAWM2) under the Andre Jean Curtis Barbe (Consultant, ETIRI), Amevi overall guidance and support of Abdoulaye Seck Rocard Kouwoaye (Consultant, ETIRI), and Aleksandar (Country Director), Alice Ouedraogo (Country Manager), Stojanov (Junior Professional Officer, ETIRI). It also Francisco G. Carneiro (Practice Manager), Raju Singh benefited from comments from Paul Brenton (Lead (Lead Economist), Clelia Rontoyanni (EFI Program Economist, ETIRI). Leader), and Carine Clert (HD Program Leader). This study received financial assistance from the Umbrella Facility for Trade Trust Fund. The report is based on the contributions of the following team members: The report benefited from the constructive comments of peer reviewers: Rick Emery Tsouck Ibounde (Senior Macroeconomics, Trade and Investment: Sonia Barbara Economist, EMNMT), Thomas A. Vis (Senior Private Ondo Ndong (Economist, EAWM2) and Joana Monteiro Sector Specialist, EAWF2), Gonzalo J. Varela (Senior Da Mota (E T Consultant, EAWM2). Economist, ESAMU), Ekua Nuama Bentil (Senior Edu­ Poverty: Mervy Ever Viboudoulou Vilpoux (Economist, cation Specialist, HAWE3), and Siddharth Hari (Econo­ EAWPV) and Akakpo Demafo Konou (Consultant, mist, HECSP). Comments were also received from Erik von Uexkull, Senior Economist (ELCMU) and Marek EAWPV). Hanusch, Senior Economist (ELCMU) at the Concept Health: Andre L. Carletto (Senior Economist, HAWH3). Note stage. The team also received guidance from Sudhir Shetty (Consultant) during the early stage of Education: Harisoa Danielle Rasolonjatovo the preparation. Andriamihamina (Senior Education Specialist, HAWE2) and Bernard Yungu Loleka (E T Consultant, HAWE3). The team also gratefully acknowledges the collab­ oration with the government of Gabon throughout Social Protection and Jobs: Ioana Alexandra Botea the preparation of the report. The report greatly (Social Protection Economist, HAWS3) and Chiara benefited from three workshops (in April 2022) and Pasquini (Consultant, HAWS3). interactions with stakeholders in Gabon, including management and staff of the Ministère de l’Economie Investment Climate: Tania Ghossein (Senior Private et de la Relance; Ministère de l’Investissement; Sector Specialist, ETIIC), Ahmed Nauraiz Rana (Con­ Agence Nationale de Promotion de l’Investissement; sultant, ETIIC), and Eloise Obadia (Consultant, EAEF2). Ministère du Commerce; Ministère de la Santé et des The GICD was conducted by E&Y under the super­ Affaires Sociales; Ministère de l’Éducation Nationale, vision of Abhishek Saurav (Senior Economist, ETIIC) du Ministère de la Formation professionnelle; and and Kartik Akileswaran (Consultant, ETIIC). Ministère de l’Enseignement Supérieur. ii ABBREVIATIONS AND ACRONYMS AEAFF Forestry and timber sector implementation agency (Agence d’Exécution des Activités de la Filière Foret- Bois) AfCFTA African Continental Free Trade Area AfDB African Development Bank AFW Western & Central Africa AGEOS Gabonese Agency for Space Studies and Observations ANINF National Agency of Digital Infrastructure ANPI Investment Promotion Agency ANS Adjusted Net Savings APEC Professional Association of Gabon Credit Institutions ASPIRE Atlas of Social Protection Indicators of Resilience and Equity BAT Best Available Techniques BEAC Bank of Central African States BREF Best Available Techniques Reference Document CAFI Central African Forest Initiative CAR Central African Republic CBAM Carbon Border Adjustment Measure CCT Conditional Cash Transfer CDE Constant Difference of Elasticities CEMAC Economic and Monetary Community of Central Africa CES Constant Elasticity of Substitution CET Common External Tariff CFAD Forestry Concession Under Sustainable Management (Concession Forestière sous Aménagement Durable) CFAF CFA franc CGE Computable General Equilibrium CNAMGS National Health Insurance and Social Guarantee Fund (Caisse Nationale d’Assurance Maladie et de Garantie Sociale) CNSS National Social Security Fund (Caisse Nationale de Sécurité Sociale) CO2 Carbon dioxide CPI Corruption Perception Index CPPF Pension and Family Benefits Fund (Caisse des Pensions et des Prestations Familiales) CWON Changing Wealth of Nations DGEPN Directorate General on Environment and Nature Protection iii iv GABON: COUNTRY ECONOMIC MEMORANDUM DHS Demographic and Health Survey DRC Democratic Republic of Congo DSA Debt Sustainability Analysis ECE Early Childhood Education ECOWAS Economic Community of West African States eGDI e-Government Development Index EGEP Gabonese Survey on Poverty, Evaluation and Monitoring EIA Environmental Impact Assessment EIS Environmental Impact Statement EITI Extractive Industries Transparency Initiative ENVISAGE Environmental Impact Sustainability Applied General Equilibrium EU European Union EEZ Exclusive Economic Zone FDI Foreign Direct Investment FGIS Gabonese Fund for Strategic Investments FIES Food Insecurity Experience Scale FNAS National Social Assistance Fund (Fonds National d’Aide Sociale) FSC Forest Stewardship Council FSRG Sovereign Fund of the Gabonese Republic FTA Free Trade Agreement GATS General Agreement on Trade in Services GCI Global Competitiveness Index GCR Global Competitiveness Report GDP Gross Domestic Product GEF Economically Weak Gabonese (Gabonais Economiquement Faibles) GFCF Gross fixed capital formation GHS Global Health Security GICD Green Investment Climate Diagnostic GRAINE Gabonese Initiative for Achieving Agricultural Outcomes with an Engaged Citizenry (Gabonaise des Réalisations Agricoles et des Initiatives des Nationaux Engagés) GSEZ Gabon Special Economic Zone GVC Global Value Chain HCI High Council for Investment HCI Human Capital Index HHI Hirschman-Herfindhal Index IBRD International Bank for Reconstruction and Development ICPE Installations classified for environmental protection ICT Information and Communication Technologies IDB Inter-American Development Bank IGA Income Generating Activity IIMAC International Institute of Mediation, Arbitration and Conciliation ILO International Labor Organization TOWARD MORE INCLUSIVE AND GREENER GROWTH v IMF International Monetary Fund ITTO International Tropical Timber Organization LDC Least Developed Country LIC Low Income Country LMIC Low and Middle-Income Country LPI Logistics Performance Index M&E Monitoring and Evaluation MERCOSUR Southern Common Market MPO Macro and Poverty Outlook MSME Micro, Small, and Medium Enterprises NCR New Convergence Rules NDC Nationally Determined Contribution NGO Non-governmental organization NICT National Institute of Communications Technology NTFP Non-timber forest product NTM Non-Tariff Measure OEC Observatory of Economic Complexity OHADA Organization for the Harmonization of Business Law in Africa ONE National Office for Employment PADEG Gabon Economic Diversification Support Project PAFC Pan-African Forest Certification PASEC Program for the Analysis of Education Systems (Programme d’analyse des systèmes éducatifs de la CONFEMEN) PAT Accelerated Transformation Plan (Plan d ’Accélération de la Transformation) PCGS Partial Credit Guarantee Scheme PEFC Program for the Endorsement of Forest Certification PFA Associated Forestry Permit PGG Permit by Mutual Agreement (Permis de Gré à Gré) PID Provision for Diversified Investments PIMA Public Investment Management Assessment PNPS National Social Protection Policy (Politique Nationale de Protection Sociale) PPP Public-Private Partnership PREF Economic and Financial Reform Program of CEMAC PRODECE Skills Development and Employability Project (Projet de Développement des Compétences et de l’Employabilité) PSD Private Sector Development PSGE Strategic Plan for an Emerging Gabon (Plan Stratégique Gabon Émergent) PTA Preferential Trade Agreement PWT Penn World Table SCLT System of Control of Legality and Traceability of Timber SEZ Special Economic Zone SFNAS Services of the National Social Action Fund (Services du Fond National d’Action Sociale) vi GABON: COUNTRY ECONOMIC MEMORANDUM SIHG Gabon’s Human Investment Strategy (Strategie d’Investissement Humain du Gabon) SITC Standard Industrial Trade Classification SME Small and medium enterprise SOE State-owned enterprise SSDS Singapore Skills Development System SPS Sanitary and Phytosanitary measures SSA Sub-Saharan Africa STEM Science, Technology, Engineering, and Mathematics STRI Services Trade Restrictiveness Index TBT Technical Barriers to Trade TF Trade Facilitation TFP Total Factor Productivity TVET Technical and Vocational Education and Training UIS UNESCO Institute for Statistics UK United Kingdom UMIC Upper Middle-Income Countries UNESCO United Nations Educational, Scientific and Cultural Organization US United States of America VAT Value Added Tax WB World Bank WBL Women, Business and the Law WDI World Development Indicators WEF World Economic Forum WGI Worldwide Governance Indicators WITS World Integrated Trade Solution WTO World Trade Organization TABLE OF CONTENTS Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv CHAPTER 1: UNDERSTANDING GABON’S GROWTH PERFORMANCE . . . . . . . . . . . 1 1.1 Growth history: reform, setbacks, and achievements . . . . . . . . . . . . . . . . . . . . . . 2 1.1.1 Since 1990 growth has been slow and volatile . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1.2 Growth decomposition post-1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.1.3 Limited structural change so far . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.2 The fragile link between growth and poverty reduction . . . . . . . . . . . . . . . . . . . 11 1.2.1 Poverty trends and international comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.2.2 Growth and shared prosperity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.2.3 The impact of the COVID-19 pandemic on poverty . . . . . . . . . . . . . . . . . . . . . . 15 1.3 Weak foundations for higher and more inclusive growth and structural transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 1.3.1 Better managing resource rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 1.3.2 Built capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 1.3.3 Institution and governance weakness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 CHAPTER 2: ACHIEVING INCLUSIVENESS AND MATCHING ASPIRATIONS WITH OPPORTUNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 2.1 Invest in education and skills promotion policies . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.1.1 Contextual factors for supply and demand of skills in Gabon . . . . . . . . . . . . . . 27 2.1.2 Fundamental learning in Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 2.1.3 Disparities in skills development in Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 2.1.4 Skills mismatch and external efficiency of education in Gabon . . . . . . . . . . . . 33 vii viii GABON: COUNTRY ECONOMIC MEMORANDUM 2.2 Socioeconomic inclusion through safety nets for the poor . . . . . . . . . . . . . . . . . 37 2.2.1 The social protection sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 2.2.3 The untapped potential of social safety nets . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 2.3 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 2.3.1 Invest in education and policies promoting skills . . . . . . . . . . . . . . . . . . . . . . . . 47 2.3.2 Socioeconomic inclusion through safety nets for the poor . . . . . . . . . . . . . . . . 49 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 CHAPTER 3: TOWARD A MORE FAVORABLE BUSINESS ENVIRONMENT. . . . . . 53 3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 3.2 Private Sector matters for Job Creation and Growth. . . . . . . . . . . . . . . . . . . . . . 54 3.3 Barriers to Private Sector Development (PSD) . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 3.3.1 Access to finance hinders enterprise development . . . . . . . . . . . . . . . . . . . . . . 56 3.3.2 Rampant informality hampers the productivity of formal companies . . . . . . . . 57 3.4 The current business regulatory environment is non-conducive to private sector development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 3.5 Reversing the Trend – Restoring Competitiveness and Fostering Green Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 3.5.1 FDI – A Driver for Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 3.5.2 Competition Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 3.5.3 Price Control and Price Distortion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 3.6 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 CHAPTER 4: HARNESSING EXPORT MARKETS THROUGH DIVERSIFICATION . . . .67 4.1 The end of business as usual – trade diversification for inclusive growth. . . . . . . 67 4.2 Gabon’s recent trade performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 4.3 Gabonese trade performance: Insights from firm-level analysis . . . . . . . . . . . . . 71 4.4 Key constraints to trade integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 4.5 Gabon’s diversification imperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 4.6 Diversifying through deeper regional ties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 4.7 Addressing the trade and climate change nexus . . . . . . . . . . . . . . . . . . . . . . . . . 84 4.8 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 TOWARD MORE INCLUSIVE AND GREENER GROWTH ix CHAPTER 5: GREENING GABON’S ECONOMIC AND TRADE STRUCTURE . . . . . .91 5.1 Diversifying where and how? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 5.1.1 Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 5.1.2 Forestry and wood products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 5.1.3 Fisheries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 5.1.4 Services – ecotourism, environmental services, and digitization . . . . . . . . . . . 94 5.2 Analysis of the afforestation and wood product manufacturing sectors . . . . . . . 96 5.2.1 Regulatory predictability and policy coherence in the afforestation and wood product manufacturing sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 5.2.2 Business entry and establishment in the afforestation and wood product manufacturing sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 5.2.3 Regulatory measures and incentives to support sustainable development of the afforestation and wood product manufacturing sectors . . . . . . . . . . . . . 99 5.3 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Recommendations to address investment barriers in the afforestation and wood product manufacturing sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 ANNEXES Annex 1: Implementation of PREF reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Annex 2: Definition of Gabon’s peer countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Annex 3: Gabon’s development plans since 1960 . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Annex 4: The COVID-19 pandemic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Annex 5: Gabon’s urbanization process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Annex 6: Additional insights on poverty and shared prosperity in Gabon . . . . . . . . . 115 Annex 7: Background on the Green Investment Climate Diagnostic (GICD) . . . . . . . 117 Annex 8: Gabon’s environmental protection framework . . . . . . . . . . . . . . . . . . . . . . 119 Annex 9: Main Features of the ENVISAGE computable model . . . . . . . . . . . . . . . . . 123 List of Figures Figure 1. Growth of real GDP per capita, 1990–2020 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 2. Volatility of GDP growth per capita, 1990–2020 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Figure 3. GDP per capita (constant 2015 USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 4 Growth cycles, 1961–2020 GDP growth (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Figure 5. Contribution to real GDP growth (pp) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Figure 6. Gabon vs. comparators: Contribution to total GDP growth (2010–2020 average (pp) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 x GABON: COUNTRY ECONOMIC MEMORANDUM Figure 7. Gabon’s economic structure (% of GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 8. Gabon: supply side decomposition (pp) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Figure 9. Employment shares (% of total employment) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 10. Value added composition (% of total value added) . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Figure 11. Correlation between change in sectoral productivity and employment shares, 2009–2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 12. Correlation between change in sectoral productivity and employment shares, 2015–2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Figure 13. Gabon vs. Peers: productivity change decomposition. Annual contribution to per capita value added growth by major sector, 2003–2019 (pp) . . . . . . . . . . . . . 9 Figure 14. Gabon vs. Peers: aggregate decomposition of per capita value added, 2003–2019 (pp) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 15. Agriculture, forestry, and fishing, value added per worker (constant 2015 USD) . . . 9 Figure 16. Agricultural TFP Index (2015=100) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Figure 17. Annual stock of output, real capital stock, and TFP per worker, 1990–2019 (%) . . . 10 Figure 18. Gabon vs. comparators: Contribution to growth, (average 2010–2019, in pp) . . . . 10 Figure 19. Decomposition of growth per worker (%) – standard Solow including natural capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 20. Per capita wealth (constant 2018 USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 21. Natural capital per capita (constant 2018 USD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Figure 22. Gabon and peers: share of wealth in 2018 (% of total wealth) . . . . . . . . . . . . . . . . . 12 Figure 23. Poverty indicators in 2005 and 2017 by area of residence . . . . . . . . . . . . . . . . . . . . 12 Figure 24. Access to basic services in Gabon and comparators (% of the population) . . . . . . 14 Figure 25. GINI coefficient by geographic areas and gender of the household head (scale 1–10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Figure 26. Growth and redistribution effect of poverty reduction (%) . . . . . . . . . . . . . . . . . . . . 15 Figure 27. Shared prosperity indicators by area of residence . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Figure 28. Job stoppage after pandemic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 29. Work stoppage by employment type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 30. Proportion of households with children engaged in education activities during the 2020 lockdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Figure 31. Difficulty accessing medical care service during the 2020 lockdown . . . . . . . . . . . . 16 Figure 32. Gabon - Real GDP, oil prices & overall fiscal deficit (1990–2020) . . . . . . . . . . . . . . . 18 Figure 33. Current and capital spending (% of total expenditures 2006–2020) . . . . . . . . . . . . 19 Figure 34. Adjusted net savings (ANS), including particulate emission damage (% of GNI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Figure 35. Gabon: adjusted net savings subcomponents (ANS) (% of GNI) . . . . . . . . . . . . . . . 20 Figure 36. Public vs. private Investment (% of GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Figure 37. Investment and GDP per capita: Gabon and peers . . . . . . . . . . . . . . . . . . . . . . . . . 20 Figure 38. Main obstacles to business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Figure 39. Human Capital Index (HCI) 2020 (1=low; 6=high) . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Figure 40. WGI: Government Effectiveness (overall estimate) . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Figure 41. Governance Indicators 2020 (percentile rank: ranges from 0 (lowest) to 100 (highest) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Figure 42. Corruption Perception 2020 (Score 0–100). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 TOWARD MORE INCLUSIVE AND GREENER GROWTH xi Figure 43. Public expenditure on education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Figure 44. Learning poverty in Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Figure 45. Trend net enrollment rate in primary, both sexes (%) . . . . . . . . . . . . . . . . . . . . . . . . 29 Figure 46. Trend gross enrollment rate in preprimary & primary education, both sexes (%) . . . . 29 Figure 47. Students’ achievement at the end of primary school in reading and mathematics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Figure 48. Transition from primary to secondary school and higher education . . . . . . . . . . . . 30 Figure 49. % of enrollment by quintile and education level . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Figure 50. Transition from primary to secondary school and higher education . . . . . . . . . . . . 31 Figure 51. Percentage of vocational and technical enrollment . . . . . . . . . . . . . . . . . . . . . . . . . 32 Figure 52. Gross enrollment rate in tertiary education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Figure 53. Relationship between TVET quality and the availability of skilled workers . . . . . . . 35 Figure 54. Current and investment expenditure in education across sectors 2016–2020 . . . . 35 Figure 55. Overview of the Gabonese labor market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Figure 56. Social protection spending in UMICs (% of GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Figure 57. Gabon’s scores for WBL2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Figure 58. Gabon: FDI net inflows (% of GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Figure 59. Gabon: share of merchandise exports by sector, 2017–2021 . . . . . . . . . . . . . . . . . . 68 Figure 60. Gabon: breakdown of merchandise exports and imports by main commodity group, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Figure 61. Gabon and its peers: export concentration metrics, 2005–2019 . . . . . . . . . . . . . . . 70 Figure 62. Gabon: regional breakdown of merchandise exports, 2010 and 2019 . . . . . . . . . . 70 Figure 63. Real effective exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Figure 64. Gabon: average number of exported products and export markets per non-oil exporting companies, 2017–2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Figure 65. Gabon: Number of exporting companies by sector, 2017–2021 . . . . . . . . . . . . . . . 73 Figure 66. Gabon: Performance of non-oil exporting companies by number of market destinations, 2017–2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Figure 67. Gabon: Share of exporters and value of exports by destination markets, 2017–2021 . .73 Figure 68. Gabon: sectoral breakdown of exporting companies serving multiple markets, 2017–2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Figure 69. Gabon: survival rates of exporting companies by size (excluding oil exporting) . . 74 Figure 70. Gabon and its peers: export survival rates using Kaplan and Meier estimates . . . 75 Figure 71. Gabon and its peers: Logistics Performance Index, 2018 . . . . . . . . . . . . . . . . . . . . . 76 Figure 72. Gabon and its Peers: Tariff Profile (simple averages) . . . . . . . . . . . . . . . . . . . . . . . . 76 Figure 73. Gabon: export revenues and world oil price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Figure 74. share of non-oil exports in total merchandise exports in Gabon, 1988–2019 . . . . . 78 Figure 75. Gabon: Services Trade Restrictiveness Index (STRI) metrics by sector (all modes), 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Figure 76. Gabon: oil and non-oil exports by destination, 1988–2019 . . . . . . . . . . . . . . . . . . . 81 Figure 77. Gabon: Share of total exports to Africa and the Republic of Congo, 1990–2019 . . . . 81 Figure 78. Static impacts of AfCFTA on real income by region, percentage change in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Figure 79. Static impacts of AfCFTA on aggregate macro indicators, percentage change in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 xii GABON: COUNTRY ECONOMIC MEMORANDUM Figure 80. Dynamic impacts of AfCFTA on real income by region, %change in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Figure 81. Dynamic impacts of AfCFTA on aggregate macro indicators, %change in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Figure 82. Gabon: Mean annual temperature and precipitation levels, 1901–2020 . . . . . . . . . 86 Figure 83. Gabon: Evolution of sea level, 1993–2015 (observed anomalies relative to mean). . . 86 Figure 84. Gabon and its peers: CO2 emissions per capita, 2010 and 2018 . . . . . . . . . . . . . . . 87 Figure 85. Gabon: Latent diversification potential in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 Figure 86. Gabon: Sectoral breakdown of commercial services exports, 2020 . . . . . . . . . . . . 95 Figure A.6.1. Trend in GDP growth, 2001–2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Figure A.6.2. Shared prosperity indicators by region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Figure A.6.3. Poverty headcount by region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Figure A.6.4. Poverty headcount in the two main cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Figure A.6.5. Gabon Growth Incidence Curves, 2005–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Figure A9.1. Gabon and its peers: STRI in commercial banking and insurance services, 2021 . . . 128 Figure A9.2. Gabon and its peers: STRI in accounting and auditing services, 2021 . . . . . . . . . 128 Figure A9.3. Gabon and its peers: STRI in mobile telecom services, by mode of supply, 2021 . . 129 Figure A9.4. Gabon and its peers: STRI inmobile telecom services, all modes of supply, 2022 . . 129 Figure A9.5. Gabon and its peers: STRI in distribution, telecom, and transport services, all modes of supply, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Figure A9.6. Gabon and its peers: STRI in professional and financial services, all modes of supply, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Figure A9.7. Gabon: top latent products in terms of the number of export years . . . . . . . . . . . 130 Figure A9.8. Gabon: top latent products in terms of value of exports . . . . . . . . . . . . . . . . . . . . 130 Figure A9.9. Gabon and Central Africa: Static impacts of AfCFTA on total output by sector in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 Figure A9.10. Gabon and Central Africa: Static impacts on total imports by sector in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Figure A9.11. Gabon and Central Africa: Static impacts of AfCFTA on total exports by sector in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Figure A9.12. Gabon and Central Africa: dynamic impacts of AfCFTA on total output by sector in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Figure A9.13. Gabon and Central Africa: dynamic impacts of AfCFTA on total imports by sector in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Figure A9.14. Gabon and Central Africa: dynamic impacts of AfCFTA total exports by sector in 2035 relative to baseline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 List of Tables Table 1. Main policy recommendations for higher, sustainable, and inclusive growth in Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xx Table 2. Performance in terms of poverty reduction in Gabon and selected countries . . . . 13 Table 3. Demand and offer of skills at different levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Table 4. Proportion of occupation for adults age 25–59, by highest educational attainment and gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Table 5. Coverage of non-contributory social assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 TOWARD MORE INCLUSIVE AND GREENER GROWTH xiii Table 6. Distribution of benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Table 7. Distribution across the seven vulnerability segments (EGEP 2017) . . . . . . . . . . . . . 45 Table 8. Simulated impacts of safety nets on poverty reduction . . . . . . . . . . . . . . . . . . . . . . 46 Table 9. Gabon: Matrix of policy reforms in education and skills promotion, and time frame . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Table 10. Matrix of policy reforms for socioeconomic inclusion, and time frame . . . . . . . . . . 50 Table 11. Constraints to competitiveness and diversification . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Table 12. Gabon: matrix of investment policy reforms, and time frame . . . . . . . . . . . . . . . . . 64 Table 13. Trade indicators, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Table 14. Gabon and its peers: trade openness metrics, 2000–2020 . . . . . . . . . . . . . . . . . . . . 72 Table 15. Matrix of Trade Policy Reforms, Implementation Responsibilities and Time Horizon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Table 16. Gabon: matrix of investment policy reforms in the afforestation and wood product manufacturing sectors, and time frame . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 Table A2.1. Gabon’s selection of peer countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Table A8.1. Major multilateral environmental agreements ratified by Gabon . . . . . . . . . . . . . 119 Table A9.1. Gabon: the op 20 exported products in 2020 (USD millions and percentages) . . 124 Table A9.2. Gabon: top 20 imported products, 2020 (USD millions and percentages) . . . . . . 125 Table A9.4. Gabon: Top 20 export destinations, 2010 and 2020 (US$ millions and percentages) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 Table A9.3. Gabon: top 20 import sources, 2010 and 2020 (USD millions and percentages) . 127 List of Boxes Box 1. Impact of the war in Ukraine on the Gabonese economy . . . . . . . . . . . . . . . . . . . . . 4 Box 2. The GRAINE program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Box 3. Evidence points to the procyclicality of fiscal policy in Gabon. . . . . . . . . . . . . . . . . 18 Box 4. Health Security vs. Human Capital: a resilience building case . . . . . . . . . . . . . . . . . 23 Box 5. The Singapore Skills Development System (SSDS) may serve as an example for developing countries like Gabon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Box 6. What is green growth, and how can it contribute to Gabon’s sustainable development?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Box 7. Despite high unemployment rates and high informality, foreigners comprise an important share of the Gabonese workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Box 8. Active labor market programs to tackle youth unemployment . . . . . . . . . . . . . . . . 39 Box 9. The surge of social safety nets in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Box 10. Proven impact of safety nets on poverty reduction and inclusion . . . . . . . . . . . . . . 44 Box 11. A new Investment Code is expected to reinforce Gabon’s appeal by increasing investor confidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Box 12. Policy measures to sustain trade diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Box 13. Trade climate change and developing countries: promoting a transition to lower carbon-intensive value chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Box 14. Leveraging Gabon’s latent export potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 TOWARD MORE INCLUSIVE AND GREENER GROWTH xv EXECUTIVE SUMMARY Over-reliance on natural resources has held back diversification of Gabon’s economy, as growth, exports, and fiscal revenues are still largely dependent on extractives. Despite Gabon’s abun­ dant natural resources, growth has been slow to reduce poverty. In the context of dual shocks from low oil prices and the COVID-19 pandemic in 2020, government authorities committed to fiscal consolidation, structural reforms, and economic diversification as part of the Accelerated Transformation Plan (PAT). In addition, at their exceptional summit in August 2021, the Economic and Monetary Community of Central Africa (CEMAC) heads of state provided a strong political endorsement for structural reforms, with emphasis on improved management of public funds and governance, business environment reforms, and regional integration of human capital. This Country Economic Memorandum (CEM) is framed along the new reforms supported by the CEMAC heads of state to achieve faster, more inclusive, and sustainable growth. In this CEM, the green economy is viewed as an opportunity for Gabon to position itself as a champion. Economic transformation is necessary to find a better, sustainable model for job creation: reinforcing labor supply through better skills and job-search training, and creating economic opportunities in a more conducive environment for investment and trade. This CEM aims at supporting policy makers in their reform efforts. Their goal is to help Gabon, a small economy of 2.3 million people, break free from its resource-dependent growth model and create the conditions to move people into jobs in promising green sectors. Thus the CEM’s four chapters provide insights on the following: (i) the mismatch of skills and aspirations in the labor market, and the need to provide more efficient social protection systems to protect the most vulnerable against shocks, including climate change shocks; (ii) reducing the footprint of state-owned enterprises (SOEs) and building an environment more conducive to private sector development; (iii) exploring Gabon’s potential for trade in goods and services and their regional integration; and (iv) greening sectors and how to protect the green economy. Each chapter includes a menu of actionable policy recommendations for achieving faster and more sustainable economic growth and accelerating job creation. xv xvi GABON: COUNTRY ECONOMIC MEMORANDUM Weak economic fundamentals and Gabon embarked on an ambitious agenda to jumpstart Gabon’s poor growth performance diversification and economic transformation.1 Gabon’s so far strategy relies extensively on a combination of tax exemptions and the use of special economic zones Gabon has so far not been able to translate its (SEZs) and public-private partnerships (PPPs). As a resource wealth into sustained economic growth. result, the oil sector’s share in the economy has been Immediately after independence in the 1960s, the oil declining since 2010, with non-oil activities the main boom allowed Gabon to achieve levels of growth over drivers of growth. In particular, activities in mining and 9 percent, which propelled it to upper-middle income forestry significantly increased their contribution to (UMIC) status. However, per capita income has fallen growth. For example, the creation of the Nkok SEZ over the last two decades as aggregate income growth near Libreville in 2010 greatly expanded the timber has failed to keep up with population growth. Today, industry through acceleration of investments in timber real GDP per capita is 20 percent lower than in 1990. processing industries. However, the strategy has not A third of citizens live below the USD 5.5/day poverty significantly reduced oil’s domination of the economy. line and 14 percent of the population is unemployed. With a wide array of constraints,2 private sector dyna­ The country suffers from poor governance and human mism and associated job creation have not fully capital lags behind its peers. It also contends with materialized. inadequate logistics and trade infrastructure, which both work against the country’s export potential by Gabon has positioned itself as a climate champion inflating trade costs. in Africa3 and undertaken a series of actions toward a transition to a green economy.4 Climate is integral to Sustained and inclusive economic growth in Gabon the PSGE. and the COVID-19 pandemic confirms the has been hampered by several key bottlenecks. urgency of accelerating diversification. As a framework Significant institutional and governance weakness such for post-COVID-19 recovery, the PAT identifies priority as inefficient bureaucracy and persistent corruption projects for 2021–2023 that redirect Gabon’s economic has constrained entrepreneurship and private sector model toward sustainable growth. Agro­ forestry5 is development, and resulted in low private investment seen as an alternative to an oil-based economy; and and foreign direct investment (FDI), especially in the Gabon’s current initiatives to diversify are reliant non-oil sector. The creation of special economic zones on sustainable development of the timber industry. has led to an increase in investment since 2012. How­ Actions Gabon is taking favor a green economy – ever, further efforts are needed to promote private developing potential in agriculture, sustainable fishery sector development. Moreover, a historically procyclical fiscal policy (tightly linked to oil price movements) has affected the impact of business cycles. Expansionary 1  Similar to previous 5-year plans launched by the Gabonese authorities, the PSGE aims to diversify the Gabonese economy and seeks to make greater fiscal policy during oil booms translated into a high-cost use of private sector investment to achieve the development of the country. structure across the economy, including high and rigid However, unlike previous plans that mainly formulate the principal develop­ ment objectives, with the elaboration of the PAT, the PSGE was translated public sector wages and dominance of the public sector into action and projects. The PAT makes these objectives more operational and actionable and provides operational guidelines on how to achieve the in the economy; meanwhile, sharp cuts in public capital development objectives set out in the PSGE. spending during downturns undermined the accumu­ 2  See the IMF/WB Joint Paper on enhancing sustainable and inclusive growth in suggested CEMAC policies and structural reforms, 2021. lation of physical capital and limited the leverage effect 3  Gabon is nearly 90 percent covered by rainforest and holds great biodiversity. of public investment on private investment. The forest sector is part of the Congo Forest Basin continuum, the second so-called green lung on the planet after the Amazon. 4  Green growth – a growth process sensitive to environmental and climate Although Gabon’s economy has been experiencing change concerns – can be favorable for current poverty reduction when the social costs are duly integrated (Dercon 2014)1 while also serving intergener­ structural change over past decades, lack of diver- ational equity. sification keeps penalizing the economy. With the 5  The creation of the Nkok SEZ in 2010 has specialized in the trade and the processing of wood and allowed the creation of more than 5,000 direct jobs Strategic Plan for an Emerging Gabon (PSGE) in 2010, (65 percent of which are held by Gabon nationals). TOWARD MORE INCLUSIVE AND GREENER GROWTH xvii resources, clean energy, and ecotourism. Gabon’s urbanization rate in Africa, most Gabonese live in the commitment to protect its forests and reduce its capital and in the other urban centers. A huge chal­ greenhouse gas emissions is bearing fruit, becoming lenge facing the country is to attract Gabonese who the first African country to receive a payment of over are either unemployed or engaged in low-productivity USD 17 million for reducing carbon emissions by pro­ activity in the informal sector to the growing sectors in tecting its rainforest. Looking ahead, Gabon must con­ rural areas such as forestry and agriculture. Managing tinue to support economic transformation in order to to attract the young labor force to green sectors, and reduce growth volatility and over-reliance on natural strengthening Gabon’s capacity of green growth skills resource exports, by allocating factors of production to are especially important at this critical juncture in the sectors with good potential for domestic value added. country’s development. Doing so will unlock existing and new opportunities for diversification, job creation, and stronger economic Gabon’s social protection system has steadily resilience to various shocks, including those linked to evolved over the last 15 years, yet non-contributory climate change. social assistance for the poor is underfinanced, fragmented, and poorly targeted. An ambitious government process to restructure the national social Matching aspirations with protection system in 2007 resulted in a set of reforms opportunities aimed at achieving universal health insurance and improving the country’s support of economically weak Gabon’s skills mismatch has been well documented. Gabonese (GEF). However, non-contributory social Human capital is a central driver of sustainable growth assistance spending is low and focuses almost exclu­ and poverty reduction. Yet, Gabon’s Human Capital sively on health insurance subsidies. Gabon spends Index (HCI) currently stands at 46 percent. This means 0.2 percent of GDP on social assistance, compared to that a child born today will be only half as productive a UMIC average of 1.7 percent, of which 89 percent is by not having access to a comprehensive education and health care system. While basic education enroll­ allocated to fee waivers. Social assistance is also highly ment has increased significantly and the country was fragmented: Gabon’s Human Investment Strategy named the best-performing country among African (SIHG) includes 19 interventions for seven vulnerable Francophone countries by the Program for Analysis groups. This excessive fragmentation dilutes the limited of Education Systems (PASEC) 2019, the quality of the funding available and complicates implementation. country’s education system remains low when com­ While Gabon has made strides toward achieving uni­ pared to structural and aspirational peers, stifling edu­ versal health insurance, its social assistance coverage cational attainment and skill development. Due to a is limited and broadly regressive. Less than one-fifth of lack of corresponding profiles, two-thirds of job offers the poor receive health insurance subsidies and only go unfilled. Youth are particularly hard hit, with one out 6 percent receive any other type of social assistance. of three currently unemployed. Most of the spending – 63 percent for subsidized health insurance and 67 percent for other programs – goes to There is also a disconnect between people’s aspi- non-poor households. rations and available economic opportunities. The demand for jobs in far exceeds available supply. A flagship safety nets program would improve Gabon’s government is working hard to close the efficiency and have transformational impact on redu- youth skills gap; however, rapid population growth cing poverty and inequality. Despite having the complicates social and economic development and building blocks of an inclusive social protection system impedes the increased scale of investment and effort in place, Gabon trails behind in terms of safety nets, required to ensure future inclusive growth and job or non-contributory transfers targeted to the poor creation. However, as the country with the highest and vulnerable. Integrating the eight cash transfer xviii GABON: COUNTRY ECONOMIC MEMORANDUM programs into a single flagship program targeting poor There is momentum to reduce barriers to investment households would reduce administrative costs, simplify and improving competitiveness. Considerable prog­ coordination, and facilitate access for beneficiaries. If ress has been made by setting up a digital one-stop accompanied by a meaningful increase in spending shop for entrepreneurs wishing to establish a limited and coverage, the program could have transforma­ liability company or a sole proprietorship; commer­ tive impacts. Our simulations show that Gabon could cial courts to improve processing times for commercial reduce poverty by 7 percentage points and extreme litigation; agencies such as the International Institute poverty by 3 percentage points if it matched the UMIC of Mediation, Arbitration and Conciliation (IIMAC) spending average on safety nets. Investments to the and those promoting gender equity; and an ongoing scale of best-performing African UMICs could reduce reform of the 1998 Investment Charter. In addition, poverty by almost half (to 20 percent) and essentially there is potential and opportunity for improvement eradicate extreme poverty (to 3 percent). Moreover, across institutions, policies, and factors that determine consolidating benefits at the household level would the level of productivity of Gabon, as well as its attrac­ improve targeting accuracy and reduce duplication. tiveness to private investors. Targeting assistance based on economic status rather than social vulnerability, in line with the 2018 law on GEF Despite a growing contribution of the non-oil eligibility, would further maximize impacts on poverty sectors to the economy, private sector growth reduction and value for money. and investment outside of extractive industries are constrained by a business regulatory environment that is stifled by burdensome regulatory proce- Toward a more favorable business dures and obstacles and thus not conducive to pri- environment vate sector development. Despite a strong reform Gabon has long relied on the public sector to create momentum aimed at reducing barriers to establishing jobs through the distribution of oil rents. Over 50 per­ a business, further improvements remain to be done, cent of the formal labor force is actively employed and particularly when it comes to applying a risk-based working for the public sector and SOEs. The reliance approach to obtaining sectoral licensing and fully on oil has crowded out development in other sectors – digitalizing the establishment process. This, coupled limiting economic diversification, job creation, and with a lack of pro-competition regulation (such as private sector development. The dominance of SOEs legal or de facto monopolies in key sectors), tends to acts as a barrier to contestable markets and creates an limit domestic competition and market contestability. uneven playing field for private businesses. Developing Government inspections add a layer of uncertainty and strengthening the private sector serves as an efficient and transaction costs on firms, and tax payment and tool for achieving desired economic diversification – structures further create a complex business environ­ shifting from an oil-reliant economy and acting as an ment. Registering property is arduous, and firms face engine for private sector-led job creation. impediments with contractual enforcement. Many of these challenges align with those outlined in the PAT Private sector development is constrained by low 2021–2023 and must be addressed through the neces­ competitiveness, economic governance, and busi- sary regulatory and institutional adjustments. ness climate. Binding constraints are found in access­ ing finance, an inadequately educated workforce, corruption, inefficient government bureaucracy and Harnessing export markets through lack of institutional capacity, and inadequate supply of diversification infrastructure. In addition, FDI tends to concentrate in resources and extractive sectors, thus limiting spillover Gabon ranks among the most highly commodity- to the rest of the economy. dependent economies in the world. The country TOWARD MORE INCLUSIVE AND GREENER GROWTH xix benefits from abundant natural resources such as oil, a high level of informality and a services ecosystem manganese ore and other extractives and wood-related comprised mainly of micro and small firms with a lower products, which together accounted for nearly 98 per­ export propensity. In pursuing its strategic aims in ser­ cent of the country’s merchandise exports in 2021, vices, there is a need to address the high level of policy a level that has hardly shifted in recent years. Countries restrictiveness of Gabon’s regulatory regime. like Gabon with above average levels of export con­ centration on a handful of primary commodities tend The African Continental Free Trade Area (AfCFTA) to specialize in only a few products. Few of them represents a potentially important means of stim- manage to achieve and sustain trade-driven growth ulating and diversifying Gabon’s trade, and can and poverty alleviation. Therefore, there is the need to thereby contribute to industrialization, accelerated assign trade a central role in diversification efforts by economic growth, creation of new jobs, and poverty boosting the competitiveness of firms involved in the reduction. However, the simulation results produced production and trade of a greener basket of non-oil in this report show that, without sustained advances goods and services. An encouraging trend in Gabon’s in diversification and stepped-up efforts at attracting recent trade performance is the fact that the number greater injections of non-oil FDI, implementing AfCFTA of exporting firms has increased in all sectors over the will result in only modest increases in Gabon’s aggre­ 2017–2021 period. gate real income, output, and trade by 2035. Despite decades of effort directed at scaling up and facilitating regional trade and financial and Greening Gabon’s economic and monetary ties, Gabon’s trade with partners in Africa trade structure remains exceedingly low and exports are chiefly Like many resource-rich developing economies destined for countries outside Africa. The challenge afflicted by poor economic governance, decades of scaling up Gabon’s exports to the African continent of reliance on the oil sector have left the Gabonese in response to AfCFTA is evidenced by the fact that economy with a weak industrial base. Diversifying only one African country – the Republic of Congo – production away from oil sector dominance would help ranks among the country’s top 20 export destinations. generate the inclusive growth needed to create more In addition, much of Gabon’s trade with African part­ and better-quality jobs for the country’s youth. Without ners, principally in agricultural products, remains infor­ sustained job creation, itself contingent on far-reaching mal in nature and thus weakly captured by official trade structural change, the rapid increase in the Gabonese statistics. labor force could lead to an unemployment crisis with Gabon’s high tariffs impede its quest for export potentially adverse social consequences. diversification and greater insertion in continental As Gabon looks to diversify its economy, green and global value chains (GVCs). CEMAC’s common growth presents itself as an opportunity to achieve external tariff (CET) stands at 18.1 percent (simple average), little changed since 2006. Gabon maintained its goal. Eighty-eight percent of Gabon is covered the second highest tariffs in the world in 2018, a policy by ecologically diverse and dense tropical rainforest, stance to revisit (in the context of CEMAC) in deep­ which allows Gabon to set the gold standard for ening its commitment to a diversification agenda forestry in Africa and beyond by employing modern and concomitant rise in FDI inflows that would allow sustainable forestry management practices. This allows greater levels of GVC insertion. the country to preserve its unique asset while also generating significant revenue and jobs. A deep dive Despite its predominant role in the domestic analysis of the forestry sector reveals that sectoral economy, the services sector contributes virtually constraints must be lifted to achieve inclusive and sus­ nothing to Gabon’s export performance. This reflects tainable growth in green sectors, and to avoid the oil xx GABON: COUNTRY ECONOMIC MEMORANDUM sector’s history of (i) weak policy coherence and reg­ an oil-dependent economy to one that is more diver­ ulatory predictability; (ii) non-transparent business entry sified, with a lower carbon footprint and an enlarged procedures; (iii) uneven administration of certification basket of competitively priced exports of goods and requirements and incentives (including an absence of services. While scope exists to direct diversification support for research and development [R&D] in the efforts within the extractive sector, goods-related sector); and (iv) operational barriers such as poor access sectors offer significant promise in agriculture, forestry to finance for domestic firms, insufficient skilled labor, and wood-related products, and fisheries. Promising and inadequate transport infrastructure. Much of this areas in services trade include development of eco­ goes hand in hand with improving the investment tourism, aligned to Gabon’s notable biodiversity, along climate and transparency – procedures, regulations, and with a range of business and professional services institutions concurrently. A policy shift toward green associated with enhanced environmental steward­ sectors and green growth will greatly benefit Gabon ship. Gabon should also prove capable of harnessing even if long-term transition to greener production has its digital strengths, including a host of digitized gov­ challenges for a country of Gabon’s population size. ernment services for export-oriented information and communications technologies (ICT), focusing on In diversifying and greening Gabon’s non-oil export neighboring markets. This will need greater engage­ basket, several sectors offer promising potential. ment in AfCFTA and World Trade Organization (WTO) Looking ahead, Gabon needs to assign trade policy negotiations on services and digital trade. the task of securing access to larger markets and to shift incentives for a successful transition away from The policy agenda is summarized in Table 1. TABLE 1. Main policy recommendations for higher, sustainable, and inclusive growth in Gabon 1. MATCHING ASPIRATIONS WITH OPPORTUNITIES ◾ Improve primary school children’s science, technology, engineering, and mathematics (STEM) proficiency to boost the foundational skills of all Gabonese youth; and address the underlying causes of the exclusion of certain population groups from the school system to avoid compromising the overall quality of the country’s future labor force. ◾ Adapt Gabon’s educational system to the country’s employment opportunities by improving collaboration between schools and the private sector; improve the performance of technical and vocational training. ◾ Address the challenge of meeting skills requirements for green jobs by improving job career guidance for green sectors; enhance systems for identifying and anticipating skills requirements. ◾ Increase spending on non-contributory social assistance. This should be coupled with efforts to improve effectiveness and accountability (e.g., reduce administrative costs and improve budgeting and expenditure data). ◾ Promote economic inclusion and reliance through labor market interventions for youth and women. Layered on top of cash transfers, time-bound income generating activity (IGA) support interventions that can boost earnings and asset accumulation, thus providing a potential exit strategy for safety nets beneficiaries able to lift themselves out of poverty. ◾ Invest in shock-responsive delivery systems such as social registries and digital payments. Gabon is making progress on the ongoing targeting reform and database for GEF to establish a social registry. A foundational identification for development (ID) system and digital payment system would further strengthen access to basic services and improve transparency. TOWARD MORE INCLUSIVE AND GREENER GROWTH xxi TABLE 1. Main policy recommendations for higher, sustainable, and inclusive growth in Gabon (continued) 2. BUILDING A STRONGER DOMESTIC MARKET: TOWARD A MORE FAVORABLE GABONESE BUSINESS ENVIRONMENT ◾ Reform the 1998 Investment Charter and put in place a new investment law to implement the state’s commitments regarding guarantees of investor protection, good governance principles, and the simplification of procedures. ◾ Reinforce the competition regulatory framework, including modernizing the setup of the competition authority, in accordance with the Competition Regulation recently adopted by Economic Community of Central African States (ECOWAS) (Regulation No. 06-19-UEAC-639-CM-33 of April 7, 2019). ▪ Design an institutional strategy and institutional performance indicators to facilitate monitoring of enforcement activities. ◾ Revisit the current SEZ legal framework and amend and improve investment laws and incentives pertaining to SEZs, especially those that offer fiscal exemptions. ◾ Rationalize investment incentives (incl. SEZ) by defining a limited number of development objectives for the incentives and replacing current exemptions with more targeted instruments to accomplish the defined objectives. ◾ Develop and implement a comprehensive national ICT strategy for adoption of key laws, infrastructure development, training, digital entrepreneurship, and the promotion of digital application of different sectors. ◾ Create incentives that support R&D by private operators on innovative and sustainable practices and their subsequent implementation and remove tax burdens that would limit their competitiveness. 3. HARNESSING EXPORT MARKETS THROUGH DIVERSIFICATION ◾ Develop a strategic road map highlighting the role that cross-border trade and investment should play, particularly within the AfCFTA context; ensuring that the various sectoral plans guiding such efforts are fully implemented, closely monitored, and evaluated; strengthen Gabon’s trade policy formulation and implementation capacity through enhanced agency in trade governance discussions at the continental and multilateral levels. ◾ Direct priority attention to strengthening Gabon’s logistics and trade infrastructure, particularly its road network, both of which hamper the country’s export potential by inflating trade costs and lessening regional trade ties. ◾ Address, with CEMAC partners, the punitively high level of the regional grouping’s CET, which are more attuned to import substitution. CET levels impede Gabon’s export diversification and weigh on the insertion of Gabonese firms in regional, continental, and global value chains. 4. GREENING GABON’S ECONOMY AND TRADE SECTOR ◾ Streamline procedures to facilitate cross-border trade (including digitalization), particularly for exporting wood products and importing equipment and machinery for afforestation and wood-processing activities. ◾ Wean Gabon off its primary commodity dependence through focused attention by policy makers on growing and/or reviving the country’s agricultural, fishery, and manufacturing production and exports, and on generating an export response in services centered on ecotourism, environmental services, and digital trade. ◾ Sustain Gabon’s efforts in promoting sound environmental practices across all sectors with an export potential, including in leveraging trade in carbon credits linked to the preservation of rainforest and the carbon capture potential this offers. CHAPTER 1 UNDERSTANDING GABON’S GROWTH PERFORMANCE The CEMAC authorities had been trying to set in motion a process to address the root cause of the region’s vulnerability – a largely undiversified economic basis overly dependent on oil. The CEMAC Commission had put in place a large-scale strategy of CEMAC Economic and Financial Reform (PREF).6 This plan defines a set of reforms, organized around five pillars, to create the basis for more diversified, inclusive, and private sector-led growth and enhanced public sector gover- nance. As the first generation of IMF-supported programs were ending, and CEMAC countries had to cope with the social and economic fallout of the COVID-19 crisis, the urgency was to identify key reforms that would underpin second-generation programs to boost progress on the PREF and focus on addressing bottlenecks to faster and more inclusive growth. The CEM responds to this need.7 It highlights a set of priority reforms at country level that can support the objective of putting Gabon on a more sustained and inclusive path. It builds upon progress already achieved by the regional institutions and country authorities as part of the PREF. To break the curse of volatile economic growth and over-reliance on natural resource exports, Gabon should: i) improve its education system and close the skills mismatch, and improve social protection; ii) strengthen competitiveness and the business climate; and iii) harness the potential of trade to support economic transformation by allocating factors of production to sectors offering greater potential for domestic value added. Doing so would improve inclu- siveness, unlock existing and new opportunities for economic diversification, and strengthen the resilience of the Gabonese economy to various shocks, including those linked to climate change. 6  See Annex 1 for more details on the PREF and on Gabon’s implementation progress. 7  The scope of the CEM has been driven by a comprehensive diagnostic analysis (country scan, which is an integral part of the new CEM 2.0 analytical framework) and consultations with stakeholders and the WB Country Management Unit (CMU). 1 2 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 1. Growth of real GDP per capita, FIGURE 2. Volatility of GDP growth per 1990–2020 (%) capita, 1990–2020 (%) 6.0 5 4.5 5.0 4 4.0 3.5 3 3.0 2.5 2.0 2 1.0 1.5 1 0.0 0.5 –1.0 0 Gabon SSA Aspirational UMIC CEMAC Structural SSA UMIC Aspirational Gabon CEMAC Structural Source: WDI Note: Volatility is determined by using the standard deviation. 1.1    Growth history: reform, 1.1.1  Since 1990 growth has been slow setbacks, and achievements and volatile Gabon has so far not been able to translate its Gabon’s GDP per capita is 21 percent lower today resource wealth into sustained economic growth. than in 1990. Over the past three decades, the aver- Immediately after independence in the 1960s, the oil age annual growth rate of GDP per capita in Gabon was boom allowed Gabon to achieve levels of growth over in negative territory at –0.6 percent, lower than that of 9 percent and propelled the country to upper-middle the Sub-Saharan Africa (SSA) region (0.6 percent), the income status. However, in the past decades Gabon CEMAC region (3.9 percent), and UMICs (3.9 percent) did not seize the opportunity of its vast natural resource (Figure 1).9 Per capita GDP in constant USD peaked in endowment to diversify its assets and productive base 1998 at over USD 9,000 and its growth remained on through investment in physical and human capital. a declining trend thereafter (Figure 3). Gabon’s 2020 Overall, growth has been significantly sluggish and GDP per capita was 21 percent lower than in 1990, volatile (at an average of 2.4 percent), mainly reflecting reflecting average low levels of GDP growth. In addi- oil prices variations. Per capita income has fallen over tion, the volatility of GDP growth per capita in Gabon the last two decades, as aggregate income growth has was higher than in SSA and other UMICs (Figure 2). failed to keep up with population growth. Today, real Gabon’s economy experienced a challenging three GDP per capita is 20 percent below what it was in 1990. decades of volatile and erratic growth. Structural anal- This chapter begins by providing Gabon’s growth tra- ysis shows that Gabon’s growth path in the past three jectory and the historical drivers of growth. It next takes decades can be divided into four periods: 1990–2002, a focused look at economic transformation in Gabon, 2003–2008, 2009–2014, and 2015–present (Figure 4). patterns of structural change and job creation over the past three decades, and the relationship between The first sub-period (1990–2002) was marked by growth and poverty reduction. Lastly, the chapter sheds highly volatile economic growth, with oil exploitation light on the weak foundations of the current growth playing a pivotal role in Gabon’s growth trajectory. dynamics using the World Bank (WB) framework devel- After the negative oil price of 1996, underlining the fra- oped in Gill et al. (2014).8 gility and vulnerability of the Gabonese economy, the  Diversified Development: Making the Most of Natural Resources in Eurasia. 8 Washington, DC: World Bank. doi:10.1596/978-1-4648-0119-8  See Annex 1 for the selection of peers used throughout the report. 9 TOWARD MORE INCLUSIVE AND GREENER GROWTH 3 FIGURE 3. GDP per capita, 1990–2020 non-oil sector contributed positively to growth for (constant 2015 USD) the first time. This sub-period, marked by a rise in commodity prices, was characterized by accelera- 16000 tion in macroeconomic reforms to support economic 14000 recovery and provide the foundations for more diver- 12000 sified growth. Gabon’s real GDP grew by an average of 0.9 percent per year. However, Gabon’s GDP per 10000 capita growth remained in negative territory over the 8000 same period, with an average growth of –1.8 percent 6000 per year. Government-led reforms with respect to private sector development included the privatization 4000 of public companies involved in telecommunications 2000 as well as palm oil and rubber production. 0 1990 1995 2000 2005 2010 2015 2020 Growth accelerated during the third period (2009– Gabon Structural Aspirational 2014), with a sustained average annual growth of CEMAC SSA 4.9 percent, mostly driven by significant structural Source: WDI changes. This sub-period was marked by the launch of the Strategic Plan for an Emerging Gabon (PSGE) in government attempted to implement several adjust- 2010, the country’s development strategy. This followed ment plans supported by the IMF. However, the politi- the election of Ali Bongo as president, marking a turning cal and social unrest resulting from the political transition point both in the fiscal policy implemented by the gov- to a multiparty system hampered the government’s ernment and in the government’s commitment toward ability to fully implement its structural reform plan. the diversification of the economy. Over this period, Annual GDP growth averaged 1.9 percent per year Gabon’s GDP per capita growth was positive and while Gabon’s GDP per capita decreased at an average averaged 1.2 percent per year (see Annex 3 for more rate of 0.6 percent during this period. information on Gabon’s national development plans). During the second period (2003–2008), economic Exogenous shocks undermined Gabon’s growth per- growth remained modest, but the expansion of the formance in more recent years. The fall of oil prices FIGURE 4. Growth cycles, 1961–2020 GDP growth (%) 50 2010-Launch of the 2014-Shock on oil 1973-Oil boom Emerging Gabon prices followed by the 1986-Shock on oil prices and Strategic 40 implementation of an launch of IMF structural Plan (PSGE) expansionary scal adjustment plans to the 30 1994-Devaluation policy economy of the CFA Franc 2020- 20 COVID-19 10 0 –10 –20 –30 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Source: WDI 4 GABON: COUNTRY ECONOMIC MEMORANDUM in 2014 and the dual shock of low oil prices and the 1.1.2    Growth decomposition post-1990 COVID-19 pandemic in 2020 contributed to Gabon’s sluggish economic performance since 2015 (at an On the demand side, growth between 1990 and average of 2 percent) and increased vulnerabilities on 2008 has been mostly driven by consumption. Gov- the macro-fiscal side. During this period, Gabon’s GDP ernment consumption between 1990 and 2002 and growth per capita was negative, at an average rate of private consumption between 2003 and 2008 were −1.2 percent per year. Overall, fiscal adjustments were driving growth (Figures 5 and 6). The positive contri- bution of private consumption between 2003 and 2008 made at the expense of social and investment spend- mostly came from job creation (linked to the expansion ing. Despite a reduction in oil production in 2021 and of the non-oil sector), the increase of the minimum wage amid the recession caused by the COVID-19 pandemic in 2006, and the increase in the civil service workforce. in the previous year, the Gabonese economy expanded by an estimated 1.5 percent in 2021 (see Annex 4 for Since 2010, the accumulation of capital has played more detailed analysis of the impact of the COVID-19 a significant role. Gabon’s average performance from pandemic). Growth was driven by the non-oil sector, 2010 to 2020 was in line with that of the selected com- in particular the booming mining and forestry sectors. parators (Figure 6). Since 2010, the contribution of More recently, the war in Ukraine has impacted Gabon investment has been significant. Public investment, through global inflationary pressures, with an impact backed by implementation of a series of priority public on domestic food prices (especially wheat since Gabon works projects within the framework of the PSGE, is a net-food importer) (see Box 1). sharply increased after 2010 and made a significant BOX 1. Impact of the war in Ukraine on the Gabonese economy GABON’S ECONOMIC OUTLOOK IS SUBJECT TO ADVERSE EFFECTS OF THE WAR IN UKRAINE The economic impact of the Russian invasion of Ukraine will occur primarily through higher global oil prices, which will benefit Gabon’s oil revenues and boost its export earnings. Investment flows into Gabon from both countries are insignificant. Hence, the tightening of global financial conditions impacting foreign financing flows is not expected to have a significant impact in Gabon. One could expect that a sustained rise in oil prices could possibly boost oil-related FDI, while non-oil-related FDI may be postponed as global uncertainty looms. Trade disruptions: The invasion increases the headwinds in the global recovery by further disrupting supply chains, especially those between both Russia and Ukraine and the rest of the world. However, direct trade exposure is limited as Gabon’s imports from Ukraine and Russia account for 0.44 percent and 0.24 percent of its imports, respectively. High global oil prices: Higher global oil prices will benefit Gabon’s oil revenues and boost its export earnings through a significant terms of trade increase. Tax revenue will also be boosted by an improvement in oil companies’ performance. Higher global oil prices will positively impact Gabon’s trade balance as oil exports represent more than 64 percent of total exports of goods, which will more than offset the impact of higher agricultural commodity prices on Gabon’s imports. Increased inflationary pressures due to higher commodity prices: The high cost of living is a subject of growing concern in Gabon due to the expected increase in food prices as a result of the war. Higher agricultural commodity prices such as wheat will feed inflationary pressures as Gabon is a net-food importer. Some pass-through effect from higher global energy prices is also expected. Food insecurity has been on the rise in the past two years (73.3 percent of households were food insecure in November 2021) and may increase further. To contain the rise in food prices, Gabon’s president instructed the government to monitor the mechanisms put in place to stabilize oil prices, as well as bread prices and several other staple foods prices. While these mechanisms should contain the rise in inflation, they are also expected to weigh increasingly on the country’s budget. There is a risk that the government will introduce additional subsidies to contain these prices, which will also weigh on the budget. Stabilizing prices may also be needed to avoid social tensions before the presidential election next year. TOWARD MORE INCLUSIVE AND GREENER GROWTH 5 FIGURE 5. Contribution to real GDP FIGURE 6. Gabon vs. comparators: growth (pp) contribution to total GDP growth, 2010–2020 average (pp) 15.0 6.0 10.0 5.0 5.0 4.0 3.0 0.0 2.0 –5.0 1.0 0.0 –10.0 1990–2002 2003–2008 2009–2014 2015–2020 –1.0 Net Exports Changes in inventories –2.0 Stat Disc Investment Private Consumption Government Consumption –3.0 GDP at market prices Gabon Aspirational Peers Structural Peers Source: WDI (CEM country tool and MFMod). Consumption Investment Net Export Source: WDI (CEM country scan tool). contribution to economic growth starting then. Private Since 2010, the share of the oil sector in the economy investment also increased in some of the dynamic sec- has been on a declining trend, replaced by a more tors of the economy (such as agribusiness, transport, dynamic services sector (Figures 7 and 8). Lower oil and forestry). For example, the partnership signed in prices have coincided with the decline in Gabonese 2009 with the international company Olam, which covers production, resulting in a gradual decline in the oil several sectors of activity, contributed to the surge in sector’s share of growth (at an average of 15.9 percent private investment. The contribution of net exports to of GDP over the past 5 years), with services becoming growth had been volatile over the past 30 years; how- the largest driver of economic activity in Gabon (Fig- ever, it has been positive since 2015. ure 8). Services, transport, trade, and, more recently, the telecommunications branch represent the bulk of On the supply side, Gabon’s economic growth was this sector. However, services remain partly dependent mostly driven by the performance of the oil sector on public sector demand. Growth in telecommunica- until 2009, but its contribution to growth has been tions in particular recorded a strong growth over the on a declining trend over the past two decades. From past thirty years, boosted by the expansion of mobile 1990 to 2009, the oil sector accounted for 33.2 percent telephony. This sector was one of the most impacted of GDP, on average. Gabon’s oil output increased sig- by the COVID-19 pandemic, which resulted in a signif- nificantly in the 1990s before reaching its peak in 1998. icant drop in the contribution of services to growth. From 1998 to 2002, a period of strong decline in oil pro- Despite significant potential, the contribution of the duction followed, from 350,000 barrels per day (bpd) to tourism sector remains marginal. 251,000 bpd in 2002, reflecting the decline in productivity of Gabon’s main oil field, Rabi-Kounga. Thereafter, new Despite some positive developments in recent years, the agriculture sector has remained relatively small. technologies helped increase the yield of existing oil The performance of the sector has been hampered by fields and the exploration of marginal fields became structural factors, including low productivity,10 the rural profitable in a context of rising oil prices. Thanks to these efforts, oil production has stabilized at around  Gabon uses five times less fertilizer than does Uruguay despite roughly 10 10 million tons per year since then. equivalent agricultural productivity levels. 6 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 7. Gabon’s economic structure, FIGURE 8. Gabon: supply side 1990–2020 (% of GDP) decomposition (pp) 60 7.0 6.0 5.0 40 4.0 3.0 20 2.0 1.0 0.0 0 1990 2008 2020 –1.0 Agriculture, Livestock, Fishing Forestry –2.0 Crude Oil Mining –3.0 Food & Beverage Industry Other Industries 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Construction Research & Oil Services Agriculture Industry Services Transport & Communications Services Services Commerce Source: MFMOD Source: WDI exodus, the aging of the rural population, and the poor 2005. The mining sector has also increased its contri- state of roads and other transport infrastructure. Even bution to growth, averaging about 3 percent of GDP though the country benefits from a considerable avail- over the period 1980–2020.11 Supported by the sus- ability of arable land, the share of agriculture into tained global demand for steel, Gabon’s manganese GDP declined from around 15 percent of GDP in the production increased, and its share of GDP increased 1960s to 6 percent of real GDP in 2010. In line with the from 0 percent in 1981 to 1.2 percent in 2019. PSGE, the Gabonese Initiative for Achieving Agricul- The industry sector has been rising in importance, tural Outcomes with an Engaged Citizenry (GRAINE), representing almost a third of GDP in 2020. The sector launched in 2014 and ratified in 2017, and agricultural has gained in importance in the past decade, mostly projects supported over the past decade by donors reflecting rising levels of investment in infrastructure, including the French Development Agency (AFD) and heavily boosting growth of the construction sector, the African Development Bank (AfDB) helped to boost main component of industry. Consequently, its share in national agricultural production on both export crops the total output increased to almost 10 percent in 2013 and food crops for some specific products (Box 2). before declining, as the fall in oil prices in 2014 eroded Consequently, the share of the agricultural sector in Gabon’s oil revenue and led to a decline in public total output started to increase to reach 9.5 percent in investment, negatively impacting the performance of 2020. Agricultural productivity remains low compared the sector. In addition, the contribution to GDP growth to its peers, explaining the overall poor performance of the timber industry has increased in recent years of the sector (Figure 15). following the ban of the export of timber logs in The expansion of forestry and mining has contrib- 2009. This ban aimed to shift Gabon from a source of uted positively to growth. Given the strong poten- cheap raw materials to a supplier of finished products, tial of forestry, the government invested heavily in therefore contributing to the creation of additional the sector and implemented reforms that enabled its value added in this sector. The creation of the Nkok development. Thanks to these efforts alongside pri- vate investment, the contribution of forestry to GDP 11  Gabon owns about a quarter of the world’s manganese reserves as well as the largest unexploited iron field in the world; other mining resources including increased from 0 percent in 1981 to 3.5 percent in gold, phosphate, rare earths, and alluvial diamonds. TOWARD MORE INCLUSIVE AND GREENER GROWTH 7 FIGURE 9. Employment shares (% of total FIGURE 10. Value added composition employment) (% of total value added) 70 100% 60 80% 50 60% 40 40% 30 20% 20 0% 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 10 Services Industry (including construction) 0 Agriculture, forestry, and shing 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Industry Agriculture Services Source: WDI Special Economic Zone (SEZ) near Libreville in 2010 also people working in services has increased sharply since contributed to the expansion of the timber industry 2000, making the services sector the largest employer through the acceleration of investments in timber in Gabon in 2019. processing industries.12 This measure also intended to contribute to professionalizing the sector and gener- The composition of value added also shifted away ating a drop in total wood production, thereby reduc- from industry toward services. Despite a marginal ing emissions. The share of the wood industry in total contribution of agriculture to total value added, the output, which was estimated at around 1.6 percent in launch of the small-hold farming program GRAINE and 1980, increased to 2.6 percent of GDP in 2020. Agri- the dynamic activity of the forestry sector contributed business has also been a dynamic sector in recent to the broad increase in agriculture value added. Agri- years thanks to the partnership signed between Olam culture, including forestry, has also seen its produc- and Gabon in 2009 and to strategic choices made by tivity increase since 2015, although this has not been the government favoring the creation of agro-industrial accompanied by a significant rise in the employment complexes organized by sector. Agribusiness, whose share of this sector (Figures 9 and 10). Figure 11 shows importance was estimated at around 1.2 percent of that during the period 2009–2014 there was a substan- GDP in 1980, has seen its contribution increase to tial rise in the value added of the service sector, albeit 3.2 percent of GDP in 2020. gains in productivity were almost null thereafter. Despite an increased contribution of the industry sector to total value added, there has only been a marginal move- 1.1.3  Limited structural change so far ment of workers to the industry sector between 2000 and 2019, likely explained by the lack of skilled labor The composition of employment has shifted away (Figure 12) (see Chapter 2 on education and skills for from agriculture to services. Between 1990 and 2020, job creation). the share of employment in agriculture declined from 44 percent to 30 percent while the share in industry Although Gabon’s economy started experiencing remained broadly constant (Figures 9 ). The number of structural change over the past two decades, the contribution of structural change to growth has  The complex is home to 104 companies involved in milling wood into sawn 12 been limited. The shift of labor from agriculture to wood, veneers, and plywood; furniture production, moldings and builder wood, glue, and varnishing. more productive sectors is corroborated by a Shapley 8 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 11. Correlation between change FIGURE 12. Correlation between change in sectoral productivity and employment in sectoral productivity and employment shares, 2009–2014 shares, 2015–2019 4 10 3 8 productivity (in %) productivity (in %) Annual change in Annual change in 6 2 4 1 2 0 0 –2 –1.5 –1 –0.5 0 0.5 1 1.5 –2 –1.5 –1 –0.5 –2 0 0.5 1 1.5 –1 –4 –2 –6 Annual change in employment share (in %) Annual change in employment share (in %) Agriculture Industry Services Agriculture Industry Services Source: WDI (CEM tool) Note: Bubble size represents employment in 2019. decomposition.13 Intersectoral productivity shifts in moved toward more productive companies. As seen industry and services contributed positively to pro- previously, both intersectoral and within-sector labor ductivity growth, meaning the movement of workers shifts contributed to higher productivity from 2006 to across sectors contributed to productivity growth to 2014 and reflect the increase in the value added of the some extent. However, over the period from 2010 to industrial and services sector (Figures 13 and 14). This 2019, per capita value added contracted (–0.2 percent may potentially reflect improvements in firms’ man- of growth). The overall outcome for Gabon reflects agerial skills, or an upgrade of their internal capabil- that labor moved from agriculture into other activities, ities more broadly, in the context of overall political such as non-tradable sectors. Although these are more and economic stability. The positive contribution of productive than agriculture, their productivity growth intersectoral growth suggests that the reallocation of remained relatively low because of the high level of resources among firms has favored the most produc- informality (see Chapter 2 for a closer look at informality tive firms in industries and services. This suggests that in Gabon). The productivity growth stemming from the firms that contributed most to overall productivity within-sector labor shifts was negative in services and growth gained in value added, while some of the least agriculture. Overall, low employment movement to productive exited the market. higher-productivity services negatively impacted pro- Gabon’s productivity growth has been low. Pro- ductivity growth and indicates that job creation has ductivity growth has been extremely modest over the been limited. past three decades. During the sub-period 2010–2019, Consistent with the evidence of a minimal struc- capital accumulation accounted for over 90 percent of tural change in Gabon, limited resources may have GDP growth in a context of limited contribution from labor and negative total factor productivity (TFP) con- tribution to growth (Figure 17). Over the same period, 13  A methodology that decomposes growth in GDP per capita in two consecu- factor accumulation rather than productivity was also tive periods in its employment, productivity, demographic components, and structural changes to disentangle the sources of output per worker growth. the major driver of growth for Gabon’s structural and Static gains (or losses) in productivity occur due to labor shifts from below- aspirational peers. to above-average productivity level sectors (or vice versa), while dynamic gains (or losses) in productivity stem from relocation of workers from below- to above-average productivity growth sectors (or vice versa). The growth in The economy-wide lack of productivity growth value added per worker can increase for various reasons: rising labor produc- tivity within each sector (if each worker produces more), structural change is also observed in agriculture, which is critical (if workers move from low- to higher-productivity activities), demography to reducing poverty in rural areas. Given the high (if the relative share of the working age population rises), and employment (if a larger share of the working age population is employed). concentration of the poor in rural areas working in TOWARD MORE INCLUSIVE AND GREENER GROWTH 9 FIGURE 13. Gabon vs. Peers: productivity FIGURE 14. Gabon vs. Peers: aggregate change decomposition. Annual contribution decomposition of per capita value added, to per capita value added growth by major 2003–2019 (pp) sector, 2003–2019 (pp) Structural Peers Structural Peers Aspirational Peers Aspirational Peers Gabon Gabon –6 –4 –2 0 2 4 6 –50% 0% 50% 100% Within, Agriculture Within, Industry Within, Services Inter-sectoral, Agriculture Productivity Dynamic reallocation Employment rate Demographic change Participation rate Inter-sectoral, Industry Inter-sectoral, Services Source: WDI (CEM tool) FIGURE 15. Agriculture, forestry, and fishing, FIGURE 16. Agricultural TFP Index value added per worker (constant 2015 USD) (2015 = 100) 6000 150 140 5000 130 4000 120 3000 110 100 2000 90 1000 80 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 0 2003 2005 2007 2009 2011 2013 2015 2017 2019 Gabon Aspirational Peers Source: WDI Structural Peers CEMAC Source: US Department of Agriculture agriculture (see section 1.2 below on poverty), the development of GRAINE in 2017 (Box 2). These initia- productivity of the sector is especially crucial to tackle tives allowed Gabon to catch up with most of its peer poverty reduction. Data shows that agricultural pro- countries in agricultural productivity (Figures 15 and 16). ductivity has been on an upward trend in Gabon since the early 1990s, with value added rising to over Over-reliance on extractives USD 5,200 per worker (in constant 2010 USD) by 2019 Growth in Gabon was largely driven by natural from less than USD 4,000 in 1991 (Figure 15).14 Gains in resource extraction. The standard Solow decompo- agriculture productivity, especially since 2010, reflect sition shows that capital accumulation, rather than the launch of the PSGE, later complemented by the productivity improvements, was the major driver of past growth per worker (Figure 18). When consider- ing the contribution of natural resources to growth  Source: WDI. 14 using the model developed by Calderón and Cantú 10 GABON: COUNTRY ECONOMIC MEMORANDUM BOX 2. The GRAINE program Set up at end of 2014 by the government in partnership with Olam International to foster agricultural production in Gabon, GRAINE was established in a context of unfavorable agricultural development. This was mainly due to (i) a small rural population, less than 15 percent of the population; (ii) obsolete and insecure land tenure; (iii) high labor costs and agricultural jobs unattractive to young people; and (iv) lack of infrastructure networks to market and transform agricultural products. This program has essentially been based on (i) support for the creation of industrial agricultural cooperatives through the distribution of plots of land to farmers; and (ii) the establishment of specific pre-financing methods to facilitate access to equipment. GRAINE originally included both a subsistence and a cash crop component. The cash crop component helped improve the contribution of the agricultural sector in Gabon; e.g., the partnership with Olam saw palm nut production improve significantly.15 However, since 2017, GRAINE has refocused on subsistence crops, with more mixed results. Contrary to its objectives, the program failed in reducing poverty, particularly in rural areas, mainly because of its design, based on the creation of cooperatives. However, this approach had implementation issues (unequal involvement between cooperative members), and many people ended up leaving the cooperatives before the end of the project. Moreover, the distribution of an initial financial contribution to support farmers distorted incentives and attracted candidates who abandoned the plantations once the distribution of premiums ceased. FIGURE 17. Annual stock of output, FIGURE 18. Gabon vs. comparators: real capital stock, and TFP per worker, contribution to growth, (average 2010–2019, 1990–2019 (%) in pp) 10 5 5 4 0 3 –5 –10 2 –15 1 –20 1990 1997 2004 2011 2018 0 Growth of GDP per worker Growth of TFP per worker Growth of capital stock per worker –1 Source: Authors based on PWT 10.1. Capital Stock Labour TFP Real GDP Source: WDI (CEM country scan tool). (2019), natural capital becomes, by far, the major con- a result that is in line with the one Calderón and Cantú tributor to growth per worker (Figure 19). This reflects found for other SSA resource-rich countries. the importance of production in oil, manganese, and forestry in the economy. Gabon is indeed among the Gabon’s wealth accumulation has almost entirely 5 major oil producers in SSA. Meanwhile, the TFP come through capital accumulation and the intensive contribution remains negative for most sub-periods, use of natural capital. Real wealth per capita declined by 12.7 percent from 1995 to 2018 (or USD 78,543 to USD 68,567) (Figure 20). Albeit also declining in recent 15 In 2021, Gabon produced 449,748 tons of palm nuts and 107,336 tons of   palm oil. Gabon supplies Cameroon with palm oil for its industrial sector. years, natural resources, especially non-renewable, were TOWARD MORE INCLUSIVE AND GREENER GROWTH 11 FIGURE 19. Decomposition of growth per 2000s. Human capital per capita decreased during worker (%) – standard Solow including the same years, which reflects the fact that Gabon did natural capital not manage to compensate for the depletion of its 25 natural resources to strengthen its human capital, which 20 is key to boosting productivity and increase future 15 wealth. However, Gabon’s aspirational peers such as 10 Mauritius, Uruguay, and Costa Rica appear to have been 5 0 more successful in doing so, with the highest share of –5 their wealth represented by human capital (Figure 22). –10 –15 –20 1.2    The fragile link between growth –25 1995–2002 2003–2008 2009–2014 2015–2020 and poverty reduction Physical capital Human capital Natural ressource capital Total Factor Productivity 1.2.1  Poverty trends and international Output per labor comparison Source: PWT 10.1, the Changing Wealth of Nations (2021), and authors’ calculations. Slow and volatile economic growth translated into slow poverty reduction in Gabon between 2005 the major driver of wealth accumulation over the past and 2017,17 with progress taking place mostly in three decades, representing almost half of the country’s urban areas. Figure 23 shows that since 2005, poverty total wealth.16 Gabon also saw a deterioration of renew- has been reduced by 8.4 percentage points, falling able natural capital per capita caused by the loss of from 41.8 percent in 2005 to 33.4 percent in 2017. It renewable assets (Figure 21) – mostly in forestry in the fell across the board but faster in urban areas driven by FIGURE 20. Per capita wealth (constant FIGURE 21. Natural capital per capita 2018 USD) (constant 2018 USD) 120,000 60,000 100,000 80,000 40,000 60,000 40,000 20,000 20,000 0 0 1995 2000 2005 2010 2015 2018 –20,000 Minerals Fossil fuel energy 1995 2000 2005 2010 2015 2018 Pastureland Cropland Net foreign assets Human capital Fisheries Mangroves Natural capital - non Natural capital - renewable Protected areas Forests, ecosystem services renewable Forests, timber Produced capital 17  The analysis focuses on 2005 and 2017 because of monetary poverty data 16  Gabon experienced a large decline in wealth per capita in 2015 resulting available. Gabon had two Living Standards Measurement Study (LSMS) from the fall in fossil fuel prices after 2014. household surveys completed, in 2005 (EGEP I) and 2017 (EGEP II). 12 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 22. Gabon and peers: share of wealth that between 2005 and 2017 the poverty incidence gap in 2018 (% of total wealth) between rural and urban area remains.19 1.2 Even though Gabon’s poverty rate is below the 1 SSA average and is the lowest in the CEMAC region, 0.8 the country is not performing as well as expected 0.6 in poverty reduction compared to its peers. Con- 0.4 sidering the extreme poverty line of USD 1.90 per 0.2 capita per day (at the 2011 PPP exchange rate), 0 Gabon’s poverty rate in 2017 is well below the SSA –0.2 aggregate (41.2 percent), low income countries on y ca an a an lia us (LICs) (46.8 percent), and its regional peers such as ua an Ri go i m ist ab rit ug w O en a au on G ts st Ur Bo m M M Co Cameroon, Chad, and Congo (Table 2). Furthermore, rk Tu Produced capital Human capital compared to UMICs and aspirational peers like Natural capital - renewable Natural capital - nonrenewable Mauritius, Gabon is doing less well. Gabon’s poverty Net foreign assets rate is almost 2 percentage points and 3.2 percentage Source: CWON 2021. points higher, respectively. In addition, in comparison with peers, Gabon recorded the lowest average annu- secondary urban areas18 (with a decrease of 12.3 per- alized poverty reduction. centage points compared to a drop of around 5 per- centage points in Libreville and Port-Gentil). However, Gabon seems to have a relatively strong relation- in rural areas the poverty incidence fell only slightly ship between poverty reduction and GDP growth, from about 65.7 percent to 59.5 percent in 12 years, so suggesting signs of pro-poor growth since 2005. FIGURE 23. Poverty indicators in 2005 and 2017 by area of residence 70.0 65.7 59.5 60.0 50.0 41.8 40.0 34.3 33.4 29.4 30.0 25.2 26.1 20.0 14.6 14.8 12.0 13.5 11.3 9.0 7.1 10.0 5.5 5.3 3.9 0.9 1.3 0.0 2005 2017 2005 2017 Change 2005 2017 Change –10.0 Change –3.0 –3.4 –1.6 –1.8 –4.9 –6.2 –8.4 –20.0 Headcount Poverty gap Squared poverty gap Urbain Rural Gabon Source: EGEP 2005, EGEP 2017, WB Open Data Catalog (March 2022), and authors’ calculations. 19  Other monetary poverty measures show the same pattern of change as the poverty incidence. The poverty gap, which measures the average shortfall in consumption of those who live below the poverty line, also decreased by 3.3 percentage points. Both the poverty gap and severity have increased over the period in rural areas, suggesting that, even though poverty decreased in  Urban area except Libreville and Port-Gentil. 18 2017 compared to 2005, people fell more deeply into poverty in 2017. TOWARD MORE INCLUSIVE AND GREENER GROWTH 13 TABLE 2. Performance in terms of poverty reduction in Gabon and selected countries AVERAGE POVERTY POVERTY ANNUAL GROWTH HEADCOUNT HEADCOUNT POVERTY ELASTICITY COUNTRY YEAR 1 YEAR 2 YEAR 1 YEAR 2 REDUCTION TO POVERTY Botswana 2009 2015 17.2 14.5 −0.5 −0.6 Cameroon 2007 2014 31.8 26.0 −0.8 −0.6 Congo 2005 2011 55.1 39.6 −2.6 −0.8 Gabon 2005 2017 8.0 3.4 20.4 21.6 Mauritius 2012 2017 0.6 0.2 −0.1 −3.5 Chad 2003 2011 60.0 38.1 −2.7 −0.5 SSA 2005 2017 51.9 41.2 −0.9 −0.4 LIC 2005 2017 54.5 46.8 −0.6 −0.3 LMIC 2005 2017 25 10.8 −1.2 −0.8 UMIC 2005 2017 13.4 1.5 −1.0 −1.2 The growth elasticity of poverty20 estimated at 1.6 sug- to a high related mortality rate – 21 per 100,000 people22 – gests that every 1 percent increase in GDP per year can which is below averages observed in SSA but remains decrease the poverty rate21 by 1.6 percent (Table 2). above both LMIC and UMIC averages. In the same This implies that Gabon may have the potential to reduce time frame, multidimensional poverty decreased, poverty four times more than the SSA average (0.4). revealing progress in some aspects of well-being. (See However, the aspirational peer Mauritius has more Annex 5 on Gabon’s urbanization process and regional than double Gabon’s elasticity of poverty reduction to disparities). GDP growth (3.5 for Mauritius), meaning that for 1 per- cent of GDP growth, Mauritius could reduce poverty by twice as much as Gabon. The country’s poverty- 1.2.2  Growth and shared prosperity reducing effect of growth was observed through the Inequality in Gabon slightly declined between 2005 consumption of the bottom 40 percent of the income and 2017, indicating a small improvement in the distribution, although the participation of the poor in distribution of resources. The Gini index23 fell from productive sectors, which would enable strong bene- fits from economic activity, remains a challenge. 39 in 2005 to 38 in 2017, indicating that Gabon made some progress in reducing inequality (Figure 25). This Since 2000, Gabon has made significant progress decrease hides a large disparity among geographic in improving access to basic services to the popula- regions and household characteristics. For example, tion, yet the country is performing below its poten- in urban areas, the Gini declined by 2 points suggest- tial. Gabon’s provision of basic services is better than ing that economic growth also contributed positively the SSA average (Figure 24). If the country compares to the substantial poverty reduction observed during favorably with LMICs in terms of access to electricity that period. However, data from the 2017 Afrobarometer and basic drinking water, access to sanitation is signifi- perception survey shows that over 75 percent of cantly worse, scoring almost 20 percentage points lower Gabonese feel they are being treated unequally, and in 2018. Limited access to improved sanitation and to a large share report serious gaps in basic services.24 safe water sources in some of Gabon’s regions has led 22  WB, Gabon Poverty Assessment 2020. 20 This elasticity is computed using the GDP growth: percentage change in   23  The Gini index is generally not heavily affected by the upper tail of the dis- poverty per 1 percentage change in GDP. tribution (Cowell and Flachaire 2002). 21  Using the international poverty line of USD 1.9. 24  WB, Gabon Poverty Assessment, 2020. 14 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 24. Access to basic services in Gabon and comparators (% of the population) A - Access to electricity B - Access to basic water 120 120 100 100 80 80 60 60 40 40 20 20 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Gabon LIC SSA Gabon LIC SSA UMIC LMIC UMIC LMIC C - Access to basic sanitation 100 90 80 70 60 50 40 30 20 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Gabon LIC SSA UMIC LMIC Source: WB Open Data Catalog, March 2022, and authors’ calculations. This is explained by the fact that the reduction in the period, inequality experienced in female-led house- poverty headcount was mostly driven by the increase holds remained unchanged. In a labor market dominated in mean household consumption (growth effect) with by self-employment and unqualified employment, which limited distribution effects, as inequality seems to have represents over half of total employment, women tend only marginally declined (Figure 26). to have lower employment opportunities and status. For example, 43 percent of those self-employed or The positive picture of relatively limited inequality working as household helpers are female compared in consumption distribution may hide persisting to 26 percent of men, resulting in female-headed inequalities between groups. In terms of regional households being more likely to be poor.25 Further- heterogeneity, inequality measured by the Gini coeffi­ more, education mobility is lower among the poor and cient declined faster in the Eastern region (from 38 to 33) among women and intergenerational mobility across and in Port-Gentil (from 36 to 34) between 2005 and economic sectors is also limited, perpetuating vulner- 2017 (Figure 25). In addition, over the same period, ability and gender inequality in future generations. households led by men were able to benefit from growth more than those led by women. During this  Ibid. 25 TOWARD MORE INCLUSIVE AND GREENER GROWTH 15 FIGURE 25. Gini coefficient by geographic FIGURE 26. Growth and redistribution effect area and gender of the household head of poverty reduction (%) (scale 1–10) 0 0.0 42 –0.6 –0.2 40 42 –1.4 39 38 38 36 37 36 38 3736 39 37 38 38 36 34 36 34 37 33 –5 –4.8 –4.8 –6.3 –6.0 –7.8 –10 –8.4 –10.3 –11.7 –15 Gabon Libreville/Port Gentil Other Urban Rural l n l e til on on on n e e na ra ba ill io al al en Ru gi gi gi ev io M m eg Ur G re re re Change in Poverty Growth Redistribution at Fe br tr rt- N th h n Li es Po ut er or W So st N Ea 2005 2017 Change Source: EGEP 2005, EGEP 2017, WB open data catalogue March 2022, and authors’ calculations. Considering that the family background of poor house- 1.2.3  The impact of the COVID-19 holds contributes to the intergenerational persistence pandemic on poverty of poverty and inequality, poor female-headed house- holds are more likely to produce the same genera- The COVID-19 pandemic has exacerbated poverty, tional pattern. with a poverty rate measured at USD 1.90 per capita per day (at the 2011 PPP exchange rate) estimated Gabon is making progress in fulfilling the shared at 34.1 percent in 2021 and projected to slightly prosperity goal, albeit this progress is only visible decrease to 33.9  percent in 2022–above the in urban areas. The annualized growth rate of Gabon’s 32.4 percent observed in 2019. Since the onset of bottom 40 percent of the population was 1.2 percent for the pandemic, the Gabonese economy has suffered the period between 2005 and 2017 while the annualized from multiple stages of stringent measures imposed growth rate of the consumption of the total population by the government to mitigate the spread of the virus. grew at a rate of 0.9 percent (Figure 27). This result sug- According to high frequency phone survey results, the gests a pro-poor pattern of consumption growth from first wave (March to August 2020) of the pandemic 2005–2017 in Gabon. A breakdown of the evolution of has had the biggest impact on the economy and shared prosperity26 across areas of residence shows that the evolution of shared prosperity in 2005 and 2017 was FIGURE 27. Shared prosperity indicators urban. Over the period, the shared prosperity premium by area of residence was 0.5 in an urban area compared to 0.2 nationwide. 1.5 Unfortunately, for rural households the shared prosperity 1.2 1.2 was negative, –0.1 percent, meaning that the shared 1.0 0.9 0.7 prosperity observed nationally is driven by urban areas.27 0.5 0.5 0.6 0.5 0.2 26 Shared prosperity is meant to complement poverty concerns in that it   emphasizes simultaneous promotion of growth and equity. The criterion 0.0 focuses on the economic welfare of the poorest 40 percent of the population Urban Rural 0.0 Total (the bottom 40). This premium is the difference between the growth rate of mean real per capita income of the bottom 40 and the growth rate of mean –0.5 real per capita income for the entire population. Average annual per capita consumption growth of the bottom 40% 27 Moreover, the growth incidence curves (GICs), which display annualized   consumption growth over the entire distribution of the population, also reveal Average annual per capita consumption growth of the total that economic growth in Gabon has been pro-poor in urban areas from 2005 population to 2017 and mostly urban at other times (see figures in Annex 6). Furthermore, Shared prosperity premium most of the gain in shared prosperity comes from the eastern region (1.4 for the shared prosperity premium) and the western region (0.4). Source: WB open data catalogue (March 2022), and authors’ calculations 16 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 28. Job stoppage after pandemic FIGURE 29. Work stoppage by employment type 25.9 6 2.42 6.87 11 11.43 Second wave 10 30.98 19.95 (delta variant of Covid-19) 16 46 35.7 14.03 11.4 11.2 9.67 8 78 6.88 73.18 66.6 48 52.87 May 20 Jul 20 Sep 20 Nov 20 Apr 21 Jul 21 Sept 21 Nov 21 Nov 20 Apr 21 Jul 21 Sept 21 Nov 21 Wage employment Own account Other FIGURE 30. Proportion of households with FIGURE 31. Difficulty accessing medical care children engaged in education activities service during the 2020 lockdown during the 2020 lockdown 72.5 25.69 51.8 51.1 48.3 48.9 27.5 74.31 Urban Rural Total None Yes Access to medical care No access to medical care Source: High frequency phone surveys results, March-August 2020. households, with 25.9 percent of households expe- children nationwide reported not having any learning riencing job losses in May 2020 (Figures 28 and 29). activity during the lockdown and subsequent months The commerce, service, and education sectors were until the reopening of schools (Figure 30). The pan- the most affected by the pandemic, especially self- demic may also have led to an increase in food employed workers. The negative effect of the pandemic insecurity,28 which is more pronounced in urban areas. on employment reduced households’ income across The ongoing war in Ukraine may also be amplifying the board, with income from domestic transfers, food insecurity with rising food prices. There was also property, investments and savings, and agriculture, a sharp reduction in households’ ability to afford med- livestock, and fishing being the most affected. icines during the second wave and lockdown, followed by a gradual recovery (Figure 31). The pandemic has also had a significant impact on human capital that could potentially shape future generations. One of the first measures to prevent the 28 Food insecurity is measured by the composite indicator based on Food   spread of the virus in Gabon was to close all schools Insecurity Experience Survey (FIES) module questions, which record self- experience episodes of food shortage by at least one household member and universities across the country. As a result, half of over the past 30 days before the survey. TOWARD MORE INCLUSIVE AND GREENER GROWTH 17 1.3   Weak foundations for higher information they need to hold governments account- and more inclusive growth and able (see section 1.3.3.). structural transformation Oil revenue resources have historically financed a This section focuses on the most binding constraints high-cost structure across the Gabonese economy, to economic growth in Gabon based on the framework with spending focused on public sector wages, trans- developed in the World Bank’s Diversified Develop- fers, and subsidies. Comparing the period before ment Report (WB2014) that proposes to decompose (2006–2014) and after (2014–2020), the oil price drop a nation’s wealth into three types of assets: (i) natural shows that the collapse of oil revenues marked a sig- resources, (ii) built capital combining human and physical nificant shift in public spending (Figure 33). Indeed, capital, and (iii) national institutions.29 before 2014, capital expenditures were significant (at just over 30 percent of total expenditure), but since then these have been cut by half, with most govern- 1.3.1  Better managing resource rents ment spending absorbed by current expenditures Gabon’s procyclical fiscal policy (especially wages, which grew from an average of Gabon’s fiscal policies magnified rather than reduced 25 percent to 40 percent of total expenditure after the impact of business cycles in the past decades. 2014). This evolution is in line with the findings in the Evidence points to the procyclicality of fiscal policy in literature, which document the low likelihood of Gabon, which is tightly linked to the dependency on public current spending contraction even in a context natural resource wealth and the associated volatility of of lower revenues when they are extremely rigid and oil revenues (Box 3). Procyclical fiscal policy hampers political resistance is high.31 Such a significant shift in long-term growth because it often results in sharp the government’s spending pattern reflects spending cuts in public spending during downturns (capital rigidity in regard to public payroll, and a fluctuation of spending in particular) as well as limited resources public investment aligned with oil revenues. for social sectors, undermining the accumulation, respec- Although Gabon’s public debt remains sustainable, tively, of physical and human capital (see section 1.3.2.) vulnerabilities are high. Despite reaching historic In 2016, a new regional reference fiscal rule was highs in 2020 at 77.4 percent of GDP, public debt adopted in CEMAC.30 The reference fiscal balance is remains sustainable according to the latest Debt Sus- a welcome step (especially in the current context of tainability Analysis performed in July 2021,32 although high oil prices associated with the war in Ukraine) as vulnerabilities are high. Current skyrocketing energy it prevents governments from increasing spending prices33 will boost Gabon’s oil revenue, and public immediately during years of high oil prices, and could therefore lead to less procyclical fiscal policies in the debt is projected to stay on a downward trend to reach future. Notwithstanding, the efficacy of the new fiscal 62 percent of GDP at the end of 2022.34 In addition, rule would be dependent on improving the quality the change in global demand preferences affected by of institutions, including improving the transparency efforts at decarbonization poses another challenge in the implementation of the budget and fiscal rule, for fiscal sustainability. Looking ahead, Gabon’s global providing lawmakers, markets, and citizens with the demand for oil may be affected by the change in con- sumer spending habits as the world decarbonizes and relies less on fossil fuels. 29  Source: Diversified Development: Making the Most of Natural Resources in Eurasia. Washington, DC: World Bank. doi:10.1596/978-1-4648-0119-8 30  The 2016 new reference fiscal criterion was adopted under the New Conver- gence Rules. The new reference fiscal balance (with a floor of –1.5 percent 31  Herrera et al. 2019. of GDP) can be defined as the overall non-oil balance plus 80 percent of the 32  IMF 2021. average oil revenue-to-GDP ratio over the 3 previous years. Therefore, it is 33  The price of crude oil rose to over USD 100/barrel in April 2022 and is expected fully disconnected from the current year’s oil revenue, and thus does not allow to average USD 100 in 2022 (WB Pink Sheet). governments to increase spending immediately when oil revenue increases. 34  WB Macro and Poverty Outlook (MPO) Spring Meetings 2022. 18 GABON: COUNTRY ECONOMIC MEMORANDUM BOX 3. Evidence points to the procyclicality of fiscal policy in Gabon Fiscal policy in Gabon and in the CEMAC region has been historically procyclical, undermining the capacity to create fiscal buffers. Using 1990–2020 data, the World Bank (2022) finds strong evidence that the fiscal policy response in the CEMAC region has been more procyclical than in other SSA countries. Since CEMAC economies are relatively undiversified, highly dependent on commodity exports and oil revenue, and suffer from significant institutional weakness, the tendency for fiscal policies in the region to be procyclical has been high. Consistent with the literature, the WB (2022) finds that an improvement in the quality of institutions (e.g., clear and enforceable fiscal rules and transparency) could considerably decrease procyclicality. Gabon follows the same trend of the region, with a history of large swings in fiscal policy, mostly procyclical, largely influenced by oil price shifts (Figure 32). From the early 2000s and up to the oil price drop in 2014, Gabon benefited from soaring oil prices, which marked a period of ratcheting up public expenditure. The favorable oil conditions and the lack of countercyclical fiscal rules were translated into a long period of expansionary fiscal policy, which gave rise to a high-cost structure across the economy, with high public sector wages and excessive dominance of the public sector. With the end of the oil boom decades, the country improved its macroeconomic management when oil prices fell in 2014 and GDP growth started to slow down. The successive oil bust period and lack of fiscal buffers from the oil boom decades forced the country into many years of fiscal consolidation, which were repeatedly undermined by tax revenue shortfalls and expenditure overruns. The decreasing oil revenues were accompanied by widening fiscal and current account deficits, along with rising debt stocks, and accumulation of domestic and external arrears. In 2020, amid the sharp deterioration of economic activity due to COVID-19, Gabon resorted temporarily to countercyclical fiscal policy to help mitigate the initial economic fallout of the pandemic. Increased public spending, however, was only possible thanks to large international support. FIGURE 32. Gabon - real GDP, oil prices, and overall fiscal deficit (1990–2020) 15.0 120 10.0 100 5.0 80 In percentage In US$/BB 0.0 60 –5.0 40 –10.0 20 –15.0 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 General government net lending/borrowing (in % of GDP) (left) Real GDP growth (in %) (left) Crude Oil Price (US$/bb) (right) Source: EIA and WEO. Gabon’s management of oil revenue decades.35 The FSRG was to be funded until 2021 Some initiatives have been undertaken recently to through a 10 percent levy on annual oil revenues and better manage oil revenues. In 1998, Gabon created half of all additional budgetary revenues above the the Sovereign Fund of the Gabonese Republic (FSRG), budget law target, but only in 2002 was a substantial to be financed by oil revenues, but it has received  The Fund for Future Generations (FFG) was created in 1998 and renamed 35 only a small part of promised resources over the past FSRG in 2012. TOWARD MORE INCLUSIVE AND GREENER GROWTH 19 FIGURE 33. Current and capital spending improving the governance, transparency, an account- (% of total expenditures 2006–2020) ability of the use of oil revenues. Despite having been excluded from the EITI in 2013 for non-compliance,37 90 80 Gabon reintegrated the EITI in October 2021 with 70 the commitment to publish regular information on 60 revenues from oil and mining activities. Some spe- 50 cific achievements ahead of the publication of the first 40 30 post-reintegration EITI report (expected by April 2023 20 at the latest), will be key to demonstrating the govern- 10 ment’s actual commitment to more transparency in the 0 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 extractive sector. In particular, completion of the diag- 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 nostic of Gabon’s extractive industries, and prepara- Current expenditure Wages and Salaries tion of a diagnostic study on transparency and citizen Goods and Services Interest payments Transfers & subsidies Capital expenditure control mechanisms for contract granting, would sig- Source: National authorities. nal that progress is on track. Expectations are that the EITI membership, which implies reporting of all reve- nue streams (including SOE transactions); exploration/ deposit made, 4 years after the creation of the Fund, production/export data from the mining, oil, and gas totaling 2 percent of GDP. Moreover, no cyclical use of sectors; and information such as revenue allocation these amounts was set and, overall, deposits to the fund and socioeconomic contributions by companies, will were not made on a regular basis.36 The Gabonese Fund generate several sector reforms. for Strategic Investments (FGIS), which has a develop- Because of poor oil revenue management, adjusted ment purpose (rather than a stabilization or savings net savings (ANS) were negative for two decades, mandate), was created in 2012 to manage FSRG funds. but in the past decade the trend has been reversed. These are meant to be distributed among priority sec- High national savings typically finance high investment tors that are in alignment with the government’s devel- in a sustained manner. Whether total ANS are adequate opment plan. However, a FGIS audit carried out in 2021 depends on whether they exceed the depreciation found substantial weaknesses in governance, organi- of physical capital and the depletion of nonrenewable zation, and investment management. The government resources. Only then does investment from these savings has committed to improving the management of the avoid a reduction in total economic endowment of FGIS, adhering to the Association of Sovereign Funds, natural, human, and physical capital.38 From 1990 to i.e., following activity reports on the association web- 2008, Gabon’s ANS in percent of GNI were negative site, establishing an entity in charge of monitoring SOEs and the depletion of natural resources has been signif- (including the FGIS), and increasing efforts to separate icant (Figures 34 and 35). On the other hand, invest- the FGIS accounts from those of the state. ment in human capital (measured through government Gabon reintegrated the Extractive Industries Trans- spending in education) was negligible, which suggests parency Initiative (EITI) in 2021 and committed to that the country has been exhausting its natural resources 36  The Provision for Diversified Investments (PID) is dedicated to economic deve- lopment projects, and the Provision for Investments in Hydrocarbons (PIH) esta- 37  Gabon first became member of the EITI in 2007. blishes the share of this fund/provision financing of investments related to the 38  ANS measures the true rate of saving in an economy by taking gross national development of the oil and gas sector. Recently in 2021, the funding framework savings adjusted for investments in human capital and net of depletion of natural was replaced by other sources of financing, including a portion of the dividends resources (including fossil fuels, minerals, and timber) and damages caused by pol- received from the shares held by the state in private companies and 25 percent lution. Source: Diversified Development: Making the Most of Natural Resources of the annual PID-PIH provision made up by oil companies. in Eurasia. Washington, DC: World Bank. doi:10.1596/978-1-4648-0119-8 20 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 34. Adjusted net savings (ANS), FIGURE 35. Gabon: Adjusted net savings including particulate emission damage subcomponents (ANS) (% of GNI) (% of GNI) 100 30 25 50 20 15 0 10 5 –50 0 –5 –100 1990–2002 2003–2008 2009–2016 –10 CO2 Consumption of Fixed Capital na ca y lia n on us ua oo Education Gross savings Ri go i wa ab rit ug er a au on G ts st m Ur Natural resources dep. Particulate emission damage Bo M M Co Ca Adjusted net savings 1990–2008 2009–2016 Source: WDI. Note: Data is not available for Gabon after 2016. without converting its natural resource rents into pro- Physical capital ductive capital, thereby not adding to its wealth (Fig- Investment, including publicly financed, has been ure 35). However, there was a reversal and, from 2009 volatile. Gross fixed capital formation (GFCF) repre- to 2016, ANS were positive, coming from lower deple- sented on average 25.3 percent of GDP over the period tion of natural resources. 1990–2020, above the trend observed for SSA (22 per- cent) but below that of UMICs (29.1 percent) (Fig- ures 36 and 37). Public investment grew continuously 1.3.2  Built capital from 2009 to 2013, averaging 10.3 percent of GDP, Gabon has failed to use its vast natural resource while it averaged 6.6 percent growth from 1990 to endowment to increase physical and human capital. 2020. Since 2010 and the implementation of the PSGE FIGURE 36. Public vs. private Investment FIGURE 37. Investment and GDP per capita: (% of GDP) Gabon and peers 60.0 14,0 Gross Fixed Capital Formation MNG 12,0 50.0 URY 10,0 CAR (% of GDP) 8,0 TKM 40.0 6,0 COG TCD 30.0 4,0 CRI OMN BWA 2,0 CMR 20.0 EQG MUS 0,0 0 2000 4000 6000 8000 10000 12000 14000 10.0 GDP per capita, PPP (constant 2017 international $) GAB Aspirational Structural CEMAC 0.0 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 Source: WDI. Public investment Private investment Source: National authorities, WDI. TOWARD MORE INCLUSIVE AND GREENER GROWTH 21 that includes a pillar on the development of infrastruc- the first half of 2014 combined with some efforts of eco- ture, the government decided to finance a large part nomic liberalization boosted foreign investment, with of public investment with the country’s own resources a peak at USD 1.048 billion in 2014. The share of FDI in addition to recourse to public debt. As a result, public to GDP is significantly greater in Gabon than in SSA investment was used as an adjustment variable in the and UMIC countries. Similarly, Gabon net inflows of event of deceleration of growth, such as the period FDI are higher than for its aspirational and structural following the 2014 oil price shock. In 2017, it reached peers. However, FDI, while being much greater than in its lowest level since 1990, at 1.7 percent of GDP. any other SSA country, has remained concentrated in the extractive sector and has had little impact on the Private investment is being crowded out by gov- rest of the economy; furthermore, the extractive sector ernment. The results of the latest Public Investment employs a highly qualified but limited workforce, thus Management Assessment (PIMA) carried out in 2019 with limited effect on the labor market. At the same showed that the correlation between public invest- time, recent significant foreign investment in agricul- ment and private investment is negative (coefficient ture (cash crops), energy, and the wood industry are of –0.23), reflecting the lack of leverage effect of supporting the government’s efforts toward economic public investment on private investment. Since 2010, diversification (see section 3.5.1 for a closer look at FDI). the phases of increased public investment were almost systematically accompanied by a decline in private While infrastructure, connectivity, and logistics are investment. Conversely, when public investment fell crucial to enable economic diversification, Gabon sharply in 2014, private investment increased from 14.5 faces a critical infrastructure gap. Poor and inade- to 18.4 percent of GDP during that same year. quate infrastructure is a key barrier to private sector-led growth and in expanding economic opportunities for Structural deficiencies in planning procedures and households. The government started to address the institutional arrangements hamper public invest- infrastructure gap through the gradual implementa- ment efficiency. The results of the latest PIMA reveal structural failures in organization and planning proce- tion of the PSGE, but efforts need to continue as reali- dures due in particular to the confusion between the zation so far remains insufficient and many bottlenecks strategic and operational roles in public investment persist. Progress has been very limited with the nota- management. A multiplicity of actors develop their own ble exception of access to water and health infrastruc- projects in an uncoordinated way. In addition, planning ture in recent years. Users’ perception of the quality tools are non-existent, dispersed, or ineffective, and of overall infrastructure is better in Gabon than in its the definition of projects and their financing methods structural comparators but has tended to deteriorate is not based in practice on objective criteria relying on over the recent period.39 prior studies. These planning failures directly affect the Gabon has a large gap in electricity infrastructure. allocation of resources and the execution of projects. In Gabon’s Enterprise Surveys, electricity was mentioned Indeed, in the absence of rigorous planning, finance as the first obstacle to private sector activity (Figure 38). law on budget allocations to investment is incomplete In 2017, the Global Competitiveness Index (GCI) ranked and subjective. the quality of electricity supplied in Gabon 114th out Gabon’s abundant natural resources and socio­ of 138 countries. The country is confronted with major political stability helped the country attract signif- shutdowns and power cuts that stem from: (i) a low icant FDI, albeit mostly in the extractive sector. Gabon’s capacity to attract FDI has improved since 2000 as illustrated by the country’s net inflows increase 39 In the infrastructure quality perception index developed by the World   from 1.4 percent of GDP in 1981 to more than 9 per- Economic Forum (WEF), Gabon was ranked 119th in 2016 (latest data point available), above its structural comparators but below the SSA average, and cent in 2019. The international surge of oil prices in ranked below its rank of 116th in 2015. 22 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 38. Main obstacles to business 30 25 20 15 10 5 0 nc e nd its er ns rc e ns n or n s n ty la rd tio tio te m tio tio tio na fo ci r ct so ra o pe a k a tri ul ul p ra ta or se st di rru x ec ist or to s d g g Ta al d re w re ce an El sp Co in ss rm an d r m Ac e e an e at ng t bo fo cc ef ad ad si Tr uc in A th tr La en x e d ed Ta e, th ic n sl im sa ly of es Cr m te es in to ua tic s s q Bu Cu de ac a Pr In Gabon Sub-Saharan Africa Source: Enterprise Surveys, WB 2009. level of spare capacity, indicating that the country Human capital generates just enough electrical capacity and faces In the first decades following its independence, shortages when demand spikes; and (ii) fragmentation Gabon’s economic growth was translated into sig- of the network, preventing compensatory supply from nificant progress in human development and living one region to another and inducing significant price conditions. Since 1976, revenues generated by oil differences between regions. Given Gabon’s current enabled the country to invest heavily in social services generation capacity, an electrical supply gap could and infrastructure. As a result, in the early 1990s, basic potentially arise. Government efforts to increase welfare indicators had reached UMIC levels and were generation capacity are ongoing, with the planned much higher than the averages for SSA and LICs. construction of four new dams – and potentially a fifth However, over the past decade, progress in human one – under public and private partnerships (PPPs) development started to erode. The dependence on with Chinese and French investors. oil revenues and the lack of adequate countercyclical Gabon made tremendous progress in the devel- policies and mechanisms to safeguard economic and opment of information and communications tech- financial gains led to wide fluctuations in both reve- nology (ICT) in recent years. Gabon possesses today nues and expenditures, with a negative impact on the largest digital capacity of the region – ranked 6th resource allocation for human development (see chap- among African countries by the International Tele- ter 2 on education, skills, and social protection). As seen communications Union in 2017 – and is way ahead of earlier, Gabon’s share of human capital in total wealth its neighbors in terms of equipment, retail prices for dropped from 32 percent in 1995 to 26 percent in internet, and mobile internet penetration. In January 2018 and Gabon’s human capital per capita decreased 2020, 51.4 percent of the population were using inter- during the same years. net against 28.6 percent in SSA.40 Despite significant progress in human capital devel- opment, Gabon’s still lags behind its peers. Human  Source: International Telecommunications Unit. 40 capital is a vital ingredient for economic growth as it TOWARD MORE INCLUSIVE AND GREENER GROWTH 23 is the ultimate source of innovation and productivity FIGURE 39. Human Capital Index (HCI) 2020 and one of the key mechanisms for transferring wealth (1 = low; 6 = high) across generations. The Human Capital Index (HCI) 0.7 measures the amount of human capital a child born 0.6 today can expect to attain by age 18, and Gabon’s HCI 0.5 is below the UMIC average and its peers (Figure 39). 0.4 Among the HCI categories, Gabon performs relatively well in harmonized test scores but lags when it comes 0.3 to learning-adjusted years of school. Overall, a child 0.2 born in Gabon today will at age 18 be only 46 percent 0.1 as productive as child that enjoyed complete educa- 0 Gabon Aspirational Structural CEMAC SSA UMIC tion and full health. In addition, in the aftermath of the Peers Peers COVID-19 pandemic and to be prepared for poten- Source: HCI 2020. tial future health and sanitary crises, it is important for Gabon to promote its health security agenda and enable the building of resilience (Box 4). BOX 4. Health Security vs. Human Capital: a resilience building case When an epidemic occurs, many lives are lost, and it causes immense economic disruption that can weaken communities. For example, the COVID-19 pandemic threatens to reverse the human capital gains of a decade.41 The COVID-19 pandemic is disrupting essential health services, such as maternal-infant healthcare, routine vaccinations, lifesaving treatments (HIV; malaria, tuberculosis, etc.).42 Health emergencies, such as infectious disease pandemics and outbreaks, are a tremendous strain to healthcare systems, diverting resources from other health objectives to fight the crises. Investments in health security are on the rise to reduce the pressure on national and global healthcare43. It entails investing in preparedness and response for health emergencies and in making health systems more resilient to infectious diseases (COVID-19, ebola, measles, etc.) and other outbreaks resulting from natural disasters (such as cholera and dengue) as well as endemic diseases such as malaria. Access to adequate healthcare has great impact on whether a person will reach their full potential and be able to work efficiently. A healthy person can be more productive and, hence, better contribute to the development of their country. The health, skills and knowledge that people accumulate throughout their lives constitute their human capital44. Investing in health security is cost-effective, as it bolsters preparedness, reduces service and budget allocation disruptions during health crises, and reduces the general anxiety. Better preparedness will make the country more resilient to infectious disease-related emergencies and the health crises resulting from natural disasters. Gabon ranks 182nd in the Global Health Security (GHS) Index, among 195 countries. The GHS Index benchmarks health security in the context of other factors critical to fighting outbreaks, such as political and security risks, the strength of the health system, and country adherence to global norms45. Despite being an UMIC, Gabon must invest heavily in the foundational elements necessary to be prepared for any outbreak: prevention, detection, reporting, and rapid response. 41  https://www.worldbank.org/en/news/press-release/2020/09/16/pandemic-threatens-human-capital-gains-of-the-past-decade-new-report-says. 42  https://blogs.worldbank.org/health/killer-2-disrupted-health-services-during-covid-19. 43  From Panic and Neglect to Investing in Health Security: Financing Pandemic Preparedness at a National Level. https://documents.worldbank.org/en/publication/ documents-reports/documentdetail/979591495652724770/from-panic-and-neglect-to-investing-in-health-security-financing-pandemic-preparedness-at-a-national-level. 44  The Human Capital Project – FAQ: https://www.worldbank.org/en/publication/human-capital/brief/the-human-capital-project-frequently-asked-questions#HCP2. 45  https://www.ghsindex.org/#l-section--countryranksect. 24 GABON: COUNTRY ECONOMIC MEMORANDUM 1.3.3  Institutional and governance FIGURE 40. WGI: Government effectiveness weakness (overall estimate) 1 Weak institutions do not contribute reliably to reducing 0.8 economic volatility, an unavoidable aspect of natural 0.6 resource-based development. Natural resource wealth 0.4 0.2 can negatively affect economic and social outcomes by 0 creating opportunities for rent-seeking practices and –0.2 exposure to volatility (Sala-i-Martin and Subramanian –0.4 –0.6 2013). Human capital and institutions determine whether –0,8 natural resources are managed for socioeconomic –1 2000 2010 2020 development. When governance and institutions are Gabon Mauritius Costa Rica weak, resource rents can lead to inefficient redistribution Uruguay Oman of revenue, greater social inequality, underinvestment in Source: WGI 2000, 2010, 2020. human capital, and corruption, which in combination allow low-quality institutions to persist (Mehlum et al. 2006; Wiens 2013; James 2015; Cockx and Francken factors deter new investments and constrain domestic 2014 and 2016). Inadequate governance is also a major entrepreneurs from expanding their operations. Entre- challenge to investment and competitiveness. preneurs rank the inefficient government bureau- cracy and corruption as, respectively, the fourth and Gabon benefits from broad political stability but fifth most problematic factors for doing business institutions and governance are weak and lag behind in the 2017 GCI (see more in chapter 3 on cross- peers. The political patronage system, which has pre- cutting constraints to investment and competitive- vented pro-equity reforms, has become deeply rooted ness). Lack of transparency in administrative processes in the administration, promoting the privatization of and lengthy bureaucratic delays raise questions for the public resources and persistent corruption within the private sector regarding discretionary treatment and a administration. Gaps related to governance quality level playing field for the private sector.46 measured by World Governance Indicators (WGI) show that Gabon lags far behind most of its SSA and UMIC Similarly, judicial capacity is weak, and enforce- peers and its score has deteriorated over time, falling ment tends to be difficult. Overall, Gabon’s judicial far below the levels of its aspirational peers (Figures 40 bodies are subject to political influence, creating an and 41). Moreover, public perception of corruption unequal playing field that is detrimental to private is high; according to the 2017 Afrobarometer survey, sector growth. While several government agencies, such over 95 percent of Gabonese believe that government as the recently inaugurated Institut International de officials are involved in corruption and over 80 percent Mediation, d’Arbitrage et de Conciliation (Arbitration, believe that corruption has been rising over time. Mediation and Conciliation Center, IIMAC), have been Despite an ambitious reform agenda to enhance gov- created to address some of these issues, they require ernance and curb corruption, anchored in the 2010 further support to be able to effectively ensure the Strategic Development Plan (PSGE), Gabon is ranked application of these reforms in competition, business 124th out of 180 countries in the 2021 Corruption regulations, and investment promotion. Perceptions Index (CPI). Corruption and poor institutional framework are among the main factors weakening the business  International Trade Administration. Gabon – Market Challenges. 2021. https:// 46 environment in Gabon (Figures 41 and 42). These www.trade.gov/country-commercial-guides/gabon-market-challenges TOWARD MORE INCLUSIVE AND GREENER GROWTH 25 FIGURE 41. Governance Indicators 2020 FIGURE 42. Corruption Perception 2020 (percentile rank: ranges from 0 (lowest) (Score 0–100) to 100 (highest) 70 60 Voice and Accountability 50 Rule of Law 40 Regulatory Quality 30 Political Stability and Absence of Violence/Terrorism 20 Government Effectiveness 10 0 Control of Corruption Aspirational SSA Structural Gabon CEMAC Peers Peers 0.0 10.0 20.0 30.0 40.0 50.0 60.0 UMIC SSA Gabon Source: CPI 2020. Source: WGI 2020. Reforms are needed to bring about better gover- Cockx, Lara and Natalie Francken. 2014. “Extending the nance and accountability, better coordinated policy, Concept of the Resource Curse: Natural Resources and Public Spending on Health.” Ecological Economics 108: and more realistic and consistent policy-making that 136–49. aligns better with budgetary constraints. A com- Cockx, Lara and Natalie Francken. 2016. “Natural Resources: prehensive governance reform package consisting of A Curse on Education Spending?” Energy Policy 92: improving governance in the relationship of firms, 394–408. reducing waste/improving efficiency in public capital Cowell, Frank A. and Emmanuel Flachaire.2002. Sensitivity of Inequality Measures to Extreme Values. LSE STICERD expenditures, and expanding the tax base through Research Paper No. 60, Available at SSRN: https://ssrn. an improvement in tax administration efficiency will com/abstract=1094842. deliver a much higher growth and fiscal space, accord- Dercon, Stefan. 2014. Is Green Growth Good for the Poor? ing to a 2018 study by the International Monetary Fund Policy Research Working Paper No. 6936. Washington (IMF). The IMF study showed that this reform package DC: World Bank. https://openknowledge.worldbank.org/ handle/10986/18822 License: CC BY 3.0 IGO. would lead to significant increase in private invest- Government of Gabon. 2011. Plan stratégique Gabon Émer- ment, private consumption, and non-oil output. Public gent (PSGE). debt would fall, allowing the tax rate to fall given the Government of Gabon. 2011. Plan d’Accélération de la Trans- fiscal reaction function, and to further stimulate pri- formation (PAT). vate demand. This package of reforms would result Herrera, Santiago, Wilfred A. Kouame, and Pierre Mandon. 2019. Why Some Countries Can Escape the Fiscal Pro- in an approximate additional annual non-oil growth Cyclicality Trap and Others Cannot? Policy Research of 1.44 percent (optimistic scenario) or 0.75 percent Working Paper No. 8963. Washington DC: World Bank. (moderate scenario). International Monetary Fund (IMF). 2020. Gabon: Technical Assistance Report – Public Investment Management Assessment. Country Report No. 2020/188. Washington References DC: IMF. James, Alexander. 2015. “The Resource Curse: A Statistical Calderón, Cesar and Catalina Cantú. 2019. Trade Integration Mirage?” Journal of Development Economics 114: 55–63. and Growth Evidence from Sub-Saharan Africa. Policy Mehlum, Halvor, Karl Moene, and Ragnar Torvik. 2006. “Insti- Research Working Paper No. 8859. Washington DC: tutions and the Resource Curse.” The Economic Journal World Bank. 116 (508): 1–20. 26 GABON: COUNTRY ECONOMIC MEMORANDUM Sala-i-Martin, Xavier and Arvind Subramanian. 2013. World Bank. 2021. Diversified Development: Making the “Addressing the Natural Resource Curse: An Illustra- Most of Natural Resources in Eurasia. Washington, DC: tion from Nigeria.” Journal of African Economies 22 (4): World Bank. doi:10.1596/978-1-4648-0119-8 570–615. World Bank. 2021. The Changing Wealth of Nations 2021: Wiens, David. 2014. “Natural Resources and Institutional Devel- Managing Assets for the Future. Washington, DC: World opment.” Journal of Theoretical Politics 26 (2): 197–221. Bank. https://openknowledge.worldbank.org/handle/ World Bank. 2020. Gabon: Increasing Economic Diversifica- 10986/36400 License: CC BY 3.0 IGO. tion and Equalizing Opportunity to Accelerate Poverty World Bank. 2022. CEMAC Quarterly Economic Barometer Reduction. Washington, DC: World Bank. https://doi.org/ Vol. 2, February 2022. 10.1596/34108. CHAPTER 2 ACHIEVING INCLUSIVENESS AND MATCHING ASPIRATIONS WITH OPPORTUNITIES Human capital is critical to inclusive and sustainable growth, and there is growing recognition of the role of human capital in the long-term success of growth around the world. This chapter has two parts: the first focuses on Gabon’s education system and provides insights on the skills and aspiration mismatch in the labor market; the second focuses on social protection’s role in mitigating poverty and income inequality. The chapter concludes with some key recommendations to improve the delivery of education, social protection, and economic inclusion in Gabon. 2.1    Investment in education and skills promotion policies This section examines inclusiveness in Gabon by analyzing disparities in education, vocational train- ing, and skills mismatch. It begins with a discussion of basic education in terms of access and quality, and performance compared to countries with a similar per capita income. Then it examines disparities in skills development, specifically why the transition to higher education in Gabon is particularly challenging. Finally, it discusses the skills and aspiration mismatch and the external efficiency of education, with a focus on skills supply in Gabon versus actual labor market needs. 2.1.1  Contextual factors for supply and demand of skills in Gabon Rapid population growth in Gabon complicates social and economic development and increases the scale of the investments and effort needed to ensure that no one is left behind. The pop- ulation of Gabon grew from 440,000 in 1960 to 1,015,000 in 1993 and then to 1,811,000 in 2013. According to the General Directorate of Statistics, Gabon’s population increased by 2.7 percent 27 28 GABON: COUNTRY ECONOMIC MEMORANDUM per year from 2013 to 2020 and is projected to grow by to basic skills acquisition is a prerequisite for higher 1.7 percent from 2020 to 2030, reaching 2,643,000 in levels of education. Learning poverty in Gabon is 2030. Gabon’s population is relatively young, with 36 per- estimated at 30.7 percent, far better than the region’s cent under the age of 15 and 59 percent aged 15 to 64. average and many other UMICs (Figure 44). Gabon Seniors (age 65+) account for approximately 4 percent of has one of the highest rates of primary school enroll- the population. In addition, Gabon is highly urbanized: ment in Africa, with 95.5 percent of boys and 97.2 per- 87 percent of the population live in cities, indicating a cent of girls enrolled (Figure 45). If the trend in gross concentrated demand for skills and training services. enrollment rates in primary education is higher than in other UMICs, Figure 46 panel B shows that entry Limited progress has been made in terms of spending does not always occur at the legally required age of on human capital in Gabon. Public investment in human 6 years; 47.1 percent of children enter the first grade capital has been very low relative to total resources after age 6. Despite extensive research demonstrating available in the economy when compared to struc- that early childhood education (ECE) prepares children tural peers like Botswana and aspirational peers like to be more effective in future primary and secondary Mauritius, Uruguay, and Costa Rica (Figure 43). Given levels of education, only about 49 percent of children the magnitude of the challenges in the education in Gabon benefit from ECE programs and most of sector, as a UMIC, Gabon should allocate at least these are provided by private institutions (Figure 46). 4–6 percent of GDP and at least 15–20 percent of Despite a favorable learning poverty rate that propels public expenditure to education; however, as shown in Gabon to the top of the international rankings, the Figure 43, the country is struggling to meet that target country still faces significant deficiencies in its basic and only spends at levels similar to LMICs on education. For example, Gabon spent only 2.8 percent of its GDP education level, particularly its quality, which could on human capital in 2019, compared to 4.2 percent for be argued to have roots in the failure of countries to middle-income countries globally. invest in ECE and build strong foundations for future learning. The benefits of quality ECE include improved school readiness, reduced repetition and drop-out 2.1.2  Fundamental learning in Gabon rates, and higher achievement in school. Gabon has made tremendous progress in primary Children in Gabon do not progress easily through education enrollment over the last 50 years; access grades, implying low internal efficiency of the FIGURE 43. Public expenditure on education A : Education expenditure (% of GDP) B : Education expenditure (% of public spending) 10 30 9 25 8 7 20 6 5 15 4 10 3 2 5 1 0 0 Costa-Rica Mauritius Uruguay Botswana Gabon Cameroon Benin Costa Rica Île Maurice Uruguay Botswana Gabon Cameroun 1990 2000 2010 2020 1990 2000 2010 2020 Source: UNESCO and authors calculation. TOWARD MORE INCLUSIVE AND GREENER GROWTH 29 FIGURE 44. Learning poverty in Gabon FIGURE 45.Trend net enrollment rate in primary, both sexes (%) 90 Cameroon 120 80 Benin 100 70 80 60 Learning Poverty Botswana 60 50 Uruguay 40 40 Gabon Mauritius 20 30 Costa-Rica 0 1970 1980 1990 2000 2017 20 Gabon Cameroon CAR Costa-Rica 10 Mauritius Botswana South-Africa 0 0 2 4 6 8 10 Education expenditure, percentage of GDP Source: UNESCO and authors calculation. education system. Even though primary education is secondary. Other issues continue to stifle educational free in Gabon, an estimated 9 percent of primary school- achievement and skills development – e.g., primary age children were not in school in 2019. These children school overcrowding; secondary school high dropout live in poor areas with limited educational infrastructure. rates, particularly among girls, who make up a large The country also has some of the highest rates of school proportion of dropouts; and poor working conditions repetition in Africa, with primary school repetition at for teachers. 30 percent compared to the African average of 15 per- cent. Repetition has become common at all levels of Despite these challenges, students in Gabon achieve education, particularly in public schools: the percent- some of the most encouraging results at the end age of repeaters in general lower secondary education of primary school, with reading proficiency levels reached 26.5 percent in 2018, and 23 percent in upper among the highest even among UMIC students. FIGURE 46. Trend gross enrollment rate in preprimary & primary education, both sexes (%) Trend gross enrollment rate in preprimary education, both sexes (%) Trend in gross enrollment rate in primary education, both sexes (%) 80 160 70 140 60 120 50 100 40 80 30 60 20 40 10 20 0 0 1970 1980 1985 1990 1995 2000 2019 2030 1970 1980 1990 2000 2017 Gabon Sub-saharan africa (excluding high income) Gabon Sub-saharan africa (excluding high income) Upper-middle income countries Upper-middle income countries Source: UNESCO and authors’ calculation. 30 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 47. Students’ achievement at the end of primary school in reading and mathematics Student performance in reading and national Income Student performance in mathematics and national Income 100 100 90 90 Botswana 80 80 Gabon Uruguay 70 Botswana 70 Costa-Rica Costa-Rica 60 Uruguay 60 Reading Math 50 50 Benin 40 40 30 Cameroon 30 Benin Gabon 20 20 10 Cameroon 10 0 0 0.00 5,000.00 10,000.00 15,000.00 20,000.00 0.00 5,000.00 10,000.00 15,000.00 20,000.00 GDP per Capita GDP per Capita Source: UNESCO and authors calculation. Children in Gabon outperformed other countries in only about 20 percent of primary school children are reading and mathematics at PASEC 2019. However, proficient in mathematics (Figure 47). significant inequalities and inequities remain hidden beneath these PASEC assessment results, and the Gabon faces significant challenges in ensuring that quality of the country’s education system remains low students transition effectively and smoothly from when compared to structural and aspirational peers. primary to secondary school and higher education, When learning achievement is combined with children while maintaining quality standards. The low transi- out of school, the country’s learning poverty drops to tion rates of students from primary to secondary and 30.7 percent; in other words, 30.7 percent of Gabonese tertiary education are a recurring issue in the country. children in late primary school today are not able to As illustrated in Figure 48, many students do not com- understand a simple paragraph. Furthermore, when plete primary and secondary education. Among the compared to children from similar wealth countries, factors that may help explain the low transition rate FIGURE 48. Transition from primary to secondary school and higher education Primary education completion rate (Gabon1970–2005) Transition rate to upper secondary school 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 1970 1975 1980 1985 1990 1995 2000 2005 0 boys girls rural urban poorest richest Total boys girls Source: UNESCO, DHS, 2012 and authors’ calculation. TOWARD MORE INCLUSIVE AND GREENER GROWTH 31 FIGURE 49. % of enrollment by quintile and education level 60 55.4 50 40.9 40 30.9 30 27.9 24.1 25.2 24.6 25.2 21.4 20.1 21.5 18.9 18.2 17.3 18.1 19.2 18.2 20 16.6 16.9 13.1 10 8.8 7.8 4.7 4.5 0.5 0 Primary Lower secondary Upper secondary Secondary (total) Upper education Lowest quintile Second quintile Third quintile Fourth quintile Richest Source: DHS 2012 and authors’ calculation. in Gabon are the following: (i) compulsory education while 28 percent come from the richest. At the upper in the country spans 10 years, ages 6–16, which puts secondary level, distribution becomes highly unequal, pressure on the education system, with overcrowded with 41 percent of students belonging to the richest classrooms in primary school and a high dropout rate quintile and only 5 percent belonging to the poorest, in lower secondary school; it is also evident that when implying regressive public spending. Although enroll- the compulsory years are over students abandon the ment per quintile is not available for preschool, the fact idea of continuing their education; (ii) due to poverty in remote areas of the country and a lack of secondary education cycles in villages, many rural households FIGURE 50. Transition from primary to discourage their children from pursuing an education, secondary school and higher education especially female children who are expected to con- Above zero : female advantage tribute to the household. Despite this, the overall 20 school transition rate has been narrowing by gender and geographical location in the country, although a 10 Percentage points (difference from 50%) significant socioeconomic gap in the transition rate to 0 secondary schools and higher education remains, with –10 only 49 percent of students from the poorest house- holds completing lower secondary. –20 –30 2.1.3  Disparities in skills development –40 in Gabon –50 Gabon’s public education spending benefits the poor –60 Primary Secondary Higher only in primary school. All wealth groups are repre- Lowest quintile Second quintile sented in primary education, as shown in Figures 49 Third quintile Fourth quintile Richest and 50. In contrast, only 9 percent of students in lower secondary education come from the poorest quintile, Source: DHS 2012 and authors’ calculation. 32 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 51. Percentage of vocational and FIGURE 52. Gross enrollment rate in tertiary technical enrollment education 35 50 30 45 40 25 35 20 30 15 25 10 20 15 5 10 0 5 Costa Rica Uruguay Cameroon Gabon South-Africa Mauritius 0 (2020) (2019) (2016) (2019) (2021) (2021) 1970 1980 1990 2000 2017 Gabon SSA (excluding high-income countries) UMIC Source: UIS data (2021 or most recently available). Source: UIS data (2021 or most recently available). that it is essentially private and urban suggests that the infrastructure and equipment appear to be on track with children from poor households and from rural areas are World Bank and other donors’ support, challenges asso- poorly represented. Furthermore, Figure 50 shows that ciated with teacher training and governance persist. Con- students from the top three quintiles attended higher sequently, the links between the training institutions, skills education the most, with over 55 percent coming from development programs, and sectors of activity are weak, the richest households, highlighting extreme educa- hampering the growth of the private sector. tion inequities and high levels of regressive spending at this level. The low enrollment rate in tertiary education, which is also a result of disparities, indicates that Gabon While Gabon lags behind countries with comparable is facing a skills shortage and an insufficient future wealth in secondary and/or pre-tertiary technical supply of skilled workers (Figure 52). Gabon’s higher and vocational education and training (TVET), gender education system remains inefficient. This is reflected disparities in TVET have narrowed. Gabon’s TVET in students’ failure, repetition, and drop-out rates, as enrollment rate in 2019 was 17.7 percent, significantly well as the relative lack of supervisory personnel and lower than the UMIC average of 30–40 percent and facilities. According to the 2018/19 statistical yearbook, lower than the SSA average of 20 percent (Figures 51 50 percent of the 33,844 students enrolled in tertiary and 52). From 19.6 percent in 1985, the percentage of education choose literature, humanities, and arts, TVET students has decreased in Gabon. Participation 18 percent choose social sciences, business, and of young women in TVET is relatively encouraging; they law, and 15 percent choose health and social protec- account for 37  percent of enrolled TVET students tion, with the proportion in science, technology, engi- and 51 percent of students enrolled in vocational train- neering, and mathematics (STEM) unknown due to ing. Key challenges confronting Gabon’s secondary the embryonic stage of the STEM field in Gabon and lack education and skills development systems include: of data. To address this problem, the country has mod- i) lack of funding for TVET; ii) poor geographical dis- estly begun training teachers in STEM, with UNESCO tribution of training; iii) inadequate skills recognition support in 2021 at the Ecole Normale Supérieure systems; iv) outdated curricula overly theoretical for the (ENS), and a few curricula on various STEM themes are labor market, leaving job seekers’ skills mismatched being developed. This is a paradox, given that most to skills expected by the productive sector; and v) lack available jobs are in STEM-relevant fields. In general of teacher training and teaching and learning materials. terms, students are underprepared because of sec- In addition, the private sector is not sufficiently involved ondary school’s lack of academic rigor, which has a in the management of training institutions. Even if negative impact on skills development. TOWARD MORE INCLUSIVE AND GREENER GROWTH 33 BOX 5. The Singapore Skills Development System (SSDS) may serve as an example for developing countries like Gabon Singapore is the most well-known example of a country that has consistently and successfully upskilled its workforce over the past four decades. The skills development system unquestionably contributes to Singapore’s consistent top rankings in comparative surveys of human resource development. The SSDS is supported by the government and managed in collaboration with the private sector. The following elements form the structure’s foundation: Structure and institutional pre-requisites: There are a number of significant actors and institutions involved in SSDS. (i) A ministry 1.  charged with implementing broad economic development policies; (ii) An agency that attracts FDI and meets foreign investors’ demands for skilled labor; (iii) An independent body tasked with balancing the economy’s demand and supply of skills; (iv) Education Ministry overseeing schools, polytechnics, universities, and institutes of technical education. Linkage between Economic Development Strategies and Skills Development: Singapore molded its national human resource 2.  policy to provide the skills needed for each of its four economic development stages. (i) During the import substitution industrialization period (1959–1965), the national imperative was to have a standardized education system that provided science, math, and technical education for economic development while preserving ethnic roots and values; (ii) 1966–1973 saw an export-oriented industrialization phase following the import-substitution phase of economic development. This phase required technically trained workers for foreign investments; (iii) In Phase three of Singapore’s economic development (1973–1984), the export-oriented strategy shifted to higher value-added and more technologically advanced products that required both general skills and specialized skills germane to the growing industries due to foreign investment; (iv) Since the mid-1980s, economic development has focused on fostering young people’s creativity, entrepreneurial and risk-taking. Degree to which the private sector is involved: The SSDS offers foreign investors incentives to establish training centers in 3.  partnership with the state. Foreign investors are guaranteed the right to hire a percentage of these centers’ graduates. This ensures that foreign investors will not experience skill shortages on a tight labor market, given that they control the supply of skilled workers. Several training institutes were founded, which were subsequently merged into larger institutions. Long-term sustainability of the system: The Skills Development Fund System (SDF) was created in 1984 to encourage firms 4.  to invest in skill development. Employers must contribute 1% of gross salaries ($1500 in July 2000) to the skills development fund. Training grants cover 80% of their investment. Training grants penalize companies that continue to use low-skilled workers. National Training Awards are given to companies that do well with workforce training. Potential for being a model for developing nations: Singapore has prioritized ensuring the availability of skills for economic 5.  growth. In 1979, the Ministry of Education proposed a new school-level education system and significant curriculum revisions at universities, particularly in engineering. Since the 1990s, education policy has been rethought in order to emphasize the development of creativity. The Ministry of Education intends to redesign and improve five areas. These include a conducive school environment, a curriculum and assessment system, the development of teachers, pre- and post-school education, and the establishment of Singapore as an Education Hub. Developed by authors based on Kuruvilla et al. (2002) & Yusuf and Nabeshima (2012). 2.1.4  Skills mismatch and external of job vacancy absorption and a troubling unemploy- efficiency of education in Gabon ment trend, with 1 in every 5 Gabonese unemployed. Youth in Gabon are even more affected, with 1 in every Education and training in Gabon are failing to pro- 3 youth currently unemployed. For example, Table 3 vide the skills required by the labor market, nor shows that demand for jobs significantly exceeds does the economy create jobs that match indi- available supply, and that more than two-thirds of jobs viduals’ skills. This market structural imbalance is not offered go unfilled due to a lack of corresponding pro- a new phenomenon in Gabon, which has a low rate files. This low level of fulfilment is observed across all 34 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE 3. Demand and offer of skills at different levels SATISFACTION SATISFACTION RATE OF JOB RATE OF JOBS JOBS JOBS JOBS OFFERED IN WANTED IN WANTED OFFERED FILLED PERCENT PERCENT Engineers/Cadres 971 188 64 34.0 6.6 High skilled Technicians 1324 321 149 46.4 11.2 Technicians 302 217 68 31.3 22.5 High Skilled artisans 1086 82 19 23.2 1.7 Skilled artisans 835 142 67 47.2 8.0 Low skills 142 42 25 59.5 17.6 Total 4660 992 392 39.5 8.4 Source: State of Skills: Gabon, ILO 2019/20, Pg. 23 and the GCR 2019. qualification categories. However, it is lower for appli- Gabon also faces a disconnect between people’s cants who are skilled workers, technicians, or engi- aspirations and available economic opportunities. neers. Furthermore, Table 4 indicates a disconnect As the country with the highest urbanization rate between education level and job quality, suggesting in Africa, most Gabonese live in the capital or other that in Gabon educational attainment generally has urban centers. A huge challenge facing the country little influence on labor-market participation, particu- is to attract Gabonese who are either unemployed larly among females as compared to males. While it is or engaged in low-productivity activity in the infor- clear from Figure 53 that the higher the quality of TVET, mal sector to the growing sectors in rural areas (such the easier it is to find a skilled employee, Gabon’s TVET as forestry and agriculture). Managing to attract the quality was rated 3.2 out of 7 by the Global Com- young labor force into green sectors and strengthening petitiveness Report, placing the country 130th out of Gabon’s capacity of green growth skills are especially 141 economies, and the graduates’ skills set was rated important at this critical juncture in the country’s devel- 3.4 out of 7, placing the country 120th globally. opment process. TABLE 4. Proportion of occupation for adults aged 25–59, by highest educational attainment and gender NO EDUCATION PRIMARY SECONDARY HIGHER OCCUPATION MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE Not working 8.37 0.00 11.73 16.47 9.99 18.60 9.35 44.83 Professional/technical/managerial 0.40 0.00 1.60 3.53 13.93 9.92 55.88 24.14 Clerical 0.00 0.00 0.25 0.00 0.22 0.41 0.24 0.00 Sales 34.66 0.00 7.28 1.18 6.26 7.02 5.28 3.45 Agriculture, self employed 5.98 16.67 10.74 9.41 3.89 2.07 0.00 0.00 Agriculture, employee 12.75 16.67 23.46 27.06 10.10 10.74 1.68 0.00 Household and domestic 0.40 0.00 0.25 1.18 0.54 0.83 0.00 0.00 Services 33.86 16.67 28.52 22.35 34.83 31.40 13.91 20.69 Skilled manual 1.20 33.33 7.16 9.41 8.05 9.09 5.28 0.00 Unskilled manual 2.39 16.67 8.52 8.24 7.94 7.85 3.60 3.45 Armed forces 0.00 0.00 0.49 1.18 4.27 2.07 4.80 3.45 Source: DHS 2012 and authors’ calculation. TOWARD MORE INCLUSIVE AND GREENER GROWTH 35 FIGURE 53. Relationship between TVET quality The Gabonese government is working hard to close and the availability of skilled workers skills gap among youth and the specialized demands of globalized labor markets. Skills are part of Gabon’s 7 y = 0.4848x + 2.2633 Emerging Strategic Plan for 2025, which includes R² = 0.6368 6 initiatives such as improving school and university infrastructure and reforming education and training Ease of nding skilled employees 5 Costa-Rica Benin programs. Figure 54 shows that between 2016 and Cameroon Uruguay 2020 expenditure in education across sectors were 4 Gabon Botswana focused on addressing TVET quality and graduates’ 3 skills set. The result has been the construction of many training facilities with funds from Morocco, China, 2 the AfDB, and the World Bank. With WB support, the Gabon Skills Development and Employability Project 1 (PRODECE) is pushing to implement a new governing 0 board with strong representation by the private sector 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 in all centers and a pedagogical council to allow for Quality of vocational training autonomy, accountability, and collaboration with the private sector. To address the skills mismatch, the project also supported the development of 49 new curricula in targeted growth sectors aligned with rel- evant employers. FIGURE 54. Current and investment expenditure in education across sectors 2016–2020 Intrasectoral evolution of current expenditure in education Intrasectoral evolution of investment expenditure in education between 2016–2020 (%) between 2016–2020 (%) 100 100 2 2 5 1 2 6 90 25 90 14 29 36 80 42 80 36 44 2 4 15 50 70 1 70 6 1 60 3 1 60 4 2 3 87 4 11 50 50 79 0 26 55 39 40 40 24 57 42 32 30 30 39 22 20 20 17 16 10 10 15 12 8 10 1 2 9 9 9 10 4 6 7 7 0 2 1 3 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Tertiary VET Tech-sec Tertiary VET Tech-sec Gen-sec Primary Preprimary Gen-sec Primary Preprimary Source: Authors’ calculations based on data from Ministry of Finance. 36 GABON: COUNTRY ECONOMIC MEMORANDUM BOX 6. What is green growth, and how can it contribute to Gabon’s sustainable development? Gabon, like the rest of the world, is faced with a dual challenge: expanding economic opportunities for all in the context of a growing global population, and addressing environmental pressures that, if ignored, threaten the ability to capitalize on these opportunities. Green growth is the intersection of these two challenges, and it is about seizing opportunities to address both at the same time. Green growth entails promoting economic growth and development while ensuring the availability of natural resources and environmental services critical to well-being. It must do so by catalyzing climate-resilient investment and innovation to sustain growth and create new economic opportunities. Gabon’s Emerging Strategic Plan for 2025 includes an entire green pillar that calls for the full exploitation of Gabonese soil wealth, particularly its forest heritage and exceptional biodiversity, allowing Gabon to claim an advantageous position in the 21st century’s green economy. However, the country’s development of a green economy is impossible without STEM skills, as the green economy relies heavily on them. The ability of Gabon to green its economic structure will require creative thinking and a thorough understanding of the sector. There are STEM fields that promote greening through ICTs, which utilize the power of digital technologies to make the energy sector more eco-friendly (e.g., smart grids, renewable energy). Smart cities, smart transportation, sustainable mining, and smart agriculture would all require a workforce with strong STEM backgrounds and local expertise. Green Growth and Sustainability in Gabon Gabon fails to develop skills in food production The wood product manufacturing sector suffers (tubers, fruits and vegetables, vegetable products) from a lack of skilled labor, hampering productivity. and short-cycle livestock farming that would increase The Forest Code only indicates that operators in agricultural potential and food security in periurban the sector may contribute to training programs and areas. Gabon has the potential to transition from an research and development projects under the super- economy based on mining and oil to one based on vision of the Ministry in charge of Forests (Forest Code, agriculture through the development of a sustainable, Chapter IV, Articles 242 and 243). The Water and Forests modern, and competitive agricultural sector. Currently, National School trains technicians and engineers the majority of Gabon’s domestic food consumption able to work in public administration, for NGOs, or is met through imports. To combine intensive and as private operators. However, some operators47 have subsistence agriculture, Gabon lacks agricultural and argued that there is need for a school dedicated to farm workers with the necessary skills. As part of a larger education initiative and the country’s strategy wood processing and transformation at the national or to become an emerging nation by 2025, TVET schools, regional level (such as the School of Mines and Metal- specialist schools, and colleges for agriculture are lurgy of Moanda). This deficiency complicates the gov- being developed. ernment’s attempts to enforce local preferences for employment in the Labor Code (Article 105).48 Foreign Gabon still needs to develop fishing trade skills and workers must obtain permits before working in Gabon, professionalize the fishing industry to maximize and which depends on the availability of Gabonese nation- sustainably exploit fishing resources. Gabon is a als to fill the required tasks (lack of skills, nature of the fish-rich nation, but the fisheries industry has been work performed, location, etc.).49 neglected – lack of infrastructure, development strat- egies and organization, funding, skilled labor, and high market prices. Therefore, the country must import fish 47 Interviews; Union des Forestiers et Industriels du Gabon et Aménagistes   to meet domestic demand because fish-catch and (UFIGA). 2019. Etude de l’état des lieux des acteurs du secteur privé de la filière forêt-bois au Gabon. production are insufficient. The fisheries industry has 48  Law No. 3/94 of November 21, 1994 on the Labor Code. the potential to stimulate the economy through the 49 Moreover, the Labor Code does not mention any quotas to regulate the   local vs. foreign workforce. creation of jobs to combat the high unemployment TOWARD MORE INCLUSIVE AND GREENER GROWTH 37 FIGURE 55. Overview of the Gabonese labor market Gabon population 2,215,227 Working-age < 15 years old population 64 years old 1.3 m (58.9%) 0.91 m 41.1% Active Inactive (15–64) 0.68 m (52.3%) 0.62 m (47.7%) Employed Unemployed Discouraged Students 0.59 m (85.8%) 0.1 m (14.2%) workers 0.3 m (48.2%) 0.07 m (11.8%) Hidden unemployment Total Inactive Population Household Informal Formal 1.53 m (69.2% of total population) 0.1 m (16%) 0.22 m (36.6) 0.28 m (47.4%) Associations Public Private and Unions 0.14 m (48.5%) 0.14 m (51.1%) 0.001 m (0.5%) Source: EGEP 2017. rate; the provision of food to combat poverty; and the the basic, utilization-adjusted-HCI falls to 0.21 and the establishment of the fish industry as a key source of full utilization-adjusted-HCI to 0.25, further highlighting income for the transition away from oil dependence; Gabon’s untapped human capital potential. See thereby attracting investors, which would help finance section 1.2 for more detailed information on poverty its growth and other development. and inequality. Socioeconomic inclusion is undermined by the fact 2.2  Socioeconomic inclusion through that less than half of the working-age population safety nets for the poor in Gabon is employed. Gabon has high inactivity and unemployment rates: 52 percent of the population Despite recent progress on poverty reduction, age 15–64 are inactive, including many discouraged work- inequality and human capital underutilization remain ers, and 14 percent of the population are unemployed high. Despite Gabon’s upper middle-income status (see Figure 55 above). Both figures are substantially (USD 14,420 PPP per capita income), a third (33.4 percent) higher than in peer countries.50 The unemployment of the population lives below the national poverty line rates referred to in Figure 55 are particularly high among equivalent to USD 4 per day. Moreover, the absolute youth (21 percent) and women (19 percent vs. 11 per- number of poor is on the rise as population growth cent for men), and rise to 32 percent and 29 percent, outstrips poverty reduction rates. Its Human Capital Index (HCI) reached 0.46 in 2020 but remains more 50 Gabon’s inactivity rate (52    percent) is substantially higher than UMICs comparable to SSA and LMIC averages (0.40 and 0.48, (36 percent) and SSA (28 percent) averages. Similarly, Gabon’s unemployment rate is much higher than UMIC and SSA (7 percent) averages. https://ilostat. respectively) than the UMIC average of 0.56. Moreover, ilo.org/. 38 GABON: COUNTRY ECONOMIC MEMORANDUM BOX 7. Despite high unemployment rates and high informality, foreigners comprise an important share of the Gabonese workforce Almost a quarter of employed workers come from other countries. Overall, foreign workers account for 20 percent of the labor force and 23 percent of all employed workers. Foreigners appear to be coming for a dual purpose: (a) to take generally undesirable jobs, performing 35 percent of informal jobs and 28 percent of household work; and (b) to take jobs for which local workers do not have the necessary qualifications, causing companies to recruit foreign workers with the required skills. In the formal private sector, 20 percent are foreign workers, due to the lack of specific skills for Gabon’s labor market. The profile of the migrants is largely drawn along gender lines: women represent about a third of foreign workers in Gabon and are more likely than men to work as own-account workers (52 percent vs. 37 percent). Conversely, men are more likely to engage in skilled work (16 percent vs. 6 percent). Most foreign workers in Gabon are from Cameroon, Mali, Benin, Togo, and Senegal. respectively, when discouraged workers are consid- 35 percent in other urban zones compared to only ered (hidden unemployment). Around 50 percent of 21 percent in the main cities, Libreville and Port-Gentil. the unemployed are less than 30 years old and/or first- Low-profile jobs are also common among people with time job seekers, underlying the difficulty of young primary education or less, among whom only 20 per- generations to access the labor market. In addition, cent are employed as managers or qualified workers, a high share of the workforce – around 300,000 people compared to over 70 percent among those with upper – are currently in school and expected to enter the secondary and higher education. labor market over the next 3–10 years,51 which high- Public sector employment accounts for an outsized lights the urgency of job creation to avoid a spike in share of the (small) formal sector. Only 41 percent of unemployment and poverty. While the unemployment active workers are employed in the formal sector and rate among the poor appears similar to the non-poor, half of them work for public institutions. Public admin- their hidden unemployment rate is much higher (30 per- istration remains an important provider of jobs, under- cent vs. 17 percent for the non-poor), suggesting the scoring Gabon’s historical tradition of large bureaucratic presence of many workers among the poor no longer public administration. The formal private sector is very searching for a job but willing or available to work. small, accounting for half of formal employment and Among those who are employed, informality and 25 percent of total employment. While the oil and low-pay employment are widespread. More than half mining sector weighs heavily in Gabon’s GDP, it con- of those employed work either in the informal sector tributes only 5  percent to employment. Although (37 percent) or at the household level (16 percent). In employment in manufacturing is also currently limited,52 addition, the labor market is dominated by low-pay growing sub-sectors like agribusiness and wood man- and precarious forms of employment: 33 percent of ufacturing show promise of ultimately generating more workers are self-employed, or household helpers/ jobs. Instead, the public sector has been the main pro- apprentices, and another 20 percent are unqualified. vider of employment: before the hiring freeze in 2016 The rates are even higher for women (43 percent are due to austerity measures, there were 109,564 jobs in the self-employed vs. 26 percent of men) and the poor public sector and 90,327 in the private sector.53 (48 percent vs. 29  percent). Household work and self-employment reach 68 percent in rural areas and 52 Private sector employment is concentrated in the services sector, with a   large share of the poor working in agriculture. In the formal private sector, 92 percent of jobs are in services, 3 percent in mining, and 2 percent each in 51 Fifty-five percent female, on average 20 years old; 30 percent are poor.   agriculture and manufacturing. School level: 7 percent were enrolled in primary level, 75 percent secondary, 53  https://www.ilo.org/wcmsp5/groups/public/---ed_emp/---ifp_skills/documents/ 18 percent tertiary. genericdocument/wcms_742205.pdf. TOWARD MORE INCLUSIVE AND GREENER GROWTH 39 2.2.1  The social protection sector ambitious restructuring of the national social protec- tion system in 2007, resulting in a set of reforms aimed Social protection in Gabon is centered on human at achieving universal health insurance and improving capital development, combining a diverse set of the country’s social safety nets. In addition to the exist- instruments to support the vulnerable and promote ing National Social Security Fund (Caisse Nationale economic inclusion. Gabon’s 2014 Human Investment de Sécurité Sociale, CNSS) for formal private sector Strategy (SIHG) announced a paradigm shift from employees, three new institutions were created to offer social aid to human investment. Specifically, the benefits and services depending on the labor market SIHG expanded Gabon’s strategy of assisting dis­ and socioeconomic status of beneficiaries: (a) the advantaged groups, moving from a policy focused National Health Insurance and Social Guarantee Fund exclusively on social assistance to an integrated policy (Caisse Nationale d’Assurance Maladie et de Garantie covering four complementary pillars: (a) social safety nets, Sociale, CNAMGS), which is in charge of health insur- (b) income-generating activities, (c) access to basic ser- ance and social transfers for GEF; (b) the National vices, and (d) socioeconomic integration infrastructures. Social Assistance Fund (Fonds National d’Aide Sociale, With the goal of building human capital and responding FNAS), which helps low-income households develop to labor market challenges, the SIHG further emphasized income-generating activities and become econom- a cross-sectoral approach through which an Economi- ically self-sufficient;55 and (c) the Pension and Family cally Weak Gabonese (GEF)54 would receive a tailored Benefits Fund (Caisse des Pensions et des Prestations package of support. Programs targeting youth are also Familiales, CPPF), which manages pension and social in place (Box 8). It proposed a total of 19 instruments for benefits for public employees. In addition to the 2014 seven types of vulnerable groups across the four pillars. SIHG, the National Social Protection Policy (PNPS) was Gabon’s social protection system has steadily evolved approved in 2016 and a new Social Protection Code over the past 15 years. The government started an was adopted in 2017. BOX 8. Active labor market programs to tackle youth unemployment The National Office for Employment (Office National de l’Emploi, ONE) is the agency in charge of supporting unemployed individuals by providing intermediation services and linkages to training programs. It includes internship and apprenticeship programs, such as the Youth Training Contract linking first-time job seekers (age 16–35) with private companies with more than 50 employees. ONE covers the cost of registering the intern at the CNAMGS, while the hiring company provides the compensation. Participants need to hold a university degree, but the field of their internship can differ from their degree field. In addition, a dual apprenticeship program targets youth age 16–24 without any degree or professional training. ONE places participants in training centers and finds them an internship over the course of one to two years. The program attracts up to 250 new registrations per day56, according to the Gabon Poverty Assessment 2020. The Ministry of Vocational Training and Youth Integration has also implemented active labor market programs. First, the Skills Development and Employability Project (PRODECE) was launched in 2016 with funding from the International Bank for Reconstruction and Development (IBRD). Second, the “Young person = a trade – from Existence to Employment” was a pilot program also launched in 2016 but is currently suspended. It aimed to provide 2,500 young Gabonese with training opportunities in small trades across more than 50 sectors. Three-month training courses were offered in the Nkémbo and Complexe Basile Ondimba vocational training and development centers as well as through NGOs. 54  A GEF was initially defined as an individual who: (a) is of Gabonese natio- nality, (b) is at least 16 years of age, and (c) earns less than FCFA 80,000 per month. However, a new poverty-based definition was introduced in 2020 and  The FNAS was suspended in 2019. 55 is being applied to recertify GEF.  Gabon Poverty Assessment 2020 56 40 GABON: COUNTRY ECONOMIC MEMORANDUM Low and inconsistent funding has hampered Gabon’s FIGURE 56. Social protection spending ability to implement social protection reforms and in UMICs (% of GDP) promote socioeconomic inclusion. The economic Social Protection Spending as % of GDP difficulties of recent years have slowed the restructur- in Upper-Middle Income Countries ing process, and a significant number of reforms put Georgia forward in the SIHG have yet to be fully implemented. Notably, non-contributory social assistance spending Namibia in Gabon remains well below its peers: it amounted Botswana to 0.2 percent of GDP in 2014, i.e., four times lower than UMICs and eight times lower than Africa region Iraq averages (Figure 56). Across social protection instru- Argentina ments, social assistance mechanisms receive less Kazakhstan funding than contributory instruments. In 2021, civil servant pensions (Mission 20) received 50 percent more Thailand than social security services for the disadvantaged Russian Federation (Mission 22).57 While allocations for mission 20 have steadily increased in recent years, allocations for Armenia Mission 22 have fluctuated widely.58 Moreover, most Jamaica of the spending to non-contributory mechanisms is Ecuador allocated to health insurance. Contrary to the SIHG, targeted health subsidies accounted for 89 percent Costa Rica of expenditures devoted to supporting GEF in 2015, Peru while cash transfers represented only 10 percent. Mexico Social assistance programs are not just unde­ Turkey rfinanced but also highly fragmented. The SIHG contains four types of interventions and 19 mechanisms Jordan designed for seven specific vulnerable groups. They Maldives are classified in four broad groups: (a) non-contributory health insurance schemes for GEF; (b) cash transfers Azerbaijan for elderly, widowed, and disabled citizens; (c) family Malaysia benefits (i.e., childbirth bonus and schooling costs for children under the age 18); and (d) in-kind benefits Fiji UMIC Africa (free school lunch, subsidies for water and electricity). Montenegro Average Region Average However, this excessive fragmentation keeps admin- Gabon istrative costs high and complicates coordination and implementation. It also dilutes the already limited 0 1 2 3 4 5 6 7 financing provided to non-contributory social assis- CCT Food and in-kind UCT Fee waivers tance programs. For example, family and school cash Social pension Other Social Assistance School feeding Public works 57 Based on the 2021 Finance Law, public pensions were allocated FCFA   70.5 million and social security programs FCFA 52.6 million. Source: ASPIRE 58  Mission 20 spending increased from FCFA 26 million in 2014 to FCFA 71 million in 2021. Mission 22 spending increased from FCFA 36 million in 2014 to FCFA 53 million in 2021, with substantial year-to-year variation. For example, funding was FCFA 90 million in 2019 before abruptly dropping to FCFA 47 million the following year. Conversely, funding for Mission 20 remained relatively constant over the same period: FCFA 62 million in 2019 and FCFA 60 million in 2020. TOWARD MORE INCLUSIVE AND GREENER GROWTH 41 TABLE 5. Coverage of non-contributory social assistance COVERAGE OF TRANSFERS (%) QUINTILES OF PER CAPITA CONSUMPTION NON- TRANSFER IN FRENCH TOTAL Q1 Q2 Q3 Q4 Q5 POOR POOR URBAN RURAL Health insurance plan for GEF Frais médicaux - GEF 20.1 15.6 17.2 19 23.9 25.6 16.4 22.1 20.9 15.8 Cash transfer for elderly, Allocations monétaires 0.5 0.4 0.8 0.7 0.2 0.2 0.7 0.4 0.6 0.2 widowed, disabled spéciales pour vieux, veufs, handicapés Monthly allowance family Allocations familiales 8.6 4.9 6.3 6.3 11.9 12.4 5.4 9.9 9.4 3.8 School year allowance Allocations de rentrée 6.2 2.8 3.2 5 8.8 10.5 2.7 7.8 6.9 2.8 scolaire Maternity grant in kind Prime à la naissance 5.9 7.8 6.1 2.5 4.1 9.9 7.3 5.1 6.1 4.2 In-kind benefits (school Autre allocations en 0.4 0.2 0.3 0.4 0.7 0.3 0.3 0.4 0.4 0.2 feeding) nature Services of the National Social Services du Fond 0.02 0.03 0.04 0.01 0.02 0 0.04 0.01 0.02 0.04 Action Fund National d’Action Sociale Source: Authors’ calculations based on EGEP 2017. allowances have been suspended since 2015 due to the bottom quintile (16 percent) to receive health insur- lack of funds. The FNAS, which was intended to pro- ance subsidies. vide income-generating support to GEF, only financed 40 business activities before being defunded in 2019. Efforts are underway to correct targeting inefficien- cies and better channel resources to the poor. In Gabon has made strides toward achieving universal 2018, the government promulgated a law redefining health insurance, but its social assistance coverage is GEF as any person of Gabonese nationality who lives limited and broadly regressive. The health insurance below the poverty line.59 This was intended as a shift subsidy, although the largest form of non-contributory away from a declarative to an objective, poverty-based support to GEF, covers less than a fifth of the poor approach. A multisectoral commission, including the (see Table 5). Conversely, it reaches a substantial share Ministry of Health and Social Affairs, CNAMGS, and of the non-poor (22 percent) and even the best-off the Department of Statistics, has developed a road- (26 percent of Q5), which suggests inefficiency. Just map to retarget GEF, based on the new poverty-based over 6 percent of the poor receive other forms of social definition, and is planning a national survey to update assistance – a share nearly the same among the non- and expand the current GEF database by the end of poor (5 percent). Family transfers (i.e., the monthly 2022. Once completed, this exercise will be the foun- family allowance and yearly school allowance) have dation for a social registry that can help target social the highest coverage, apart from the subsidized health assistance interventions to address poverty more insurance; however, both are more likely to go to the effectively and efficiently. non-poor than the poor. Analyzed differently, 63 percent of the spending on subsidized health insurance and 59 “Within the meaning of this law, every person of Gabonese nationality   67 percent of the spending on other forms of social who lives below the poverty line is considered to be an Economically Weak assistance goes to non-poor households (see Table 6). Gabonese. The poverty line is determined on the basis of a multidimensional approach combining variables related to average income, health, education, Notably, the top quintile (15 percent) was as likely as and standard of living.” 42 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE 6. Distribution of benefits DISTRIBUTION OF TRANSFERS (TARGETING ACCURACY) (%) QUINTILES OF PER CAPITA CONSUMPTION NON- TRANSFER IN FRENCH Q1 Q2 Q3 Q4 Q5 POOR POOR URBAN RURAL Health insurance plan for GEF Frais médicaux - GEF 15.8 27.6 15.2 25.9 15.5 37.4 62.6 81.1 18.9 Cash transfer for elderly, widowed, Allocations monétaires 43.7 15.6 15.3 13.3 12.1 56.2 43.8 78 22 disabled spéciales pour vieux, veufs, handicapés Monthly allowance family Allocations familiales 10.8 14.6 15.6 25.6 33.4 17.1 82.9 82.5 17.5 School year allowance Allocations de rentrée scolaire 44 8.3 13.9 14.1 19.7 47.9 52.1 89.8 10.2 Maternity grant in kind Prime à la naissance 34.7 11.8 9.7 26.6 17.2 43.1 56.9 92 8 In-kind benefits (school feeding) Autre allocations en nature 10.5 26 8.6 47.3 7.7 22.9 77.1 90.9 9.1 Services of the National Social Services du Fond National 20.2 20.2 8.1 35.3 16.2 40.5 59.5 46 54 Action Fund d’Action Sociale Source: Authors’ calculations based on EGEP 2017. In addition, a new health insurance fund for non- support across regions and country income groups poor informal sector workers was formally created (see Box 9).60 Gabon launched a food assistance pro- in 2018. The Gabonese government has made gram in April 2020, although it had limited coverage61 remarkable efforts to achieve universal health coverage, and was marred by allegations of favoritism and including by creating the CNAMGS in 2007 and then leakage.62 It also represented a small share of the total introducing health insurance funds for (i) GEF, in 2008; COVID-19 solidarity funds, with the bulk of the funding (ii) the public sector, in 2011; and (iii) the formal allocated to general subsidies and fee waivers. 63 private sector, in 2014. However, there was no public However, although the government’s preferred policy mechanism for non-GEF informal sector workers, response, universal value-added tax (VAT) and tariff who account for more than half of the workforce. exemptions on consumer goods have been shown to As thousands of current GEF are expected to become have limited impact on reducing the cost of living for ineligible because of ongoing data cleaning and retar- the poor.64 Moving forward, Gabon should strengthen geting efforts, a new fund for non-poor informal sector its social assistance system and better leverage its workers will be implemented. It aims to provide sub­ potential to offer targeted support in response to sidized health insurance for informal sector workers covariate shocks – pandemics as well as those related and foreigners otherwise excluded from the existing to climate change or global price increases. three funds – thus filling in the final gap toward universal health coverage. 60  Gentilini et al. 2020. Despite these important developments, the 61  The Food Assistance Program was allocated a budget of FCFA 5 billion (USD 8 million) to provide 31,000 food vouchers and 4,700 food kits for COVID-19 pandemic has highlighted the need for 60,000 households. a more robust and inclusive social assistance mech- 62  The distribution of food vouchers and food kits was entrusted to local authori- ties (mayors and deputies), which led to capture and leakage. Protests broke out anism. Globally and in Africa, the social protection in many locations, as people aware of the program felt unfairly left out. There response to the adverse economic impacts of the was wide criticism of the program in social and mainstream media. 63  Out of the FCFA 25 billion, electricity and water subsidies received FCFA pandemic has been unprecedented: 223 countries 7 billion, free public transportation FCFA 6 billion, food banks FCFA 5 billion, tax cuts to SMEs FCFA 3.5 billion, rent freeze compensation FCFA 2.5 billion, have invested over USD 3 trillion – 2 percent of GDP, and repatriations FCFA 1 billion. on average – in social protection measures, with social 64  General subsidies have been found to mostly benefit upper income levels, with only very small amounts (between 1 percent and 13 percent depending on the assistance representing the most prevalent form of food item) benefiting the poorest 40 percent. (Poverty Assessment 2020) TOWARD MORE INCLUSIVE AND GREENER GROWTH 43 BOX 9. The surge of social safety nets in Africa65 Africa has seen a remarkable expansion in access to social safety nets programs over the past two decades. The expansion accelerated during and in the aftermath of the global food, fuel, and financial crises of the 2000s. Just prior to the COVID-19 pandemic, 45 SSA countries – three times as many as those at the end of the 1990s – had introduced social safety nets programs to tackle chronic poverty by increasing consumption among poor and vulnerable people. The pandemic further triggered an unprecedented expansion, with social protection emerging as the policy response tool of choice both globally and in Africa. Across the continent, 48 countries adopted social protection response measures in 2020: either horizontal expansions of cash transfer programs to cover additional beneficiaries, or vertical expansions with higher benefits for existing recipients, or both. Africa’s social safety nets expansion over the past two decades was motivated by stalled progress in poverty reduction, high inequality, and persistently poor human capital outcomes. Policy makers have increasingly looked to social safety nets and modernization of delivery systems as tools to promote human capital formation. Social safety nets programs, far from being handouts, promote human capital by using cash transfers as incentives to promote school enrollment and attendance, utilizing health and nutrition services, and complementing cash with services focused on encouraging good parenting practices and delivering knowledge about child development. By targeting the poor, social safety nets can also help narrow within-country inequalities in human capital attainment. In view of SSA’s multiple challenges, the objectives and design of social safety nets have started to diversify. Today, most cash transfers are delivered with so-called accompanying measures (or cash plus) focused on: (i) early childhood development and human capital, especially through behavioral change components; (ii) shock response and mitigation in view of growing vulnerability in particular to climate shocks; or (iii) economic/productive inclusion interventions to help households build resilience to shocks and diversify their livelihoods. Such interventions typically include small productive grants, savings groups, coaching, and training, and often focus on empowering women and girls. They open a pathway to self-employment. In some contexts, public works programs provide a safety net through temporary employment; expand access to basic social infrastructure such as school and health centers; and advance greener projects such as watershed management, which can help manage climate change through adaptation and mitigation. 2.2.3  The untapped potential of social pandemic, which has highlighted the role of targeted safety nets support in helping poor households better manage risks and build resilience to cope with ever more fre- Gabon’s social protection system rests on a solid quent and disruptive shocks. While Gabon has already foundation, yet its potential for poverty reduction established safety nets instruments, the efficiency of and socioeconomic inclusion remains underuti- these initiatives has been undermined by excessive lized. Despite having put in place the building blocks fragmentation, poor targeting, and lack of funds. of an inclusive social protection system, Gabon trails behind in terms of safety nets – or non-contributory Merging current initiatives into a flagship safety net transfers targeted to the poor and vulnerable. Based program would reduce administrative burden and on their success in Latin America,66 social safety nets improve implementation efficiency. As previously dis- have become a core part of development strate- cussed, Gabon’s social assistance system includes four gies to address poverty and inequality (see Box 10). types of interventions and 19 mechanisms targeting They have further expanded during the COVID-19 seven vulnerable groups. Combining mechanisms of the same type – a process that has already started with a decree that specifies priority groups for monetary transfers and exemptions – would reduce administra- 65  Zeufack et al. 2022. https://openknowledge.worldbank.org/handle/10986/37281 66  Social safety nets, in particular conditional cash transfers (CCTs), were first tive costs, simplify coordination, and facilitate access implemented in Latin America to reduce current poverty and develop the next generation’s human capital, thus breaking the intergenerational transmission for beneficiaries. Specifically, the eight cash transfer of poverty. Pioneered in Brazil and Mexico in the late 1990s, by 2011 CCTs programs could be merged into a single flagship pro- had spread to 18 countries in the region and covered as many as 129 million beneficiaries. gram targeting poor households. The amount of the 44 GABON: COUNTRY ECONOMIC MEMORANDUM BOX 10. Proven impact of safety nets on poverty reduction and inclusion Among the best evaluated interventions in development policy, social safety nets are proven to have wide-ranging effects on poverty reduction, human capital formation, and resilience to shocks. A systematic review of 165 studies from LMICs found that non-contributory cash transfers had clear and significant impact on household consumption, access to schooling, and use of health services;67 and on secondary outcomes such as savings, productive investments, and diversification of livelihood strategies. Safety nets programs have been found to have positive impacts on household consumption and reduce poverty. Among the 79 countries for which household surveys are available (including 23 SSA countries), household consumption rose by an average USD 0.74 for each USD 1.00 transferred, making transfers an effective way to alleviate poverty and reduce inequality.68 Concerns about the use of cash transfers to buy alcohol, tobacco, or other temptation goods have been shown to be unfounded.69 Far from being handouts that create dependence and passivity, safety nets facilitate productive investments, improve earnings, and boost economic self-reliance. Beneficiary households are between 4 and 20 percentage points more likely to be saving relative to comparable non-beneficiary households and evaluations suggest that households are also using transfers to reduce borrowing and indebtedness. Livestock ownership rose an average of 34 percent across seven programs reporting on this outcome. Moreover, impacts are reinforced when involving a plus approach, supporting beneficiaries to start or grow income-generating activities. The recent pandemic experience has also demonstrated the critical role safety nets play in responding to covariate shocks. Cash transfer programs help households build resilience to shocks, including climate shocks, by enabling them to protect consumption in the face of shocks and to protect and invest in productive assets (particularly livestock holdings) to diversify livelihoods and strengthen coping mechanisms. Safety nets have strong impacts beyond direct beneficiaries, making them a smart investment. Safety nets have proven to have a multiplier effect: for each USD 1 transferred to beneficiaries, non-beneficiaries can experience estimated income increases of USD 0.30 or more. Together with the impacts on beneficiaries, these additional income effects lead to local economy multipliers of from 1.08 to 1.84; i.e., each dollar transferred through a social safety net to a beneficiary household is projected to add more than one dollar to the local economy. transfer or access to complementary services could from several limitations. First, the criteria are broad: vary according to the characteristics of the house- 69 percent of households in Gabon meet at least one of hold as a whole (e.g., household size) or of individual the vulnerability criteria. This is mainly driven by the fact members (e.g., disability status); but distribution mech- that most households have at least one child (59 per- anisms, monitoring and evaluation systems, and griev- cent across segments 1 and 2); but the share remains ance and redress instruments would be combined and high even when only focusing on the other dimensions managed by the same agency or institution. (28 percent across segments 3 to 7). Second, there is overlap between the segments. For example, most Moreover, consolidating benefits at the household widows are women over the age of 60 and therefore level would improve targeting accuracy and reduce doubly counted under segments 3 and 4. The use of vul­ duplication. The SIHG identifies seven vulnerable nerability criteria at both household level and individual groups, called segments, in need of government assis- tance (see Table 7). However, this approach suffers level leads to further duplication. Among households that meet at least one vulnerability criterion, almost a third (28 percent) meet two or more across different 67  Bastagli et al. 2017. Hyperlink : https://www.cambridge.org/core/journals/journal- household members. Therefore, targeting households of-social-policy/article/impact-of-cash-transfers-a-review-of-the-evidence- from-low-and-middleincome-countries/F8273371A30A504CBDCAFA32BF would reduce duplication and improve efficiency. 6F2EAD. 68  Beegle et al. 2018. Channeling benefits to poor households most in need 69  Evans and Popova 2017. https://www.journals.uchicago.edu/doi/full/10.1086/ 689575. of government assistance would further maximize TOWARD MORE INCLUSIVE AND GREENER GROWTH 45 TABLE 7. Distribution across the seven vulnerability segments (EGEP 2017) TOTAL POOR POOR AS HOUSEHOLDS HOUSEHOLDS SHARE OF SHARE NUMBER SHARE NUMBER TOTAL Segment 1 Households (only father or two parents) with 1–2 children 26% 139,666 5% 27,848 20% Households (only father or two parents) with 3–4 children 16% 85,610 7% 34,572 40% Households (only father or two parents) with 5+ children 9% 47,861 5% 27,107 57% Segment 2 Woman (only adult in hh) 18+ with at least one child 7% 36,584 2% 10,112 28% Segment 3 60+ years old living alone 3% 15,248 0% 2,118 14% 60+ years old 13% 66,445 4% 23,719 36% Segment 4 Widows living alone 2% 8,577 0% 1,482 17% Widows living with at least one child 4% 23,454 2% 11,701 50% Segment 5 person with diability 15% 81,851 5% 25,890 32% Segment 6 students 18+ living alone 1% 7,359 0% — 0% Segment 7 orphans 1% 4,606 0% 2,488 54% Total 517,262 167,038 Any of the 7 categories above 69% 366,372 21% 109,912 30% Any of segments 3 to 7 28% 149,831 8% 44,473 30% Source: authors’ calculations based on EGEP 2017. impacts on poverty reduction and improve value for inclusive safety nets program. Gabon trails behind money. Not all seven segments are intrinsically eco- its peers in terms of spending on safety nets. To reach nomically vulnerable: for example, a woman may be the mean of its income group, Gabon would need to living alone with her children because she was financially spend an additional 1.5 percent of GDP – or around independent enough to get away from an abusive rela- USD 225 million annually. Among Gabon’s income tionship. Many people with disability lead productive level peers in the region, Botswana spends six times and independent lives. Indeed, the share of the poor more (1.3 percent of GDP), while Namibia, South Africa, among the seven segments is not higher than the share and Mauritius all spend over 15 times more (3–3.4 per- of the poor in the overall population (30 percent vs. cent of GDP). To catch up with the top performers, 33 percent). A few categories are, in fact, regressive: Gabon would thus need to spend an additional only 20 percent of households with 1–2 children are 3 percent of GDP (USD 450 million). Alternatively, poor; of the elderly or widows living alone, 14 percent countries unable to increase government spend- and 17 percent, respectively, are poor; and no students ing on safety nets have accessed donor financing living alone are poor (see Table 7). Providing govern- instead. The share of safety net spending provided ment assistance to individuals or households who do by development partners ranges from 0 percent in not appear to be in need is inefficient, especially in a Namibia, Mauritius, Gabon, Botswana, Angola, and context where social assistance coverage among the the Seychelles to 100 percent in the Central African poor remains very low. Targeting assistance based Republic (CAR), Congo, Democratic Republic of on economic status rather than social vulnerability is Congo (DRC), Malawi, Somalia, and South Sudan, hence more likely to be perceived as fair and achieve with most other African countries relying on a mix of the desired poverty-reduction and inclusion impacts. government and donor financing.70 Substantially higher investment, either from gov- ernment or development partners, is needed for an 70  Beegle et al. 2018. 46 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE 8. Simulated impacts of safety nets household characteristics, the simulations assume on poverty reduction a constant amount for simplicity. Note also that this represents an underestimate of the potential impacts. SCENARIO A SCENARIO B Based on these assumptions, conservative estimates Safety nets spending 1.5% 3% show that safety nets could reduce poverty by 7 per- (% of GDP) centage points (to 26 percent) and extreme poverty by Safety nets spending USD 223,942,334 USD 451,770,000 (US amount) 3 percentage points (to 5 percent). Investments to the Number of poor 176,938 176,938 scale of best-performing African UMICs could reduce households poverty by almost half (to 20 percent) and essentially Yearly hh transfer (average) USD 1,139 USD 2,553 eradicate extreme poverty (to 3 percent). The results Simulated poverty rate (baseline: 33.4%) hold when accounting for moderate targeting errors. 100% targeting accuracy 26.4% 20.5% 90% targeting accuracy 27.2% 22.1% Safety nets can contribute to a range of other devel- 80% targeting accuracy 28.0% 23.2% opment objectives, especially when cash transfers Simulated extreme poverty rate (baseline: 8.2%) are coupled with accompanying measures. Safety 100% targeting accuracy 5.3% 2.8% nets programs are increasingly leveraged to promote 90% targeting accuracy 5.6% 3.4% investments in human capital and reduce the inter- 80% targeting accuracy 5.9% 3.8% generational transmission of poverty. To do so, pro- grams may promote the adoption of good practices Gabon could achieve transformative effects on or the use of specific basic services by encouraging or poverty and inequality if it gradually matched the requiring health care visits, growth monitoring ses- UMIC spending on safety nets. Table 8 below pres- sions, or school attendance. These mechanisms or ents two scenarios depending on the annual budget conditionalities used to promote positive behavior allocated to safety nets: scenario A assumes spending or service use may include verification of compliance equivalent to 1.5 percent of GDP (USD 225 million), and, increasingly the norm, be clearly labelled with the while scenario B assumes spending equivalent to 3 per- intended objective. 72 Moreover, additional activi- cent of GDP (USD 450 million).71 Although expressed ties layered on top of the cash transfers may include the as a share of GDP, the funding for safety nets may be provision of short-term skills training, start-up capital, provided by the government, development partners, mentorship, and savings support to improve income or a mix of the two. Next, given Gabon’s relatively small generating capacity. Indeed, there has been a surge of population size, the simulations assume that the safety economic inclusion programming in Africa based on nets program would aim to cover all poor households. global evidence that a multifaceted, time-bound pack- Based on a population size of 2.26 million inhabitants age of support can sustainably increase earnings and and a poverty rate of 33.4 percent, the number of enable beneficiaries to lift themselves out of poverty.73 poor households in estimated at 176,938. The yearly Robust delivery systems, including a social registry, amount of the direct transfers to poor households, are key for enabling a timely and efficient response assuming 10 percent administrative costs, is estimated to shocks. As programs grow, investment in delivery at either USD 1,139 or USD 2,553, depending on platforms is needed – i.e., social registries, inter­ the scenario. While the amounts may vary based on operable management information systems, and digital payment systems – to allow administrative cost savings 71  For simplicity, we assume all safety nets spending goes to cash transfer pro- grams targeting the poor. In practice, a variety of instruments can be adopted and facilitate planning and coordination. Effective to further tailor support and strengthen its impact as discussed in this section. Government financing of the health insurance subsidy also remains critical and should unquestionably be maintained. Simulations subtracting the cur- 72  Hyperlink: https://www.nber.org/papers/w19227#:~:text=We%20use%20 rent allocation to GEF health insurance (using 1.36 percent and 2.86 percent a%20large%20randomized,as%20an%20education%20support%20program. of GDP) yield comparable results and are available upon request. 73  State of Economic Inclusion Report 2021, WB. TOWARD MORE INCLUSIVE AND GREENER GROWTH 47 delivery systems are also key for enabling govern- are a better predictor of future academic success ments to respond to shocks, such as those related to than reading skills, attention skills, or socioemotional climate change or food price increases, promptly and behaviors. Focus should be put on underserved efficiently. In particular, social registries (or systems that rural areas and targeting children from poor families. collect socioeconomic information and identify poor Furthermore, students in high school require STEM and vulnerable households) provide governments with proficiency to succeed in coursework that serves as a a central mechanism to identify potential beneficiaries gateway to technological literacy and digital skills as and coordinate different programs. In Gabon, data well as higher education. The government can make collected during the GEF recertification process could significant efforts to promote math and science skills, be leveraged to form the foundation for a social regis- but also softer STEM skills like creativity and problem- try serving a variety of social assistance programs. solving, encouraging schools to find new ways to improve fundamental learning, even by devoting a few hours per Finally, safety nets are essential for promoting socio- week to teaching methods that help students learn economic inclusion and contributing to green growth. effectively. Short-term, this would necessitate the Notwithstanding its clear links to poverty reduction, the upskilling of existing primary school teachers in math- transition to a green economy risks disruptions in labor ematics along with extensive STEM teacher training; markets that can disproportionately affect the poor. In long-term, reevaluating and upgrading teacher train- addition, due to their initial poverty and their relatively ing programs to improve pedagogical aspects of their high dependence on environmental capital for their math and sciences curricula. The government can also livelihoods, the poor are likely to suffer most due to their work to promote teaching and learning approaches resource constraints. Therefore, green growth policies that foster both cognitive and socioemotional skills. should be designed to maximize benefits and minimize costs to the poor and most vulnerable.74 This includes Expanding access to skills and higher education ensuring that skills are upgraded and jobs are decent; will require diversifying student financing options vulnerable groups are not marginalized or left behind; to support marginalized and vulnerable youth. and revenues from fiscal reforms are also channeled into Tuition fees and the costs of school supplies often broader social protection and health measures. In partic- make it difficult for these groups to pursue studies ular, inclusive and shock-responsive safety nets have at secondary and higher levels. Specific policies an important role to play in easing the burden of tran- must be developed to address the primary imped- sition on the most vulnerable by improving their eco- iments to educating youth. Among the measures to nomic resilience and strengthening the social contract. be implemented are ensuring that labor-market- oriented school curricula are available. The government 2.3  Recommendations can also take steps to encourage more qualified ado- lescents from the last two quintiles to continue their 2.3.1  Invest in education and policies education, especially in growth sectors and STEM. promoting skills More effort should be made to expand remedial pro- grams in order to improve the quality in the pipeline of To improve primary school children’s STEM profi- those transitioning from primary school who are of ciency, the government should improve overall edu- secondary-school age from the lowest two quintiles, cation quality by focusing on basic STEM instruction which should also help to reduce repetition rates. at the preschool and primary levels (Table 9). STEM is Concerning youth of secondary-school age who have more likely to be successful if taught early, and evidence dropped out, policies have been planned aimed at suggests75 that mathematics skills entering kindergarten the integration of young people in situations of vulner- ability. The Government could step up efforts in favor  Hyperlink: https://imagebank2.worldbank.org/search/16283976. 74  Duncan et al. 2007. 75 of the effective implementation of second chance and 48 GABON: COUNTRY ECONOMIC MEMORANDUM acceleration programs, along with other skilling oppor- (d) the number of professionals providing training at the tunities, to help these young people reintegrate into institution, along with workplace exposure of trainers. the formal education stream (either general or TVET) These recommendations are also valid for universities. or transition into the workforce. For trainees in pre­ tertiary TVET programs, enrollment of youth from New jobs are emerging and will continue to emerge underprivileged families can be increased through as countries commit to a green transition, gener- voucher schemes and stipends,76 and, for example, free ating new skills needs and also opening up new skills training packages. Regarding tertiary education, frontiers for scientific research in the country and some schemes offer low-interest loans and targeted the region. Gabon’s government must address the scholarships for job-relevant training areas such as challenges of meeting skills requirements for green STEM or for specific youth groups such as girls.77 jobs. Some actions are underway to diversify the offer of TVET, such as the construction of new cen- Adapting Gabon’s educational system to the ters (including the International Multisectoral Training country’s employment opportunities addresses the and Vocational Education Centers in Nkok, Mvengué, root causes of youth skills mismatch and improves and Ntcengué, as well as centers dedicated to train- governance, with greater private sector involvement. ing in the sectors of ICT, construction and public Participation of the private sector in skills development works, the wood industry, and logistics and transport). in Gabon remains challenging, but the government There are other concrete actions that the government has made a considerable effort to establish a policy of Gabon could take: (i) As in Chile, set up a well- framework for PPPs. However, more efforts and specific managed fund based on tax revenues or oil and mining policies are needed to build trust with the private sector, revenues,80 (which should be distinct from the current reinforcing micro-level collaboration with training companies and other legal entities’ contribution to centers to develop relevant skills. The following steps TVET81) to finance qualified but marginalized students’ must be taken to accomplish this: (i) increase private tertiary education (for example, in the STEM fields). sector participation to 50 percent of TVET institution The government can send some of these students boards; (ii) improve collaboration between schools and to other African countries with stronger programs. The businesses; each TVET institution must have a part- fund can also support green research; (ii) Companies nership agreement with the representatives of the must set up a skills fund (funded, for instance, through relevant private sector,78 these PPPs to include at a levies) which can be used for workforce upskilling, minimum internships, apprenticeships, training by especially for the green and digital economies. Man- professionals, work-exposure of trainers; (iii) improve agement of the fund should be given to the compa- the autonomy and accountability of TVET institutions nies. (iii) Forming PPPs to create an innovation hub/ through performance-based contracts between the tech park around a few priority industries in clusters institution and the government. Performance criteria (e.g., agriculture/forestry/fisheries) to promote private could include (a) strong private sector representation sector skilling and support youth job placement after on the board of directors; (b) enrollment in job-relevant training at these hubs/parks (e.g., Sèmè city in Benin82 training,79 including youth from the lowest quintiles and and Edo Tech Park in Nigeria83). In addition to the a proportion of females; (c) graduate numbers and rates of employment within one year of graduation; and 80  African Development Bank. 2016. 81  Since January 1, 2017, companies, other legal entities subject to corporation 76  For example, the Tanzania Skills Development Fund Bursary Scheme. tax, and natural persons subject to personal income tax in Gabon must pay a 77 Examples include Rwanda’s student loan and bursary program, and the   contribution to vocational training (CVT) levy to finance technical and voca- Ghana Education Trust, which dedicates a share of the value added tax (VAT) tional education and training (TVET). This is meant to help organizations and to scholarships for gifted but financially needy students. (Source: Western and structures implement vocational training programs. Central Africa [AFW] Education Strategy, WB 2022). 82  Sèmè City in Benin. https://www.semecity.bj/en/ 78  The PPP model developed under PRODECE could be utilized. 83  Edo Tech Park. https://guardian.ng/news/obaseki-inaugurates-edo-tech-park- 79  This includes ICT. to-produce-global-talents/ TOWARD MORE INCLUSIVE AND GREENER GROWTH 49 TABLE 9. Gabon: Matrix of policy reforms in education and skills promotion, and time frame OBJECTIVES POLICY RECOMMENDATIONS TIME FRAME Improve primary school children’s STEM I.  Devote a few hours per week to teaching methods that help students   1.  ST skills proficiency. learn effectively.   2.  Re-skill existing primary school teachers in STEM. ST Encourage schools to find new ways to improve fundamental learning.   3.  MT Make significant efforts to promote calculation learning.   4.  LT Assess and upgrade teacher training programs to enhance pedagogical   5.  LT aspects of their STEM curriculum. Address the underlying causes of exclu- II.  Encourage more qualified adolescents from the last two quintiles to   6.  ST sion of certain population groups from continue their education. the school system. Expand remedial programs to improve the pipeline of low-income   7.  ST secondary students. Develop school curricula more oriented to labor markets.   8.  MT Provide second chance, acceleration, and skills programs to help young   9.  MT people reenter formal education or enter the workforce. Strengthen financial support for low-income youth to pursue second- 10.  LT ary and higher education. Adapt Gabon’s educational system to III.  Improve collaboration between schools and businesses. 11.  ST the country’s employment opportuni- Increase private sector participation to 50 percent of TVET institution boards. 12.  MT ties. Improve the autonomy and accountability of TVET institutions by means 13.  LT of performance-based contracts with the government. Address the challenges of meeting IV.  Encourage individuals and businesses to invest in green growth skills 14.  ST skills requirements for green jobs. development. Develop STEM-based job market skills at the tertiary level. 15.  MT Improve green job career guidance. 16.  MT Enhance systems for identifying and anticipating skills requirements. 17.   LT above, specific policies must be developed to the measures to be implemented are, but are not lim- address the primary barriers to youth learning those ited to: (i) encouraging individuals and businesses to skills. In SSA, energy, construction, and agriculture invest in green growth skills development; (ii) improving will create the largest number of green jobs in com- green job career guidance; (iii) enhancing systems ing years.84 Compared to non-green jobs, jobs in the for identifying and anticipating skills requirements; green economy typically require higher levels of cog- (iv) encouraging mutual learning in order to green nitive and interpersonal skills as well as prior prepa- TVET and skills development; as described in Box 5, the ration through formal education, work experience, Singapore Skills Development System (SSDS) may serve and on-the-job training.85 Therefore, education is the as a model for developing nations such as Gabon. only way to build the skills to power the transition to green and resilient economies and jobs.86 Among 2.3.2  Socioeconomic inclusion through safety nets for the poor 84  United Nations Women and African Development Bank 2021. 85  Consoli et al. 2016. Social protection is a powerful tool to reduce pov- 86  Korea has long offered an exemplary curriculum on environmental issues to secondary students, including education model schools and school-forest erty and inequality, improve labor market outcomes, initiatives. In the Philippines, the Dark Green Schools program offers a distinc- and provide a cushion against shocks. While Gabon’s tive whole-institution approach and accreditation system for environmental topics. (Source: AFW Education Strategy, WB 2022) social protection system has steadily evolved over the 50 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE 10. Matrix of policy reforms for Second, a flagship safety nets program for GEF would socioeconomic inclusion, and time frame improve both efficiency and cost-effectiveness. Gabon’s social assistance system is not just under­ POLICY RECOMMENDATIONS TIME FRAME financed but also highly fragmented, with the 19 inter- Increase spending on non-contributory social 1.  ST ventions for seven vulnerable groups across four pillars assistance. set out in the SIHG. The large number of instruments Establish a flagship safety nets program for 2.  ST poor households. keeps administrative costs high and complicates 3.  Expand labor market interventions for poor MT implementation, while the multiplicity of vulnerable youth and women. groups leads to coordination challenges and dupli- 4.  Invest in shock-responsive delivery systems ST cation. Therefore, it is recommended that the gov- (social registry, digital payments). ernment consolidate its cash transfer initiatives into a single, flagship safety nets program targeting poor last decade, its efficiency has been undermined by households. The program should rely on three princi- inadequate funding, excessive fragmentation, and ples to maximize its impact on poverty reduction and regressive coverage. To realize the full potential of ensure value for money: (a) poverty, or GEF status, as social protection – particularly non-contributory social the primary eligibility condition, with additional social assistance – and ensure that the gains from Gabon’s vulnerability criteria potentially used to further tailor economic growth are more equally shared among the the support package; (b) the household as the unit population, the government should implement the of targeting, not only because poverty is estimated following reforms (Table 10): at household level, but also to reduce overlaps and implementation complexity; and (c) integrated targeting, First, Gabon should close the gap with its peers in distribution, and monitoring and evaluation (M&E) terms of social assistance financing. At 0.2 percent systems. Finally, the program could consist exclusively of GDP, Gabon’s social assistance spending is substan- of cash transfers – appropriate especially in emergency tially lower than the UMIC average of 1.7 percent of situations – and/or cash transfers plus accompanying GDP. Nevertheless, achieving inclusive growth and sus- measures to promote human capital development and tainable poverty reduction depends on adequate and economic inclusion. reliable funding for non-contributory social assistance programs. Potential strategies to increase the social Third, labor market interventions for the poor and assistance budget include reallocating funding from vulnerable, especially youth and women, would pro- general subsidies and tax exemptions to targeted sup- mote economic inclusion and self-reliance. Gabon’s port for the poor and reinforcing contributory schemes labor market is characterized by high unemployment and revenue collection. Therefore, the government rates (26 percent) and informality (53 percent), with should guarantee adequate funding each year to go the poor, women, and youth being particularly dis- beyond health insurance subsidies and establish an advantaged.88 Expanding safety nets coverage and inclusive safety nets program for poor households. In performance will facilitate productive investments addition, spending increases should be coupled with and improve economic resilience. In addition, comple- efforts to improve effectiveness and accountability by mentary interventions to support income-generating reducing administrative costs and improving budgeting activities (IGAs) would strengthen these impacts and and expenditure data collection and analysis.87 provide a path to self-reliance. Layered on top of cash 87  There also needs to be more clarity and accuracy in the budget nomenclature to enable the government to properly evaluate and plan expenditure. The autho- rities need to undertake household surveys on a regular basis to improve the 88 The unemployment rate includes discouraged workers (12 percent). The   quality of the pre-analysis plans (PAPs), (PER 2020). informal sector rate includes those working for households (16 percent). TOWARD MORE INCLUSIVE AND GREENER GROWTH 51 transfers, time-bound IGA support interventions have African Development Bank. 2016. Chile’s Fiscal Policy Imple- been proven to boost earnings and asset accumula- mentation and Mining Revenue. A Case Study. https://www. afdb.org/fileadmin/uploads/afdb/Documents/Publications/ tion, thus providing a potential exit strategy for safety anrc/CHILE_CASESTUDY_ENG__HR_PAGES.pdf nets beneficiaries able to lift themselves out of poverty.89 Andrews, Colin, Aude de Montesquiou, Ines Arevalo Sanchez, Expanding and strengthening active labor market pro- Puja Vasudeva Dutta, Boban Varghese Paul, Sadna grams for youth is also important to address existing Samaranayake, Janet Heisey, Timothy Clay, and Sarang unemployment and inactivity challenges while also Chaudhary. 2021. The State of Economic Inclusion better positioning Gabon to capitalize on its demo- Report 2021: The Potential to Scale. Washington, DC: graphic dividend. World Bank. https://openknowledge.worldbank.org/ handle/10986/34917. Fourth, investments in modern and robust delivery Bastagli, Francesca, Jessica Hagen-Zanker, Luke Harman, systems are key to ensuring the efficiency and Valentina Barca, Georgina Sturge, and Tanja Schmidt. 2019. “The Impact of Cash Transfers: A Review of the shock-responsiveness of the sector. Social assis- Evidence from Low- and Middle-Income Countries.” tance has been the preferred policy response tool Journal of Social Policy 48 (3): 569–94. doi:10.1017/ during the COVID-19 pandemic both globally and S0047279418000715. in Africa. Countries able to mobilize support fastest Beegle, Kathleen, Aline Coudouel, and Emma Monsalve. and most efficiently were those with robust systems in 2018. “Realizing the Full Potential of Social Safety Nets place to identify those in need and make the transfers. in Africa.” Africa Development Forum. Washington, DC: World Bank. https://openknowledge.worldbank.org/ As shocks become increasingly common and severe, handle/10986/29789. including those related to climate change and global Benhassine, Najy, Florencia Devoto, Esther Duflo, Pascaline price increases, developing robust and inclusive delivery Dupas, and Victor Pouliquen. 2013. “Turning a Shove systems is more important than ever. Gabon is well into a Nudge? A ‘Labeled Cash Transfer’ for Education.” placed to build on the ongoing targeting reform and Working Paper 19227. Working Paper Series. National GEF database to establish a social registry. It should Bureau of Economic Research. https://doi.org/10.3386/ incorporate best practice in this area and support w19227. Consoli, Davide, Giovanni Marin, Alberto Marzucchi, and dynamic inclusion rather than rely on census sweeps, Frabcesci Vona. 2016. “Do Green Jobs Differ from Non- which are not only costly but also prone to rising inclu- Green Jobs in Terms of Skills and Human Capital?” sion and exclusion errors as the information becomes Research Policy 45 (5): 1046−60. out of date.90 In addition, a foundational ID system is Duncan, Greg J., Amy Clasessens, Aletha C. Huston, Linda S. critical for ensuring access to safety nets and other Pagani, Mimi Engel, Holly Sexton, Chantelle J. Dowsett, basic services, while a digital payment system has the et al. 2007. “School Readiness and Later Achievement.” potential to improve transparency and traceability Developmental Psychology 43(6): 1428–46. https://doi.org/ 10.1037/0012-1649.43.6.1428. while also promoting financial inclusion. Evans, David K., and Anna Popova. 2022. “Cash Transfers and Temptation Goods.” Economic Development and Cultural Change 65 (2). https://www.journals.uchicago. References edu/doi/full/10.1086/689575. Gentilini, Ugo, Mohamed Almenfi, Ian Orton, John Blomquist, African Development Bank. 2017. A Toolkit of Policy Options Pamela Dale, Luciana De la Flor Giuffra, Vyjayanti Desai, to Support Inclusive Green Growth. https://www.afdb.org/ et al. 2020. Social Protection and Jobs Responses to fileadmin/uploads/afdb/Documents/Generic-Documents/ COVID-19 : A Real-Time Review of Country Measures. A%20Toolkit%20of%20Policy%20Options%20to%20 Washington, DC: World Bank Group. Support%20Inclusive%20Green%20Growth.pdf. ILO. 2020. State of Skills – Gabon Country Brief. https://www. ilo.org/wcmsp5/groups/public/---ed_emp/---ifp_skills/ documents/genericdocument/wcms_742205.pdf.  Andrews, Colin et al. 2021. 89 Kuruvilla, Sarosh, Christopher K, Erickson, and Alvin  Leite, Phillippe et al. 2017. 90 Hwang. 2002. “An Assessment of the Singapore Skills 52 GABON: COUNTRY ECONOMIC MEMORANDUM Development System: Does It Constitute a Viable Model People of Western and Central Africa. Washington DC: for Other Developing Countries?” World Development World Bank. 30(8): 1461–76. DOI:10.1016/S0305-750X(02)00046-3. World Bank. 2020. Gabon Poverty Assessment. Washington Leite, Phillippe, Tina George, Changqing Sun, Teresa Jones, DC: World Bank. and Kathy Lindert. 2017. “Social Registries for Social World Bank. 2022. Macro and Poverty Outlook. Washington Assistance and Beyond: A Guidance Note and Assess- DC: World Bank. ment Tool.” Social Protection & Labor Discussion Yusuf, Shahid and Nabeshima, Kaoru. 2012. Some Small Paper No. 1704. Washington, DC: World Bank. https:// Countries Do It Better: Rapid Growth and Its Causes openknowledge.worldbank.org/handle/10986/28284. in Singapore, Finland, and Ireland. Washington DC: Viboudoulou Vilpoux, Mervy Ever, Abdoullahi Beidou, World Bank. https://openknowledge.worldbank.org/ Akakpo Domefa Konou, Alice R.Ouedraogo, Clelia handle/10986/2243 Rontoyanni, Johan A. Mistiaen, and Ambar Narayan. Zeufack, Albert G., Cesar Calderon, Alain Kabundi, Megumi 2022. Gabon – COVID-19 Impact Monitoring at the Kubota, Vijdan Korman, Dhushyanth Raju, Kaleb Girma Household Level. Washington, DC: World Bank Group. Abreham, et al. 2022a. “Macro and Poverty Outlook.” World Bank. 2022. Western and Central Africa Education Africa’s Pulse 25. Washington, DC: World Bank. https:// Strategy From School to Jobs: A Journey for the Young openknowledge.worldbank.org/handle/10986/3728. CHAPTER 3 TOWARD A MORE FAVORABLE BUSINESS ENVIRONMENT 3.1  Introduction Gabon has a pressing need to improve the investment climate and economic governance. Persistent challenges related to governance and the investment climate, coupled with lack of sound fiscal policy and budgetary planning, hinders the development of a strong private sector and prevents effective creation of a diversified economy. A competitive private sector is crucial for efficient allocation of capital and resources, driving innovation and the diffusion of technology while leading the creation of quality jobs. Markets and policies should support the emergence of new local firms that challenge unsustainable incumbents. Business environment reforms should help remediate key constraints faced by businesses through their lifecycle. In order to incentivize greater private investment across different sectors, Gabon could intensify its efforts to improve the overall environment for doing business. Government needs to enable the private sector to realize its potential. The private sector serves as the main engine in this process, while the government plays a critical role by devising policies and regulations that facilitate private sector participation. To further the diversification agenda and also to mitigate the economic impact of the COVID-19 pandemic, the country has designed a strategy focusing on supporting seven key sectors identified as growth promoters: mining, hydrocarbons, agriculture, fishing, trade, tourism, and energy. While the initiative to develop non-oil sectors is underway, a significant shift toward more dynamic tradable sectors is yet to be achieved. Gabon’s economic growth is also inhibited by the dominance of SOEs.91 SOEs in Gabon operate across many sectors – including but not limited to the energy sector, extractive industries, and public  While there is no agreed universal definition of SOEs, for the purpose of the analysis, SOE is a legal entity that is majority owned or controlled 91 by a national or local government, whether directly or indirectly, or where the government has substantial minority ownership. This definition is drawn from the Approach Paper, World Bank Group Support for the Reform of State-Owned Enterprises, 2007–2018. Independent Evaluation Group (IEG). https://documents1.worldbank.org/curated/en/107181548340490150/pdf/World-Bank-Group-Support-for-the-Reform-of-State- Owned-Enterprises-2007-2018-Approach-Paper.pdf. 53 54 GABON: COUNTRY ECONOMIC MEMORANDUM utilities where the government maintains monopolies. A defining feature of Gabon’s sectoral landscape is In this context, the government may be tempted to the presence and dominance of SOEs that inhibit grant certain privileges to SOEs that risk an unlevel private sector competition and development by playing field to the detriment of the private sector. crowding out possible resources that may help Government support for SOEs and inadequate assis- strengthen private sector firm capabilities. SOEs tance for small enterprises impede the emergence of tend to have an informally induced preferential advan- a vibrant private sector. The problem is further exac- tage compared to private companies, even though erbated by inadequate governance, involving issues there are no laws that specifically accord preferential with effective service delivery, and lack of institutional treatment. Government support for SOEs and inade- capacity, both of which inhibit the creation of a busi- quate assistance to small enterprises tend to limit busi- ness climate conducive to private sector competitive- ness-led growth. ness and investment. The state’s presence through SOEs acts as a barrier This chapter first looks at economy-wide barriers to contestable markets and creates an uneven play- hampering private sector growth and investment ing field for private businesses. This can discourage outside of extractive industries. Second, the chapter entry by private businesses and it lowers investment in provides insight on how to restore competitiveness by economic activity that enhances productivity. Years of leveraging FDI and reducing price controls and dis- poor governance and under-investment in the private tortions. The chapter concludes by providing a closer sector have cost the country millions of dollars, annu- look at the constraints faced by the afforestation and ally, and also affected the country’s level of competi- wood product manufacturing sectors,92 and provides a tiveness. A preference for the public sector along with set of recommendations. challenges in the investment climate have thus con- tributed to a small formal private sector. 3.2   The private sector is key to job SOEs also tend to be – both explicitly and implicitly – creation and growth the engine of employment, as many small and medium enterprises (SMEs) in the private sector exist as The private sector is central to growth and job cre- part of the value chain feeding into SOEs. This cre- ation, but in Gabon it remains underdeveloped and ates a model of employment that accords great power struggles to drive long-term transformation of the to a sectoral landscape dominated by the presence economy. Under-investment from the private sector of SOEs. Formal employment makes up only 47 per- in an economy that has historically been dominated cent of total employment. Fifty percent of formal by the public and publicly controlled extractive sec- employment is in the public sector, and only 23 per- tors has prevented the private sector from building its cent of the active population work for formal private productive capabilities and, in turn, from contribut- employers, a small fraction of which is in the oil and ing to a sustainable structural transformation. The size mining sectors. distribution of companies is skewed toward micro and small-scale businesses (less than 20 employees) – 90 per- Private sector employment tends to be concentrated cent are considered micro or small. Larger companies in the services sector (56.4 percent in 2019), and account for about 10 percent of enterprises, prevalent very few jobs are available elsewhere. Official primarily in the extractive industries sector. unemployment has remained high, hovering near 20 percent over the last 20 years, in part due to the economy’s reliance on the oil sector, which generates few jobs, as well as rigid labor regulation and skills mismatch.  The sectoral deep dive is based on a newly developed diagnostic tool, the 92 Green Investment Climate Diagnostic (GICD). Further, Gabon’s overall employment-to-population TOWARD MORE INCLUSIVE AND GREENER GROWTH 55 ratio has been low – below structural and regional sectors, improve the business environment to peers. The figure is particularly pronounced for women attract job-creating investment, and build up the in Gabon – only about 40 percent of women are in the private sector and the productivity and growth of labor market (as opposed to 64 percent of men), with small firms. The country has made some effort in line even lower employment in industry, at 2.72 percent with the reform agenda set out in the PSGE, namely, (against 14.1 percent for men). It is crucial for the addressing competitiveness and building up priority country to foster the development of more formal jobs – sectors that have strong growth potential. These efforts across sectors and especially in urban centers – to be have recently begun to bear fruit with a slight accelera- able to accommodate a growing urban population. tion of private sector development, but the hoped-for private sector dynamism and associated employment The private sector, and SMEs in particular, can serve creation have yet to materialize. as a force for economic diversification and an engine for employment generation. SMEs represent 90 per- cent of total formal companies, but account for only 3.3   Barriers to Private Sector 30 percent of formal employment. Agriculture, fish- Development (PSD) ery, agribusiness, wood and forestry, construction, and tourism sectors have the potential to provide avenues As a country that has historically relied on its public for job creation and growth but remain underdevel- sector to create jobs through the distribution of oil oped due to lack of investment and effective policies. rent, the development of the private sector would The focus on some of these factors is only recent and be key for Gabon. Developing the private sector will will require years to manifest into sustainable job and help achieve the diversification desired – i.e., facilitate wealth creation considering the existing challenges the shift from an oil-reliant economy – and spur sus- and non-competitiveness (on international markets). tainable growth founded on the creation of value. To this end, enhancing investment competitiveness and The ICT sector is one that is promising as it has high improving the business climate and economic gover- multiplier effects; and leverages Gabon’s compar- nance will likely create a conducive environment to pri- ative advantages within the region while sidestep- vate sector development. ping some infrastructure gaps such as lack of road networks (impeding growth of industries that rely on According to the most recent competitiveness physical mobility and cross-country transportation of assessment by the World Economic Forum (WEF), goods). Gabon possesses the largest digital capacity Gabon has a Global Competitiveness Index (GCI) of the region – ranked 6th among African countries by score of 47.46, ranking 129th among 141 econo- the International Telecommunications Union in 2017 – mies. This highlights the need for improvement across and is far ahead of its neighbors in terms of equipment, the many institutions, policies, and factors that deter- retail prices for internet, and mobile internet pene- mine the level of productivity of Gabon, as well as its tration, which is near 130 percent. However, the sector attractiveness to private investment. The most bind- concentrates less than 4 percent of employment. ing constraints, as identified by data and findings from Gabon’s regional comparative advantage – advanced a range of investment climate measurement instru- high-speed fiber optics networks – carries great poten- ments (Table 11), include access to finance, an inad- tial to develop a national IT industry with a regional equately educated workforce, corruption, inefficient outreach and beyond, leading to jobs’ creation and government bureaucracy, and inadequate supply of transforming the country into a regional digital hub. infrastructure. Structural changes are needed within the economy Addressing these constraints does not only mean a to enhance private investment in non-resource better environment for businesses, but also potential 56 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE 11. Constraints to competitiveness and diversification GLOBAL COMPETITIVENESS INDEX ENTERPRISE SURVEY (2009) DOING BUSINESS (2020) (2016–17) Access to finance Registering property Access to finance Inadequately educated workforce Paying taxes Inadequately educated workforce Corruption Enforcing contracts Corruption Transportation Starting a business Inefficient government bureaucracy Electricity Electricity Inadequate supply of infrastructure Note: Similar colors indicate similar issues identified. Sources: WB Enterprise Survey (2009); WB Doing Business (2020); WEF (2016–17). windfalls and spillovers for the whole economy and (vs. the UMIC average of 73 percent). However, the for individuals. For example, establishing a more inclu- financial system is failing to cater to businesses, espe- sive financial sector can alleviate access to finance cially SMEs. According to the Gabonese banking asso- constraints for businesses and individuals alike. It can ciation (APEC), loans to SMEs are limited because of also help manage the fiscal risks associated with a their lack of capacity to provide complete loan files financial sector that is prone to vulnerabilities and and guarantees to repay loans, along with prohibitively a source of contingent public liabilities. Likewise, high interest rates. more transparent and formal ways of managing land Local investors and entrepreneurs struggle to access issues may also enhance domestic resource mobili- finance due to weaknesses in the legal framework zation through taxes and fees, as well as attract new and lack of available information. Weaknesses are investors. noted with respect to legal rights, an absence of This section will take a closer look at some of these collateral registry, and no priority payments to secured barriers, namely access to finance, informality, and a creditors. The credit registry discloses very limited infor- weak business regulatory environment. PSD is ham- mation, although Gabon has recently established a pered by other equally important constraints tackled framework for licensing and operating credit bureaus in other parts of the report: gaps in infrastructure (see in accordance with CEMAC. High loan rates – up to chapter 1.3.2) and in logistics and trade infrastructure 15 percent – also discourage businesses. It particularly (see chapter 4.4 on trade), an inadequately educated penalizes domestic investors, who do not benefit from workforce (see chapter 2.1 on education and skills), international credit markets. For 30 percent of Gabonese and lack of governance and institutional capacity (see companies, access to bank loans is regarded as a con- chapter 1.3.4). straint for establishing a business. This difficulty has led, for example, to inefficient wood processing by entities that use more wood than their peers, leading 3.3.1  Inadequate access to finance to increased deforestation. hinders enterprise development Additionally, most banks in Gabon are local Private sector firms, SMEs in particular, struggle branches of foreign banks, whose primary inter- with gaining access to finance. Fragile financial and est is to finance oil and mining projects rather than banking systems limit access to credit for the local local enterprises. Confronted with immense diffi- private sector. Financial inclusion has improved, from culties to access finance and negotiate loans, SMEs 19 percent in 2011 to 59 percent in 2017, largely on remain trapped in small-scale operations and fail to the back of an increase in mobile money accounts expand their activity, which eventually leads to their TOWARD MORE INCLUSIVE AND GREENER GROWTH 57 decline and bankruptcy after a few years of operation. While the informal sector may also act as a source According to a 2017 BEAC report on cost and credit of supplemental or otherwise unavailable income, conditions in CEMAC, SMEs in Gabon obtained less its existence is partly a function of inefficiencies in than 1 percent of short-term loans and only about the broader economy, including a weak business 6 percent of medium-term loans. Enacting legislation environment. Empirical evidence shows that the labor to centralize and digitalize all movable collateral reg- productivity of informal companies is about 25 percent istries, improve the general business environment, of that of formal companies. Moreover, labor produc- protect creditors’ rights, and clarify a solvency regime tivity of formal companies competing with informal could contribute to addressing the finance issues. companies is about 75 percent of average productivity with no such competition. The large informal economy Afforestation and wood processing firms also face tends to hold back growth and create unfair competi- difficulties in accessing finance. Local banks lack tion for formal companies, eroding their market share understanding of the business model and financial and resources available to boost productivity – in a capabilities of firms in these sectors (e.g., in terms of weak business (regulatory) environment. collateral that can be used). Networking events have been initiated to support matchmaking and facilitate In addition to the challenges described, an unat- greater understanding, but they remain limited in tractive investment climate is a major impediment number and attract few participants.93 to private sector growth and employment creation. Gabon’s regulatory framework, marked by complex latory procedures and barriers throughout the busi- regu­ 3.3.2  Rampant informality hampers the ness lifecycle, has been sustained by a one-dimensional productivity of formal firms economy, overly reliant on oil and, hence, unable to capture its true potential. To this end, improving the Informal economic activity is highly pervasive in business environment, and reducing regulatory barriers Gabon and tends to be survivalist rather than to competition will unlock private sector development, entrepreneurial. The informal economy accounts for as explained in detail in the following section. A closer approximately 52 percent of Gabon’s GDP and 50 per- look at the country’s legal and regulatory framework cent of the employment – functioning as a dual labor for environmental protection, as well as the applica- market. It is imperative to note that government support tion of regulations and control mechanisms to ensure for SOEs and inadequate assistance to small enterprises operators’ compliance with environmental regulations have acted as impediments to formal business- is provided in Annex III. led growth. Coupled with historically generous public sector wages, an unattractive investment climate, and limited access to finance have given the economy a high-cost structure. As a result of these factors, and 3.4    The current business regulatory in addition to others, the informal sector has contin- environment is not conducive to ued to exist and grow. In urban settings, informality private sector development is concentrated in services, while in rural settings it is A strong business regulatory environment is a key predominantly concentrated in agriculture. The infor- enabler for achieving productivity growth to attain mal sector being most prevalent among the poorest the high levels of private investment, competi- segments of society continues to perpetuate a vicious tiveness, and economic diversification that Gabon cycle of poverty. aspires to. Sound regulations, policies, and related institutions that facilitate the entry, operation, growth, 93  A project for creating State Guarantees to support the development of acti- and exit of companies create a level playing field for vities in these sectors has also just been initiated in collaboration with the AfDB. all market actors and promote dynamic contestable 58 GABON: COUNTRY ECONOMIC MEMORANDUM markets. At the same time, rule of law, strong insti- the economy. Additionally, time-efficient procedures tutions, and secure contractual and property rights with respect to enforcing contracts and remediation of encourage domestic and foreign investments. The legal conflicts are indictors of greater protection (for findings of this chapter identifying regulatory barriers, creditors’ rights). and the subsequent strategic direction for enacting policy reforms, align with the government’s Economic Registering property in Gabon is arduous, notably Recovery Plan (PRE) 2020–2023, which is structured on because of the cost involved, and the absence of a improving the investment climate, among other pillars. Land Registry and deficient official property docu- ments. The cost to register property is about 11.5 per- Despite a strong reform momentum in the past cent of the property value, compared to 7.3 percent decade, Gabon’s business environment remains in SSA and 4.2 percent in OECD HICs. In addition to stifled by burdensome regulatory procedures and a cumbersome procedure, taking 72 days to register obstacles, which has constrained private sector land, Gabon’s land administration system could be growth and investment outside of extractive indus- further improved in respect of transparency of infor- tries. Additionally, regulations are sometimes applied mation available, land dispute resolution, and equal inconsistently, allowing larger firms with political influ- access to property rights. ence to sidestep certain obligations and leaving smaller companies, which have little clout, to struggle. Companies of all sizes also tend to face impediments This may also explain why many micro and small com- with contractual enforcement. Up until 2020, it would panies choose to operate informally as noted above. take nearly double the number of days in Gabon as it would elsewhere in SSA. The quality of judicial pro- cess has been significantly inferior. More broadly, as Barriers to entry captured by indicators on alternative dispute resolu- Despite substantive progress to improve the business tion, case management, court automation, and court registration process, there are still several constraints structure and proceedings, Gabon has had a virtu- to market entry. Efforts to reduce delays have been ally nonexistent case management process and court taken by the National Investment Promotion Agency automation. To address this, the government adopted (ANPI-Gabon). However, understanding and navigating a law on specific courts in 2019 (Organic Law No. Gabon’s regulatory requirements can still be difficult. 008/2019), setting up commercial courts and installing Suboptimal regulation in key sectors of the econ- magistrates in March 2020. Under this law, decisions omy hinders market contestability by restricting are rendered as a last resort for disputes where inter- entry and protecting incumbents. Barriers to entry est is less than CFA 5 million; orders for summonses and obtaining operating licenses coupled with a lack are issued within an average of 24 hours following the of pro-competition regulation (such as legal or de facto filing of the request; and the first hearing is held within monopolies in key sectors) tend to limit domestic com- 5 and 10 days following the filing of the request. This is petition. For example, in the telecoms sector, access a necessary step in the right direction: it improves the to essential infrastructure owned by incumbents is not quality of justice procedures and reduces processing mandated, which hinders market entry and innovation. times for commercial litigation. Registering property and legal enforcement Redundant inspections and taxation Strong institutions, and secure contractual and Government inspections add a layer of uncertainty property rights encourage investment by extend- and transaction costs on companies, particularly ing greater transparency and security in attract- smaller ones. Inspection procedures in Gabon are often ing investment in distinct industries and sectors of redundant, cumbersome, and overlapping between TOWARD MORE INCLUSIVE AND GREENER GROWTH 59 various Ministries. For example, inspections for con- to prohibit discrimination in the economy and revised struction permits are considered overly burdensome; the country’s 1972 Civil Code enabling women to be a company can expect four different inspections, which the official head of household, choose where they live, may be unscheduled and conducted by multiple and own and manage property in the same way as men. authorities. Surveyed firms complain that the frequency Women may also open a bank account independently of these audits demonstrates a lack of coordination of their husbands and apply to a broader range of between government and municipal administrators, jobs. Married women are no longer legally bound to given the fact that a multitude of agencies run similar spousal obedience. Amendments to the Criminal Code inspections, with little communication between each protect women from discrimination based on gender other. in accessing credit. In the Women, Business and the Law 2022 report (WBL 2022), Gabon scores 82.5 out Stringent and excessive inspections, especially for of the 100 (Figure 57) quantifying indicators structured businesses and sectors which pose low level of risk, around the life cycle of a working women. The overall impact the growth of firms not only through the score for Gabon is higher than the SSA regional average direct cost of administrative burden, but also through of 71.5. its impact on investment decisions: starting a business, engaging in activities to expand, build, procure new However, when it comes to constraints on freedom equipment/assets, or hire staff, etc. The government of movement, women’s pay, marriage, and women’s is already taking steps to improve inspections and work after having children, Gabon could consider controls systems in two key economic sectors, agri- reforms to improve legal gender equality. For exam- business and forestry. Ongoing work is under way to ple, one of the lowest scores for Gabon is on the indi- promote harmonization of controls within the public cator measuring laws affecting women’s pay (WBL administration to eliminate conflicts of jurisdiction and 2022 pay indicator). To improve on the pay indicator, competence, and to simplify and align the inspection Gabon might consider mandating equal remunera- process with recognized good practices. In terms of tion for work of equal value; and allowing women the paying taxes, the number of payments per year is sig- same access as men to jobs deemed dangerous, and nificantly higher in Gabon than the SSA average (50 vs. to industrial jobs. Advancing gender equality will serve 36.6 payments) and the time spent dealing with taxes to raise productivity capacity and support Gabon’s is more than double (632 vs. 280.6 hours). trajectory toward an emerging and diversified economy. Gender equality Access to public procurement Closely linked to regulatory frameworks are wom- Public procurement is a powerful lever for achiev- en’s legal rights, greatly improved since 2011 and ing economic, environmental, technological, and more so recently, in 2021. Gabon adopted new laws social goals. Many governments around the world FIGURE 57. Gabon’s scores for WBL 2022 WBL 20U Index Mobility Workplace Pay Marriage Parenthood Entrepreneurship Assets Pension Score 75 100 25 80 80 100 100 100 82.5 Source: WBL. 2022. 60 GABON: COUNTRY ECONOMIC MEMORANDUM are pursuing various methods of incentivizing SMEs FDI can contribute to gaining export competitiveness to partake in the public procurement market, given much faster than the infant industry policies (such as that SMEs make up a large share of businesses in their import substitution, forced joint ventures, etc.) with economies, are a significant source of employment which many countries have experimented. opportunities, and make significant contributions to FDI (net) inflow levels have increased from 3.1 per- their GDP. In Gabon, there is still need to facilitate cent of GDP in 2003 to around 9 percent in 2019, access by SMEs to government procurement. Simpli- with most FDI going into extractive sectors. In recent fying the procurement framework and the process to years, Gabon’s FDI as a percentage of GDP has been access public tenders for SMEs can create opportuni- rising (Figure 58) and continues to be higher than that ties for companies by opening up the public market of SSA and some UMICs as well. However, because and fostering competition – which may also help investments are concentrated in the extractive sectors – reverse the impact of the COVID-19 pandemic and primarily oil and mining – which are by nature capital accelerate economic recovery. intensive and employ a highly qualified but limited The challenges identified mostly align with those workforce, they have had little positive spillover effects of the PAT 2021–2023 and must be addressed on the rest of the economy, which could lead to job through the necessary regulatory and institutional creation or technology transfer to local enterprises. adjustments. For example, land reforms directly Recent foreign investments in cash crops and wood respond to the concurrent parameters of investment industries can help diversification to move forward if potential in several key sectors, such as agribusiness or properly managed. tourism, as these capitalize directly on the possibility To attract greater investment, the government has of exploiting land. Moreover, a reformed competition created Special Economic Zones (SEZs), which tend climate is more likely to attract local and international to provide fiscal and operational benefits. However, investors – small and large. Such reforms include the such benefits need to be extended beyond these fair allocation of markets and promoting entry by more zones, otherwise they may create distortions. Ameni- sophisticated actors who would support related areas, ties include but are not limited to priority access to such as access infrastructure to the sites concerned. FIGURE 58. Gabon: FDI net inflows 3.5   Reversing the trend – restoring (% of GDP) competitiveness and fostering 14 green growth 12 3.5.1  Foreign direct investment – 10 a driver for diversification 8 6 Foreign Direct Investment (FDI) can be a key driver 4 of diversification and improve export competi- 2 tiveness if properly overseen, promoted, and pro- 0 tected. FDI has long focused on natural resources, –2 with no evident spillover to the rest of the economy –4 or benefit to the population. However, with the right –6 enabling environment and investment policy for 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 attraction, promotion, and retention, Gabon can help redirect investment flows into other strategic sectors. Source: WDI. TOWARD MORE INCLUSIVE AND GREENER GROWTH 61 electricity and water, on-site legal and financial ser- among African countries. It aims to restore investor vices, a single-window business service for participants, confidence, facilitate trade between countries, and beneficial fiscal and tax incentives. While the incentive develop an efficient private sector. structure, characterized by fiscal exonerations, acts as Investment Promotion has not yet realized its a powerful incentive for foreign investors, it limits the potential. To address some of these bottlenecks the government’s fiscal gains and reduces the potential government is reforming the 1998 Investment Charter economic, social, and financial spillovers for the rest and putting in place a new and reformed investment of the economy. The ad hoc and sometimes generous law to implement the state’s commitments regard- nature of exemptions accorded investors in SEZs can ing guarantees of investor protection, good gover- amplify distortions between SEZ investors and those nance principles, and the simplification of procedures outside of the zones – creating an uneven playing field (Box 11). To help streamline the investment process, between investors that benefited from exemptions Gabon established the Investment Promotion Agency and those that did not. By extending incentives to all (ANPI-Gabon) in 2014 and operationalized a one- investors alike, Gabon can improve its overall compet- stop-shop in 2018. The ANPI and the High Council for itiveness as an investment destination. Furthermore, Investment (HCI) can further benefit by defining and the current framework offers the opportunity to amend effectively implementing their promotion, expansion, and improve investment laws pertaining to SEZs, which and retention strategy. can be strengthened through regulation. Among the challenges that Gabon faces in further increasing and diversifying its foreign investment, is 3.5.2  Competition policy the obstacle related to the implementation of the Competition policy is a cross-cutting issue essential existing investment framework. The implementation to improving the business climate and promoting of the existing investment framework is hindered by foreign investment in Gabon, boosting long-term inefficient bureaucracy and lack of transparency. For productivity. Several challenges seem to limit domes- example, new investment contracts require ministerial tic competition in Gabon: (i) barriers to entry and lack negotiations and approval by the president. This can of pro-competition regulation (such as legal or de be time-consuming and challenging to navigate, and facto monopolies in key sectors); (ii) limited implemen- the frequent turnover in government can further pro- tation of the principle of competitive neutrality (e.g., long and confuse the process. the existence of discriminatory state aid and preferen- tial access to finance that distorts competition among The Investment Charter supports foreign invest- private and public operators); and (iii) limited imple- ments and trade, but investors face significant issues mentation of competition rules, particularly through for doing business in Gabon, given the complexity of the absence of an independent competition authority the country’s business climate. Gabon’s 1998 invest- and its lack of human and budgetary resources. ment Charter conforms with the CEMAC investment regulations and affords foreign companies operating The Gabonese Competition Law of 1998 prohibits in Gabon the same rights granted to domestic compa- potentially legitimate practices and triggers anti- nies. The Investment Charter aims to support foreign trust scrutiny of mergers that may not have anti- investment, including allowing foreign investors to competitive effects. Coupled with mild sanctions, repatriate capital and profits and the savings on sala- this framework has failed to foster compliance and ries they would have paid expatriate personnel (Title I, deterrence against infringements. Key concerns Art.1). Business law is governed by the rules of the include: (i) the current competition framework seems Organization for the Harmonization of Business Law to sanction dominant positions per se, which is at in Africa (OHADA), which harmonizes business laws odds with international practices that only prohibit 62 GABON: COUNTRY ECONOMIC MEMORANDUM BOX 11. A new Investment Code is expected to reinforce Gabon’s appeal by increasing investor confidence To attract and retain foreign investors, Gabon is working on a new Investment Code to replace the 1998 Charter. The goal is to provide a secure, clear, transparent, and stable legal framework for investment that is driven by an inclusive dialogue between the public and private sectors. The proposed reform also strives to reach a balance between the rights and obligations of the state and investors. The following key changes are being considered: To include best practices for the protection of investors while preserving the right of the state to regulate for public purpose. 1.  The draft law ensures fair and equal treatment as well as protection against expropriation and indirect expropriation. It reiterates the right to repatriate profits. To introduce provisions on dispute resolution between investors and the state for the enforcement of obligations under the law, 2.  with an emphasis on amicable settlement and recourse to mediation. To provide incentives for investors both inside and outside of the SEZs to be introduced via the tax and customs codes. The 3.  objective is to replace (to some extent) the current exoneration regime for companies investing in Gabon prior to investment operations with a regime based on investment performance results. This new regime is a win-win deal, as the fiscal incentives are tax rebates on effective investment, whereas current investment policy grants exonerations before investment operations. The goal is also to incentivize investors willing to carry out their projects in less developed areas with a view to further the harmonized development of the country. 4.  To develop incentives for existing operators to reinvest their money and pursue their investment goals in Gabon. 5.  To better guide new operators with their investment goals in Gabon considering the lack of investment infrastructure. abuses of dominance. Similarly, the law may prohibit also responsible for consumer protection and monitor- other individual business practices that, in the absence ing price controls.94 Although this agency has already of a dominant position, are not harmful, such as pred- carried out some investigations and released some atory pricing or refusals to deal. The lack of individual antitrust decisions (e.g., in the insurance sector), it exemptions for agreements with innocuous or even still lacks sufficient material and human resources to positive competitive effects exacerbates this problem; ensure effective enforcement of competition rules in (ii) merger control is based on market share thresholds, Gabon (e.g., limited tools for conducting inspections). which are subjective and difficult to predict; as a result, Moreover, its limited advocacy role prevents compe- companies might be forced to report insignificant tition principles from being introduced into Gabon’s transactions, giving rise to unreasonable burden on regulations. the private sector; and (iii) fines, set typically at 10 per- Development and adoption of an implementing cent, are not based on turnover but on caps (maximum regulation for the law on competition, and capacity of FCFA 500 million; approximately USD 850,000) that building for the competition enforcement agency, do not foster sufficient deterrence for larger firms. can serve to address the shortcomings in competition Limited independence and a complex mandate policy and practices. (Important to note: the WB has of the competition enforcement body might be been working with Gabon’s government on adoption hampering the effective enforcement of competi- tion rules. The Competition and Consumer Protection  Although the DGCC seems to be very active on the identification of coun- 94 Directorate (DGCC), under the Ministry of Economy, terfeit products and protection of consumer, competition rules enforcement seems to be limited. See also: https://www.ensafrica.com/doing-business/ is not only in charge of competition enforcement, but download/?termId=28 (last accessed: May 2020). TOWARD MORE INCLUSIVE AND GREENER GROWTH 63 of improved practices under its African, Caribbean and this regard, the government is carrying out a strategy - Pacific [ACP] program.) the fight against the high cost of living (Lutte Contre la Vie Chère) – for regulating prices of basic goods and other products. As a result, price controls exist in mar- 3.5.3  Price control and price distortion kets where competition is feasible, such as staples, beverages, alcohol, tobacco, residential and commer- Business risks related to lack of competition poten- cial rents, sale of books and CDs, as well as for regu- tially hinder market dynamics in Gabon. Unfair com- lated professional services. petitive practices, such as those that tend to favor SOEs and price controls enacted by government are The relationship between competitiveness, shared also considered as relevant constraints in Gabon, prosperity, and environmental sustainability shows which are likely to have a negative impact on private that there is no inherent trade-off in building com- investment. petitiveness. Empirical evidence suggests that envi- ronmentally driven total factor productivity (TFP) losses Price control can distort market outcomes and create market failures. Although price regulation can be may even outweigh the costs associated with transition- used to promote certain economic and social protec- ing to a low-carbon economy. With the changes in pref- tion goals such as granting access to essential goods, erences of global consumers and investors alike, green broad grounds for imposing price controls can dis- business models and policies are disrupting markets. tort market outcomes and limit investment in com- Greening the environmental footprint by promoting petitive markets. Price control can act as a reference and strengthening green sectors is acknowledged point for collusion and lead to an inefficient allocation as a decisive factor in international competitiveness of resources – with the corresponding increase in gov- and in the ability to attract international finance and ernment expenditure to sustain the policy. Thus, it is investment. critical to limit price controls to situations where they The pathway to green growth presents an opportu- address specific market failures. nity for Gabon to adopt and build upon efficiency Among domestic competition subindicators, such gains. This could be done through expanding green as CGI’s distortive effect of taxes and subsidies on industries, sectors, and technologies, supporting competition, state intervention in the form of subsi- quality jobs, and proactively building up resilience to dies and tax breaks is perceived as the main source climate and disaster risks. This would require accel- of competition-related market distortions. In Gabon, erating transition to a low-carbon economy (while freedom to set prices is enshrined in the Competition advancing structural reforms). Much of this goes Law95 as a general principle. However, this law also hand in hand with improving the investment climate: anticipates the possibility of the government regulat- processes, regulations, and institutions concurrently. ing the price of goods and services without being sub- A policy shift toward green sectors and growth serves ject to any time limitation or objective justification. In as an avenue that Gabon can greatly benefit from.  Article 4 of Law No. 014/1998 on the competition regime in the Republic 95 of Gabon. 64 GABON: COUNTRY ECONOMIC MEMORANDUM 3.6  Recommendations96,97 TABLE 12. Gabon: matrix of investment policy reforms, and time frame OBJECTIVES POLICY RECOMMENDATIONS TIME FRAME I. Investment Finalize investment law and implementing decrees: reform the 1998 Investment Charter   1.  Short term/ Climate and put in place a new Investment Law to implement the state’s commitments regarding Medium term (Investment Policy guarantees of investor protection, good governance principles, and the simplification of and Promotion, procedures. Competition, Rationalize Investment Incentives (incl. SEZ) with the definition of a limited number of   2.  Medium term Business development objectives for incentives and the replacement of current exemptions with Regulations:) more targeted instruments that can accomplish the defined objectives. Support the Investment Promotion Agency-Gabon (ANPI) and the High Council for Investments   3.  Short term/ (HCI) to determine and effectively implement their promotion strategy; Medium term Set up an investor relationship management system to track investor services and develop –  a project database to better direct resources and support sector studies; Establish the conflict prevention mechanism or systemic investment response mechanism –  (SIRM), liaising with the HCI. Reinforce the Aftercare Team, e.g., deploy the tools needed to improve services, and –  promote reinvestment and expansion of existing projects in accordance with international good practices.   4.  Reinforce the competition regulatory framework: Short term/ Implement regulations, guidelines, and internal manuals/procedures for antitrust –  Medium term enforcement in key areas such as assessment of cartels and other anticompetitive conduct; Introduce regulations and guidelines for reviewing mergers; –  Develop analytical methodologies to identify and remove anticompetitive regulations. –  Modernize and reinforce the structure of the competition authority, in accordance with the   5.  Short term Competition Regulation recently adopted by Economic Community of Central African States (Regulation No. 06-19-UEAC-639-CM-33 of April 7, 2019): Design an institutional strategy and institutional performance indicators to facilitate –  monitoring enforcement activities. Implement the recommendations identified in the in-depth diagnostic of the quality   6.  ST/MT/LT infrastructure system (standards, certification, metrology, institutional setup, etc.). Facilitate SMEs’ access to government procurement by providing capacity awareness   7.  Short term programs to SMEs, training of procurement officials, incentives, and set aside SME quotas for contracts below a certain threshold. Continue to promote a level playing field for women (laws/enforcement) and to ensure that   8.  Short term/ the new law is applied in practice in awareness-raising and training of judges and other Medium term authorities. Reduce the number of payments per year and facilitate tax administration processes to help   9.  Medium term and support entrepreneurs and SMEs. 96  Recommendations are defined in the small term (< 1 year) or medium term (< 3 years) and long-term (>3 years). 97  The matrix is not an exhaustive list of all recommendations that need to be adopted, but of key ones that should be prioritized by the government. TOWARD MORE INCLUSIVE AND GREENER GROWTH 65 TABLE 12. Gabon: matrix of investment policy reforms, and time frame (continued) OBJECTIVES POLICY RECOMMENDATIONS TIME FRAME II. Access to Enact legislation to centralize and digitize all collateral registries (e-platforms for secured 10.  Medium term/ Finance transact ions). Long term Establish a robust partial credit guarantee scheme (PCGS) that adequately addresses the 11.  Medium term need for guarantees to reduce the credit risk of SMEs; lower interest rates by allowing banks and SMEs to familiarize and gain experience in SME lending/borrowing, and improve access to finance. Consider other instruments such as leasing and factoring that could help meet the 12.  Medium term investment financing and liquidity needs of SMEs in the absence of a guarantee fund. Build capacity of local companies to present bankable projects and set up programs to 13.  Short term/ improve the governance of SMEs and employee skills in managing and reporting financial Medium term and technical information. 14.  Promote digital entrepreneurship. ST/MT 15.  Improve the policy and regulatory framework for digital services: Medium term/ Adopt the four key draft laws on electronic communications, electronic transactions, cyber –  Long term security, and the protection of personal data; Create foundational law for digitization of public service administration and online –  procedures to support the implementation of the e-government strategy and online services, and revision of the Civil Code for e-ID; Develop a comprehensive National Institute of Information and Communications (NICT) –  strategy that encompasses regulatory issues, infrastructure development, training, entrepreneurship and the promotion of digital applications for different sectors (infrastructure, finance, agriculture, mining, forests, etc.). References International Trade Administration. 2021. 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CHAPTER 4 HARNESSING EXPORT MARKETS THROUGH DIVERSIFICATION 4.1    The end of business as usual – trade diversification for inclusive growth As a small commodity-dependent economy, Gabon’s economic prospects will hinge increasingly on its ability to export goods and services within the region and globally to sustain its eco- nomic growth. Such growth cannot be sustained unless the government continuously supports regional trade integration, invests in trade facilitation infrastructure, and enlarges the market access opportunities available to the country’s exporting companies, while also addressing the twin imperative of decarbonization and climate change. Experience from other developing countries that have had strong and sustained trade-led growth suggests the benefits that would accrue to Gabon if local producers and service providers were able to increase their participation in regional and global value chains and diversify their export basket. Export diversification away from carbon-intensive production and strengthened regional trade integration, including with partners on the African continent, can be key drivers of economic growth and job creation in Gabon. While both the structure and size of the Gabonese economy impose limits on the scale and pace of economic transformation, the country can reduce growth volatility and over-reliance on the export of natural resources by harnessing the potential of trade to support economic transformation in allocating factors of production to sectors offering grea- ter potential for domestic value added. Doing so would unlock existing and new opportunities for economic diversification, both within and beyond resource-based activities, and strengthen the resilience of the Gabonese economy to various shocks, including those linked to climate change. Improving Gabon’s trade performance will also be contingent on strengthening the country’s trade policy formulation and implementation capacities, and the ability of Gabonese policy makers to assign economy-wide aims to trade and investment policy that connect trade with logistics, climate policy, and improved resource management. 67 68 GABON: COUNTRY ECONOMIC MEMORANDUM This chapter examines the role of export diversi- accounted for a mere tenth of Gabonese merchandise fication and regional trade integration in building exports (6 percent for agriculture and 4.3 percent for a greener, more resilient, and inclusive economic manufactured exports), while services account for a recovery path. The chapter addresses two key ques- negligible 0.4 percent share of aggregate exports. tions: (i) what characterizes Gabon’s recent trade per- formance? and (ii) how can cross-border trade and The marginal contribution of manufacturing exports investment be harnessed to promote the twin impera- and of exports of associated goods-related services tive of diversifying and greening the country’s export (which accounted for 0.2 percent of commercial basket and reducing the share of oil and primary com- services exports at latest count) attest to Gabon’s modities in total exports? virtual absence from the cross-border produc- tion networks (value chains) that have reshaped the geography of contemporary cross-border trade and 4.2    Gabon’s recent trade investment activity in recent decades. Gabon’s mer- performance chandise import profile further confirms the economy’s limited productive capacity and inadequate diversifi- Gabon ranks among the most highly commodity- cation, with manufactures (73.2 percent) and agricultu- dependent economies in the world, with natural ral products (23 percent), between them accounting for resources such as oil, manganese ore, and other extrac- 96 percent of merchandise imports (Figure 60). tives, and wood-related products; between them, these account for close to 98 percent of the country’s While Gabon’s oil and extractive wealth produce hefty merchandise exports in 2021, a level that has hardly merchandise trade surpluses, equal to 12.6 percent budged in recent years (Figure 59). of GDP in 2020, these contrast with the sizeable deficit the country runs on its services trade account. To wean itself off its primary commodity depen- This deficit amounted to 10.4 percent of aggregate out- dence implies that Gabonese policy makers focus put in 2020, reflecting a near absence from global services their attention on growing and/or reviving the country’s agricultural and manufacturing produc- tion and exports, and generating an export res- FIGURE 60. Gabon: breakdown of merchandise ponse in services. These are sectors that together exports and imports by main commodity group, 2019 Exports FIGURE 59. Gabon: share of merchandise exports by sector, 2017–2021 100 1.9 11.3 9.6 12.4 12.9 Agricultural products: 6 Fuels and mining products: 89.6 90 Manufactures: 4.3 Other: 0.1 80 70 60 Imports 50 82.6 96.8 81.7 76.8 74.3 40 30 20 Agricultural products: 23 Fuels and mining products: 3.2 10 Manufactures:73.2 Other: 0.6 7.8 9.7 10.9 0 5.3 1.2 2017 2018 2019 2020 2021 Source: WTO Trade Profiles98 Agriculture Minerals Others Petroleum Wood  See https://www.wto.org/english/res_e/statis_e/daily_update_e/trade_ 98 Source: Authors’ calculations using customs firm-level transactions data. profiles/GA_e.pdf. TOWARD MORE INCLUSIVE AND GREENER GROWTH 69 TABLE 13. Trade indicators, 202099 latest count, while the top 20 export markets absorbed 97 percent of total merchandise exports.101 Exports of merchandise (millions of USD) +4,903.0 Imports of merchandise (millions of USD) –2,937.0 Highlighting the weak levels of trade integration Merchandise trade balance (millions of USD) +1,966.0 realized within Gabon’s immediate periphery, Gabon’s Merchandise trade balance as a share of GDP (%) +12.6 exports are chiefly destined for countries outside Exports of commercial services (millions of USD) +203.0 Africa. The challenge of scaling up Gabon’s exports Imports of commercial services (millions of USD) –1,825.0 within the African continent, in response to AfCFTA, Services trade balance (millions of USD) –1,622.0 is evidenced by the fact that only one African Services trade balance as a share of GDP (%) –10.4 country – the Republic of Congo – ranks among Goods and services trade balance (millions of USD) +344.0 Gabon’s top 20 export destinations. China was by Source: WTO Trade Profiles. far Gabon’s most important export partner in 2020, accounting for 62 percent of Gabonese merchandise exports, followed by the Netherlands (6 percent), India export activity and Gabon’s high dependence on imports (6 percent), Singapore (4 percent), and the Republic of of commercial and transport services (Table 13). Korea (3 percent). The last decade has witnessed signi- As the discussion of firm-level data below confirms, ficant changes in Gabon’s leading export destinations, Gabon is more diversified in terms of markets than including a significant drop in exports destined for the products, but in recent years both markets and US market;102 only China remaining among the top five. products have seen any diversification gains eaten Gabon’s trade across neighboring land crossings away. This can be seen from trends in the Herfindahl- and with partners in Africa is exceedingly low des- Hirschman Index (HHI)100 over the 2005–2019 period pite decades of efforts to scale up and facilitate (excluding petroleum). Product concentration has regional trade and financial and monetary ties. Much increased, and Gabon is less diversified relative to of Gabon’s trade with African partners remains infor- all comparator countries other than Angola and the mal in nature and therefore weakly captured by official Republic of Congo (Figure 61). Evidence shows that trade statistics. This is particularly the case in various product and market diversification was highest in the categories of agricultural products. In 2020, the share period 2000–2008, after which concentration levels exports destined to neighboring markets by means rose noticeably. Yet again, this points to vulnerabili- of land transport accounted for a mere 0.1 percent of ties for which sustained efforts at diversifying product aggregate Gabonese exports, down from 0.63 percent and market destinations, including in the context of in 2010. This figure attests to the weakness of Gabon’s the PSGE (see Annex 2), need to command continued regional connectivity links and the correspondingly low attention and implementation focus. level of its intraregional trade ties. Gabonese exports Gabon’s highly concentrated export basket is chiefly destined to its SSA trading partners accounted for directed to trading partners in Asia (South, South- 2.6 percent of aggregate flows in 2020, up marginally East, and North-East) and Europe (EU and UK), which from a decade earlier when it stood at 2.4 percent. absorb the bulk of Gabon’s exports (Figure 62). The The low level of exports delivered overland or directed country’s top five export destinations accounted for to continental partners reflects weaknesses in the four-fifths (81  percent) of merchandise exports at country’s trade infrastructure and a commodity com- position of trade that depends strongly on trade ties 99  See Annex Tables 1 and 2 for a disaggregated look at Gabon’s top-20 mer- chandise exports and imports. 100  The Hirschman-Herfindahl Index (HHI) is the sum of the squared export shares by product. Thus: 0 USD 10 million. This data Av. export value 2017 Av. export value 2021 excludes oil companies. Source: Authors’ calculations using customs firm-level transactions data. Note: Some companies export products to more than one market destination and are therefore double counted. FIGURE 66. Gabon: Performance of non-oil boosting the competitiveness of exporting companies exporting firms by number of market and scaled-up efforts at trade and investment promo- destinations, 2017–2021 tion, opportunities exist for Gabonese companies to 100 6 diversify exports in terms of markets and products. Firm-level data further indicates that companies Average value per rm, Million USD 5.1 5 4.8 % share of total exporting rms 80 exporting to more than one market generate 49.8 4 higher export revenues (Figure 67). So do compa- 60 3.6 3.5 3.4 66.0 nies exporting to more distant markets, which typi- 3 68.8 cally requires stronger managerial skills to comply with 40 69.7 69.3 2 diverse import country standards. This should certainly 50.2 20 not reduce efforts to harness the growth potential of 31.2 30.7 30.3 34.0 1 exports to regional (CEMAC) and continental (AfCFTA) 0 0.1 0.1 0.0 0.0 0.0 0 markets; and continuing expansion in global markets, 2017 2018 2019 2020 2021 notably Asia and the EU, which absorb a predominant Multi markets share of Gabonese exports, remains key for sustained Single market export diversification. Figure 68 shows that exporting Single market (export value) Multi markets (export value) companies in the wood and petroleum sectors show Source: Authors’ calculations using customs firm-level transactions data. Note: a greater propensity to serve multiple markets than For firms that serve a single market, the average export value ranges from USD companies in the agricultural sector. 0.02 million to USD 0.07 million. The data excludes oil exporting companies. The capacity of a country or firm to maintain or grow existing trade flows or to enter into new markets, generally depicted as the process of 74 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 68. Gabon: sectoral breakdown of export survival, can represent a significant source exporting firms serving multiple markets, of sustained growth. In Gabon, as elsewhere, 2017–2021 larger exporting firms exhibit higher survival rates 70 than do MSMEs. Measured by the entry into new 62 markets and duration of export flows, export survi- 60 55 53 53 53 50 51 val rates correlate strongly with export growth and 50 42 42 diversification efforts (Brenton et al., 2010). The 40 37 survival rate of large exporting firms after the first year 30 28 of operation is approximately 50 percent, a quarter 22 19 19 17 19 20 19 17 higher than that of smaller firms (Figure 69). Such a 20 15 16 15 13 14 12 difference is due to the fact that larger firms tend to 10 be more productive, export more products, and serve 0 more markets than their MSME counterparts. Ho­ w­ Agriculture Minerals Others Petroleum Wood ever, the probability of larger firms maintaining an 2017 2018 2019 2020 2021 export relationship for more than two years stands at Note: Some firms export products to more than one sector and are therefore double counted. 17 percent, only marginally higher than that of other Source: Authors’ calculations using customs firm-level transactions data. companies (at just under 15  percent). Figure  69 panel B shows that agricultural exporters have the highest survival rate, at just over 40 percent compared to less than 30 percent for companies exporting wood and petroleum products. However, beyond the first year, FIGURE 69. Gabon: survival rates of exporting firms by size (excluding oil exporting firms) Survival rate by rm size Survival rate by sector 1.0 1.0 0.8 0.8 0.6 0.6 Probability Probability 0.4 0.4 0.2 0.2 0.0 0.0 0 1 2 3 4 5 0 1 2 3 4 5 Analysis time (years) Analysis time (years) Large Medium Micro Small Agriculture Minerals Others Petroleum Wood Note: Firms size by annual export value: Micro USD 10 million. Source: Authors’ calculations using customs firm-level transactions data. TOWARD MORE INCLUSIVE AND GREENER GROWTH 75 FIGURE 70. Gabon and its peers: export survival rates using Kaplan and Meier estimates Kaplan and Meier estimates Survival rates by destinations 1.0 1.0 0.8 0.8 0.6 0.6 Probability Probability 0.4 0.4 0.2 0.2 0.0 0.0 0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 6 7 8 9 Analysis time Analysis time BWA CAF CMR CRI GAB GNQ MUS TCD URY ASIA CEMAC EU28 NA Note: GAB=Gabon, BWA=Botswana, CAF=Central African Republic, CMR=Cameroon, CRI=Costa Rica, GNQ=Equatorial Guinea, MUS=Mauritius, TCD=Chad, URY=Uruguay, NA=North America, EU28=European Union Source: Authors’ calculations using WITS. agricultural exporters display the lowest survival rate 4.4   Key constraints to trade among leading export sectors. integration The data reported in Figure 70 suggest that the Gabon suffers from poor logistics and trade infra­ export survival rate of Gabonese exporters is low structure, both of which hamper the country’s export compared to regional peers. The probability that potential by inflating trade costs. In 2018, the last Gabon’s export relationships survive beyond year year for which data under the World Bank’s Logistics one is 38 percent, a figure lower than all comparator Performance Index (LPI) are available, Gabon ranked countries – other than Chad, Equatorial Guinea, 150th out of 163 countries. In terms of international and CAR – with regional export survival rates hove- shipping, Gabon ranked poorly relative to its peers. ring between 41 and 47 percent (Panel A). The like- Even though CAR is a landlocked country facing puni- lihood of Gabonese companies maintaining export tive trade costs, Gabon ranked poorly in comparison, relationships for more than two years is less than even in terms of international shipments. 20 percent, again a level lower than that observed in regional peers, which ranges between 21 percent and Gabon’s weak trade infrastructure and logistics 25 percent. Moreover, Gabonese exporters stand a performance is problematic given that the country’s better chance of surviving in the markets of the EU, exports are chiefly directed to more distant mar- Asia, and North America, where trade networks are kets, which require advanced logistics and efficient already established, than in the neighboring CEMAC air and maritime transport connectivity levels. region despite the deep trade and monetary ties pro- Accordingly, shocks affecting the country’s logistics moted by this economic union among its members infrastructure or the imposition of travel bans, as in the (Panel B). wake of the COVID-19 pandemic, can produce marked 76 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 71. Gabon and its peers: Logistics FIGURE 72. Gabon and its Peers: Tariff Profile Performance Index, 2018 (simple averages) LPI 20 18.2 5 17.7 4 Customs Timeliness 15 3 2 10.5 1 10 Tracking & tracing Infrastructure 7.6 5.6 5.2 5 Logistics competence International shipments 0.8 Gabon 2018 0 Income: Upper middle income 2018 na n lia ca y on s oo ua iu wa go Ri Region: Sub-Saharan Africa 2018 ab rit ug er ts a on G au m st Ur Bo Germany 2018 M Co Ca M Source: WB, LPI. Source: Authors’ calculations using WITS, WTO-IDB. swings in export activity. Figure  72, which situates 35 defects identified in the rail infrastructure, but it Gabon’s LPI performance relative to regional and needs to be accelerated.108 This connection is essen- income level peers as well as the world’s top performer tial, since Franceville constitutes a multimodal terminal (Germany), points to a number of weaknesses in the which links Libreville’s port to neighboring countries.109 country’s overall logistics environment, particularly as In addition, Gabon plans to create an SEZ including regards logistics competence, international shipments, wood activities in Franceville110 and to develop 300,000 ha customs, and tracking and tracing metrics.107 While of plantations of fast-growing wood species in the east roads represent Gabon’s most important transport and west of Franceville. Maritime ports also suffer from mode, their poor condition hinders competitiveness frequent saturation and inaccessibility, leading to pro- and prospects for industrial development. Meanwhile, duction downtime. Moreover, they are poorly connec- the poor quality of Gabon’s port infrastructure hinders ted with each other and with other ports in the Congo the country’s international competitiveness. Basin, which leads to high maritime costs. Regarding energy, most wood processing facilities located close Inefficient transport and energy infrastructure harms to logging sites lack access to distributed electricity competitiveness of the afforestation and wood and rely on generators. This results in high energy product manufacturing sectors. Gabon has a single costs for these companies. railway linking Libreville to Franceville – for both passengers and goods transportation – which leads Gabon’s high tariffs further impede its quest for to overcapacity and frequent train derailment. An export diversification and greater insertion into upgrade program was launched in 2017 to repair the continental and global value chains. As a member 108  Le Nouveau Gabon. 2020. “Transgabonais : 35 défauts identifiés dont 33 présentent des risques de déraillement”. Available from: Link [Accessed 107 Gabon’s logistics weaknesses were confirmed by the WEF, which ranked   06/04/2022]. it 108th out of 138 countries in the 2017 edition of its Global Competitive- 109  Gabon Review. 2021. “Franceville : L’Oprag veut recadrer les activités du ness Index (GCI). The WEF ranked the quality of Gabon’s trade infrastructure port sec”. Available from: Link [Accessed 25/04/2022]. and roads 119th and 121st, respectively, out of 138 economies, whereas the 110  Trust Gabon. 2020. “GSEZ : Lambaréné et Franceville choisies pour accueil- country’s port infrastructure ranked 101st. See http://reports.weforum.org/ lir deux nouvelles zones économiques spéciales”. Available from: Link africa-competitiveness-report-2017/files/2017/05/Gabon.pdf. [Accessed 25/04/2022] TOWARD MORE INCLUSIVE AND GREENER GROWTH 77 FIGURE 73. Gabon: export revenues and 4.5  Gabon’s diversification world oil price imperative 120 14,000 Gabon’s Economic Complexity Index, which mea- 100 12,000 sures the accumulation and use of productivity knowledge in industries of varying complexity, 10,000 80 offers a telling sense of the diversification challenge US$ million exports 8,000 confronting the country’s policy makers. The country Oil price 60 ranked 138th out of the 146 economies surveyed by the 6,000 Observatory of Economic Complexity (OEC) in 2020, 40 4,000 a ranking that has changed little since 2010 when the country ranked 137th out of 139 economies subject to 20 2,000 OEC rankings.112 Harvard University’s Atlas of Econo- 0 – mic Complexity paints much the same picture, ranking Gabon 126th out of 133 countries in its 2019 sample. 88 91 94 97 00 03 06 09 12 15 18 19 19 19 19 20 20 20 20 20 20 20 Oil prices Exports Countries like Gabon, with above average levels of Source: Authors’ calculations using WITS exports mirror data and statista.com. export concentration on a handful of primary com- modities, tend to specialize in only a few products. of the CEMAC customs union – a regional pact with Few such countries manage to achieve and sustain whom Gabon maintains marginal trade ties, Gabon trade-driven growth and poverty alleviation. Coun- applies CEMAC’s common external tariff (CET) on tries with high commodity dependence struggle to imports from outside CEMAC. These are subject to increase their export growth because performance is four different tariff rates: (i) 5 percent on products of driven by the prices of their primary export commodi- first necessity; (ii) 10 percent on raw materials and ties, and these are set on international markets beyond equipment; (iii) 20 percent on intermediate goods; the control of domestic policy makers. As a result, and (iv) 30 percent on consumer goods. Such a tariff commodity-exporting countries are highly vulnerable structure appears more attuned to an import substitu- to commodity price fluctuations and face significant tion model of industrial development than one predi- macroeconomic challenges as they struggle to grow cated on value chain insertion. CEMAC’s CET stands at their economies in volatile environments. As Figure 73 18.1 percent (simple average), little changed since 2006. shows, Gabon is no exception, with an almost perfect By comparison, the simple average CET of ECOWAS, correlation between its export performance and world the Southern Common Market (MERCOSUR), and the oil prices. Southern African Customs Union is 12.3  percent, 14.0  percent, and 8.3  percent, respectively. As While Gabon is less dependent on oil exports than Figure 73 shows, the average tariff for Gabon was some of its regional oil-exporting peers, its most 17.7 percent in 2019, a higher level than that of all important non-oil exports – ores and wood products – comparator countries other than Cameroon. Gabon remain heavily tied to commodity trade dynamics and maintained the second highest tariffs in the world in their associated price volatility. Figure 74 draws atten- 2018, a policy stance it will need to revisit (in a CEMAC tion both to the greater diversity of Gabon’s non-oil context) in deepening its commitment to a diversifi- exports relative to its regional peers (other than Ghana cation agenda and the concomitant rise in FDI inflows and Cameroon) and to the volatility of the country’s that would allow greater levels of GVC insertion.111 non-oil export receipts over the past two decades. 111  https://www.worldfinance.com/strategy/top-5-countries-with-the-highest- trade-tariffs.  See https://oec.world/en/rankings/eci/hs6/hs96 112 78 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 74. share of non-oil exports in total Gabon’s economic vulnerability, including in the merchandise exports, 1988–2019 extractive and natural resources sectors in which 120.0% Gabon already specializes, and in the growth of new and greener export sources. Gabon is faced 100.0% with declining oil reserves and the increasingly pres- Share of total exports 80.0% sing need to decarbonize its economy as the country’s trading partners implement their climate commit- 60.0% ments under the Paris Agreement and trade measures 40.0% sensitive to the carbon footprint of imported products (so-called carbon border adjustment measures). 20.0% Therefore, the government needs to accelerate the 0.0% pace at which it implements the PSGE 2025 pro- 88 90 92 94 96 98 00 02 04 06 08 14 16 18 10 12 gram and Gabon’s complementary strategic plans – 20 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 Angola Cameroon the Green Plan, Digital Plan, and the Plan to Support Rep. Congo Gabon Ghana Equatorial Guinea Diversification of the Gabonese Economy (PADEG). Nigeria The greater integration of Gabonese companies Source: Authors’ calculations using WITS exports mirror data. into SSA markets and regional value chains holds important implications for their diversification Receipts peaked in 2008 and 2017 at about 38 percent and survival prospects. Diversifying Gabon’s export of the country’s total export basket before falling to basket and the number of markets for its exports 31.7 percent at year-end 2019. is key to strengthening the resilience of Gabonese companies. 113 Boosting regional trade ties and Together with the carbon-intensive nature of its growing trade volumes with Gabon’s neighbors – leading merchandise exports, Gabon’s dependency within CEMAC and with trading partners across the on natural resources points to the urgent need to African continent through AfCFTA, where trade flows diversify and lessen the carbon footprint of the remain negligible – needs far greater policy atten- country’s export basket. The prime benefit of export tion. Indeed, as the section below suggests, without diversification, whether in terms of a country’s basket export diversification, Gabon’s membership of AfC- of products or market destinations, lies in its ability FTA will be a missed opportunity devoid of significant to cushion the risks of external shocks and to harness development gains. productivity premia typically associated with exporting activity. Export diversification is associated with lower output volatility and faster sectoral reallocation of Stepping up engagement in key negotiating fora resources. Empirical evidence also shows that impro- In pursuing its strategic goals for services, Gabon vements in the quality of exported products strongly needs to show greater engagement in various correlate with productivity growth (IMF 2014). More­ trade negotiating fora and a readiness to address over, productivity gains from export diversification are the high level of policy restrictiveness of its regu- widely believed to arise from learning-by-doing pro- latory regime for services. As regards the first cesses, technology transfers, and the need to comply with product standards under more contestable market conditions (Box 12). 113  Regolo (2013) has shown that exports between countries with similar charac- It is essential that efforts to boost diversification teristics (i.e., South-South, and North-North) tend to be more diversified than exports between trading partners with marked differences in characteristics through greater value added be sustained to lessen (i.e. ,South-North, and North-South). TOWARD MORE INCLUSIVE AND GREENER GROWTH 79 BOX 12. Policy measures to sustain trade diversification Recent research devoted to the determinants of successful export diversification in developing countries identified several key factors that can explain the variations observed in export diversification across countries and over time (Giri et al. 2019). The analysis suggests that, to diversify, policy makers should (i) prioritize human capital accumulation, and (ii) reduce tariff and non-tariff barriers to trade with a view to lowering transaction costs and promoting greater market contestability. Other key policy interventions include improvements in the quality of institutions and in financial sector depth. For commodity exporters like Gabon, reducing barriers to trade in sectors other than oil ranks among the most important drivers of diversification, followed by improvements to educational outcomes at the secondary level and increased financial sector inclusion. Creating an enabling framework for public investment and policy reforms that can promote export diversification is no easy task. This is especially true for small economies like Gabon, where diversification is limited by the size of the domestic market and the limits of the country’s productive capacity. Although there is no single blueprint for economic diversification, several trade and competitiveness policies should be considered as anchoring elements of a diversification strategy. These include: (i) an appropriate incentive framework; (ii) policy reforms aimed at improving the investment climate and attracting sustainable FDI; (iii) social and educational/training policy measures for the labor market, to support adjustment and the reallocation of resources to new activities and sectors; and (iv) government interventions that target specific market, policy, and institutional failures. Such horizontal policies are increasingly seen as critical for export diversification. Salinas et al. (2021) find that horizontal policies (mainly governance, education, infrastructure, and trade openness) are associated with the emergence and/or growth of sophisticated (non-hydrocarbon minerals) manufacturing and more complex exports and, to a lesser extent, to increased services exports. challenge, Gabon must leverage the market and tech- trade policy stance on services is trade restrictive in all nical assistance opportunities on offer in the AfCFTA sectors other than reinsurance.114 and WTO contexts to boost the quality of its regula- tory frameworks and the competitiveness of its offer of services in its immediate periphery. Gabon also needs 4.6    Diversifying through deeper to rethink the cautious stance it has exhibited by not regional ties participating in recently completed multilateral nego- African countries have long identified regional trade tiations at the WTO on domestic regulation for services, integration as a key driver of economic develop- which aim to improve overall governance in the sector ment. This has led, most recently, to the conclusion of by tackling a host of potentially growth-impeding a continent-wide push for deeper integration through regulatory practices. The country’s decision to remain AfCFTA, signed in March 2018 in Kigali, Rwanda, and on the sideline in ongoing WTO Joint Statement Initia- entered into force in May 2019, with Gabon as a foun- tive discussions on e-commerce also sits uneasily with ding member.115 Gabon is also a member of CEMAC, Gabon’s aim to accelerate the pace of digitalization a customs and monetary union formed in 1999 linking and empower a private sector response in the sector. it to five other countries in Central Africa. Gabon is also Much the same holds true of ongoing WTO talks on a founding member of the WTO since its creation in trade and environmental sustainability, the aims of which are well aligned to Gabon’s quest for more sus- tainable production and trade patterns. In leveraging the economy-wide and trade benefits flowing from 114  On a scale from 0 (fully open) to 100 (fully closed), an STRI exceeding 25 more contestable services markets, Gabon must revi- is deemed restrictive, while measures above 50 reflect severe restrictions on entry and operation. See Annex Tables 5 to 10 on Gabon’s STRI across sectors sit what are often punitively high levels of policy res- relative to regional peers Angola (AGO), Ghana (GHA) and Nigeria (NGA). trictiveness across the broad spectrum of its service 115  Negotiations on some aspects of AfCFTA had not concluded at the time of this report. Trading under AfCFTA was due to start on July 1, 2020, but as a economy. As can be seen from Figure 75, Gabon’s result of the COVID-19 pandemic was postponed to January 2021. 80 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 75. Gabon: Services Trade Restrictiveness Index (STRI) metrics by sector (all modes), 2021 Commercial banking 44.7 Internet services 51.9 Mobile telecommunication services 51.9 Fixed-line telecommunication services 51.9 Maritime intermediation auxiliary services 58.5 Maritime cargo-handling, storage, warehousing and container 49.5 Auditing services 77.6 Accounting services 77.6 Air freight international 42.8 Air passenger international 65.4 Air freight domestic 53.7 Air passenger domestic 53.7 Legal services: Host country representation services 87.6 Legal services: Host country advisory services 70.4 Legal services: Home country law and/or third country law 71.4 and-or third country law Non-life insurance 57.3 Life insurance 56.1 Road: Freight transportation 40.7 Rail: Freight transportation 88.0 Maritime: Freight transportation 34.0 Reinsurance and retrocession 22.2 Retailing services 40.4 Wholesale trade services 40.4 0 10 20 30 40 50 60 70 80 90 100 Source: WB and WTO STRI database. 1995. The country is not a party to other preferential In particular, oil exports to the US and the rest of the trade agreements but has entered into bilateral invest- world registered a sharp decline after 2015, whereas oil ment treaties with several countries. exports to China have increased noticeably in recent years. Gabon’s trade at the regional level has been chiefly driven by non-oil exports, while global exports Other than exports to the Republic of Congo, there largely consist of petroleum products. At the is little evidence of current trade ties between regional level, non-oil exports to CEMAC partners Gabon and other CEMAC countries. More worrisome grew between 2006 and 2014 but subsequently is the virtual absence of Gabonese trade links with the declined markedly. Meanwhile, oil and non-oil exports rest of the continent other than sporadic exports of to other African countries are practically non-existent oil to Algeria, Angola, Morocco, and South Africa. (Figure 76 Panel A). While exports of oil go to a wide Figure 77 traces the extreme volatility and sharply range of global destinations, several important shifts in downward trend of Gabonese exports to the Republic the geographical destination of Gabonese oil exports of Congo and the declining share of exports destined occurred over the past two decades (Figure 76, Panel B). to the African continent over the past decade. As the TOWARD MORE INCLUSIVE AND GREENER GROWTH 81 FIGURE 76. Gabon: oil and non-oil exports by destination, 1988–2019 Panel A: Non-oil exports Panel B: Oil exports 3500 10000 9000 3000 8000 2500 7000 6000 US$ million US$ million 2000 5000 1500 4000 1000 3000 2000 500 1000 0 0 88 91 94 97 00 03 06 09 12 15 18 88 91 94 97 00 03 06 09 12 15 18 19 19 19 19 20 20 20 20 20 20 20 19 19 19 19 20 20 20 20 20 20 20 Africa CEMAC China Africa CEMAC China EU-EFTA Rest of the World USA EU-EFTA Rest of the World USA Source: Author’s calculations using WITS. section below makes clear, without significant diversi- Assessing the potential impacts of AfCFTA fication of Gabon’s product mix and export basket and on the Gabonese economy a clear road map on how closer regional ties can serve Static impacts the country’s diversification aims, Gabon’s CEMAC and The African Continental Free Trade Area (AfCFTA) AfCFTA membership may yield only tepid develop- represents a potentially important means of stim­ ment dividends. ulating and diversifying Gabon’s trade, thereby contributing to the country’s industrialization, accel­ erated economic growth, creation of new jobs, and FIGURE 77. Gabon: Share of total exports poverty reduction. AfCFTA can offer Gabonese to Africa and the Republic of Congo, producers unfettered preferential access to a continent- 1990–2019 wide market, reducing barriers to trade and invest- Africa Rep Congo ment and boosting competition, while also promoting adoption of a host of governance-enhancing measures. 40 AfCFTA membership can also raise the investment attractiveness of Gabon and attract anchor foreign 30 investors who can help Gabonese suppliers enter Export Share regional value chains. AfCFTA can significantly increase 20 the size of the market that foreign investors can access by locating in Gabon and facilitate access to inputs from 10 across the African region. 0 This section runs various scenarios to better under­ 1990 2000 2010 2020 1990 2000 2010 2020 stand the long-term quantitative impacts of AfCFTA Year on Gabon’s economy, distinguishing static effects Source: Authors’ calculations using WITS. from the dynamic effects associated with a deepening 82 GABON: COUNTRY ECONOMIC MEMORANDUM of policy areas, subject to negotiated commitments. FIGURE 78. Static impacts of AfCFTA on real The respective scenarios were assessed using an Envi- income by region, percentage change in ronmental Impact and Sustainability Applied General 2035 relative to baseline Equilibrium (ENVISAGE) Computable General Equili- 6 5.4 brium (CGE) model116 (Annex VIII). Due to data limita- 5.2 5 tions, Gabon is aggregated together with other Central 4 Africa countries.117 Four main scenarios are explored. 3 The baseline, which contrasts with all three other sce- 2.4 2.2 narios, represents the business-as-usual policies prior 2 1.1 to the implementation of AfCFTA. In the other three 1 0.4 0.8 0.3 scenarios, all AfCFTA partner countries progressively 0 0 implement additional parts of the AfCFTA agreement: –0.4 –1 Mauritius Botswana Gabon and Central ◾ In the tariff-cutting scenario, tariffs on intra­ Africa continental trade are progressively reduced in line Tariffs Tariffs + NTMs Tariffs + NTMs + TF with AfCFTA modalities. Starting in 2020, tariffs on Source: WB staff calculations from ENVISAGE simulations 90 percent of tariff lines are gradually eliminated (over a 5-year period for non-LDCs and 10 years for LDCs). Starting in 2025, tariffs on an additional 7  percent the existing literature (de Melo and Sorgho 2019). of tariff lines are gradually eliminated (over a 5-year Reduction in trade costs flowing from the adoption period for non-LDCs and 8  years for LDCs). Up to of trade facilitation measures ranges between 2 3 percent of tariff lines, accounting for no more than and 10 percent over the 2020–2035 period. 10 percent of intraAfrican imports, can be excluded from liberalization by the end of 2030 for non-LDCs The simulation results suggest that implementing and until 2033 for LDCs. AfCFTA will increase Gabon’s aggregate real income, ◾ In the scenario addressing non-tariff measures output, and trade by 2035, but only modestly. (NTMs), NTMs on both goods and services are When tariff-, NTM-, and TF-related reforms are all reduced on a most favored nation treatment basis. It implemented, Gabon sees a 1.1 percent rise in income is assumed that 50 percent of NTMs can be addressed by 2035 relative to the baseline (Figure 78). Gabon’s by policy changes within the context of AfCFTA. It is real income gain is much smaller than that registered also assumed that there will be additional reductions by other AfCFTA signatories with comparable income on NTMs on exports. levels, such as Mauritius or Botswana.118 The income ◾ In the trade facilitation (TF) scenario, AfCFTA gain is equally distributed between the three parts of will also be accompanied by measures to facilitate AfCFTA, with each contributing about one third of aggre- trade with commitments closely aligned to the gate gains (Figure 79). Gabon’s real income gain does WTO’s Trade Facilitation Agreement. Estimates of not come primarily from an increase in output, which the size of these trade barriers are borrowed from only grows by 0.05 percent (Figure 94 in annex VIII), but rather by a 7.1 percent increase in the country’s imports relative to the baseline, concentrated in light 116  CGE models offer useful insights into the static gains accruing from reallo- manufacturing, processed foods, textiles, and chemi- cating resources across sectors but sometimes struggle with more dynamic cals (Figure 95 in annex VIII). gains from trade. The ENVISAGE model used to carry out the AfCFTA simula- tions in this section capture what is arguably the most important dynamic force at play: changes in capital stocks, including from increased FDI. 117 The XCF region of the GTAP database contains the following countries:   CAR; Chad; Congo, Rep.; Equatorial Guinea; Gabon; and São Tomé and  In 2020 Gabon’s GDP per capita was USD 6,882; Mauritius, USD 8,628; and 118 Príncipe. See https://www.gtap.agecon.purdue.edu/databases/regions.aspx? Botswana, USD 6,405. See https://data.worldbank.org/indicator/NY.GDP. Version=10.131. PCAP.CD. TOWARD MORE INCLUSIVE AND GREENER GROWTH 83 FIGURE 79. Static impacts of AfCFTA on in net FDI inflows induced by AfCFTA. For its part, the aggregate macro indicators, percentage AfCFTA FDI deep scenario includes all the impacts change in 2035 relative to baseline of the broad scenario while also assessing additional 8 trade cost reductions brought about by commitments 7.1 7 across a broader range of behind-the-border mea- 6 sures such as competition policy, services, and regu- 5 4.7 latory cooperation. 4 3.0 3.1 As in the case of the static analysis described above, 3 2.6 without significant diversification of the country’s 1.9 2 export basket, Gabon registers negligible gains 1.1 0.8 1 0.4 from AfCFTA-induced increases in FDI inflows. Such 0 results highlight the urgency of enhancing Gabon’s Income Imports Exports investment climate and redoubling efforts at attracting Tariffs Tariffs + NTMs Tariffs + NTMs + TF greater volumes of FDI in non-oil sectors of its economy. Gabon and the rest of Central Africa see approximately the same benefits from AfCFTA on The modest static gains accruing from AfCFTA are income, imports, and exports under both the tariff + due to the undiversified nature of the Gabonese NTM + TF scenario and the broad AfCFTA scenario economy and its heavy concentration on fossil fuel (which also includes FDI inflows). These modest gains exports. While AfCFTA does liberalize trade in fossil once again are in contrast to results for other AfCFTA fuels, the baseline tariff, NTM, and TF barriers affecting signatories (Figure 80). the sector are already quite small. This implies that the fossil fuel sector’s gains can only come from access Gabon stands to derive greater gains from a deep to cheaper imported inputs. As a result, not only are AfCFTA, with real income gains doubling from 1.3  percent gains from AfCFTA small relative to those of other under the Tariff + NTM + TF and the broad scenario to countries without tangible export diversification, but 2.6 percent under the deep scenario (Figure 25). Such AfCFTA also may heighten Gabon’s dependence on results are chiefly driven by greater access to imported fossil fuel exports which, as Figure 79 shows, account goods (including intermediate goods), as the increase in for more than half of the 3.1 percent gains in 2035 imports also doubles (from 8.7 percent to 15.6 percent), export volumes induced by the continental pact. Dynamic (FDI-induced) impacts FIGURE 80. Dynamic impacts of AfCFTA A forthcoming World Bank report provides additional on real income by region, % change in 2035 relative to baseline analysis of the impacts of AfCFTA, with a focus on the dynamic impacts of the continental pact 15 induced by a rise in FDI inflows.5 As with the above 11.2 simulations, the latest report assesses four scenarios: 10 (i) a baseline (business as usual) scenario, (ii) a Tariff + NTM +TF scenario, (iii) a broad AfCFTA scenario, and 5.5 5.4 4.7 5 (iv) a deep AfCFTA scenario. The baseline and Tariff + 2.6 NTM + TF scenarios are very similar to those discussed 1.3 1.3 above but introduce slight methodological differences 0 Mauritius Botswana Gabon and Central and updates. The AfCFTA FDI broad scenario builds on Africa the Tariff + NTM + TF scenario but considers changes Tariffs + NTMs + TF Broad Deep 84 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 81. Dynamic impacts of AfCFTA reforms has been slow and, most recently, impeded on aggregate macro indicators, % change by the COVID-19 pandemic.120 The spike in oil prices in 2035 relative to baseline induced by the war in Ukraine cannot be a reason for 20 complacency, as pressures to diversify and decarbonize 15.6 Gabonese output and trade remain compelling. The 15 government can usefully direct the windfall gain from the current turmoil in energy markets toward a necessary 10 8.7 8.6 green transition by removing investment and trade dis- 5.07 tortions and supporting private sector efforts to create 5 3.7 3.7 1.3 1.3 2.6 opportunities in new sectors. 0 Income Imports Exports Tariffs + NTMs + TF Broad Deep 4.7  Addressing the trade and climate Notes: Impacts are not available for the deep scenario for Mauritius and change nexus Botswana. Source: WB staff calculations from ENVISAGE simulations. Over the past few decades, climate change has emerged as a global concern exerting profound led by an increase in imports of processed foods. The effects on countries at all development levels. While export impact also increases, though not as much (from many developing countries, especially in Africa, are 3.7 percent to 5.0 percent) (Figure 81). lower emitters of greenhouse gases, they rank among those likely to experience the strongest adverse Overall, the sectoral composition of changes in effects of global warming and climate change through output, imports, and exports is broadly similar under severe heat waves, floods, and droughts. Such vulnera- both the static and dynamic scenarios (Figure 92, bility is compounded by the fact that many develop­ Annex 8). Fossil fuels drive gains in output and exports ing countries are heavily reliant on rain-fed agriculture while the rise in imports chiefly concerns light manufac- and show above-average dependence on primary turing goods. The only notable difference between the commodity exports as a means of sustaining their broad and deep scenarios is that the import increase economies. Box  13 highlights how unfolding global in the deep scenario is driven by processed foods.119 climate dynamics are prompting a shift toward lower carbon intensive value chains. The simulation results highlight the urgency of Gabon’s diversification agenda and the need both to accele- Trade plays a key role in climate change. It does so rate the implementation of the PSGE and to devise both as an exacerbating factor and as an impor- a strategic roadmap on how best to harness AfCFTA tant means to combat climate and environmental for purposes of trade diversification, FDI attraction, degradation. Trade affects climate change through an and GVC insertion in non-oil activities. While the increase in economic activity and concomitant rise in risks associated with Gabon’s undue reliance on the oil energy use and greenhouse gas emissions. How­ ever, sector have long been acknowledged in Gabonese poli- trade also forms a key part of the solution to climate cy-making circles, progress in implementing needed change by enhancing access to environmentally friendly technologies, goods, and services, all of which are key to promoting trade in green products and 119  As regards the distributional impacts associated to dynamic AfCFTA scena- rios, the pursuit of deeper levels of integration increases wages in Gabon and lessening the carbon footprint of production. This is the rest of Central Africa by 6 percent. This increase is driven by an 11 percent especially important for developing countries, including rise in the wages of unskilled female workers and a 9 percent gain in skilled female wages. Unskilled male wages increase by 1 percent, while the wages of skilled male workers rise by 6 percent, confirming the wage premia typically associated with FDI inflows.  See Aki 2018. 120 TOWARD MORE INCLUSIVE AND GREENER GROWTH 85 BOX 13. Trade climate change and developing countries: promoting a transition to lower carbon-intensive value chains Climate change is already affecting the trade of LMICs and could have a far greater impact on GVCs than recent shocks to global trade. The increasing prevalence and greater violence of extreme weather events as well as rising temperatures and changing precipitation are altering traditional comparative advantages. LMICs continue to be the most affected by climate change and are also the least able to afford its consequences. Fighting climate change and its consequences is an imperative for spurring development and fighting poverty. More extreme weather events are creating greater uncertainty and the need for greater trade resilience in LMICs. Moreover, the longer-term adaptation to the changing climate and the shift to a lower-carbon growth trajectory will be key challenges for countries with the fewest resources and weakest capacity to adjust to a changing climate. Exporters in LMICs will also be affected by emerging policy responses to climate change. Measures to achieve Nationally Determined Commitments (NDCs) under the Paris Agreement, including carbon border adjustment mechanisms (CBAMs), will prompt a shift in demand away from fossil fuels and carbon-intensive products in major markets. Under the EU Green Deal, for example, imports of coal could be reduced by almost two-thirds. Most heavily affected will be fossil fuel exporters and countries that are heavily involved in carbon-intensive GVCs, such as chemicals. Hence, the prevalence of policies to support climate mitigation objectives, including through CBAMs, will increase the importance of export and output diversification in countries highly reliant on exports of fossil fuels and carbon-intensive manufactures. The shift away from carbon-intensive GVCs will entail new opportunities in GVCs that are less carbon intensive. As trade in carbon-intensive manufactures declines, suppliers in GVC-intensive sectors, such as electronics, motor vehicles and parts, and other light manufacturing, will see higher demand for their goods, resulting in even stronger GVC linkages across countries. As a result, key exporters of these products, such as China, Malaysia, and Vietnam, can strengthen their integration into GVCs following carbon border adjustment measures. Thus, climate mitigation policies not only will lead to the decarbonization of the economy, but also will stimulate higher integration into the GVCs of low carbon-intensive commodities. Countries that are already heavily involved in these GVCs or have the potential to participate in them will see new opportunities for trade. Source: Brenton, Ferrantino, and Maliszewska (2022). Gabon, which often lack the technological capabilities Gabon faces a triple challenge. Gabon’s weakly diver- required to produce environmentally friendly products. sified, commodity-dependent economy is a prime example of a country confronted with the triple challenge Trade also provides countries with access to larger of mitigating the adverse consequences of climate markets, affording them greater scale to diversify change, decarbonizing its product and export basket, their exports and develop new products, services, and leveraging the economic potential of its abundant and technologies, including those best able to miti- natural resources, particularly its rainforest. Located on gate the adverse effects of changing climates. Greater the equator, Gabon enjoys an equatorial climate. Over market access opportunities facilitate the transition from 20 million ha of forest cover 85 percent of its territory. Over sectors generating high greenhouse gas emissions and the past century, Gabon has experienced noticeable large energy consumption to less carbon- or energy- changes in climatic conditions. Gabon’s mean annual tem­ intense sectors. Additionally, trade contributes to eco- perature increased from 24.7°C in 1901 to 26°C in 2020 nomic growth and, consequently, to gains in per capita (Figure 82). Meanwhile, average annual rainfall decreased income levels. Experience shows how gains in per capita from 1988 millimeters in 1950 to 1757 millimeters in income translate into vocal political demands for impro- 2020. Average temperatures in Gabon display consi- ved environmental governance and environmentally derable regional variance, with greater variability in friendlier production and consumption baskets. coastal areas relative to the hinterland. At the same 86 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE 82. Gabon: Mean annual temperature of Congo, Cameroon, Chad and the Central African and precipitation levels, 1901–2020 Republic. Importantly, Gabon’s per capita level of CO2 emissions has decreased in the most recent period 26 25.9 2050 25.7 (Figure 84). As seen in section 3.6, Gabon is the first 25.8 2000 1988 25.6 1950 country in Africa to receive results-based payments Mean temperature °C for reduced emissions from deforestation and forest Precipitation in mm 25.4 25.2 1900 25.2 1850 degradation. Gabon is one of the countries with the 25 1800 1757 highest carbon sequestration rates in the world.121 24.8 24.7 1750 1727 1731 24.6 1700 Gabon’s current export mix, dominated by minerals 24.4 1650 and fossil fuels (with oil and manganese contributing 24.2 1600 24 1550 85  percent of aggregate exports), contributes 1901 1950 2010 2020 substantially to greenhouse gas emissions, pollu- Temperature Precipitation tion, and environmental degradation. While diver- Source: WB. sification toward wood and wood-related products, which contribute roughly 8 percent of merchandise exports, can be expected to lower the carbon foot- time, coastal regions exhibit lower precipitation levels print of Gabon’s export basket, care must be taken to than inland areas. Gabon is already experiencing the ensure the adoption of sustainable forestry practices effects of rising sea levels (Figure 83). to mitigate the potentially adverse effects of deforesta- tion and associated loss of carbon capture. Chapter 5 Gabon has higher CO2 emissions per capita than of this report advances several recommendations on most surrounding countries. Gabon’s CO2 emissions sustainable forestry practices. Similar considerations (measured in metric tons per capita) stood at least arise in agriculture, a sector in which significant scope 4 times higher than those of the neighboring Republic exists for Gabon to leverage potential export gains, by focusing on climate and forest-friendly agricultural activities and on value added through scaled-up agri- FIGURE 83. Gabon: Evolution of sea level, food exports. 1993–2015 (observed anomalies relative to mean) Several policy decisions have been taken by the government in recent years to address the adverse 200.00 effects of climate change. Climate-related conside- Average historical sea level anomaly 150.00 rations were embedded in the PSGE, which features tools for tackling climate change and, by 2025, for 100.00 cutting greenhouse gas emissions in half relative to 50.00 the baseline scenario. Specific measures undertaken 0.00 include the adoption of sustainable forest manage- ment practices, certification initiatives in forestry, the –50.00 prohibition of flaring in the oil industry, and the adop- –100.00 tion of sustainable palm oil standards.122 –150.00 1993 1994 1996 1997 1999 2000 2002 2003 2005 2006 2008 2009 2011 2012 2014 2015 Average Monthly Anomaly 121  Gabon’s rainforests are able to sequester a total 140 million tons annually, Average Annual Anomaly making Gabon a net absorber of 100 million tons of carbon. 122  This report has not been able to document to what degree PSEG climate- Source: Authors’ calculations using WB data related targets are being met. TOWARD MORE INCLUSIVE AND GREENER GROWTH 87 FIGURE 84. Gabon and its peers: CO2 emissions per capita, 2010 and 2018 18 16 14 Metric tons per capita 12 10 8 6 4 2 0 Botswana Central Cameroon Congo, Costa Rica Gabon Equatorial Mongolia Mauritius Oman Chad Turkmenistan Uruguay African Republic Rep Guinea 2010 2018 Source: Authors’ calculations using WDI data. Moreover, in 2021 Gabon passed legislation allowing Gabon needs to assign its trade policy the task of trade in carbon credits, linked to its efforts to pre- gaining access to larger markets, shifting incentives to serve rainforest and the carbon capture potential this transition successfully from oil-dependency to a more offers. Each credit equals the sequestering or prevent­ diversified economy, with a lower carbon footprint and ing the emission of 1 metric ton of CO2. Under the an enlarged basket of competitively priced exports of carbon credit policy, companies given emission allow­ goods and services. ances must comply with emission limits within two years. Along with Guyana and Bhutan, Gabon is among the world’s few net carbon sequesters, leveraging its rich 4.8 Recommendations carbon-absorbing rainforest endowments. In 2019, Gabon This chapter’s assessment of Gabon’s recent trade became the first African country to receive results- performance and forward-looking prospects sug- based payments for reduced emissions resulting gests that urgent action is required, but also that from its sustainable forest management practices. there is scope for diversifying and greening the Gabon’s diversification toward a greener export country’s export basket; and for progressively insert­ basket can place the economy on a more sustainable ing Gabonese companies into regional and global environmental trajectory. Diversification toward a value chains – through increased FDI inflows from a greener export basket composed of manufactured sustained effort at improving the investment climate goods (including a wider range of wood-related pro- and overall governance. Beyond two such overarching ducts such as furniture and construction materials), trade policy aims, this report advances 10 recommen- fishery and agricultural products for regional and dations aimed at helping Gabon to better harness global markets, along with a host of commercial ser- cross-border trade for purposes of faster, more resilient, vices can lessen its dependence on carbon-intensive and inclusive growth. These are summarized in Table 15 and environmentally degrading oil and minerals along with the main institutional actors responsible for production and place the economy on a more sus- implementing key policy reforms and the time horizon tainable environmental trajectory. Looking ahead, for their enactment. 88 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE 15. Matrix of Trade Policy Reforms, Implementation Responsibilities and Time Horizon POLICY RECOMMENDATIONS LEAD IMPLEMENTING AGENCY TIME HORIZON Adopting a strategic road map for trade policy centered on the fourfold Ministry of Trade in coordination with End of 2022 aims of export diversification, GVC insertion, leveraging regional key sectoral ministries integration (particularly in AfCFTA) and greening Gabon’s export basket; clarifying the role assigned to cross-border trade and investment in the PSGE. Focusing export diversification efforts on the following sectors: Ministry of Trade and key sectoral Ongoing agriculture; fisheries (including aquaculture); forest and wood products; ministries and services (ecotourism; environmental services); and digital trade while ensuring sustainable farming, fishing and forest management practices. Developing a robust, quality infrastructure ecosystem with a view to Ministry of Trade 2022–2025 ensuring conformity with rising TBT and SPS requirements and standards in importing countries. Strengthening Gabon’s trade and FDI promotion agencies and practices Ministry of Trade; relevant trade and Ongoing in key target markets. FDI promotion agencies Reducing production and trade costs and promoting regional and c Ministry of Trade; Ministry of Trans- Ongoing ontinental trade through sustained improvements in Gabon’s logistics port; Gabonese Customs performance, faster implementation of the WTO’s Trade Facilitation Agreement, and through improved trade infrastructure (especially road transport networks and maritime transport; seeking greater air connectivity to increase tourism flows). Engaging CEMAC partners with a view to reducing high levels of border Ministry of Trade; Ministry of Finance 2022–2024 taxation levels under the Common External Tariff, which appears more attuned to import substitution goals than to the insertion of regional companies in GVC trade and FDI linkages. Engaging in the progressive liberalization of restrictive trade and Ministry of Trade and sectoral minis- Ongoing investment measures in services, autonomously, with AfCFTA and at the tries and regulatory agencies in key WTO. Priority attention to be given to reducing policy restrictiveness service sectors levels in internet, mobile and fixed line telecommunications services as well as transportation services (all modes). Ministry of Trade; Customs; 2022–2023 Improving the quality and timeliness of trade-related data. National Statistical Agency Increasing Gabon’s participation in ongoing WTO negotiations on Ministry of Trade Immediately harmful fisheries’ subsidies and in multilateral (Joint Statement Initiative) negotiations of services, domestic regulation, MSMEs, e-commerce, and trade and environmental sustainability. Strengthening the negotiating, analytical and implementation capacity Ministry of Trade and relevant 2022–2023 of key Gabonese trade institutions. Ensuring an inclusive government trade-related institutions approach to trade policy formulation through strengthened inter- agency coordination and external stakeholder consultations, involving key public and private sector actors in trade, logistics, climate policy, and resource management. TOWARD MORE INCLUSIVE AND GREENER GROWTH 89 References International Monetary Fund. 2014. 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Trading Agreements: A Landscape with Measures to Sekkat, Khalid. 2016. “Exchange Rate Misalignment and Address Challenges at Harmonization.” Journal of African Export Diversification in Developing Countries.” The Trade 08 (1) : 96–108. Quarterly Review of Economics and Finance 59: 1–14. CHAPTER 5 GREENING GABON’S ECONOMIC AND TRADE STRUCTURE By accelerating transformation to a greener economy, Gabon will be able to achieve a more sustainable and inclusive growth trajectory, create jobs for its young population, and reduce its vulnerability to shocks. However, to achieve sustained growth momentum, Gabon must con- tinue to address the underlying constraints to attaining a green economy. This chapter will look at ways to improve the investment climate and transparency, specifically the processes, regulations, and institutions in green sectors. The second part will address the need for Gabon’s trade policy to gain access to larger markets, shifting incentives to transition successfully from oil-dependency to a more diversified economy with a lower carbon footprint and an enlarged basket of competitively priced exports of goods and services. 5.1    Diversifying where and how? In diversifying and greening Gabon’s non-oil export basket, several sectors offer promising potential. While scope exists to direct diversification efforts through greater value added within the extractive and natural resource sectors, goods-related sectors – agriculture, forestry, wood-related, and fisheries – offer significant promise. Promising areas in the services trade include offering eco- tourism aligned to Gabon’s remarkable biodiversity, along with a range of business and professional services associated with enhanced environmental stewardship. Gabon should be able to harness its digital capabilities to digitize a host of government services and produce export-oriented ICT ser- vices focused on neighboring markets; efforts in this direction imply greater engagement in AfCFTA and WTO negotiations on services and digital trade. Further, there is scope for Gabon to exploit its latent export diversification potential by lending support to companies who recently exited export markets, particularly in manufacturing (Box 14). 91 92 GABON: COUNTRY ECONOMIC MEMORANDUM BOX 14. Leveraging Gabon’s latent export potential Gabon can further benefit from trade by leveraging its latent export diversification capabilities. Gabon’s historical exports provide important information about the country’s latent diversification potential and the sectors in which it can diversify its product exports. Latent diversification looks at the products that Gabon was able to export in the past and could export in the future if the right conditions are in place, i.e., adequate human capital, access to frontier technology, improved trade infrastructure, and expanded market access opportunities.123 Even if a country appears to specialize in a few products over time, it may have a large latent diversification potential resulting from the constant opening and closing of export product categories. In terms of latent diversification, the most promising industries through which Gabon can diversify its goods exports are manufactured products, chemicals, foodstuff, and live animals. Figure  85 shows the number of products exported within each SITC 2-digit code for Gabon. The first bar reports the number of exported products in 2019; the last bar shows the number of SITC 5-digit codes present within each SITC 1-digit code (i.e., the maximum number of exportable products); and the middle bar captures the concept of latent trade diversification proposed by Lederman, Pienknagura, and Rojas 2019).124 Annex IV figures provide a more disaggregated look at a range of products in which latent export diversification potential exists and state the year when the firms producing such goods exited an export market. Several Gabonese products that were exported for over 25  years have recently ceased to be traded. These include manufactured goods such as women’s garments, textiles and footwear, transportation equipment, glass containers, milling grain machines, and wooden products, some of which were exported until very recently. This suggests that scope may exist to diversify Gabonese merchandise exports if production in these sectors can be revived through an adequate private sector response and targeted industry support measures (see Annex IV figures). FIGURE 85. Gabon: Latent diversification potential in 2019 800 600 Number of products 400 200 0 tio o tic ts rt s ls ts s ls al od cc po ue uc ue fa ar ac im ba go od f ls, ns f ns ed an al pt to oi tra pr tra er ed ur ce e nd le in d ct liv d ur ex d ab te M an sa a an t d uf ac la ls, t an ge e y an es re uf ia er ag ve od iti er an m nd in er od at h M Fo us nd sa v ac m Be m o a al M ne m e al ic ud co la im em Cr el An er isc Ch th M O Exports 2019 Latent Maximum Source: Author’s calculations using WITS mirror exports. 123  The concept of latent diversification suggests that if Gabonese exporters have already paid the fixed costs associated with exporting, they could reenter the export market once domestic conditions improved. Lederman, Pienknagura, and Rojas (2019) show that latent diversification is an important determinant of trade volatility, and that countries with a more diversified latent export basket experience less volatility. This is particularly important for Gabon, as the discovery of oil reduced incentives to develop the country’s agriculture and manufacturing sectors. 124  Latent diversification is calculated by looking at the entire history of a country’s exports; it is defined as the number of export lines that have been active for at least one year since 1960. TOWARD MORE INCLUSIVE AND GREENER GROWTH 93 5.1.1  Agriculture importer. Agricultural trade can help secure access to better and cheaper inputs that can be used to boost The Gabonese agricultural sector offers significant agricultural productivity and production. Most of diversification promise. Employing close to one in Gabon’s neighbors are net importers of agricultural and three workers, Gabon’s agricultural sector arguably falls food products. Therefore, there is potential for Gabon below its weight level by contributing only 6.6 percent to provide these countries with agricultural products, of aggregate output and a mere 6 percent of exports. including cereals (e.g., sorghum, maize, rice), vegeta- Lacking an agricultural tradition, as an oil-rich, middle- bles, and chicken. Evidence shows that preferential trade income country with the highest urbanization rates in agreements (PTAs) can boost members’ trade, particu- Africa, Gabon is a net food-importing country. It relies larly in agricultural products.126 Scope exists for Gabon’s on foreign sources for about 60 percent of its nutritional agricultural sector to serve the rising food trade needs requirements; this despite the relatively high tariff rates of African partners in the AfCFTA context. In turn, this applied to food imports under the CEMAC CET, a policy could accelerate economic and employment growth, at odds with the government’s stated aim of reducing lending support to Gabon’s efforts to diversify its econ- poverty. The WTO’s latest Trade Policy Review of Gabon – omy. Gains in agricultural productivity could also serve already close to a decade old, noted that the average an expanding domestic ecotourism sector. tariff rate in the sector stood at a punitive 23.7 percent, without counting other import duties and taxes and internal taxes (WTO, 2013). 5.1.2  Forestry and wood products Gabon’s ability to exploit its comparative advantage As Chapter 3 shows, Gabon’s forestry and wood sector in agriculture runs up against environmental chal- presents important value-added opportunities by lenges. While the country has about 1 million hectares processing wood into furniture and various con- of rich arable land and abundant rainfall, favoring struction materials for export. Despite its ample for- agricultural production for export, any sustained tran- estry resources, Gabon remains a net importer of wood sition toward producing foodstuff for export generates furniture, a trend that holds for SSA as a whole. Here additional pressure for deforestation.125 Such trade- again, both CEMAC and AfCFTA offer space for Gabon to offs point to the need to raise productivity levels in the diversify its economy by developing an export-oriented sector and to adopt sustainable and digitized farming wood-processing industry, a process already underway. practices that also facilitate sanitary and phytosanitary Recent steps taken through legislation prohibit the export of raw wood and provide incentives for the develop- (SPS) compliance with rising food safety standards ment of a domestic wood-processing industry and in importing countries. Diversifying the agricultural its integration into regional and global value chains.127 export basket with more forest-friendly products – e.g., black pepper, frozen fish, coffee, cocoa, and fruit juices – avoids crops such as soy, corn, cotton, palm oil, 126 Korinek and Melatos (2009) , Grant and Lambert (2008), Jayasinghe and   Sarker (2008), and Sarker and Jayasinghe (2007) use a gravity model to show or livestock production, all of which are associated with that regional trade agreements have increased trade in agricultural products between member countries. greater deforestation pressures. Such diversification 127  International experience with policies centered on promoting domestic pro- efforts can respond to the growing global demand for cessing through export bans suggests the need for careful monitoring. Exports of processed wood ranked as Gabon’s third, fourth, and eighth leading export foodstuff associated with changing lifestyles and con- products in 2020, accounting between them for 11.4 percent of total mer- chandise exports (Annex Table 1). While such trends offer evidence of positive sumption habits such as healthy and green products. structural change, an export ban can reduce the price of wood and the inco- mes of workers and companies operating in the forestry sector. In the absence Agricultural trade can thus help Gabon to secure of alternative income-generating opportunities, this could potentially lead to illegal exports and increase the amount of wood being cut, i.e., deforestation, access to better and cheaper inputs as a net food a trend observed in a number of countries. Therefore, care must be taken to ensure that policy approaches in the forestry and wood sectors consider the interests of all stakeholders, improve the management of Gabon’s timber  An estimated 1.1 percent of Gabon’s land mass is dedicated to agricultural 125 resources, and provide adequate guarantees to leading investors on availabi- production (WTO 2013). lity of timber so as to limit the impact of any shocks. 94 GABON: COUNTRY ECONOMIC MEMORANDUM Developing Gabon’s wood sector involves parallel efforts fighting illegal fishing, and improving the sustainability at adapting to and monitoring compliance with sustain- of the fisheries sector. Sustained efforts are needed able forestry practices to mitigate the possible down- to scale up domestic capacity in the sector, in terms sides of undue deforestation. both of increased fish catch by domestic fishing fleets and in processing fish products onshore. Gabon has an As for agriculture (and fisheries), boosting exports important stake in the ongoing WTO negotiations on of wood products will require enhanced compli- harmful fisheries subsidies. ance with quality standards and lower certifica- tion costs to facilitate exports of sustainable goods, particularly to advanced country markets such as 5.1.4  Services – ecotourism, environmental the EU. In turn, this points to the need for Gabon services, and digitization to develop a quality infrastructure ecosystem (and a host of business services associated with it) to ensure Cross-border provision of services has under­ compliance with stringent product standard require- exploited potential in Gabon, as can be seen from ments in leading export markets. Currently, there is the negligible export receipts generated in a sector no such ecosystem in Gabon, given that the country’s accounting for a predominant share of aggregate export basket made up of primarily unprocessed output and employment. natural resources. Ecotourism 5.1.3  Fisheries The extraordinary wealth of fauna and flora found in Gabon’s forests endows the country with superior As with agriculture, Gabon has an important fish- ecotourism potential, severely curtailed by COVID-19- eries potential that can be harnessed to respond induced travel restrictions. Tourism receipts repre- to rising worldwide demand for healthier diets and sented Gabon’s second source of services export a lessening of red meat consumption. The country’s earnings prior to the pandemic (Figure 86). Having seacoast is 750 km long, and its exclusive economic established a network of national parks and protected zone (EEZ) extends over 213,000 km², about 8 per cent areas in 2002, Gabon became the country protecting of which is reserved for offshore oil recovery activities. the second largest percentage of its territory, after The sector is dominated by traditional (artisanal) sea Costa Rica. Still, despite subsidy programs for tourism fishing, the bulk of which involves fishing boats from neighboring countries along with a weak domestic infrastructure, the sector remains undeveloped. There presence in the more export-oriented industrial fishing is an inadequate supply of hotels that are poorly served segment where foreign vessels are licensed. Deep sea by transport services and bad roads. Reviving the fishing, involving the exploitation of tuna resources, is sector as the pandemic recedes must remain a priority, practiced in the EEZ under bilateral agreements with together with heightened efforts at branding a country a number of partners, including the EU, Japan, China, yet to register on global ecotourism maps. Doing so and Chinese Taipei. The aquaculture sector is under- will require better air travel connections with airlines developed despite its potential. from leading source countries. The output of fishery products is insufficient to cover Gabon’s average annual per capita consump- Environmental services tion, which is supplemented by imports. Important Gabon is among a handful of SSA countries to have steps have been taken in recent years to strengthen demonstrated a firm commitment to protect its the sector under the Gabon Blue program with a view forests and biodiversity, curb carbon emissions, and to improving fisheries management and oversight, address climate risks. Achieving such aims requires TOWARD MORE INCLUSIVE AND GREENER GROWTH 95 FIGURE 86. Gabon: Sectoral breakdown of commercial services exports, 2020 Miscellaneous business, professional, and technical services Personal travel Sea transport Air transport Financial services Telecommunications services Reinsurance Business travel Construction in the compiling economy Audiovisual and related services $0 $10M $20M $30M $40M $50M $60M $70M $80M Source: Observatory of Economic Complexity (https://oec.world/en/profile/bilateral-country/gab/partner/gab) a sophisticated environmental services industry. The The development of Gabon’s quality infrastructure imperative of greening Gabon’s export basket can ecosystem is also contingent on a host of readily avail- itself be a major spur to the emergence of a vibrant able services linked to metrology and conformity environmental services sector. Such a process has assessment services. Growing the expertise required arguably not taken sufficient root in Gabon’s oil sector, of a cutting-edge environmental service industry holds which remains highly dependent on imports of special- important implications for Gabonese human resource ized technical services. planning, particularly in vocational education. Gabon should lend more vocal support to ongoing efforts The transition toward low-carbon production methods to revive WTO negotiations addressing tariff and in non-oil sectors cannot easily proceed in the non-tariff impediments affecting trade in environmen- absence of competitively priced and efficiently sup- tal goods and extend such talks to a host of relevant plied technical services that are needed to install, environmental services. maintain, and repair environmental goods, and help facilitate the adoption of climate-smart, high pro- ductivity practices in agriculture, fishing, forestry, and Digital trade extractive industries. In several environmentally friendly Already the most developed market in Central sectors, a lack of technical expertise and necessary Africa and the sixth-ranked player in Africa accord- equipment can frustrate trade in low-carbon technolo- ing to the International Telecommunications Union, gies. Gabon’s production and adoption of green goods the expansion of Gabon’s ICT sector is high on the will require the concomitant liberalization of a host of government’s priorities as it continues to push for related technical services. For example, cutting edge economic diversification and private sector-led agricultural and land-use technologies and expertise growth. Digitization has indeed been placed at using geospatial mapping services can help restore the center of economic and social transformation degraded lands to high-productivity agricultural land efforts over the past decade. The PSGE and the or forest instead. Digital Gabon Plan affirm the aim of turning the country 96 GABON: COUNTRY ECONOMIC MEMORANDUM into a center of excellence in services and a pioneer 5.2    Analysis of the afforestation of the digital revolution by 2025. Seen through a trade and wood product manufacturing lens proxied by ICT services trade growth, such objec- sectors tives have yet to materialize in a significant manner and will require redoubled efforts. This chapter presents a deep dive analysis of the forestry and wood product manufacturing sector, in The digitalization of governmental operations and addition to the analysis in chapter 3 identifying cross- the increased use of digital technologies and ser- cutting opportunities to improve Gabon’s investment vices holds important potential to improve Gabon’s and competitiveness and support economic growth and resilience to climate change and address persistent job creation. This section analyzes Gabon’s efforts to societal inequalities and exclusion by investing in develop afforestation and wood product manufacturing interconnected digital public platforms. A 2019 sectors – thus fostering economic diversification planned diagnostic of Gabon’s digital economy as part of the in the PAT – as well as difficulties faced in applying exist- World Bank’s Digital Economy for Africa (DE4A) initia- ing regulations. It is based on a newly developed diag- tive reviewed the key building blocks of Gabon’s digi- nostic tool, the Green Investment Climate Diagnostic tal economy and recommended advancing the devel- (GICD), which Gabon becomes first to pilot (see Annex II opment of interconnected digital public platforms to for more details on the diagnostic tool). accelerate digital transformation. Significant invest- Eighty-eight percent of Gabon is covered by eco- ments in digital infrastructure have helped Gabon logically diverse and dense tropical rainforests. progress in e-government development, demonstrat- Given the number of known types of timber species ing higher than regional average scores in the UN and the legal minimum tree diameter for harvesting, E-Government Index (EGDI) 2020. However, the country the harvestable stock is estimated at 400 million m3, is below the world average and lags behind even with natural growth of between 3–5 million m3 annually. regional averages in the provision of online services This presents Gabon with the opportunity (and also and e-participation. highlights the potential) to set the gold standard for Gabon’s digital strategy is to position e-government forestry in Africa and beyond by employing modern as a central element in broader public sector reform sustainable forestry management practices and efforts. The introduction of harmonized and integrated capitalizing on the support and involvement of local digital public platforms can help improve efficiency and communities. This will allow Gabon to preserve this unique asset while enabling the country to generate quality of public services for individuals and businesses significant revenues and jobs – including sustainable as well as governance and accountability. Doing so exploitation and processing of certified valuable tropi- can increase the private sector’s trust and willing- cal wood, carbon finance, agroforestry, and non-timber ness to participate in the e-government agenda forest product (NTFP) harvesting, pharmacognosy (the and engage in the digital economy ecosystem with study of plants and other natural sources for medicinal a view to boosting domestic and regional trade over purposes), wood crafts, and world-class ecotourism. digital platforms. The social and economic transfor- mation that can result from the greater use of digital technologies will allow the government to reach the 5.2.1  Regulatory predictability and policy population directly and expeditiously. It will also ben- coherence in the afforestation and wood efit the poor who need assistance most, provide job product manufacturing sectors opportunities for youth, and foster the development of the local digital industry – all critical elements for The wood sector has been recognized by the Gabonese economic and social recovery and eventual economic government as one of the key sectors for diversifi- and trade diversification. cation and development. It is identified as one of TOWARD MORE INCLUSIVE AND GREENER GROWTH 97 the four priority sectors of the economic pillar of the and (iv) involvement of the local population. However, 2021–2023 PAT;128 a dedicated sectoral policy is being it has put little emphasis on wood processing activities, developed (National Policy for the Wood Sector of the with only 13 out of 298 articles dedicated to it. Few Republic of Gabon, Vision 2025–2030). The PAT aims decrees and ordinances have been adopted since to to double or even quadruple the GDP of this sector by supervise operations in this sector. The Forest Code 2030 – compared to 2020 – based on three key channels: has been under review since 2015 with the following (i) improving the upstream forest framework through objectives: (i) promotion of rational and sustainable measures that support wood certification and stop management of forest resources to increase their illegal practices; (ii) creating plantations of fast-growing contribution to economic, social, and cultural devel- species; and (iii) developing the second and third trans- opment; (ii) better support of forest exploitation in formation129 processes with high added value. accordance with international certification standards and sustainability standards; and (iii) improvement of The government has recently initiated works to traceability issues involving the creation of a national operationalize this goal (action plans, resources, control system.130 monitoring). Operators have expressed a lack of comprehensive vision on forest plantations – including preferred species (production relies on Okoume, while 5.2.2  Business entry and establishment other tree species are underexploited); and the volume in the afforestation and wood product and location of new plantations – and on transforma- manufacturing sectors tion activities, in terms of products resulting from wood processing and valorization of coproducts. To opera- Afforestation and wood product manufacturing tionalize the PAT, the government has established two activities are subject to accreditation, but the pro- task forces dedicated to the afforestation sector and cess is lengthy, informal activities remain frequent, the acceleration of second and third transformations. and limited application of the labor law is observed. They have mitigated a lack of coordination between Economic operators in the afforestation and wood ministries regarding the development of afforestation product manufacturing sectors require accreditation and wood processing activities, which resulted from delivered by the Ministry of Water and Forests to weak operationalization of the national committee operate, along with an industrialization plan. Private on wood sector industrialization (created by Decree operators expressed concerns about delays in obtain- No. 001031). ing or renewing this license and approval of their industrialization plan.131 Digitalization of these proce- Operations in the afforestation sector benefit from dures is included as part of the revision of the Forest comprehensive framework regulation that has been Code and is expected to streamline and shorten the reviewed for several years to support more efficient process. Nonetheless, informal forestry operations and sustainable activities. The Forest Code was insti- and wood product trades still serve the local market.132 tuted in 2001 by Law No. 16/2001. It has four main objectives: (i) sustainable forest management through Forest permits ensure legal rights of forest uses, development practices, (ii) ecosystem conservation, but the allocation of permits suffers from a lack (iii) further industrialization of the wood product sector 130  Gabon Review. 2021.“Nouveau Code forestier : Gestion durable et tra- çabilité bien intégrées”. Available from: https://www.gabonreview.com/ 128  PAT 2021–2023. nouveau-code-forestier-gestion-durable-et-tracabilite-bien-integrees/ 129  Wood product manufacturing has three stages of transformation: first trans- [Accessed 03/04/2022] formation (first operations on the wood extracted to obtain a product), second 131  Interviews; Union des Forestiers et Industriels du Gabon et Aménagistes transformation (operations such as drying and molding on products from the (UFIGA). 2019. Etude de l’état des lieux des acteurs du secteur privé de la first transformation to obtain semi-finished elements) and third transformation filière forêt-bois au Gabon (operations on products from first or second transformation to obtain finished 132  Government of Gabon. 2021. Plan d’Accélération de la Transformation products). 2021–23. 98 GABON: COUNTRY ECONOMIC MEMORANDUM of transparency and corruption. The Forest Code certification of forest products, and defines sanctions. defines three different forest permits and their charac- However, public administrators face issues in regard teristics, in particular in terms of size and origin of the to enforcement, e.g., limited skills to assess manage- investors: (i) Forestry Concession under Sustainable ment plans provided by applicants; and lack of human, Management (CFAD) 50,000–200,000 ha; ii) Associ- material, and financial resources to perform controls on ated Forestry Permit (PFA) <50,000 ha, granted only to the ground.138 To address these issues, Gabon launched domestic operators; and iii) Permit by Mutual Agree- Control of Forest Management (CAF) project in 2014 ment (PGG), which are granted specifically to local to ensure the effective application of forest manage- communities for non-industrial purposes and 50 trees ment plans and verify that forest exploitation practices maximum. It has been determined that ‘silence equals were legal, but this project was suspended.139 The gov- acceptance’ for timely delivery of forest permits; ernment has engaged in negotiations140 with the EU accordingly, if an applicant has received no answer to sign a voluntary partnership agreement within the within 3 months following submission of an applica- framework of the Forest Law Enforcement, Governance tion and a further 15 days following a reminder from and Trade (FLEGT) Action Plan, but this initiative did the applicant, the permit is considered granted. How- not succeed (unlike for other countries in the region). ever, some operators perceive corruption and a lack of In 2018, a dedicated traceability system – called Tracer transparency in allocating permits due to the number Nkok – was implemented by GSEZ and has been rec- of actors involved on the ground (local administration, ognized since 2021 by the EU Regulation on Wood. It civil society, operators, etc.) and a lack of information requires operators to be evaluated by an independent from the administration (little communication, lack of party, the NGO Brainforest, before getting a 12-month clear information, delays in responding to questions, certificate that allows for supplying wood processing etc.), also leading to lengthy procedures and delays.133 companies within the GSEZ with logs. In 2021, Gabon As for accreditations, the procedures for allocating created a mechanism for verifying and controlling the forest permits are being digitalized through revision legality and traceability of Gabonese woods (called of the Forest Code and the work of the Task Force on SCLT-Gabon, created by Order No. 041 in 2021). It is afforestation activities on e-government. a set of procedures, from audits to controls, to certify and guarantee that the wood circulating on Gabonese Illegal logging is considered widespread in Gabon, markets and international export markets comes from but recent initiatives and regulations are expected legal and traceable sources.141 Uncertainties remain to reinforce traceability.134 Gabon still struggles to regarding the implementation of this new mechanism, fight illegal wood production.135 Media and NGOs fre- both in terms of transformation of the public adminis- quently reveal cases of illegal logging and suspicions tration, e.g., change of procedures, use of digital tools, of corruption.136,137 The Forest Code (Law No. 16/2001) etc.; and sustainable financing, with sources of funding specifies methods of control, standardization, and not clearly identified at this stage. Little information on forest resources, activities, 133  Union des Forestiers et Industriels du Gabon et Aménagistes (UFIGA). 2019. Etude de l’état des lieux des acteurs du secteur privé de la filière forêt-bois and management is processed and disclosed by the au Gabon. 134  National Climate Council. 2021. Gabon’s Proposed National REDD+ Forest Reference Level. 135  National Climate Council. 2020. Premier résumé d’informations du Gabon sur la prise en compte et le respect des sauvegardes REDD+ 138  NEPCon. 2020. Analyse de risque sur la légalité du bois. 136  Enact. 2020. “Le plus grand scandale du bois au Gabon peut-il sauver son 139  Brainforest. 2018. Etude sur la transparence dans le secteur forestier au secteur forestier?”. Available from: https://enactafrica.org/enact-observer/ Gabon; AFD. 2013. Contrôler l’aménagement durable de la forêt gabonaise. le-plus-grand-scandale-du-bois-au-gabon-peut-il-sauver-son-secteur-forestier 140  Nyare Essima, N. 2020. Identification des modalités de reprise des négocia- [Accessed 23/02/2022] tions APV FLEGT entre le Gabon et l’Union Européenne. 137  Brainforest. 2019. Rapport de mission d’observation d’allégations D’illé- 141  Afrik Environnement. 2021. “Gabon, contrôle de la légalité et de la traça- galités forestière. Available from: https://www.brainforest-gabon.org/panel/ bilité du bois une réalité avérée”. Available from: https://afrikenvironnement. docfichiers/fichiers/131-rapport_oi_n001_17-23-2019_bf_fr_synthese.pdf info/gabon-controle-de-la-legalite-et-de-la-tracabilite-du-bois-une-realite- [Accessed 29/02/2022] averee/ [Accessed 21/02/2022] TOWARD MORE INCLUSIVE AND GREENER GROWTH 99 government. The Forest Code requires the adminis- certification144 is globally supported by NGOs and, tration to publish an annual report on the afforestation in Gabon, more developed as a national reference sector, but this is not done in practice.142 However, to for environmental certification. Fourteen percent of improve natural resource management at the national forests are FSC certified against 2 percent for PAFC. level, the government created the Gabonese Agency The government has introduced incentives and regu- for Space Studies and Observations (AGEOS) in 2015. latory requirements to favor certification. Since 2020, It provides useful information on forest resources and a different forest tax applies depending on the surface support controls by the forest administration. One of forest certified: (i) a low rate for concessions with of the issues identified by stakeholders is the lack of certified forest management; (ii) an intermediate rate modernization of control systems in the afforestation for concessions with a certificate of legality; and (iii) a sector; for example, little use is made of digital tools high rate for concessions without any certification. The for timber marking or monitoring of activities. The gov- decision in 2018 to ensure all operators certify their for- ernment launched a digital platform aimed at connect- est areas according to FSC standards by 2022 makes ing economic operators’ management systems and Gabon the first country in the world to make forest cer- the Ministry’s information centralization system. This tification mandatory. This bias toward FSC certification tool is intended to facilitate the declaration of forest worried operators who had chosen other certifications, production data and wood movements from exploita- as they now have to shift to FSC,145 but the government tion areas to processing units, as well as on amounts has postponed mandatory FSC certification to 2025 of resources valued in processing units and exported. because of delays implementing the FSC processes.146 According to interviewees, certified operators are Government monitoring and control of management accustomed to using digital tools and will become plans will be important to ensure that operators effec- familiar with this new platform easily. In contrast, public tively comply with FSC certification. officials will need time to handle, test, and assess this new tool. Services in sequestering carbon from Gabon’s forests have recently generated revenues for the state, although they have not yet benefited operators. 5.2.3  Regulatory measures and incentives In 2021, Gabon became the first African country to to support sustainable development receive results-based payments for reduced CO2 of the afforestation and wood product emissions due to deforestation and forest degrada- manufacturing sectors tion. After independent verification, the government received a payment of USD 17 million from Norway, as Sustainable practices in the afforestation sector are a reward for carbon reductions in 2016 and 2017 com- supported by regulatory obligations and tax incen- pared to the annual emission levels between 2006 and tives based on international certification systems. 2015 (USD 5/ton of CO2 avoided). This first payment Today, Gabon uses two standards of forest certifica- aligns with the Central African Forest Initiative (CAFI), tion recognized internationally: Pan African Forest which is expected to generate USD 150 million over Certification (PAFC), recognized by the Program for the Endorsement of Forest Certification (PEFC); and the Forest Stewardship Council (FSC) standard. Such 144 FSC certification aims to promote sustainable forest management and   involves applicants’ compliance with a set of international principles and cri- certifications are required to access some international teria, such as writing a forest management plan and ensuring the social and economic well-being of forest workers. An independent organization carries markets, such as the US, the EU, and Australia.143 FSC out the procedures that grant FSC certificate for 5 years and include annual audits each year 145  GWMI. (2018) “Gabon: All concessions need to be FSC certified by 2022”. Available from: https://www.globalwoodmarketsinfo.com/gabon-conces- 142  Brainforest. 2018. Etude sur la transparence dans le secteur forestier au sions-need-fsc-certified-2022/ [Accessed 27/04/2022] Gabon. 146  Le Nouveau Gabon. 2022. “Certification forestière FSC : le Gabon repousse 143  PAT 2021–2023. l’échéance du projet de trois ans”. Available from: Link [Accessed 05/04/2022]. 100 GABON: COUNTRY ECONOMIC MEMORANDUM 10 years. The Ministry of Forest and Environment will of these incentives, 80 percent of the wood processing mobilize these revenues to support forest protection units of the country, from the first to third processing initiatives.147 Some operators have expressed expecta- stage, are located in the GSEZ. Investors already operat- tions about rewards or compensation for their efforts ing in Gabon have not managed to move all their activ- on forest conservation and carbon sequestration (i.e., ities into the zone and have suffered from competition afforestation activities per their mandatory sustainable with new foreign investors fully established there. management plans). The ban on log exports and specific tax incentives The wood product manufacturing sector has ben- in the wood product manufacturing sector have efited from strong financial incentives for the last favored local wood processing. The ban on the 10 years, which have favored new foreign invest- export of logs entered into force in 2010 and resulted ments, from Asia in particular. For example, from 2011 in a decrease in the total production of logs in Gabon to 2019, the amount of forestry permits allocated to in the short term. Yet, since 2014, production has been Chinese firms increased from 25 percent to 74 percent, continuously increasing after local processing units in line with Gabon’s efforts to establish a favorable tax adapted.152 Consequently, exports of wood products regime.148 Indeed, since 2012, wood processing compa- fell by 40 percent in 2011 (in terms of value, compared nies have benefited from special tax arrangements, span- to 2010), but have since increased by 6 percent per year ning 5 fiscal years and comprising (i) flat-rate minimum on average and have reached the same value as before tax and corporate income tax exemption, (ii) degressive the ban.153 The ban is perceived as well enforced by depreciation of equipment, (iii) VAT exemption on the stakeholders in the sector, though they highlighted acquisition of intermediate consumption in the opera- the suddenness of the original measure in 2009, which tion of the plant (electricity, technical assistance services, took operators by surprise and forced some of them to etc.), (iv) exemption from withholding tax on dividend close their businesses.154 Some operators flagged how distributions, (v) exemption from property taxes, and limited the consultation had been prior to the drafting (vi) exemption from customs duties on equipment, of new regulation. machinery, and materials and capital goods intended for wood processing.149 The wood product manufacturing Limited efficiency in the tax collection system limits sector has largely benefited from the Gabon Special Eco- tax revenues and increases transaction costs. Due to nomic Zone (GSEZ, also called Nkok Special Economic the incentives noted above, tax revenues decreased by Zone)150 in which 84 out of the 144 companies in the 20 percent between 2010 and 2020, and represent only zone operate in wood processing. Companies located 0.4 percent of the total tax revenues while producing here come from China, Malaysia, Indonesia, India, 3.3 percent of the national GDP.155 As an example, sawing and the EU.151 Companies located in the GSEZ bene- activities are two or three times less taxed in Gabon fit from additional incentives such as VAT exemption than in other countries of the Congo Basin region.156 for 25 years, customs duty exemption on imports and Besides the tax regime that limits potential revenues exports (machinery and equipment), 0 percent property for the state, irregularities in tax collection in the affor- tax, 0 percent income tax, and 100 percent repatriation estation and wood product manufacturing sectors have of capital and profits. As evidence of the attractiveness been observed:157 tax evasion, with the complicity of 147  Africa Renewal. 2021. “Gabon becomes the first African country to receive 152  PAT 2021–2023. payment for reducing CO2 emissions.” Available from: Link [Accessed 153  Ibid. 08/04/2022]. 154  Union des Forestiers et Industriels du Gabon et Aménagistes (UFIGA). 2019. 148 D. Legault D., Cochrane L. 2021. Forests to the Foreigners: Large-Scale   Etude de l’état des lieux des acteurs du secteur privé de la filière forêt-bois Land Acquisitions in Gabon au Gabon. 149  LEXplicite. 2013. “Gabon, ce qu’il fait savoir pour s’implanter et exporter”. 155  PAT 2021–2023. Available from: Link [Accessed 03/03/2022] 156  Groupe de la Banque Africaine de développement durable. 2019. Rapport 150  Decree No.0461; GSEZ website, web page NKOK SEZ. Available from: Link Stratégique Regional – Développement intégré et durable de la filière bois [Accessed 03/03/2022] dans le Bassin du Congo. 151  GSZE website, home page. Available from: Link [Accessed 03/04/2022] 157  NEPCon. 2020. Analyse de risque sur la légalité du bois. TOWARD MORE INCLUSIVE AND GREENER GROWTH 101 government officials; tax payments below actual value 5.3  Recommendations due to false statements; frequent non-payment of local development taxes to communities; difficulties Recommendations to address investment in controlling the volumes of logs and felled species barriers in the afforestation and wood and those entering the factory for calculation of the product manufacturing sectors abatement tax, etc. Even though official taxes on affor- Reinforce PAT monitoring and evaluation to ensure estation and wood product manufacturing activities the sustainability and visibility of its effects are clear, operators have expressed concerns about incidental taxes occurring all along the value chain, Gabon’s PAT 2021–2023 provides a strong impetus and notably during logistics activities (transportation, for development the afforestation and wood prod- weighting, etc.). There is little transparency on these uct manufacturing sectors. This plan sets long-term incidental taxes, and limited visibility for investors that (2030) quantitative targets and provides visibility on the do not currently operate in this market. Also, operators development of the wood sector in the medium-term. suffer from non-reimbursement of taxes (VAT notably) Measures and responsibilities to operationalize these by the government, and significant delays.158 ambitions have been determined; and two task forces dedicated to the afforestation sector and the acceler- Developing afforestation and wood product man- ation of second and third transformations have been ufacturing sectors involves innovation challenges created to solve multidimensional issues through coor- requiring R&D efforts. There are three key chal- dination between Ministries. However, it is critical that lenges for the wood processing industry, dependent these efforts be sustained over time and promoted on future research: (i) market more tree species –today, to stakeholders. Not doing so will create uncertainty only 60 out of 400 tree species are marketable – to for investors, who have little information on the prog- reduce pressure on the Okoumé in particular, which ress made and on what is coming next. For example, is currently overexploited; (ii) develop fast growing while the task forces implemented during the PAT have species; (iii) find market outlets for wood coproducts, proved efficient in terms of coordination between the which are still considered waste. Some projects have Ministry in charge of Forest and other Ministries relevant been initiated by the government to foster innovation, for the sector (Industry, Economy, Justice, Commerce, such as the Gabon Economic Diversification Support etc.), they are not meant to continue after the end of Project (PADEG) with the African Development Bank PAT. It will be important that the momentum, achieved (AfDB) to create a research center in Nkok SEZ. Transfer thanks to the task forces, continues beyond 2023. or development of innovative technologies could provide additional opportunities for new markets (e.g., xylochemistry, new processes for developing coprod- Facilitate access to information and financing ucts) or for improved operational performance (e.g., for business entry through better data management). Stakeholders have Part of the business entry issues are currently being noticed limited incentives or support for these activi- addressed by the on-going revision of the Forest Code ties,159 with no agency in charge of supporting innova- and the current e-government project supervised by tion in these sectors, nor tax incentives to operators one of the PAT task forces to digitalize administrative (e.g., research credits). Representatives of the private procedures. These reforms are expected to streamline sector cite little collaboration with the public sector for processes for getting forest permits and professional conducting experiments in the field. accreditations and to reduce administrative burdens and delays for operators. Also, unfair competition with 158  Union des Forestiers et Industriels du Gabon et Aménagistes (UFIGA). 2019. illegal afforestation activities may be addressed by the Etude de l’état des lieux des acteurs du secteur privé de la filière forêt-bois upcoming implementation of SCLT-Gabon, which will au Gabon. 159  Ibid. further enable controls and limit market access to illegal 102 GABON: COUNTRY ECONOMIC MEMORANDUM timber. Notwithstanding the complete and appropriate products and do not benefit from the tax incentives implementation of the solutions noted here and above, afforded afforestation or wood processing. There is little significant difficulties for business entry would still exist effort on research, design, and development (RD&D) in terms of accessing financing solutions and informa- from either public institutions or private operators, and tion (on administrative procedures and incidental taxes collaboration to support experiments in the field is lim- (parafiscalité) for example). Entrepreneurs face issues in ited; for example, the GSEZ research laboratory project accessing credit, having limited financial management is experiences issues to become operational. Also, as capacity (e.g., for designing a business model or a finan- noted above, Gabon’s USD 17 million result-based cial plan), and banks are unfamiliar with these sectors payment for reduced CO2 emissions from deforesta- and their specificities (e.g., in regard to collaterals to be tion and forest degradation in 2021 has not yet bene- used as part of granting credit). fited operators, some of whom expect to be rewarded or compensated for their efforts in forest conservation and carbon sequestration. Streamline and simplify tax and custom procedures Low efficiency in the tax collection system limits tax revenues, and high transaction costs have been Support capacity building and ownership of users observed. Operators have expressed concerns in with the digital tools being operationalized regard to incidental taxes occurring all along the value With the coming Forest Code, changes are expected chain and notably during logistics activities (trans- at regulatory level, which will enable the use of portation, weighting, etc.). These tax burdens both new digital tools to enhance transparency, improve affect the competitiveness of wood products made for monitoring, and simplify procedures related to affor- export and increase the time and resources dedicated estation and wood processing activities. to dealing with administrative procedures. Moreover, operators must deal with tax collection by many dif- SCLT-Gabon is a digital platform designed to i.  ferent Ministries, which creates confusion and com- gather and regularly disclose information on wood plexity and may limit tax collection rates due to lack production, which can generate greater confidence of coordination. A PAT task force is currently working across international markets on the sustainability on supporting better coordination between Ministries of Gabon’s wood product exports. However, SCLT- in terms of information sharing and consistency, but Gabon is being tested while still under development operators continue to be uncertain about the total and will not be operational before the end of the amount of taxes to be paid. year. Some implementation risks have already been identified, such as limited capacity of public officials to use digital tools. Communication on the performance Support innovation and environmental protection and results of this system remains to be disseminated related practices through dedicated incentives to build market confidence. Forest and wood activities require additional efforts P rocedures for forest permit allocation and ii.  to meet development needs on particular topics, professional accreditation are being digitalized such as fast-growing tree-species or coproduct according to revision of the Forest Code and the valorization. There are already tax incentives that e-government project supervised by the PAT task support second and third transformation, and a new tax force on afforestation. However, to simplify and on material yield may be introduced through the revi- shorten procedures effectively, public officials will sion of the Forest Code to support the valorization of have to adjust and adapt to these new digital tools. co-products. However, investors have identified tax burdens on afforestation and wood processing co- These are summarized in Table 16 along with the sug- products: these are taxed at a higher level than imported gested time horizon for enacting reforms. TOWARD MORE INCLUSIVE AND GREENER GROWTH 103 TABLE 16. Gabon: matrix of investment policy reforms in the afforestation and wood product manufacturing sectors, and time frame OBJECTIVES POLICY RECOMMENDATIONS TIME FRAME 1. REINFORCE MONITORING Implement an in itinere monitoring of PAT implementation to report publicly on  1.  Short term AND EVALUATION OF progress made and results achieved. THE PAT TO ENSURE Conduct an ex-post evaluation at the end of PAT implementation to identify   2.  Medium term SUSTAINABILITY AND lessons learned (e.g., best practices, limits) and design complementary measures VISIBILITY OF ITS EFFECTS to sustain short-term results; in addition, define a roadmap toward 2030 objectives (including cross-Ministry coordination and action plans). FACILITATE ACCESS TO 2.  Bolster sectoral information and marketing updates for banks and investors   3.  Short term INFORMATION AND through regular communication, e.g., data on operations, presentation of typical FINANCING FOR business models, key financial figures of the sector, etc. Lend further support BUSINESS ENTRY to matchmaking investors and operators through networking events (meetings, forums, etc.). Build the capacity of local entrepreneurs in financial and administrative management   4.  Medium term (preparing business and financial plans, understanding regulatory requirements and administrative procedures, etc.) in support of sectoral business development. Consider different options such as: (i) strengthening the capacity of the executing agency in charge of wood processing activities (AEAFFB); (ii) increasing collaboration between the national agency in charge of promoting investments and stakeholders in afforestation and wood processing; (iii) promoting production clusters, incubators, and certified management centers in these sectors.160 3. STREAMLINE AND Assess opportunities to reduce tax pressure and simplify the tax collection process   5.  Short term SIMPLIFY TAX AND by (i) mapping incidental taxes currently paid by afforestation and wood processing CUSTOM PROCEDURES actors, and (ii) removing and/or merging some of these incidental taxes. Create a single-entry point for sectoral operators in order to streamline the tax   6.  Short term collection process by limiting the number of different steps in the payment of taxes; facilitating communication with the public administration and enhancing visibility of private operators in regard to the total tax burden as well as its administration. Streamline procedures (incl. digitalization) to facilitate cross-border trade,   7.  Medium term particularly for exporting wood products and importing equipment and machinery for afforestation and wood processing activities. 4. SUPPORT INNOVATION Create a local carbon market to reward or compensate operators who support   8.  Medium term AND ENVIRONMENTAL carbon sequestration through forest management practices. PROTECTION RELATED Create incentives, such as tax credits and annual calls for projects with subsidies,   9.  Medium term PRACTICES THROUGH to support R&D by private operators on innovative and sustainable practices DEDICATED INCENTIVES – e.g., valorization of waste and coproducts, fostering less-known tree species, developing new products; adding tax incentives to promote their implementation and removing tax burdens that limit their competitiveness. Support collaboration between public institutions and private actors by improving governance –e.g., having RD&D within the mandate of an existing committee, or creating a dedicated committee; and supporting active sectoral stakeholders by including these activities under the mandate of an executing agency. 5. SUPPORT CAPACITY Train public officials to facilitate skills acquisition and appropriation of new digital 10.  Short term BUILDING AND tools, as well as streamlining procedures to enable more control and transparency. OWNERSHIP OF USERS Promote the outputs of the SCLT-Gabon (system of control of legality and 11.  Medium term WITH THE DIGITAL TOOLS traceability of timber) via regular publications. BEING OPERATIONALIZED  African Natural Resources Centre (ANRC). 2021. Performance of the Gabonese 160 Forest Industry. AfBD. Abidjan, Côte d’Ivoire. 104 GABON: COUNTRY ECONOMIC MEMORANDUM References Government of Gabon. 2021. Gabon’s Proposed National REDD+ Forest Reference Level. National Climate Council. Agence Française de Développement (AFD). 2013. Con- Government of Gabon. 2021. Plan d’Accélération de la trôler l’aménagement durable de la forêt gabonaise. Transformation 2021–23. https://www.afd.fr/fr/carte-des-projets/controler- Grant, Jason H., and Dayton M. Lambert. “Do Regional lamenagement-durable-de-la-foret-gabonaise Trade Agreements Increase Members’ Agricultural African Development Bank. 2019. Rapport Stratégique Trade?” American Journal of Agricultural Economics Regional – Développement intégré et durable de la filière 90 (3), 765–782. bois dans le Bassin du Congo : Opportunités, défis et recom- Jayasinghe, Sampath, and Rakhal Sarker. 2007. “Regional trade mandations opérationnelles. AfBD: Abidjan, Côte d’Ivoire. agreements and trade in agri-food products: evidence for African Development Bank. 2021. Performance of the the European Union from gravity modeling using disaggre- Gabonese Forest Industry. African Natural Resources gated data”. The Journal of the International Association of Centre (ANRC). Policy Brief. AfBD: Abidjan, Côte d’Ivoire. Agricultural Economists 37 (1), 93–104. Bennett, Federico, Daniel Lederman, Samuel Pienknagura, Jayasinghe, Sampath, and Rakhal Sarker. 2008. “Effects of Diego Rojas. 2016. “The Volatility of International Trade Regional Trade Agreements on Trade in Agrifood Products: Flows in the 21st Century: Whose Fault Is It Anyway?” Evidence from Gravity Modeling Using Disaggregated Policy Research Working Paper. 7781. World Bank: Data”. Review of Agricultural Economics 30 (1), 61–81. Washington, DC. https://openknowledge.worldbank.org/ Korinek, Jane, and Mark Melatos. 2009. “Trade Impacts of handle/10986/24862 Selected Regional Trade Agreements in Agriculture” Brainforest. 2018. Etude sur la transparence dans le secteur OECD Trade Policy Papers 87. OECD Publishing. forestier au Gabon. Centre pour l’Environnement et le Développement (CED). https://www.brainforest-gabon. Nyare, Nathalie Essima. 2020. Identification des modalités org/publications/?id=130 de reprise des négociations APV FLEGT entre le Gabon Brainforest. 2019. Rapport de mission d’observation d’alléga- et l’Union Européenne. International Tropical Timber tions d’illégalités forestières. Rapport de synthèse. https:// Technical Association. https://www.atibt.org/files/upload/ www.brainforest-gabon.org/panel/docfichiers/fichiers/ news/Rapport_Relance_APV_FLEGT_au_Gabon-VF 131-rapport_oi_n001_17-23-2019_bf_fr_synthese.pdf _02072020.pdf Legault, Danielle, and Logan Cochrane L. 2021. “Forests to Union des Forestiers et Industriels du Gabon et Aménag- the Foreigners: Large-Scale Land Acquisitions in Gabon”. istes (UFIGA). 2019. Etude de l’état des lieux des acteurs Land, MDPI 10 (4), 1–22, April. du secteur privé de la filière forêt-bois au Gabon. Inter- Government of Gabon. 2020. Premier résumé d’informations national Tropical Timber Technical Association. https:// du Gabon sur la prise en compte et le respect des sau- www.atibt.org/wp-content/uploads/2020/06/02-06-20- vegardes REDD+. National Climate Council. GABON-Rapport-UFIGA-26072019_VF.pdf A N N EXES Annex 1: Implementation of PREF reforms ES GENERAL OBJECTIVES IMPLEMENTATION STATUS IN GABON Pillar 1: Fiscal policy Strengthening tax policy/   1.  ◾ The initial and revised Budget Law, in 2021 and 2022, respectively, introduced a set of provisions strengthening non-oil aimed at reducing tax expenditure (the removal of exceptional or ad hoc exemptions was introduced revenue mobilization. in both finance laws), and introduced new measures such as the Unique Land Contribution. Several provisions along these lines have also been introduced under the IMF program. ◾ A report on tax expenditures is attached to the Budget law. ◾ As regards efforts to strengthen transparency of tax levies, in the case of Gabon, the reforms implemented have focused on earmarked revenue and Special Appropriation Accounts with the objective of increasing transparency and improving follow-up. Rationalizing financial  2.  ◾ Creation of the Single Treasury Account, now operational. management of the state/ optimizing management of the Treasury. and optimizing public   3.  ◾ In the 2022 Budget law, priority was given to investments financed with own resources in the energy, expenditure efficiency/ infrastructure, transport, and R&D sectors, representing 40 percent of the volume of investments. improving living ◾ A national social safety nets strategy has been adopted and is based on the National Health conditions of the poorest Insurance and Social Guarantee Fund (CNAMGS) policy through the creation of various solidarity by implementing social funds. safety nets. ◾ The state has set up a social protection system per CNAMGS giving priority to the most vulnerable populations and has extended social coverage to non-poor workers in the informal sector who are currently excluded from existing systems (creation of the ‘Fonds 4’). ◾ A census of GEF is underway and will be used as a starting point to facilitate identification, registration, and provision of services and will help accelerate the adoption of digital payments. Moreover, with the adoption of the law on the new definition of GEF, the state is strengthening the strategic and institutional framework for the design, implementation, and management of social protection programs. ◾ With the Filles-Mères (girl mothers) Program, the state is implementing a global strategy to empower girls and women and fight against teenage pregnancies. (continues) 105 106 GABON: COUNTRY ECONOMIC MEMORANDUM GENERAL OBJECTIVES IMPLEMENTATION STATUS IN GABON Harmonizing fiscal  4.  ◾ Transposition and implementation of the new public finance directives has been carried out under rules and improving schedules prescribed by directives enforced by the state. coordination of fiscal ◾ In accordance with the commitments made, public debt has not increased beyond the new rule policies. of multilateral surveillance (compliance with the 70 percent ceiling). Similarly, recourse to non- concessional debt and pledging future oil resources have been avoided. National public debt management committees are set up and operational, and the public debt issuance schedule is aligned with the cash flow plan. ◾ An arrears clearance strategy has been developed and is currently under review. ◾ The Three-Year Convergence Programs have been prepared but will need to be updated. Pillar 2. Monetary policy and financial system Ensuring long-term  5.  ◾ As stipulated, the rate of retrocession of currencies to the Central Bank reaches at least 70 percent external currency per month. At the end of October 2021, the effective retrocession rate was 79.77 percent for Gabon. stability/standardizing application of foreign exchange regulations in CEMAC by limiting derogatory provisions and strengthening monitoring of international capital flows in CEMAC. Strengthening the  6.  ◾ In line with the recommendations, reform in favor of centralizing public deposits has been carried out effectiveness of monetary in Gabon. policy and promoting the ◾ Reforms of the judicial system and with regard to insolvency regulations have been implemented supply of bank credit to with the creation of a commercial court in Libreville and three arbitration and mediation centers. the productive sector. Strengthening financial  7.  ◾ Mobile banking, both access and use, has been developed through the introduction in 2021 of stability and inclusion, products enabling sector operators to retain existing customers and attract new ones. (Airtel Money and fighting money Gabon and Moov Africa introduced a service called Mobile Banking.). As a result, the number of laundering in CEMAC. active mobile money accounts increased by 9.9 percent between December 2020 and December 2021. Operationalizing  8.  ◾ As requested, an awareness campaign targeting public and private companies on the need to and revitalizing the position themselves on the CEMAC financial market has been launched and is ongoing. subregional financial ◾ The list of public companies likely to be listed on the stock exchange has been transmitted to the market. Bank of Central African States (BEAC). Pillar 3: Structural reforms 11. Strengthening economic ◾ Gabon submitted to the CEMAC Commission the draft of its diversification policy, including the diversification and private development of value chains. sector development. ◾ The Accelerated Transformation Plan (PAT) is being implemented since 2021. The financial statements of all public enterprises are audited in accordance with the regulations in force (Organization for the Harmonization of Business Law in Africa – OHADA Uniform Act). However, these financial statements have not yet been published. ◾ Three new vocational training centers were delivered in 2021. (continues) TOWARD MORE INCLUSIVE AND GREENER GROWTH 107 GENERAL OBJECTIVES IMPLEMENTATION STATUS IN GABON Improving the business 12.  ◾ A reform has been implemented to facilitate and simplify business creation procedures. The time climate. needed to create a company decreased from 42 days in June 2020 to 5 days in May 2021 ◾ Creation and operationalization of the Commercial Court of Libreville and of the Center for Arbitration, Mediation and Conciliation, which will allow integration of alternative methods of conflict resolution. ◾ The revision of the Code of Civil and Commercial Procedures was carried out to integrate the best international practices of commercial justice. The Uniform Act, in force in Gabon since 2019, legislated on securities. ◾ Ongoing reform to improve the judicial system and commercial courts to strengthen specific capacities to deal with commercial and financial crimes. ◾ Incubators have been created by the Ministry in charge of SMEs/SMIs and are operational. ◾ A reform aimed at reducing delays in obtaining title deeds has been implemented. The time required to obtain a title deed has gone from several years to some 180 days on average. ◾ Regulations for implementation of the declaration of assets prior to and after taking office have been enacted and promulgated. Pillar 4: Regional integration Completion of the 19.  ◾ Efforts to mobilize the funding announced at the Round Table are ongoing. Funding for integrative Regional Economic projects is being mobilized. Program (Programme ◾ Efforts to support the state in the contracting process with donors are ongoing (projects have Economique Régional, started). A monitoring report on the effective implementation of integration projects is being PER) (operational tranche prepared. 2021–2025) Pillar 5: International cooperation 24. Negotiations with ◾ The 1st generation program with the IMF has been concluded and completed. technical and financial ◾ A new agreement in line with the prescriptions of the second phase of PREF-CEMAC has been partners (partenaires concluded with the IMF. techniques et financiers, ◾ In October 2021, Gabon set up the Economic and Financial Programs Monitoring Committee with PTF) international economic and financial institutions, which will make it possible to obtain broad access to concessional financing. 108 GABON: COUNTRY ECONOMIC MEMORANDUM Annex 2: Definition of Gabon’s peer countries Across the CEM, the performance of Gabon is benchmarked to other countries. Gabon’s structural and aspi- rational peers were identified using a data-driven approach. TABLE A2.1 Gabon’s selection of peer countries GROUP DEFINITION SELECTION CRITERIA SELECTED COUNTRIES Regional peers Countries in the same region as Countries in SSA Take the average across all SSA Gabon per the WB classification CEMAC countries countries, excluding South Africa and Nigeria CEMAC countries Structural peers Countries anywhere in the world that Structural peers were selected based ◾ Equatorial Guinea have similar economic characteristics on the following criteria: ◾ Botswana to Gabon ◾ Turkmenistan (i) population size ◾ Mongolia (ii) GDP per capita (iii) Oil rent (iv) life expectancy (v) trade-to-GDP ratio; (vi) government revenue Aspirational peers Aspirational peers are countries that Countries that had similar levels ◾ Mauritius share similar structural characteristics of GDP per capita to Gabon in ◾ Uruguay but are ahead of the curve in terms 1990–92 (average of 1990, 1991 and ◾ Costa Rica of their development outcomes 1992) and increased, reaching levels ◾ Oman 30 percent or higher than Gabon’s in 2013. TOWARD MORE INCLUSIVE AND GREENER GROWTH 109 Annex 3: Gabon’s development plans this plan developed the logic of regional plan- since 1960 ning (by relying on public enterprises) that Gabon adopted. The idea consisted in creating productive The idea of implementing structured and planned bases across the country aimed at keeping part of development took hold very quickly in Gabon. Thus, the population in place by allowing access to regu- Law No. 11/63 of January 12, 1963 approved the Interim lar income in the form of wages or through private Development Program, which determined the frame­ exploitations. work for investment programs over the 1963–1965 period and guided economic expansion as well as 2012: Emerging Gabon Strategic Plan (PSGE), social progress. As illustrated below, several develop- 2011–2016 ment programs (investment codes/programs) were Objective: The PSGE presented the new vision the developed later with the objective of guiding the acti- government developed for 2025 and the strategic vities of the private sector to fit into the country’s deve- development orientation for the period 2011–2016. lopment strategy. The main objective of this new development plan was and remains to provide guidance to diversify 1963: Interim Development Program, 1963–1965 the productive base of the economy. The PSGE has Objective: Determine the framework for investment three strategic axes: (i) consolidating the founda- programs over the 1963–1965 period and guide economic tions of emergence; (ii) developing the pillars of expansion and social progress. emergence; (iii) shared prosperity. The first aims to strengthen Gabon’s competitiveness through 1971: Second Economic and Social Development four key dimensions considered the foundations Plan, 1971–1975 of emergence, namely sustainable development, Objective: Determine the framework for investment pro- governance, human capital, and infrastructure. The grams over the 1971–1975 period. This plan confirmed second is the diversification of the country’s growth the state’s commitment to work with private investors on pillars. Emergence will only become a reality if Gabon implementing projects considered priority or strategic; succeeds in changing from a rent-seeking economy based on a large volume of investments, mainly in the based on raw materials (hydrocarbons, timber, area of infrastructure. mines) to a value-added and diversified economy. 1976: Third Economic and Social Development Plan, In 2025, the Gabonese economy should no longer 1976–1980 rest on one foot but on three solid pillars: Industrial Objective: Determine the framework for investment pro- Gabon, Green Gabon, and Services Gabon. Imple- grams over the 1976–1980 period. This plan translated menting the three pillars of emergence will gene- the government’s new ambition to use the resources rate stronger and more sustainable growth. Finally, obtained from the exploitation of oil to prepare for the strategic axis 3 aims to ensure that this growth will next period. To achieve this goal, the strategy focused on benefit all Gabonese, not only by increasing the the development of economic and social infrastructure income of the population, but also through catch- and making productive investments in activities likely to up in social sectors (health, employment, social ensure ongoing permanent growth of the economy. protection, access to drinking water, sanitation, culture, etc.). 1984: Fifth Economic and Social Development Plan, 1984–1988 2017: Economic Recovery Plan (PRE), 2017–2019 Objective: In addition to determining the framework Objective: A reform plan developed to accelerate the for investment programs over the 1984–1988 period, transformation of the economy despite the context 110 GABON: COUNTRY ECONOMIC MEMORANDUM of economic crisis. The PRE aims at continuing imple- 2021: Accelerated Transformation Plan (PAT), mentation of the PSGE while making the necessary 2021–2023 corrections imposed by the economic difficulties Objective: To support the government in updating and encountered since 2015 (following the oil price shock) accelerating its strategic plan to meet the current eco- and taking concrete measures to improve the well- nomic and social challenges while taking into account being of the population. the post-COVID-19 context. TOWARD MORE INCLUSIVE AND GREENER GROWTH 111 Annex 4: The COVID-19 pandemic ◾ FDI. The third transmission channel comes from a decline in FDI, notably in the oil sector and dynamic Transmission channels new sectors such as agribusiness and forestry. Big The COVID-19 pandemic severely affected Gabon’s companies revised their investments downward as economy through foreign and domestic transmission they anticipated a negative economic outlook. Self- channels. Key external transmission channels include the financed public investment was not able to offset the fall in oil prices, reduced trade with China and Europe, global drop in public investment as the government lower FDI, and tighter global financial conditions. These had to cut capital expenditure to meet the IMF negative effects have been aggravated by the COVID-19 fiscal deficit quantitative indicators. The decline outbreak within the country, including travel restrictions, in investment, combined with social distancing, social distancing, and fiscal adjustment to limit the fiscal borders and businesses closures compromised the impact of the crisis as Gabon was still committed to meet timely pace of implementation of public and private quantitative indicators under the previous IMF Extended investments, further negatively impacting the short- Fund Facility (EFF) program, completed in June 2020. term outlook. ◾ Commodity prices. The first transmission channel Economic impact of the COVID-19 pandemic comes directly from the fall in oil prices, which resulted in lower domestic revenue mobilization than The sharp decrease in oil prices in 2020, contraction expected, aggravated by the decline in oil production in activity in China and Europe, and expected post- to meet quotas of OPEC+. The impact was significant ponement of some public and private investments as Gabon remains highly dependent on the oil sector, resulted in an economic contraction of 1.8 percent of which represented 11 percent of GDP in 2019, as well GDP in 2020, against 3.4 percent growth anticipated as on oil revenues, which represented 38  percent before the pandemic. Lower revenues translated into of total revenue in 2019 and 75 percent of export cuts in public expenditure, including social spending, earnings in 2019. Travel restrictions and lowering additional arrears accumulation, and a widening customs revenues further impacted revenues. fiscal deficit. ◾ Trade relationship. The second transmission channel is related to trade with China and European countries, ◾ The fiscal position turned into a deficit of 2.1 percent Gabon’s main trading partners. In 2019, exports to of GDP in 2020, against a pre-COVID-19 crisis China and the Euro zone accounted for 63 percent anticipated surplus of 1.3 percent of GDP, reflecting and 10.9 percent of total exports, respectively, while the significant additional financing needs related to oil revenues represented 75 percent of exports. The the COVID-19 outbreak. To fill the additional financial slowdown in economic activity in China and Europe needs, debt increased. The decrease in revenue translated into a contraction in demand for raw delayed the implementation of the clearance plan materials and then a drop in Gabon’s exports. Lower for domestic arrears and led to new accumulation of imports because of decreased revenues only partly foreign and domestic arrears, resulting in higher non- offset the negative impact of lower oil prices on performing loans on banks’ balance sheets (more export revenues, resulting in greater current account distressed banks), hampering their ability to provide deficit and lowering foreign reserves. credit to the economy. 112 GABON: COUNTRY ECONOMIC MEMORANDUM Set of measures implemented by the Government Social and economic measures Public health measures -Coverage of water and -Medical checks at airports; Lockdowns electricity bills for the most Social distancing -Systematic quarantine; -Lockdown of the vulnerable; -Closure od school -Creation of a toll-free Greater Libreville; -Suspension of rent and universities; number to inform the -Request for a Movement payments; -Restriction of public population; special authorization restrictions -Financial support granted gatherings; -Mandatory wearing of from the Ministry of -Curfew. to small landlords to -Reorganization of masks in public spaces; Interior to travel compensate for the working hours. -Mandatory presentation of between the Greater suspension of rents a health pass to access Libreville and the payments; public spaces. rest of the country. -Free ground public transport provided by public companies; -Provision of food aid to people in distress. TOWARD MORE INCLUSIVE AND GREENER GROWTH 113 Annex 5: Gabon’s urbanization Gabonese public companies, performing in major sec- process tors previously controlled by foreign companies. Public enterprises, among other priorities, developed in acti- More than four in five Gabonese citizens live in cities vities in which foreign private investors were reluctant and more than half the population live in the three to invest (e.g., agriculture, agroindustry, telecommuni- biggest cities (Libreville, the capital, Port-Gentil, the cations, railway sectors). economic capital, and to a lesser extent, Franceville), leaving the rest of the country with a density of less Relying on these public enterprises, Gabon adopted than 2 inhabitants per km². Although low population a policy of regional planning. By developing the agro- density increases per capita resource availability and industrial sector, the state’s strategy was to reduce reduces pressure on the environment, it also generates regional disparities by establishing fixed income- diseconomies of scale for public services and increases generating activities throughout the country and by their cost. To understand Gabon’s high urbanization keeping the population in the regions, in particular rate, it is important to come back to two or three major those less favored. This policy led to the creation of episodes or events. modern production centers (large public enterprises) suited to local populations thanks to an improved stan- The first major episode is the colonial era, which marks dard of living. The idea was to keep part of the popu- the beginning of real demographic explosion in Libre- lation within the regions, by allowing them to access a ville. The colonial era was marked by the depopulation regular income through wages. To achieve this goal, of the villages and can be considered the first steps in health components (construction of dispensaries) and an exodus that recurred several times. From 1898, the education components (construction of schools) were population in villages decreased to satisfy the demand included in each regional project. for labor on construction sites; consequently, recruit- ment from villages was significant (Nguema, 2005). Despite government effort to maintain populations in rural areas, an economic shock led to another signi- The second major episode is the period of oil dis­ ficant wave of rural exodus. The oil shock of 1986 covery following Gabon’s independence in 1960. The caused significant adjustments following the drying discovery of large oil fields in the early 1970s accele- up of financial flows from the Treasury to the produc- rated rural-urban migration, with Gabon becoming tive sector. It marked the end of state voluntarism and the fourth largest oil-producing country in Africa. This financial support to businesses, including those that resulted in a demographic explosion over this period. had not yet reached their maturity threshold. Indeed, In one decade, the capital grew from 77,000 inhabi- the structural adjustment programs recommended by tants in 1970 to 200,000 inhabitants in 1980, i.e., an the IMF insisted on a financial clean-up of public enter- influx of more than 12,000 of new city dwellers per year. prises. Consequently, many of them closed because This demographic phenomenon was accompanied by there were not enough suitable relays/handovers for uncontrolled expansion of the Libreville area. their financing at the start of structural adjustment. Since 1976, faced with significant income disparities Many projects launched to prepare and support diver- that persisted between the regions, especially between sification of the productive base, and have the whole urban and rural sectors, the government made an ideo- territory benefit from oil’s spinoffs, came to an end. This logical shift, based on the idea of using oil resources was reflected by growing impoverishment of the popu- to prepare for the post-oil era. Since then, voluntarism lations in the regions and acceleration of rural exodus, by the state emerged and became the context for explaining the current urbanization rate of the country. 114 GABON: COUNTRY ECONOMIC MEMORANDUM MAP A5.1 Population density C������� E��������� G����� C���� Population Density buy Province <2 Persons by km² <3 Persons by km² 3–3,9 Persons by km² 4–4,9 Persons by km² 5–5,9 Persons by km² >10 Persons by km² Data 2020 TOWARD MORE INCLUSIVE AND GREENER GROWTH 115 Annex 6: Additional insights on poverty and shared prosperity in Gabon FIGURE A.6.1. Trend in GDP growth, FIGURE A.6.2. Shared prosperity indicators 2001–2019 by region 8.0 2.2 1.7 1.3 1.4 6.0 1.2 1.0 1.0 0.8 0.8 0.8 0.6 4.0 0.3 0.4 0.2 0.1 –0.1 2.0 –0.8 0.0 –1.7 –2.0 e til d d t st Es ill or Su ue en ev N on O G on br on rt- gi on gi Li ré Po gi ré gi ré –4.0 ré 00 02 04 06 08 10 12 14 16 18 20 Average annual per capita consumption growth of the bottom 40% 20 20 20 20 20 20 20 20 20 20 20 Average annual per capita consumption growth of the total population GAB Period1: Period2: Period3: 2000–2010 2011–2016 2017–2019 Shared prosperity premium FIGURE A.6.3. Poverty headcount by region FIGURE A.6.4. Poverty headcount in the two main cities 68.2 64.6 58.9 Poverty headcount in the two main cities 57.4 55.8 65.7 47.2 59.5 33.6 50.0 29.3 29.6 26.4 22.5 20.9 38.2 26.0 21.2 –5.7 –7.2 –6.8 –8.6 –8.7 –10.8 th h st t til le es 2005 2017 2005 2017 2005 2017 ut Ea il en or ev W So N t-G br Librev./P-Gentil Other urban Rural Li r Po 2005 2017 Change 116 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE A61.5. Gabon Growth Incidence Curves, 2005–2017 (a) Gabon (b) Libreville and Port-Gentil 6 6 4 4 2 2 0 0 0 20 40 60 80 100 0 20 40 60 80 100 Consumption percentiles Consumption percentiles Growth rate by percentile Growth rate in mean Growth rate by percentile Growth rate in mean (c) Other Urban (d) Rural 6 6 4 2 4 0 –2 2 –4 –6 0 0 20 40 60 80 100 0 20 40 60 80 100 Consumption percentiles Consumption percentiles Growth rate by percentile Growth rate in mean Growth rate by percentile Growth rate in mean Source: WB, Gabon Poverty Assessment 2020. TOWARD MORE INCLUSIVE AND GREENER GROWTH 117 Annex 7: Background on the Green typology of barriers could assist CCDR teams in asses- Investment Climate Diagnostic (GICD) sing investment climate policies and regulations that impact companies in making green investments. The Green Investment Climate Diagnostic (GICD) identifies policy and regulatory barriers to green The diagnostic is applied to a select group of sec- investment with the goal of indicating areas for tors in each country. These sectors should be funda- potential policy reforms. The diagnostic focuses on mentally linked to environmental objectives, either investment policy restrictions (de jure barriers) and regu- because they produce goods or services that directly latory bottlenecks that constrain foreign and domes- contribute to these objectives (e.g., electric vehicles tic investment in sectors and activities that contribute production, low carbon technology manufacturing) or to decarbonization, climate change adaptation, and because they have scope for reducing their environ- other environmental objectives. It seeks to inform mental harm (e.g., decarbonization of heavy industries investment policy reforms to better align government like steel production). These sectors are selected in policies, regulations, and institutions; to enable green close consultation with WBG country teams. Focusing private sector investment as well as identify examples on a small set of sectors enables the diagnostic to offer where governments are taking a more effective outco- insights beyond existing economy-wide policy and mes-based, rather than prescriptive, approach to regu- regulatory reviews. latory compliance. The diagnostic is administered by WB staff and legal The diagnostic draws upon a systematic review of experts (specialized in investment advisory in envi- policy, regulatory, and administrative documents. In ronmental and renewable energy projects). The team addition, this activity is complemented by consulta- collects the required information using a standardized tions with business representatives of both domestic questionnaire. The questionnaire covers business regu- and foreign-owned companies, government agen- lation and investment policy questions, in the following cies (including regulators), and other policy experts sub-categories: to compile the information required for completion of a questionnaire. The objective of this approach ◾ Environmental Protection Laws and Regulatory is to understand the perspective of end-users of Design the policy and regulatory environment, i.e., private ◾ Environmental Risks, Licenses, and Clearances investors and industry associations, and to supple- ◾ Overall Investment Policy Regime ment this as necessary with information from other ◾ Regulatory Predictability and Policy Coherence relevant sources. ◾ Business Entry and Establishment The GICD is designed to inform country policy dia- ◾ Incentive Framework for Investments logue (including through CCDRs) by identifying ◾ Technology Adoption and Company Linkages investment climate and business regulation policies ◾ Institutional Arrangements and Capacity that facilitate investments toward low-carbon tran- sition. Specifically, the application of this diagnostic Investment climate issues can affect sectors diffe- enables the WB Group (WBG) to focus on policies rentially, and the implementation of the GICD tries and regulatory barriers that hinder investment in new to account for such differences. For example, for decarbonization activities and in transformative clean the greening of emissions-intensive cement produc- technologies in carbon-intensive sectors. Additio- tion, the diagnostic may uncover entry and operatio- nally, a select set of investment policy barriers that nal barriers (e.g., limits on foreign investment, local apply across sectors is also identified. Together, the content requirements) or the absence of regulations 118 GABON: COUNTRY ECONOMIC MEMORANDUM and government support to encourage clean tech- to enable local suppliers to meet global standards nology adoption and improved efficiency of energy is absent. and input use. In contrast, for manufacturing of low- carbon technologies (i.e., a new green activity), the The final output of the diagnostic process is a diagnostic may reveal that the regulatory framework 15–20-page report and associated briefing materials is inadequately defined (thereby affecting long-term that encompass key policy and regulatory barriers, predictability); the incentive structure is not tied to priority areas for reform, and a bibliography of reference production or performance; and government support materials. TOWARD MORE INCLUSIVE AND GREENER GROWTH 119 Annex 8: Gabon’s environmental but did not ratify the 2003 African Convention on the protection framework Conservation of Nature and Natural Resources (the Maputo Convention), which commits signatory coun- As part of the GICD, Gabon’s legal and regulatory tries to enhance environmental protection, foster the framework for environmental protection was analyzed, conservation and sustainable use of natural resources, as well as the application of regulations and control and harmonize policies in these fields. Gabon is ranked mechanisms to ensure operators’ compliance with envi- 76 out of 180 countries by the 2020 Environmental Per- ronmental regulations. formance Index published by Yale University, coming third among African countries and with a score that has increased by 10 percent over the last 10 years. Environmental protection laws and regulatory design Gabon has enforced a framework law on environ- Gabon has been recognized for its early engage- mental protection but lacks more comprehensive ment on sustainable development and climate regulation on some topics (e.g., water management, change. It has ratified major multilateral environmen- air quality, circular economy, biodiversity) . In tal agreements as exemplified in Table 17. Gabon was 2014, Gabon adopted a framework law (Law the first African country to submit its Nationally Deter- No. 007/2014 enacted by Decree No. 0261) that mined Contribution (NDC) within the framework of the defines key principles for environmental protection in Paris Agreement. Gabon had already enacted a national line with international standards: precaution, avoid- climate action plan in 2012 and a framework law on reduce-compensate sequence, polluter pay, responsi- sustainable development in 2014. A law ordinance on bility, participation, and inclusiveness. This law defines climate change has been drafted to enact Gabon’s qualitative orientations – namely, natural resource pre- engagement defined in its first NDC. As regards forest servation and sustainable usage, prevention of pollu- protection and restoration, Gabon’s membership in tion and nuisances, improvement and protection of the International Tropical Timber Organization (ITTO) the living environment, promotion of new values, and is worth mentioning. Nevertheless, Gabon signed income-generating activities linked to the protection TABLE A8.1. Major multilateral environmental agreements ratified by Gabon MAJOR MULTILATERAL ENVIRONMENTAL AGREEMENTS RATIFIED BY GABON (AND YEAR OF RATIFICATION) Kyoto Protocol (2006) and Paris Agreement (2016). Minamata Convention on Mercury (2014). Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (2008). International Plant Protection Convention (2008). Convention on the Conservation of Migratory Species of Wild Animals (2008). Stockholm Convention on Persistent Organic Pollutants (2007). International Treaty on Plant Genetic Resources for Food and Agriculture (2006) Rotterdam Convention on the use of hazardous chemicals (2004) Convention on Biological Diversity (CDB) (1997), Cartagena Protocol on Biosafety (2007), and Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization (2011) United Nations Convention to Combat Desertification (1996) Vienna Convention for the Protection of the Ozone Layer (1994), Montreal Protocol on Substances that Deplete the Ozone Layer (1994) Convention on International Trade in Endangered Species of Wild Flora and Fauna (CITES) (1989) Convention on Wetlands of International Importance especially as Waterfowl Habitat – RAMSAR (1987) Convention Concerning the Protection of the World Cultural and Natural Heritage (1987) 120 GABON: COUNTRY ECONOMIC MEMORANDUM of the environment – but lacks quantitative objec- of EIAs. The Directorate General on Environment tives. This law covers most environment-related issues and Nature Protection (DGEPN) has recently signed (waste management, water management, renewable a national charter on environmental protection and energy, etc.), and defines governance requirements nature preservation with 50 NGOs in order to set up (Ministry of Environment, National Commission of a framework partnership between the administration Environment, Inter-ministerial Technical Commission and civil society. on Environment, etc.), and resource mobilization (e.g., creation of the fund for the safeguard of the environ- Environmental risks, licenses, and clearances ment) to support this ambition. Gabon has also enac- Regulation on environmental impact assessments ted a law on national parks (Law No. 003/2007) but may (EIA) ensures that the environmental implications of lack dedicated regulation on the following topics: policies and projects are taken into account before ◾ Gabon is one of the only African countries without implementation. The mechanism of EIA was intro- a code that regulates water treatment and supply duced in Decree No. 000539 from the Ministry of Envi- as well as electricity production, transportation, and ronment in 2005, evidencing procedures, reporting distribution. Law No. 024/2016 defines the legal modes and actors subject to EIAs. This mechanism regime for these activities and a code is under is supported by additional practical guidance – and development. confirmed by the framework law on environmental pro- ◾ The legal and regulatory framework on waste tection (Law No.007/2014 (Art. 29) enacted by Decree management, including Decree No. 000541 (2005), No. 0261). This former law states that strategic environ- covers only waste treatment and does not address mental assessments must be conducted to evaluate circular economy. policies, plans, and sectoral programs. It is specified ◾ There is no regulatory framework or national strategy that any draft legal act directly or indirectly related to on air quality. Gabon is currently working with the environment should be communicated to the Ministry Climate and Clean Air Coalition (which the country of Environment in charge of issuing an opinion. This joined in 2020) to structure its strategy on air quality. regulation also defines a comprehensive list of opera- ◾ Gabon has put emphasis on biodiversity and tions for which an EIA is mandatory, as well as an eli- eco­ systems protection and restoration through gibility threshold. Projects not listed in the regulation successive legal and regulatory requirements, and the or of a size below threshold are only subject to a sim- government is currently working on a biodiversity plified Environmental Impact Statement (EIS). Wood code to provide a more comprehensive framework processing plants and afforestation activities are both on this topic. listed and subject to EIA, when clearing non-permanent forests of an area equal to or larger than 25 ha or when Public consultation and inclusion with regards to reforesting areas equal to or larger than 100 ha (for environmental protection have been instituted by afforestation). Applicants are required to provide ini- regulation and reinforced through partnerships. In tial site analysis, impact assessments, as well as miti- the process to getting Environmental Impact Assess- gation and off-setting measures. In 2021, the DGPEN ments (EIAs) (see section below), Law No. 007/2014 approved 154 EIAs out of 280 received and assessed. mentions that any operation involving EIAs must be Such an administrative process averages between subject to public consultation. As for authorization 6 and 12 months because of a lack of resources at granted to classified activities, they are also subject the DGPEN. Besides these delays that can be expe- to systematic public consultation according to the rienced by industrials, it is worth mentioning the dis- Decree No. 000543 (2005). This decree also mentions crepancies between industrial cycles and bureaucratic that changes to local customs and traditional usages procedures that may impact business entry (when such from village communities are included in the scope lengthy procedure is not anticipated enough). There TOWARD MORE INCLUSIVE AND GREENER GROWTH 121 can also be unpredictability in the length of adminis- needs support from private sectors in complying with trative processing due to context differences between this new regulation. As regards public officials, tech- projects (for example, assessing a project in an urban nical trainings are required to support more sector- area on well-framed activities goes faster than asses- specific analysis (e.g., mining-related risks). sing a mining project in a forest located in the north of Gabon). Mechanisms have been set up to ensure controls and monitoring of environmental requirements, but A dedicated environmental protection regulation, in practice their efficiency remains to be proven. installations classified for environmental protection There is a general mechanism to ensure controls and (ICPE) provides generic guidance on industrial acti- monitoring of environmental requirements instituted vities, but without specifying industry standards. by Law No. 007/2014 (Art. 86). It enforces the responsi- The regime for ICPE (Decree No. 000543, 2005) defines bility of the state to install continuous environmen- specific requirements for industrial sites likely to harm tal monitoring networks, allowing the establishment the health or to affect the quality of the environment and updating of quality standards, and ensuring their such as factories, workshops, warehouses, and other application. An online platform is available to file public or private industrial, agricultural, mining, artisa- complaints regarding any observation of environmen- nal, commercial, or other installations. Depending on tal deterioration due to industrial activities. Decree their level of impact on health, environmental quality, No. 000543 (2005) defines the process and responsi- or neighborhoods, these installations are subject to bilities for inspections, which can also result from authorization by the Ministry of Environment, or to a citizens’ complaints, requests from public administra- declaration to this Ministry. However, this decree does tions or private entities, and sanctions. Decentrali- not specify how to assess the significance of these zation supports control by public officials from the impacts. Both procedures require the applicant to Ministry of Environment located all over the country, provide comprehensive information about activities on contributing to surveillance and reporting, and facili- site, an EIA and a hazard study for authorizations, and tating on-site controls. a simplified EIS when it comes to declarations. When operating, the beneficiary is required to provide an annual report on the implementation of its environmen- Institutional arrangements and capacity for tal management plan. There are currently no industry environmental protection standards that specify industrial processes or their Institutions and committees have been set up for operating conditions and emission rates. Only limited environmental protection, but institutional arrange­ environmental protection requirements have been ments and governance are not fully operational. defined in the legal framework of polluting activities The DGEPN is the key focal point for economic opera- as the mining, oil, and gas sectors. A new framework tors, charged with examining declarations and appli- for ICPEs was adopted in 2021, but managing change cations for installations classified for environmental Best Practices: industry standards in regard to air emissions The EU developed reference reports, called Best Available Techniques (BAT) Reference Documents (BREFs) which describe industrial processes, emission and consumption levels of applied techniques, and best available techniques for integrated prevention and control of pollution from industrial activities. Recommendations defined through BAT are to be considered by EU member states as reference when setting permit conditions for all installations within the scope of the Industrial Emissions Directive. For example, two BREFs have been developed on wood-product manufacturing: (i) Production of Wood-based Panels, and (ii) Production of Pulp, Paper and Board. 122 GABON: COUNTRY ECONOMIC MEMORANDUM protection, including EIA analysis, and delivering 29.8 million), which represents 1.5 percent of the total the authorization. An interdepartmental committee budget for 2022 (Decree No.0095). (CIEI) has been initiated by Decree No. 000539 (2005) to support a coordinated review of EIAs. There is Dedicated financial and human resources are allocated currently no national environmental protection policy or to environmental protection, with some limitations concrete action plan (while required by the framework in the operationalization and implementation of Law No. 007/2014 on environmental protection), nor a policies. Environmental protection remains limited national environmental protection agency that would in terms of human resources as well. The 2022 Budget support its implementation. However, a Biodiversity Law sets the employment authorization limits of Protection Agency (Agence Nationale de Préservation Ministries, independent administrative authorities, de la Nature) was created through Decree No. 00111 and institutions, which are generally at 104,184 agents, in 2017, placed under the supervision of the Ministry among which 1,479 are at the Ministry of the Envi- of Water and Forests, the Sea and the Environment. ronment and Forest (1.4 percent of total agents). As regards national governance, contrary to what was The amount of budget allocated to forest economy foreseen in Law No. 007/2014, no National Commission and environmental protection (0.7 percent in 2019) is on Environment and no technical interdepartmental far below the weight of these sectors in the national committee on environmental protection have been economy (3.3 percent of GDP in 2019). These limited created. A workforce of 1,479 staff has been allocated human and financial resources are insufficient to in 2022 to the Ministry of Water and Forests, the Sea achieve Gabon’s national objectives regarding envi- and the Environment, equal to 1.5  percent of the ronmental protection. In 2012, the government wrote total workforce in Gabon’s Ministries. Several funds a national plan for climate to assess greenhouse gas have been created to support resource mobilization (GHG) emissions by sector and draw an overall miti- for environmental protection: (i) the environmental gation strategy for the country and specific strategies protection fund created by Law No. 007/2014, which to reduce sectoral GHG emissions. The Green Gabon benefits from environment-related taxes (on air pollu- Operational Plan issued by the government in 2015 tant emissions, waste management, the use of oil and as part of the three pillars of the PSGE summarized lubricants, or installations classified for the protection the vision of Green Gabon and detailed concrete of the environment); (ii) the sustainable development actions to achieve this vision, describing their applica- fund created by Law No. 02/2014; and (iii) the bi­ o­ tion modalities. In the coming years, the adoption of diversity protection fund. State budget allocated to the law related to climate change in September 2021 environmental protection remains limited (only FCFA should lead to concrete plans and programs. TOWARD MORE INCLUSIVE AND GREENER GROWTH 123 Annex 9: Main features of the equalize rates of returns. Installed capital is imperfectly ENVISAGE computable general mobile across sectors. If all sectors are expanding, old equilibrium model (installed) capital is assumed to receive the economy- wide rate of return. In contracting sectors, old capital the economic effects in Gabon of implementing the is sold on secondary markets using an upward AfCFTA FTA are modeled using computable gene- sloping supply curve. This implies that capital is only ral equilibrium (CGE) simulations, in particular the partially mobile across sectors. Land and water are Environmental Impact and Sustainability Applied allocated across activities using a nested CET specifi- General Equilibrium (ENVISAGE) model. Production cation. Natural resources are supplied to each sector in the model is implemented as a series of nested using an isoelastic supply function with the possibi­ l­ constant-elasticity-of-substitution (CES) functions to ity of differentiated elasticities depending on market capture the substitutability and complementarity conditions. across all inputs. Crops and livestock have a produc- tion structure different from other production goods. Trade is modeled using the Armington specification, The model incorporates five types of production which assumes that demand for goods is differentiated factors: labor (differentiated by skill and by gender); by region of origin. The model allows for domestic/ capital; land; a sector specific natural resource (such as import sourcing at the aggregate level (after aggre- fossil fuel energy reserves); and water. gating domestic absorption across all agents), as well as at the agent level. Thus, a second Armington nest Domestic production is allocated to the domestic allocates aggregate import demand across all export­ market or exported, following a constant elasticity of ing regions using a representative agent specification. transformation (CET) function. There are three domes- Exports are modeled in an analogous fashion using tic final demand agents: households (h), a government a nested constant-elasticity of-transformation (CET) sector (gov), and an aggregate investment sector (inv). specification. The domestic supply of each commodity Income comes from payments to factors of produc- is supplied to the domestic market and to an aggregate tion and is allocated to households (after taxes). The export bundle using a top-level CET function. The latter government sector accrues all net tax payments and is allocated across regions of destination using a purchases goods and services. Investment income is second-level CET function. equated to the sum of domestic and foreign savings. A portion of capital income flows to a global holder Dynamics in ENVISAGE involve three elements: of equity that then apportions profits from the global (i) labor supply (by skill level) grows at an exogenously fund. Remittances are also incorporated and are fully determined rate; (ii) the aggregate capital supply bilateral. evolves according to the standard stock/flow motion equation, i.e., the capital stock at the beginning of The model incorporates multiple utility functions for each period is equal to the previous period’s capital determining household demand. In this specification, stock, less depreciation, plus the previous period’s a constant difference of elasticities (CDE) utility func- level of investment; and (iii) labor augmenting tech- tion is assumed. This function allows for more flexibility nical change – calibrated to given assumptions about in terms of substitution effects across goods and for GDP growth and intersectoral productivity differences. non-homotheticity. The capital market assumes vin- In policy simulations, technology is typically assumed tage capital. New capital is allocated across sectors to to be fixed at the calibrated levels. 124 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE A9.1. Gabon: top 20 exported products in 2020 (USD millions and percentages) RANK HS6 PRODUCT DESCRIPTION EXPORT (M USD) SHARE (%) 1 270900 Petroleum oils 2703.49 54.91 2 260200 Manganese ores and concentrates 1410.87 28.65 3 440799 Wood, nec sawn or chipped lengthwise 306.55 6.23 4 440890 Veneer sheets and sheets for plywood 177.75 3.61 5 271000 Petroleum oils, etc. (excl. crude) 66.13 1.34 6 720230 Ferro-silico-manganese 47.66 0.97 7 400122 Technically specified natural rubber 39.11 0.79 8 441211 Plywood 26.81 0.54 9 710812 Gold in unwrought forms 24.8 0.5 10 890190 Cargo vessels nec and other vessels 15.05 0.31 11 440610 Railway or tramway sleepers 11.79 0.24 12 811100 Manganese and articles thereof 11.68 0.24 13 151110 Crude palm oil 11.55 0.23 14 440920 Non-coniferous wood 3.91 0.08 15 740319 Refined copper products, unwrought 3.59 0.07 16 151321 Crude palm kernel or babassu oil 2.94 0.06 17 270799 Other oils and oil products, nec 2.51 0.05 18 880230 Aircraft nec of an unladen weight 2.4 0.05 19 880212 Helicopters of an unladen weight 2.08 0.04 20 230230 Brans, sharps and other residues 2.07 0.04 Total 4872.74 98.95 Source: Authors’ calculations using WITS and mirror data. TOWARD MORE INCLUSIVE AND GREENER GROWTH 125 TABLE A9.2. Gabon: top 20 imported products, 2020 (USD millions and percentages) RANK HS6 PRODUCT DESCRIPTION IMPORT (M USD) SHARE (%) 1 890520 Floating or submersible drilling equip. 151.92 7.23 2 100630 Semi-milled or wholly milled rice 80.47 3.83 3 20741 Frozen cuts and offal of chicken 60.11 2.86 4 300490 Other pharmaceutical products 52.96 2.52 5 160413 Prepared or preserved sardines 29.11 1.39 6 890190 Cargo vessels nec and other vessels 25.86 1.23 7 100190 Spelt, common wheat and meslin 25.06 1.19 8 271000 Petroleum oils (excl. Crude oil) 21.89 1.04 9 20230 Frozen boneless bovine meat 20.49 0.98 10 890590 Floating docks and vessels 20.17 0.96 11 860692 Railway cars 19.5 0.93 12 880330 Aircraft parts nec 19.07 0.91 13 730420 Casings, tubing & drill pipes 18.84 0.9 14 852520 Transmission apparatus 18.71 0.89 15 190190 Other food preparations of flour 18.67 0.89 16 40221 Milk and cream in solid forms 17.76 0.85 17 848180 Taps, cocks, valves and similar appl. 17.4 0.83 18 880212 Helicopters 16.58 0.79 19 630900 Worn clothing & other worn articles 16.21 0.77 20 270400 Coke and semi-coke of coal 15.27 0.73 Total 666.05 31.72 Source: Authors’ calculations using WITS and mirror data. 126 GABON: COUNTRY ECONOMIC MEMORANDUM TABLE A9.3. Gabon: top 20 export destinations, 2010 and 2020 (USD millions and percentages) VALUE SHARE VALUE SHARE RANK COUNTRY (M USD) (% OF TOTAL) RANK COUNTRY (M USD) (% OF TOTAL) 2010 2020 1 United States 2276.5 31.57 1 China 3217.54 61.51 2 China 969.74 13.45 2 Netherlands 330.38 6.32 3 Trinidad and Tobago 836.02 11.59 3 India 317.13 6.06 4 Malaysia 770.72 10.69 4 Singapore 183.58 3.51 5 Australia 382.54 5.3 5 Korea, Rep. 164.59 3.15 6 Spain 324.04 4.49 6 Australia 151.33 2.89 7 India 320.17 4.44 7 France 119.88 2.29 8 France 283.49 3.93 8 Norway 116.51 2.23 9 Congo, Rep. 206.65 2.87 9 United States 83.63 1.6 10 Italy 145.98 2.02 10 Italy 50.63 0.97 11 Germany 137.16 1.9 11 Malaysia 48.37 0.92 12 Netherlands 126.92 1.76 12 Belgium 47.59 0.91 13 Ukraine 79.98 1.11 13 Germany 47.24 0.9 14 Japan 52.3 0.73 14 Russian Fed. 41.54 0.79 15 Norway 42.45 0.59 15 Thailand 32.61 0.62 16 Korea, Rep. 29.08 0.4 16 Uni Arab Emirates 28.91 0.55 17 Morocco 25.34 0.35 17 Japan 27.29 0.52 18 Greece 16.67 0.23 18 Spain 21.34 0.41 19 Vietnam 15.59 0.22 19 Turkey 20.38 0.39 20 Belgium 14.67 0.2 20 Greece 19.75 0.38 Total 7056.01 97.84 Total 5070.22 96.92 Source: Authors’ calculations using WITS and mirror data. TOWARD MORE INCLUSIVE AND GREENER GROWTH 127 TABLE A9.4. Gabon: top 20 import sources, 2010 and 2020 (USD millions and percentages) VALUE SHARE VALUE SHARE RANK COUNTRY (M USD) (% OF TOTAL) RANK COUNTRY (M USD) (% OF TOTAL) 2010 2020 1 France 751.38 29.04 1 France 456.36 21.58 2 Congo, Rep. 327.38 12.65 2 China 415.58 19.65 3 United States 235.61 9.1 3 Congo, Rep. 226.79 10.73 4 China 205.81 7.95 4 United States 88.53 4.19 5 Netherlands 102.78 3.97 5 Netherlands 85.89 4.06 6 Italy 86.93 3.36 6 Belgium 62.16 2.94 7 Germany 86.05 3.33 7 Singapore 53.26 2.52 8 Belgium 69.24 2.68 8 India 52.33 2.47 9 United Kingdom 69.1  2.67 9 Morocco 52.2 2.47 10 Cameroon 57.56 2.22 10 Turkey 51.57 2.44 11 Japan 49.6 1.92 11 Thailand 43.81 2.07 12 Spain 47.27 1.83 12 Cambodia 43.35 2.05 13 South Africa 46.95 1.81 13 Italy 36.74 1.74 14 Thailand 43.03 1.66 14 Spain 35.08 1.66 15 India 34.55 1.33 15 United Kingdom 34.42 1.63 16 Brazil 29.54 1.14 16 South Africa 31.78 1.5 17 Morocco 26.07 1.01 17 Germany 30.98 1.47 18 Cote d’Ivoire 24.61 0.95 18 Brazil 29.49 1.39 19 Singapore 19.57 0.76 19 Malaysia 26.86 1.27 20 Turkey 18.91 0.73 20 Japan 21.08 1 Total 2331.94 90.11 Total 1878.26 88.83 Source: Authors’ calculations using WITS and mirror data. 128 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE A9.1. Gabon and its peers: STRI in commercial banking and insurance services, 2021 90.0 120.0 79.2 80.0 100.0 100.0 100.0 100.0 70.0 79.2 60.0 56.0 80.0 74.9 52.0 50.0 46.1 57.6 43.8 60.0 52.0 40.0 37.5 36.6 37.0 31.5 40.9 36.6 37.0 30.0 26.0 40.0 31.5 18.0 20.0 20.0 10.0 0.0 0.0 0.0 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 AGO GAB GHA NGA AGO GAB GHA NGA FIGURE A9.2. Gabon and its peers: STRI in accounting and auditing services, 2021 120.0 120.0 100.0 100.0 100.0 100.0 100.0 100.0 83.9 84.0 83.9 84.0 79.0 77.2 78.9 77.2 80.0 80.0 66.8 66.8 64.4 64.4 60.0 60.0 37.4 36.6 40.0 40.0 32.1 31.5 32.1 31.5 25.0 25.0 20.0 20.0 0.0 0.0 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 M1 M3 M4 AGO GAB GHA NGA AGO GAB GHA NGA TOWARD MORE INCLUSIVE AND GREENER GROWTH 129 FIGURE A9.3. Gabon and its peers: STRI FIGURE A9.4. Gabon and its peers: STRI in mobile telecom services, by mode in mobile telecom services, all modes of supply, 2021 of supply, 2022 90.0 NGA 39.3 79.2 80.0 67.0 70.0 57.6 60.0 52.0 GHA 36.8 50.0 37.9 40.0 32.1 30.0 25.0 GAB 51.9 20.0 10.0 0.0 AGO 62.8 M3 M4 M3 M4 M3 M4 M3 M4 AGO GAB GHA NGA 0.0 20.0 40.0 60.0 80.0 FIGURE A9.5. Gabon and its peers: STRI FIGURE A9.6. Gabon and its peers: STRI in distribution, telecom, and transport in professional and financial services, services, all modes of supply, 2021 all modes of supply, 2021 AGO AGO 70 100 60 80 50 40 60 30 40 20 NGA 10 GAB NGA 20 GAB GHA GHA Financial Professional Distribution Telecom Transport Source: WB-WTO STRI Database PEAK EXPORT VALUE (US$ MILLION) NUMBER OF EXPORT YEARS, 1962 UNTIL 2019 130 0 5 10 15 20 25 30 35 0 5 10 15 20 25 19 20 92 16 Lubricating prep. cont.>70% by weig Wood groved and tongued 20 20 16 16 Engines, wind, hot air engines not Engines, wind, hot air engines not 20 20 18 08 Ash and residues bearing non ferrou Postage and similar stamps of phila 20 20 16 16 Horn, antlers, whalebone, etc. and Horn, antlers, whalebone, etc. and 20 20 16 17 Lumber, planed, tongued, grooved, e Commercial containers of glass 20 20 17 17 Paper cutting machines Metal plastic joints Source: Authors’ calculations using SITC mirror exports. Source: Authors’ calculations using SITC mirror exports. 20 20 16 18 Bread, ships biscuits & other baker Moulding boxes for metal foundry 20 20 17 Metal plastic joints 17 Cork and wood 20 20 18 16 Ores & conc. of silver, platinum, e Machinery for milling grain, etc. 20 20 18 Duplicating, addressing, etc. machi 17 Stockings, etc., knitted or crochet 20 20 PEAK EXPORT YEAR PEAK EXPORT YEAR 17 Wood groved and tongued 17 Other made up textile articles, n.e 20 20 09 Toys, n.e.s. 18 Technical models for demonstrating 20 20 16 Other paper & paperboard cut to siz 18 Duplicating, addressing, etc. machi FIGURE A9.8. Gabon: top latent products in terms of value of exports 20 20 18 Technical models for demonstrating 18 Other textile fabr./artic. used in 20 20 17 Road rollers, mechanically propelle 16 Photographic equipment, n.e.s. 20 20 Prep. foods obt. By roasting of cer Women's/inf. under garments, not FIGURE A9.7. Gabon: top latent products in terms of the number of export years 16 16 kn 20 20 18 Moulding boxes for metal foundry 17 Sauces; mixed seasonings 19 20 86 Sawlogs & veneer logs, roughly squa 17 Paper cutting machines 20 20 17 Sauces; mixed seasonings 17 Footwear with soles of wood or cork GABON: COUNTRY ECONOMIC MEMORANDUM TOWARD MORE INCLUSIVE AND GREENER GROWTH 131 FIGURE A9.9. Gabon and Central Africa: Static impacts of AfCFTA on total output by sector in 2035 relative to baseline 0.4 0.29 Change in Sector’s Output Divided by Baseline 0.3 Total Output of All Sectors Combined, (%) 0.2 0.1 0.06 0.05 0.06 0.05 0.04 0.04 0.03 0.04 0.05 0.02 0.01 0.02 0.00 0.00 0.0 –0.01 –0.02 –0.1 –0.06 –0.12 –0.12 –0.14 –0.2 –0.20 –0.3 re s .s. s s l g s ts g n es es es es es es es es es es l re ta el od ct ct io rin rin uc tu .e ic ic ic ic ic vic ic vic ic ic To pa fu du du ct fo rv rv rv rv rv rv rv rv tu tu sn ul od er er tru ap il ro ro se se se se se se se se nd ric ac ac d ss pr al ls ss rp lp se ns Ag uf uf g Fo ra e rt rt rts n te y er er ia es tic lit in ad io es Co po po oa an an pe G ta th in nc po ta ar at sin as oc Tr M es O m ,c tM ns ns pa na pi we ic ns pl bu Pr um tra tra ive un os al ra gh d r, nd re er an H er m rt be ns le il er Li ra th sa e, m th tro Ai te at d ub O nc Co O d oo W ile in Pe ,r an ra xt W gy al su ad Te ic er In em Ro En Ch Tariffs Tariffs + NTMs Tariffs + NTMs + TF Notes: Figure shows the absolute dollar value change in output (or exports) for a sector, divided by the total absolute dollar value of output (or exports) for all sectors in the baseline, expressed as a percent. Numeric labels are given for combined effect of Tariffs + NTMs+ TF. Source: WB staff calculations from ENVISAGE simulations. 132 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE A9.10. Gabon and Central Africa: Static impacts on total imports by sector in 2035 relative to baseline 8 7.06 Change in Sector’s Imports Divided by Baseline 7 Total Imports of All Sectors Combined, (%) 6 5 4 3.05 3 2 1.03 1.06 1.06 1 0.33 0.12 0.05 0.20 0.05 0.13 0.02 0.00 0.00 0.00 0.01 0.01 0.01 0 –0.06 0.00 0.00 –0.01 –1 re s .s. s s l g s ts g n es es es es es es es es es es l re ta el od ct ct io rin rin uc tu .e ic ic ic ic ic vic ic vic ic ic To pa fu du du ct fo rv rv rv rv rv rv rv rv tu tu sn ul od er er tru ap il ro ro se se se se se se se se nd ric ac ac d ss pr al ls ss rp lp se ns Ag uf uf g Fo ra e rt rt rts n te y er er ia es tic lit in ad io es Co po po oa an an pe G ta th in nc po ta ar at sin as oc Tr M es O m ,c tM ns ns pa na pi we ic ns pl bu Pr um tra tra ive un os al ra gh d r, nd re er an H er m rt be ns le il er Li ra th sa e, m th tro Ai te at d ub O nc Co O d oo W ile in Pe ,r an ra xt W gy al su ad Te ic er In em Ro En Ch Tariffs Tariffs + NTMs Tariffs + NTMs + TF Notes: Figure shows the absolute dollar value change in output (or exports) for a sector, divided by the total absolute dollar value of output (or exports) for all sectors in the baseline, expressed as a percent. Numeric labels are given for combined effect of Tariffs + NTMs+ TF. Source: WB staff calculations from ENVISAGE simulations. TOWARD MORE INCLUSIVE AND GREENER GROWTH 133 FIGURE A9.11. Gabon and Central Africa: Static impacts of AfCFTA on total exports by sector in 2035 relative to baseline 4 Change in Sector’s Exports Divided by Baseline Total Exports of All Sectors Combined, (%) 3.10 3 2 1.61 1 0.22 0.31 0.19 0.14 0.09 0.19 0.04 0.06 0.02 0.01 0.02 0.00 0.01 0.06 0.01 0.08 0.01 0.02 0.01 0 0.00 –1 re s .s. s s l g s ts g n es es es es es es es es es es l re ta el od ct ct io rin rin uc tu .e ic ic ic ic ic vic ic vic ic ic To pa fu du du ct fo rv rv rv rv rv rv rv rv tu tu sn ul od er er tru ap il ro ro se se se se se se se se nd ric ac ac d ss pr al ls ss rp lp se ns Ag uf uf g Fo ra e rt rt rts n te y er er ia es tic lit in ad io es Co po po oa an an pe G ta th in nc po ta ar at sin as oc Tr M es O m ,c tM ns ns pa na pi we ic ns pl bu Pr um tra tra ive un os al ra gh d r, nd re er an H er m rt be ns le il er Li ra th sa e, m th tro Ai te at d ub O nc Co O d oo W ile in Pe ,r an ra xt W gy al su ad Te ic er In em Ro En Ch Tariffs Tariffs + NTMs Tariffs + NTMs + TF Notes: Figure shows the absolute dollar value change in output (or exports) for a sector, divided by the total absolute dollar value of output (or exports) for all sectors in the baseline, expressed as a percent. Numeric labels are given for combined effect of Tariffs + NTMs+ TF. Source: WB staff calculations from ENVISAGE simulations. 134 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE A9.12. Gabon and Central Africa: dynamic impacts of AfCFTA on total output by sector in 2035 relative to baseline 0.6 0.54 0.5 Change in Sector’s Output Divided by Baseline 0.4 Total Output of All Sectors Combined, (%) 0.3 0.16 0.16 0.2 0.11 0.10 0.10 0.09 0.07 0.06 0.06 0.1 0.02 0.03 0.03 0.00 0.0 –0.01 –0.1 –0.05 –0.08 –0.07 –0.2 –0.16 –0.21 –0.3 –0.25 –0.4 –0.5 –0.6 –0.56 –0.7 re s .s. s s l g s ts g n es es es es es es es es es es l re ta el od ct ct io rin rin uc tu .e ic ic ic ic ic vic ic vic ic ic To pa fu du du ct fo rv rv rv rv rv rv rv rv tu tu sn ul od er er tru ap il ro ro se se se se se se se se nd ric ac ac d ss pr al ls ss rp lp se ns Ag uf uf g Fo ra e rt rt rts n te y er er ia es tic lit in ad io es Co po po oa an an pe G ta th in nc po ta ar at sin as oc Tr M es O m ,c tM ns ns pa na pi we ic ns pl bu Pr um tra tra ive un os al ra gh d r, nd re er an H er m rt be ns le il er Li ra th sa e, m th tro Ai te at d ub O nc Co O d oo W ile in Pe ,r an ra xt W gy al su ad Te ic er In em Ro En Ch Tariffs + NTMs + TF Broad Deep Notes: Figure A9.13 shows the absolute dollar value change in output (or exports) for a sector, divided by the total absolute dollar value of output (or exports) for all sectors in the baseline, expressed as a percent. Numeric labels are given for the deep scenario. Source: WB staff calculations from ENVISAGE simulations. TOWARD MORE INCLUSIVE AND GREENER GROWTH 135 FIGURE A9.13. Gabon and Central Africa: dynamic impacts of AfCFTA on total imports by sector in 2035 relative to baseline 20 Change in Sector’s Imports Divided by Baseline 15.65 Total Imports of All Sectors Combined, (%) 15 10 6.20 4.46 5 1.67 1.75 0.25 0.61 0.35 0.21 0.19 0.04 0.00 0.00 0.00 0.01 0.01 0.01 0.01 0 –0.11 –0.01 –0.00 –0.02 –5 re s .s. s s l g s ts g n es es es es es es es es es es l re ta el od ct ct io rin rin uc tu .e ic ic ic ic ic vic ic vic ic ic To pa fu du du ct fo rv rv rv rv rv rv rv rv tu tu sn ul od er er tru ap il ro ro se se se se se se se se nd ric ac ac d ss pr al ls ss rp lp se ns Ag uf uf g Fo ra e rt rt rts n te y er er ia es tic lit in ad io es Co po po oa an an pe G ta th in nc po ta ar at sin as oc Tr M es O m ,c tM ns ns pa na pi we ic ns pl bu Pr um tra tra ive un os al ra gh d r, nd re er an H er m rt be ns le il er Li ra th sa e, m th tro Ai te at d ub O nc Co O d oo W ile in Pe ,r an ra xt W gy al su ad Te ic er In em Ro En Ch Tariffs + NTMs + TF Broad Deep Notes: Figure A9.14 shows the absolute dollar value change in output (or exports) for a sector, divided by the total absolute dollar value of output (or exports) for all sectors in the baseline, expressed as a percent. Numeric labels are given for the deep scenario. Source: WB staff calculations from ENVISAGE simulations. 136 GABON: COUNTRY ECONOMIC MEMORANDUM FIGURE A9.14. Gabon and Central Africa: dynamic impacts of AfCFTA total exports by sector in 2035 relative to baseline 6 5.04 Change in Sector’s Exports Divided by Baseline 5 Total Exports of All Sectors Combined, (%) 4 3.12 3 2 1 0.39 0.31 0.39 0.04 0.06 0.03 0.17 0.08 0.01 0.08 0.09 0.15 0.04 0.02 0.02 0.00 0.01 0.01 0.02 0.01 0 –1 re s .s. s s l g s ts g n es es es es es es es es es es l re ta el od ct ct io rin rin uc tu .e ic ic ic ic ic vic ic vic ic ic To pa fu du du ct fo rv rv rv rv rv rv rv rv tu tu sn ul od er er tru ap il ro ro se se se se se se se se nd ric ac ac d ss pr al ls ss rp lp se ns Ag uf uf g Fo ra e rt rt rts n te y er er ia es tic lit in ad io es Co po po oa an an pe G ta th in nc po ta ar at sin as oc Tr M es O m ,c tM ns ns pa na pi we ic ns pl bu Pr um tra tra ive un os al ra gh d r, nd re er an H er m rt be ns le il er Li ra th sa e, m th tro Ai te at d ub O nc Co O d oo W ile in Pe ,r an ra xt W gy al su ad Te ic er In em Ro En Ch Tariffs + NTMs + TF Broad Deep Notes: Figure A9.15 shows the absolute dollar value change in output (or exports) for a sector, divided by the total absolute dollar value of output (or exports) for all sectors in the baseline, expressed as a percent. Numeric labels are given for the deep scenario. Source: WB staff calculations from ENVISAGE simulations.