Rill COPY Report No

Tni r CnDY R ERESTRICTED rILl COPY Report No. AF-15a Public Disclosure Authorized

This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

THE ECONOMY OF

THE FEDERAL REPUBLIC OF CAMEROON

Volume I

Main Report Public Disclosure Authorized

April 8, 1964 Public Disclosure Authorized

Department of Operations Africa CONVERSION RATES

50 C FAF = 1 French franc 1 CFAF = 0. 4 U.S. 247 CFAF 1 $ U.S. 1 million CFAF = 4, 051 $ U.S.

1 E 1 US$

1950 - August 31, 1957: CFAF 492 175 August 31, 1957 - Dec. 31, 1958: CFAF 590 210 after December 31, 1958: CFAF 685 247 THE ECONOMY OF CAMEROON Table of Contents Volwae I - MIain Report

Page No.

BASIC DATA

IAPS OF RAINFALL, POPULATION, EXPORT PRODUCTS AND TRANSPORTATION NETWORK

SUNMNARY AND CONCLUSIONS ...... i

I. THE COUNTRY AND ITS PEOPLE . . . . . 1

A. Geography and Climate ...... 1 B. Population ...... 1 C. Political Background ...... 2

II. STRUCTURE AND PERFORMANCE OF THE ECONOI-lY ...... 5

A. Structure of the Economy ...... 5 B. Principal Economic Sectors ...... 8 Agriculture ...... 8 Livestocktuin ...... 11 Fishing . . a ...... 11 ForestryPbiA iisrto ...... 11 B-aeninge ...... 12 ManufacturingDE.P.TLA IN.... 12 Power . *...... 14 Transportation and Co2munications 14 Education * ... 15 Public Administration ...... 16

III. TRADE AND PAg2ENTS ...... 17

A. External Trade and Payments ...... 17 B. Trade Relations ...... a 19

IV. FINANCE AND DEVELOR'ENT PLANNINIG ...... 21

A. Money and Credit ...... 21 B. The Budget ...... 22 C. Development Planning ...... 24

V. ECONOMIC PROSPECTS ...... 27

Capacity to Carry Debt ...... 30 THE ECONOMY OF CAMEROON

Table of Contents

Volume II - Appendices

Page No.

I. TRANSPORTATION 1

II. TRADE POLICIES 8

III. INVESTMENT POLICY 12

IV. PRODUCTION, M4RKETING AND PROSPECTS OF PRINCIPAL EXPORT CROPS 14

V. STATISTICAL APPEFiDIX 26 Table No. Land use in Cameroon 1 Estimates of the Total and llorking Population 2 Estimated Distribution of Employed Population 3 Gross Domestic Product by Industry of Origin 4 Use of Resources 5 Financing of Gross Domestic Capital Formation 6 Indicators of Economic Growth and Standard of Living for East Cameroon 7 Retail Price Index for European Consumers in Douala 8 Production of Principal Farm Crops 9 Production and Export of Commercial Crops in East Cameroon 10 Production and Export of Commercial Crops in 'West Cameroon 11 Forestry Production 12 Power 13 Road Transport - Number of Licensed Vehicles 14 Railway Traffic Statistics 15 Port Movements and Cargo Loaded and Unloaded 16 Airport Movements 17 Foreign Trade 18a Indices of Trade 18b Exports of Principal Commodities from East Cameroon 19 Exports of Principal Commodities from West Cameroon 20 Exports of Principal Commodities from the Federation 21 Average FOB Prices of Export Products 22 Estimate of Financial Gain to Cameroon from protected and guaranteed prices in French market 23 Sales of Cameroon Development Corporation of Export Products 24 Composition of Imports 25 Average CIF Prices of Import Products in East Cameroon 26 Tonnage of Imports of Selected Commodities in East Cameroon 27 Commodity Trade Balance by Currency Area for East Cameroon 28 Commodity Trade Balance by Currency Area for West Cameroon 29 Principal Trading Partners for Export of Principal Commo- dities from East Cameroon 30 V. STATISTICAL APPENDIX (Cont'd.)

Table No. Balance of Payments of East Cameroon 31 Money Supply 32 Assets and Liabilities of Central Bank in Cameroon - Balance of Operation Account and Other External Assets of Central Bank 33 Deposits 34 Loans and Advances to the Economy 35 Industrial Classification of Short and Medium Term Loans and Advances Declared 36 Loans by the "Caisse Centrale de Coop6ration Economique" 37 Loans Granted by the "Banque Camerounaise de D6veloppement" 38 Banque Camerounaise de D6veloppement -Loans Outstanding and Loans in Default 39 Consolidated Revenue and Expenditure of Federal and Federated Governments of Cameroon 4o Consolidated Revenue and Expenditure of Federal and Federated Governments of Cameroon -Percentage by Category 41 Consolidated Capital Account for Federal and Federated Governments of Cameroon 42 Comparative Expenditure of Federal and Federated Governments of Cameroon 43 Estimate of Public Debt Outstanding 441 Investment under the FIDES Plan 1947-1959 45 First Development Plan of Republic of Cameroon 1961-1965 46 Foreign Aid Commitments 47 Export and Import Trends 1960-1967 48 CAMEROON

Basic Data - 1962

East West Federation 2 Area (thousand km ) 432.0 43.5 475.5 (thousand square miles) 166.8 16.8 183.6

Population: (estimated) (million) 3.3 0.9 4.2 Natural Increase (%) .. 1-1.5 Population of '0Jorking Age (million) 2.0 0.5 2.5 WIage Earners (thousands) 155 45 200 School Enrollment (% of children of school age) 64 51 59 Gross Domestic Product (Estimates 1959)

Total GDP (billion CFAF) 99.0 11.0 110.0 Rate of Growth of GDP 1951-1959: about 4% per year; of GDP per capita about 2.55% per year. GDP/Capita (CFAF) 31,000 12,000 27,000 (Dollars) 125 50 110 Money GDP /(CapitEa) (CFA.F) 21,000 9,000 17,000 Gross Fixed Investment (% of GDP) l0.4 Origin of GDP (%) Agriculture 50 67 51 Industries 9 ., 8 Administration 8 26 10 Services 33 7 31 External Trade Exports (Billion CFAF) 25.5 4.4 29.9 Imports (Billion CFAF) 25.1 3.2 28.3 Balance (Billion CFAF) +o,4 +1.2 +1.6 Balance of Payments: Estimate of Current Balance of Payments with the Non-Franc Zone (billion CFAF) -2,5 ..

Change in Reserves (billion CFAF) .. .. +1,7 Estimate of external reserves (at 31 Dec.1962) (3.7) (1.5) 5.2 Basic Data (Continued)

East West Federation

Co:parative 3xpenditure of Federal and Federated Governments 1962-1963 (billions CFAF)

Federal Ordinary 14.1 6.0 1.7 21.8 Equipment 1.5 0.5 0.3 2.3 Federal Subvention to Federated States (incl. above) 2.6

Government Finances 1963/1964

Consolidated Expenditure of Federal and Federated Governments (billion CFAF) 22.3 Consolidated Receipts of Federal and Federated Govrernments (billion CFA.F) 22.3 Consolidated Capital Expenditure of Federal and Federated Governments (billion CFAF) 5.4 French Government Subvention for Equipment Budget (billion CFAF) 1.0

External Public Debt, June 1963 (billion CFAF) 11.1 MAP I

'\° N.

FORT FOUREAU FEDERAL REPUBLIC OF CAMEROON RAINFALL AND RELIEF MAP ,Om6

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/ t . ~~~~~~~~~~~~~~~~~~~~~~~~~(BRAZZA V ILLE) NOVEMBER 1963 I8RD-1235 R SUPMARY AN'D C0iCLUSIONS

1. The Federal Republic of Cameroon was established on the 1st of October 1961 when the former British trusteeship territory, Soutlhern Cameroon (now called West Cameroon), joined the Republic of Cameroon (now called East Cameroon) which had achieved independence on the 1st of January 1960. The country is a federation with a one-party system and presidential government. The integration of the two states is still far from complete economically - price and wage levels are very different and a customs barrier is still maintained. It has close financial and monetary ties with France and enjoys a protected market for tropical products in France. It is also associated with the Common ilarket. As a member of the Equatorial Customs Union, comprising Chad, Central Afri- can Republic, Congo, Gabon and the Cameroon, it has agreed to a common external tariff and entered into agreements to promote the harmonization of industrial development proposals within the Union.

2. The economy is based aLmost entirely on agriculture, on wihich approximately 85% of the population is dependent. Exports of tropical products such as cocoa, coffee, bananas, timber, palm oil, rubber and cotton provide over 75% of foreign exchange receipts. Production for the market of other crops and of livestock is still largely undeveloped. Mining is also little developed and, with the exception of the highly capitalized, modern aluminum plant at Edea, industrialization has not progressed very far.

3. In the period 1951-59, for which national income data are available for the East Cameroon, the economy achieved an average rate of growth in real output of about 4% per annum. In 1959, the gross domestic product of the federation as a whole was estimated at 110 billion francs CFA ($447 million) or some 27,000 francs CFA ($110) per head. Since 1959 there have been three years of difficult transition marked by civil disturbances which effectively checked the growth of the economy. 4. The dynamic force in the economy has been the increasing sale of primary products abroad. Export receipts from primary products have increased by almost 150% during the period 1950-60, the actual increase in the volume of output being about l00. During the next five years, the substantial premium above world market prices which the Cameroon has hitherto enjoyed on its exports to France is to disappear, in accordance with the terms of the Second Convention between EEC and the associated countries. It can, of course, expect to benefit from entry into the larger market represented by EEC and the protection afforded by the EEC's common external tariff. There seems little prospect, however, that any possible expansion in output in the next five years can offset the decline in prices likely to folloa! the disappearancebf prieiniums and'loss of protection oin the French market and the prevailing downward trend in world market prices of nearly all the principal export commodities of the Cameroon. There is, in addition, the possibility of restrictions on the extent to which exports of cocoa and coffee can be increased, w-hile in the case of bananas it is -ii - doubtful whether this commodity would be competitive or marketable at prevailing market prices, On October 1, 1963, the West Cameroon lost the benefit of Commonwealth preference on its exports to the U.K., affecting principally bananas. Apart from the possibility of some expansion in the output and export of timber and cotton, subject to some reduction in producer costs in the case of cotton, there appear to be only limited possibilities for expansion in other directions in the short run.

5. An important contribution has been made to the growth of the economy by the large volume of fixed investment, approximately 100 billion francs CFA over ten years, two-thirds of which has been financed from French official scurces. This has endowed the Cameroon with an extensive infrastructure which, apart from roads and education, is largely adequate for the present and immediately foreseeable needs of the economy. In agriculture the volume of investment in the last five years at least has not reflected the priority which this sector deserves. In the first Development Plan, 1961- 1965, since independence, provision has been made for a total investment of 53 billion francs CFA and of this amount only 20% has been allocated to agriculture and a further 11% to other productive activities. The main share, 47%, has been reserved again for investment in infrastructure. 1/ 6. External aid comnitments of FAC, FED, AID and Germany to the Cameroons have averaged approximately 5 biflion francs per year over the last four years and this level of aid may be expected to continue provided the supply of suitably documented projects can be maintained. However, expatriate civil servants have been replaced too rapidly by inexperienced staff and execution of projects has lagged seriously. Full utilization of the foreign assistance likely to be available wTill depend on energetic efforts being made by the government to speed up the preparation and execution of projects. It is also important that every effort should be made to channel further investment into those sectors which are likely to contribute directly to an increase in urport earnings and government revenues.

7. The combined government current accounts for the Federal Area have been in deficit since 1957. This deficit, which averages about 1.7 billion francs CFA per year, does not take account fully of certain expenditures of the services of the French Government in Cameroon, progressively trans- ferred to the Cameroon budget, and the salaries, paid out of the French budget, of French technical assistance personnel, who can be regarded for the most part as filling a gap in the Cameroon civil service. As a result of efforts to restrict the growth of public expenditure and to increase rates of taxation, the Federal Government has planned to balance its current budget for the financial year 1963/64. It is doubtful whether the rather burdensome tax measures will succeed in providing the increase in revenue expected. On the expenditure side, the government must expect increases in recurrent expenditure arising from development and the need to expand basic services for agriculture, public works and education, which are the key departments in preparing development projects and implementing or supervising them. There is in addition an important gap

1? Fonds d'Aide et de Coop6ration, Paris; Fonds Europ6en de D6veloppement, Brussels; Agency for International Development, Nviashington. in the executive and professional grades of the civil service, which will be difficult to fill from within the Cameroon. In the absence of recruitment from abroad, with its consequential increase in current costs, the government must expect a further slowing down of its current activities and increasing difficulty in implementing the development program. It therefore seems unlikely that the government can succeed, in the short run, in balancing its current budget without a drastic reassessment of priorities and far-reaching economies in less essential fields. This is all the more unfortunate since, in view of the limited possibilities for mobilizing private saving, the government would have to rely on the public sector to supply the substantial volume of domestic saving assumed in current plans for economic development and this would require a large current surplus.

8. Prospects for tle immediate future are uncertain. The Cameroon has gone through its initial independence period evidencing a substantial degree of political maturity and there seems to be a general willingness to adopt reasonable policies and to make a strong development effort. Much depends now on the willingness of the government to reexamine its economic policies and on the speed with which it can determine and implement the immediate measures necessary to maintain some progress over the next 3-5 years of readjustment. There- after, the conditions required to establish a more healthy position in the balance of the economy and in the balance of external payments, and to attain a higher level of investment activity and achieve a rate of growth sufficient to raise the present low income per head would require a much higher priority for agriculture and a much larger allocation of resources for agricultural development, a restricted and less ambitious scale of government intervention in the economy, continuing measures to maintain a balanced budget and to increase government savings, and a revised and less restricted policy of recruitment of non-Cameroonians. Even given these conditions it would not be wise to plan for rapid progress, and especially in the absence of a significant improvement in primary commodity prices on the world market, which is unlikely.

9. To conclude: the main need of Cameroon is for technical assistance and for further financial assistance closely associated with the priority sectors (agriculture, roads, education) which will help to assure not only that they secure priority in investment but that the necessary support in the form of government policies and current expenditures will be provided. The present external debt is not large, debt service absorbing about 2% of export earnings. However, in the light of the uncertain export prospects, the problems of the current budget and the major adjustments facing the economy, any substantial increase in external debt on conventional terms would not appear to be wise in the near future. At the same time, while Cameroon would appear to qualify for aid on non-conventional terms on the basis of poverty and of performance so far, the potential for improved development policies is sufficiently great to warrant the conclusion that any such aid should be closely geared to further improvements in such policies. I. TrE COUNTRY AND ITS PEOPLE

1. The Federal Republic of Cameroon, with a population of 4.2 million inhabitants, is the second largest country, in terms of population, of the franc zone. It has a coast line on the Gulf of Guinea of 250 miles and the territory extends over 800 miles inland to Lake Chad and covers an area of 183,000 square miles. As a result of its location, Cameroon has been for centuries a melting pot of races, languages, and religious and social systems.

A. Geography and Climate

2. There are several distinct zones: the West Cameroon is a small mountainous region, exclusively agricultural and pastoral, with difficult communications; the equatorial climate of the East Cameroon, with two rainy and two dry seasons, determines three distinct regions, hal-f of which are covered by forests. The southern region, hot and humid, with an average annual rainfall of about 80 inches, is covered by forests. In the north there are extensive plains and savannahs with a clearly defined rainy season. Between the tropical forest of the south and the savannahs to the north there is the central plateau with less rain and a low temperature.

3. The soil is constantly menaced by erosion and exhaustion but is in most parts fair and is particularly rich in the volcanic areas of the south-west, and in the West Cameroon. The country is w-Tell endowed with rivers with a high hydro-power potential but with little importance for transportation. In the southern region with its dense forests and in the western mountain region of East Cameroon and in the coastal area of the '-est Cameroon, the cultivation of subsistence and commercial crops is carried out on a more extensive scale than in any other part of the country. In all only 92 of the total area is under cultivation.

B. Population

4. The population of the East Cameroon is estimated at 3.3 million in 1963 and to this must be added a population of 900,000 in the West Cameroon, making a total of 4.2 million for the Federal Republic. This includes 16,000 non-Africans. The population is increasing at a net annual rate of around 1 to 1-1/2%. Population density is very low, averaging about 20 per square mile in the East and about 50 per square mile in the West, but is very unevenly distributed throughout the country.

5. There are five areas of rather heavy population: the urban center of Douala, the cocoa growing country around Yaounde, the mountainous Bamileke section with up to 390 inhabitants per square mile, the coastal divisions of Victoria and Kumba, and parts of the north with approximately 100 inhabitants per square mile. The three concentrations in the southern region account for some 67% of the population and, with the exception of cotton growing areas of the north, for virtually the whole of the commercial life of the country. There are areas in the central plateau, as well as in the eastern and south-eastern parts, with population density barely reaching one inhabitant per square nmle. These regions, in particular the central plateau, have fair soils and an agreeable climate but lack the necessary transportation and communication links. The population is mainly rural, only one city, Dbuala, has a population of 150,000; Yaounde, the capital, has 58,000 and N'Kongsamba, 31,000.

6. The Cameroon is a racial crossroads where the people from the Sudan areas of the north meet the Bantu along the edge of the pygmy country. The Bantu predominate in the south, many of them Christians while in the north are found the Kirdis, a Sudanese race, pushed back into the mountains by the Fulani, who introduced the Moslem religion to the Cameroon. In the western highlands are concentrated the Bamilekes, an industrious tribe, multiplying rapidly and spreading out into other parts of the Cameroon. The majority of the population is animist though there are strong Chiris- tian and Moslem minorities. The tribal composition of the population is extremely fragmented and complex with well over 100 vernaculars spoken. The population structure is further complicated by continuous migration over the international borders and within the territory.

C. Political Background

7. European contact with the coast of what is today the Federal Repub- lic began in the 1500's. Throughout the next three centuries, Spanish, Dutch and British traders visited the area and there was almost continuous missionary activity. Modern Cameroonian history may be said to have begun in 1884 when Germany, Great Britain and France competed in their efforts to annex the area. Germany succeeded in bringing the Cameroon under its control until in 1916 combined French and British forces forced Germany to surrender the territory. By agreement between Britain and France, the territory was divided between them and this division was given legal sanc- tion in 1922 under the League of Nations mandate system and, from 19h6, under the U.N. Trusteeship Council. Britain governed the i'orthern Came- roons and the Southern.now rst, Cameroons as an administrative adjunct of Nigeria. The French trusteeship was ended on January 1, 1960 wqhen the Republic of Cameroon achieved independence. As a result of a plebiscite in the British Cameroon in February 1961, the southern portion chose union with the new Republic. On October 1, 1961, this unification was realized and the present Federal Constitution was adopted.

8. There remain, however, fundamental differences between the two states of the Federal Republic in political outlook, trade orientation, currency, education and administration.

9. Since its independence, the Federal Republic of Cameroon has been faced with a number of unusually difficult problems including serious civil disturbances which in some cases had flared up earlier as a result of existing economic and sociological problems. In the last four years the Bamileke tribe in the western highlands of the eastern region of Cameroon and the tribes of the Sanaga Maritime Region have had near civil war at times. The situation has considerably improved recently. 10. Cameroon has its share of problems common to many African countries: a government costly for the country's modest resources and difficult to operate with the number of qualified personnel available; much more rapid Africanization than the acute shortage of qualified executive and professional grades in the civil service really allowed; dependence of the economy on exports of a small number of primary products, the prices of which have fluctuated widely on world markets, and wihose future prospects are subject to very serious ruservations; the conservative nature of peasant farmers and the difficulty of intro- ducing new methods of cultivation; the limited local market and absence of a5ly special factors likely to assist industrial development on a competitive basis.

11. The Constitution of the Federal Republic of Cameroon which took effect on October 1, 1961, represented a compromise between the constitu- tional arrangements in effect in the East and West Cameroon, respectively. While it envisages the eventual establishment of a federal system in which a Central Government would have great power, the transitional arrangements are of a looser nature.

12. Legislative power is vested in the National Federal Assembly which passes laws by simple majority of its members although legislative initiative is also granted to the President who is also elected directly by the people. The President appoints the Federal Ministers (there is no Prime Minister) and nominates the Prime Ministers of the Federated States. The Constitution also provides for an independent judiciary. The Federal Government has exclusive authority in foreign affairs, currency and banking, the judiciary and legal system, national defense, higher education, social services and economic planning. For the present, power in such matters as local government, real estate laws, labor affairs and primary education remains vested in the states which have their own legislative assemblies. The budgets of the states are, however, subject to effective control by the Federal Government which determines the amount of the subventions required to balance the current budgets and finance part of the capital equipment budgets of the federated states.

13. The two remaining political parties in the Cameroon, the Union Cameroonaise (UC) in East Cameroon and the National Democratic Party (KNDP)in the Wlest, control their respective state assemblies and dele- gations in the Federal National Assembly. In April 1962, these parties joined to form one Parliamentary Group in support of the present government and in the interest of national unity.

14. In effect, therefore, the Cameroon has the familiar one-party system and Presidential regime with executive power and most of the normal business of government concentrated in the hands of a small group round the President. 15. The key ministry is the Ministry of Finance which is also responsible for the Plan. The main preoccupation of the Ministry to date has been the current budget and this has left little time for carrying out a program of development.

16. The government would appear to be generally reluctant to facilitate any large-scale capital development entirely under the control of foreign enterprise.

17. The government has taken steps nevertheless to encourage new business development and increase the confidence of the private sector by rationaliz- ing the various fiscal provisions into an investment code and by stimulating domestic credit expansion. The Banque Camerounaise de Developpement was established to take over the former Credit du Cameroun and in its larger role is also responsible for government participation in the formation or expansion of private enterprese.

18. The Cameroon has pursued a policy of cooperation with France, at the same time attempting to remove many of the features of its former dependence. Cameroonization of the administration has been carried out very rapidly. The number of Frenchmen emaployed in key technical and administrative posts has been reduced from 2,000 at the time of independence to about 600 in May 1963. This rapid divesting of key personnel has left a serious gap in the administrative structure. The government has accepted the financial and monetary commitments of membership of the franc zone and of the Central Bank (of Issue) for the States of Equatorial Africa (Chad, Central African Republic, Congo and Gabon) and the Cameroon. The Cameroon has accepted associated status with the Common Market and benefits from the general tariff preferences and the aid provided by the European Development Fund. The Cameroon has also recently signed the new five-year Convention which i n1oV yet been rat-fied.

19. The Cameroon has also concluded a Convention with the four Equa- torial States. The Convention calls for the gradual implementation of its several provisions which include a customs union and a common external tariff against countries outside the franc zone and the Diropean Economic Comnunity with effect from 1st July 1962. The Cameroon is also a member of the regional political organizations, U.A.M., and its economic offshoot, A. C oE.i/, formed to develop cooperation among French-speaking countries of the Afro-lalagasy group.

20. In its relations with other independent African countries, the Came- roon has pursued a moderate course. It has itself effectively accepted the integration of the Northern Cameroon in Nigeria although the results of the referendum remain a subject of legal dispute before the International Court.

1/ Union Africaine et Malgache. 2/ Organisation Africaine et Malgache pour la Cooperation Econoiique. - 5 -

II. STRUCTURE AND P3RFORiMANCE OF TI-E 3CONONY

A. Structure of the Economy

22. The economy is based almost entirely on agriculture in which approximately 85, of the population is dependent. Tropical agricultural products such as cocoa, coffee, bananas, timber, palm oil products, rubber and cotton normally provide about 75% of foreign exchange receipts. Cocoa, coffee, and more recently bananas, are the traditional cash crops largely in the hands of African family enterprises; about half the exports of bananas, about 20% of coffee, 10% of cocoa and almost 100% of the exports of rubber and palm oil, are organized on a plantation basis, usually under non-African ownership or management. Cotton has been developed entirely on the basis of organized peasant farming.

23. With the exception of the highly capitalized and modern aluminum plant at Edea, industrialization has not progressed very fast. Road and rail transport have been well developed generally, especially in the East Cameroon, but still remain inadequate for the satisfactory movement of domestic produce and for the evacuation of export products.

24. According to national income data, agriculture accounts for 50% of the domestic output in a normal crop year; industry, mainly food processing and craft industries, accounts for perhaps 10u; transportation and commerce for just over 30%; government and the remaining services for about 10Z.

Table 1: Gross Domestic Product of Federal Area by Industry of Origin

(Billion CFAF)

1951 In q 195? In ;]

Agriculture 42.6 61.7 56.3 51.4 Industry 4.4 6.4 8.7 7.9 Trade ( ( 26.6 24.3 Transportation & Communications (17.5 (25.4 2.6 2.4 Other Services ( ( 3.0 2.7 Administration 4.2 6.1 11.0 10.0 Personal Services 0.3 0.4 1.3 1.2 Gross Domestic Product 69.0 100 109.5 100 Of which: Monetary Sector 37.6 54.5 70.3 64.2 Subsistence Sector 31.4 45.5 39.2 35.8 i4oney GDP Per Capita (CFAF) 9,817 17,146

Total GDP Per Capita (CFAF) 18,015 26,707 - 6 -

25. National income data are available only for the East Cameroon and for four years only - 1951, 1956, 1957 and 1959 - and the statistics are not necessarily fully comparable in all respects. However, on the basis of a rough approximation of GDP for the West Carneroon for 1951 and 1959 respectively it is possible to put the gross domestic product for the federal economy at about 110 billion francs CFA (2447 million) in 1959 compared with a figure of about 69 billion francs CFA ($285 million) in 1951 (see Table 1). Since 1959 there have been three years of difficult transition marked by internal civil disturbances. It is probable that the national income data for 1962 would show very little change, overall, from those for 1959.

26. During the period 1951-1959, the output of East Cameroon increased by a little over 60% or a compound rate of growth of about 6% per year at current prices. There are no official statistics from which to estimate changes in real national income but bearing in mind that the increase in the retail price index, which is available only for European consumers in Douala, has been at an annual rate of 5%, export prices at about 5% and import prices at about 4% per annum, it appears reasonable to assume that the general level of prices in the money economy has increased probably by a little over L4 per year. If the output of the money economy at current prices is deflated by this amount, the resulting approximation to the value of output at constant prices for 1959 would be 80 billion francs CFA compared with a figure of 61 billion francs CFA in 1951, or an average rate of growth of under 4% per year. This may be on the high side, since it ignores the increase in prices used to value the output of the subsistence sector. With a rate of growth of population at a little over 1% per year in terms of output per head, the rate of growth of the economy would therefore appear to have been between 2% and 3% per annum over this period. This increase in output has stemmed from investment almost entirely financed from French official and private sources, averaging about 10 billion francs CFA ($40 million) per year, and the rising volume and value of the exports of a broad range of primary products which together accounted for some 25% of the national product in 1959 compared with about 15% in 1951.

27. There have been no great changes in the economic structure over the last decade, apart from a decline in the relative contribution of subsistence agriculture from 42% in 1951 to 32% in 1959. There have been slight increases over the same period in the proportion of GDP contributed by industry, transportation and administration.

23. Given the dominance of agriculture in the economy, trends year by year reflect for the most part export and seasonal conditions but underlying the relatively small growth achieved over this period has been a relatively low rate of productive investment. In 1951, total investment in East Cameroon accounted for 16% of total GDP; this fell to 12% in 1956, 12% in 1957 and 10% in 1959. Investment in the private sector, including government investment in enterprises and services to enterprises, amounted to 10% of GDP in 1951, 7%5 in 1956, 7% in 1957, and 6% in 1959. Neither of the two federated states has been the recipient of large private investment except for the aluminum ingot plant at Edea. Neither territory has substantial mineral deposits to attract foreign investment. Moreover, Wlest - -7-7 -

Cameroon has been particularly hindered by the general low state of its economic infrastructure - poor roads, communications and transportation - as well as by a lack of public welfare facilities such as schools and hospitals.

29. Government investment fell successively in 1960 and 1961 from 4.5 billion francs CEA in 1959 to 2.7 billion in 1960 and 2.2 billion in 1961; however, in 1962 government expenditure on investment showed a definite increase to 3.5 billion. Increases in expenditure on anied forces and internal security forces, from 323 million francs in 1957 to 3,490 million in 1963/6h, and uncertainties about the future and the physical problems of transition from trusteeship status to independence have also acted as a check on the maintenance of the level of investment in the public sector, but the main weakness appears to be in the lack of human resources with the required skill and experience to prepare and implement suitable projects.

30. Private investment has been predomidnantly in agriculture, 15% of total; manufacturing 55%; and also in distribution, 25%, while that of government has been devoted primarily to the economic, 50%, and social, 12%, infrastructure, with about 35% on production, including services to enterprises. Of the total of approximately 65 billion CPA francs spent on public investment including public enterprises in the period 1950-60 over 55 billion has been directly contributed from French official sources. Private investment during the same period can be roughly estimated at some 30 billion CFA francs, including some 7 billion francs borrowed from the Caisse Centrale, most of which was lent to Alucam to assist in financing the privately-owned aluminum plant at 25dea. Of the remaining 23 billion francs invested by the private sector a large part of this represented the reinvestment of profits and depreciation and other reserves, particularly in the last eight years.

31. Local savings may be assumed to have contributed in the main towards replacement expenditures on the fixed assets of enterprises, including ports and railways, the improvement of roads and bridges, leaving little or no margin for new investment projects. These appear to have been financed almost entirely from foreign funds. Since 1959, new foreign private investment has been estimated to have been barely 0.2 or 0.3 billion CFA francs per annum.

32. The general level of incomes throughout the Federation is low. Domestic product per head is estimated at some 30,000 francs CFA in the Eastern Cameroon (approximately $120) and less than half of this figure in the West. Money incomes per head account for some 20,000 francs CFA. Average earnings of wage earners are estimated at 140,000 CFA francs ($560) in the 2ast and just over half of this figure in the West. The difference between the level of incomes between the two regions of the Federal Republic is not, however, necessarily indicative of a comparable difference in the standard of living of the population. If one excludes the relatively small number of better paid politicians, civil servants and skilled workers, the majority of the population, or 80%, enjoys a comparable standard of living - little above normal subsistence requirements. For this part of the population, expenditure on imports is - 8 -

usually relatively unimportant. There is also a marked difference, possibly of the order of 40% of the average level in the East, between the general level of cash incomes and prices between the two regions of the Federal Republic.

33. The population of working age is estimated at about 2.5 million and of this figure only 200,000, or less than 8%, are in wage earning employment, approximately 5.0% of the entire population. Approximately 20,000 are employed in the government or local government sectors and some 65,000 in agriculture, including a Cameroon Development Corporation labor force of about 18,000. Manufacturing accounts for about 50,000, including some 30,000 employed in building trades; about 25,000 are employed in commerce, about 20,000 in transportation and the balance in education and health and other services. The bulk of the working population are farmers or herdsmen. There is no clear-cut division between the monetary and subsistence sectors of the economy; most farmers sell only their surplus production, except in the case of special crops produced primarily for export: cocoa, coffee, bananas, or cotton.

34. Particularly in the large subsistence and agricultural sectors under-employment is widespread, but this is frequently a function of individual preferences rather than economic factors. Unemployment as such is not as yet a serious problem. Although the drift towards towns and the increase in the number of primary school leavers unwilling to accept employment in the less promising opportunities available has tended to increase. The number of unemployed has been reinforced as a result of recent increases in wages in the private sector.

B. Principal Economic Sectors

Agriculture

35. Some 45% of the total GDP is contributed by agriculture and a further 5% by forestry and fishing. The area under cultivation represents only 9% of the surface area of Cameroon. Of this, about 35% is devoted to foodstuffs, about 15% to cash crops, and the remainder lies fallow.

36. Major policy decisions in agriculture have yet to be taken on the future role of plantations in the economy or on the possible establishment of large-scale commercial enterprises. There are a number of crops, bananas being the most important, for which future export prospects are discouraging in the absence of any radically new approach to production or distribution. Serious consideration needs to be given to dealing with the problems of excess acreage, low productivity, lack of disease control, large-scale replanting of new and improved species, improved methods of farming, improvement of evacuation channels, or the gradual development of alternative crops. Moreover, much valuable research has been carried out in the past but the results have not yet been utilized or brought to bear on the formulation of policy. - 9-

37. The government has, however, outlined some measures it proposes to adopt for aiding the development and expansion of agriculture but is seriously handicapped by shortage of staff and of funds. These measures include: (1) agricultural extension work carried out in the East through five regional organizations called Secteurs de Modernisation Agricole (SEM); (2) encouragement of the development of cooperatives in order to permit production and marketing to take place on a large scale; (3) agricultural education; and (4) in the East a definite program for the expansion of farm credit.

38. During the last three years, there has been virtually no net progress in agriculture, due, on the one hand, to the difficulties of per- suading peasant farmers to change, and on the other to the reluctance or inability of the non-African plantation economy to invest further. This reluctance stems from fears of government interference in the normal marketing channels and the fear of deliberate discrimination in favor of the peasant farmer when markets are subject to quotas.

39. Cameroon is fortunate in the diversity of its agriculture. Cocoa is the most important crop accounting for 25% of export receipts, fol- lowed by coffee 20%, bananas, timber, cotton and palm products. Produc- tion of the principal cash crops has increased in quantity by about 100% between 1950 and 1960. Subsistence production, with notable exceptions, such as maize, manioc and rice, has shown only a marginal increase necessary to meet the requirements of the slowly-rising population. Despite the basic self-sufficiency of Cameroon, the country imports substantial quantities of rice, sugar, wheat and other foodstuffs and is also defi- cient in dairy products.

Table 2: Exports of Some Commercial Crops of the Federation

(000 tons)

1955 1958 1960 1961 1962

Bananas 142 159 123 133 134

Cocoa 60 59 65 66 66

Coffee 1/ 14 26 31 36 31 Cotton fiber 1/ 4 7 10 10 13

Rubber 5 6 7 9 8

Palm oil 12 13 5 6 4

Palm kernels 25 20 18 17 15

1/ East Cameroon only. - 10 -

40. In West Cameroon the majority of the export crops, with the exception of the banana crop, is produced on large plantations of which those of the Cameroon Development Corporation (CDC), managed by the United Kingdom Commonwealth Development Corporation, cover some 58,000 acres under cultivation out of a total concession of over 250,000 acres. Other plantations in the West account for another 17,000 acres. The acreage of plantations under cultivation is about one-eighth of the total area under cultivation in West Cameroon, and about 40% of the total area under export crops. The value of exports from plantations represents about 40% of the total value of exports.

41. The CDC was established under the Nigerian Government in 1947 to take over the commercial development of the former German plantations situated mainly in the coastal region where cocoa, bananas, pepper, coffee, palm products, tea and rubber are grown. The profits of the Corporation, which operates as a commercial enterprise, are paid into the general revenue of the Government of West Cameroon, while substantial sums are paid to the Federal Government in the form of export taxes. The Corporation's functions include cultivation of crops, stock raising, road communications, internal trading for the benefit of its employees, averaging about 18,000, as well as provision of educational, health and housing facilities, social welfare and research.

42. The contribution of the ligerian Government to the Corporation has been converted into a loan of 692 million francs CFA repayable to the Government of Nigeria and a loan of 519 million francs CFA repayable to the West Cameroon Government. A loan of 692 million francs was received from the United Kingdom Commonwealth Development Corpora- tion in 1962. More recently the Banque Gamerounaise de Developpement (BCD) has provided medium term capital amounting to 277 million francs CFA. The Cameroon Government interprets the present form of organization as a partnership in which the Cameroon Government provides the physical resources, knowledge and experience gained on the plantation and part of the capital and the Commonwealth Development Corporation a substantial amount of capital, and the management and special expertise. The Cameroon Government may take over the Nigerian Government's interest at any time by repaying the loan.

43. The future form of organization of the Corporation is still under consideration by the government and a final decision on its capital structure has been postponed until the assets of the Corporation have been revalued. The Federal Government will also have to decide whether the Corporation's responsibilities for social services and for the operation of the ports and small gauge railway shall be continued. Of even greater importance, however, for the efficient operation of the Corporation, is the decision of the government as to what will be the future role of such a large-scale producer, the method of financing the replanting and new developments of the Corporation or its successors and whether it will be free to operate financially as an efficient commercial enterprise. - 11 -

44. In spite of the iriportance of agriculture and the existence of the results of much research, very little has been done to relate the potential resources to future market prospects in an effort to determine the pattern and scale of future production. Independent studies of a more limited nature have been made of some aspects of agricultural production; for example, s'Pc proposals exist for cocoa rehabilitation and more particularly cocoa marketing and for the development of large-scale ranching and meat production, while the development of cotton production in the north has already made an outstanding success. Agriculture should be the foundation of the government's economic policy and especially of its development program. There has been a gradual recognition of the need to give greater importance to productive investment but more shruld be done to move in this direction.

Livestock

45. Animal husbandry is a major economic activity in Cameroon but does not figure importantly among exports, although there is a significant seasonal movement of cattle across the borders of the Cayaeroons. The meat requirements of the south are met by slaughtering cattle *which have been brought do7rn from the north and, on an increasing scale, from the central plateau, on the hoof wTith considerable loss of weight and quality en route. Pioneer schemes exist for transporting meat in refrigerated vans by road from the Adamoua highliands to the consumers in the south, and there are obvious possibilities for developing these on a large scale. Some of Cameroon's meat is reported to be among the finest on the wrest coast of Africa. Goats, sheep and poultry are reared throughout the country. The government has a number of projects under consideration for utilizing the country's good pasture land and good quality cattle by means of large scale ranching combined w-ith an organization for marketing and distribution. Such possibilities merit a great deal more effort in their investigation and implementation than appears to have been possible to date.

Fishing

46. Fishing is carried out on the rivers, lakes and ponds to supply immediate subsistence requirements. In Douala and intermittently in Victoria, fishing is operated on a commercial basis and on a relatively small scale, with an annual output of about 5,000 tons. There may be room for development of deep-sea fishing up to a possible limit betw-reen 30,000 and 50,000 tons per year. The marketing of fish inland is likely to provide the principal obstacle and the possibility of utilizing or sharing in the system of meat distribution might merit further investigation.

Forestry

47. Sixty percent of Cameroon is covered by forests, wooded savannahs or mangroves. Nevertheless, Cameroon's forest products industry has not been developed extensively and full advantage does not appear to have been taken of the country's virtual monopoly of azobe hardwood to organize an efficient control of the methods of exploitation. I!ood products account for 6Mo of exports and currently rank fifth in terms of value. - 12 -

48. The further development of the timber industry is likely to be retarded primarily by the inadequacy of transport and by the haphazard method of exploitation, especially in 'Jest Cameroon. There are, howJever, large un- touched forests in the eastern and south-eastern parts of the country and in the northern part of I-est Cameroon. -That appeared to be a flour-ifshing small-scale industry in the wfest has, through financial and managerial difficulties, largely disappeared. Exports of timber and lumber products have risen in value from 242 million CFA francs in 1950 to 2,100 million CFA francs in 1960, falling to 1,800 million CFA francs in 1962, the collapse of a large producer in the west partly offsetting other increases.

ianing

49. ITTning accounts for only a very small part of economic activity and is restricted to small amounts of gold and cassiterite. Particular importance has been attached to the search for a domestic source of bauxite for the existing aluminum plant. Bauxite deposits have been discovered in the Bamileke territory and at Ninim-iartap on the Adamoua plateau, where the deposits are estimated at l4CO mil'ion tons of ore wi-th a rather low alumina content of 1142,. NIdnim-Martap, in East Cameroon, is situated along the route of the projected Trans-Cameroonian Railway. However, transport costs are high, and the aluwina content of the ore is lowF compared to ores elsewhere in Africa ith greater accessibility to wTorld markets. There are indications of a sizeable iron ore deposit near Kabi. Studies on the content of the ore and on the real magnitude are still to be made. There are no coal deposits of economic significance, drilling for oil has not yet yielded sufficient results to justify commercial exploitation. Some significant natural gas fields with reserves estimaued at 400 million m3 have been found near Douala but there are no proposals at present for their exploitation.

Manufacturing

50. Planufacturing is still of very limited importance and is concentrated in Douala (with the exception of an aluninum plant at Edea). The net value added in manufacturing amounted to 9 billion CFA francs in 1959 and an estimated 10 billion in 1962, or about 8, of gross domestic production, including power and building and construction. This nevertheless shows an increase of more than 120, since 1951. Total employment in industry is estimated at about 47,000, of which about half are employed in building and construction, sorme 105 in latex ma-nufacture, about 65, in -woodiorldng carpentry shops and building firms, about 2" in power and the bal,nce of about a third are engaged in other industries involving some degree of processing and transformation.

51. Apart from saw-milling and two veneer factories, most industries are small-scale processing plants based on locally produced rawf material, such as cocoa, coffee, cotton, farm produce, rubber, groundnuts and tea, including also meat canning and grain milling. There are also factories for ready-made clothing, beer and an assortment of metal products.

52. A general study of industrial development possibilities in Cameroon was carried out by SEDS 1/ in 1959 but little effort appears to have

1/ Societe d'Etudes pour le Developpement Econorrique et Oocial, Paris - 13 -

been made to complete the next stage of investigations or to implement any of the proposals. Other studies have been privately financed or undertaken jointly with the Cameroon Development Bank. In addition, the government has confided the study of a number of small or medium scale activities to special groups.

53. The largest industrial enterprise in the country, the Edea aluminum plant, was erected to take advantage of low cost electric power provided by the hydroelectric plant at Edea. All its raw materials are imported, including the alumina, which is supplied by the FRIA operation in Guinea, and its output is entirely exported.

54. The Edea aluminum plant was built in the mid-'fifties by the Compagnie Camerounaise de l'Aluminum Pechiney-Ugine (Alucam), a company owned and managed by French aluminum and chemical interests, with a capital of five billion francs CFA and a low interest-bearing loan of three billion francs CFA from the Caisse Centrale 1/. The Cameroon government owns 8% of the equity. Alucam began operations in February 1957 and gradually increased production until in 1961 it approached its planned capacity of 45,000 tons annually. mhis target wTas exceeded in 1962 with an output of 52,000 tons, or about 1% of world production. It is considered that the optimum output of the Edea aluminum plant could be increased to 57,000 tons if a regular supply of 105/110 million kwh electricity per month could be assured. Plans to improve the regularity of the flow of water at Edea are under consideration.

55. The building and construction industry is responsible for about 50% of total investment. Of the total for new works, some 60% was spent on roads, bridges and other public works and buildings, about 20% on housing, barely 5% on industrial and related construction and abou-t 15% on offices and commercial buildings. (In addition, farmers are responsible for approximately 2-1/2 billion francs per year investment in housing and agricultural work of traditional construction.) The capacity of the industry has remained almost unchanged during the last decade.

56. The majority of work is carried out by foreign contractors and seven large firms in particular. In both regions, the Public Works Depart- ments have been unable, as a result of shortage of experienced technicians, to analyse very critically tenders submitted by private contractors and building and construction costs have been high. The position might be improved if the government attempted to increase competitive bidding by putting contracts out to public tender by a much larger number of foreign firms, and if the Public 'Iorks Departments were to be strengthened through technical assistance, particularly in the fields of design, cost analysis and supervision. One of the obstacles to greater competition and a reduction in costs and efficiency is the small scale or piece-meal approach to planning and constructional works. There are distinct advantages to be gained by examining, for example, road developments, over a longer period ahead and by contracting out complete sections of work on a scale sufficient to interest larger, more experienced and, financially, better established firms. Consultants should be used for most large scale projects but for these to be interested and to operate efficiently also requires a larger scale of operation than appears to have been normal in the past.

!/Caisse Centrale de Coop6ration Lconomique, Paris. Power

57. Cameroon has been well endowed with numerous waterfalls suitable for development, particularly in the east and south. Until now, however, only the Edea falls have been developed in East Cameroon. There are four small hydroelectric plants in Wiest Cameroon with a total capacity of some 2,500 KVA.

58. The Edea hydroelectric plant has an installed capacity of 150,000 KVA, the greater part of which is made available to the Alucam aluminum factory. The remainder, up to a lirit of 20,000 KVA, is earmarked to supply Douala and Edea urban centers. Any unused capacity is available for the aluminum plant. Unfortunat+el-y, the full capacity cannot be utilized during the dry season due to the irregular supply of water. The plant is controlled and operated by a public authority "Enelcamrl established in 1948, with a capital of almost 2 billion francs CFA. of which the Federal Govern- ment and other public authorities in Carneroon owm less than 155' while the bulk of the capital was subscribed by French official institutions.

59. The electricity supplies for Yaounde, N'Kongsamba and H'aroua are managed on behalf of the Government by La Compagnie Centrale de Distribu- tion d'Energie Electrique, (C.C.D.E.E.), while all other municipal plants in the East are under the Director of Public Works. In the Wlest electricity is under a statutory body, the Cameroon Electricity Corporation. The combined capacity of the small hydro and diesel-thermal power plants, apart from Edea, only amounts to a total of 7,000 KVA in East Cameroon and some 3,300 KVA in the West.

60. A reorganization of the electricity industry at present forms the subject of a general study financed by FAC. 1/ The object is to estimate the needs, to inventory existing plant and to draw up proposals for the future. It is envisaged that the final proposals will provide for a central electricity authority for all the eastern region at least.

61. There is a proposal for harnessing the Chutes d'Ekom on the river Nkam, near .WTkongsamba, and for extending at a later date, the transmission grid. A preliminary estimate puts the cost in the region of 700 million Frs.CFA for the harnessing of the Chutes d'ZEkom, 80 million Frs.CFA for the local transmission line, and 300 million Frs.CFA for a 100 mile link with Douala. Plans are also under consideration for the construction of a dam at Tibati, on the upper Sanaga, to store flood water and to insure a regular increased flow at Edea. This would enable the monthly output at Edea to be raised from an average of 125 million kwh to an assured figure of 140/150 million kwh, from which Alucam could be assured of receiving its full requirements of 105/110 million kwh. The cost of construction of the dam is estimated at 1.4 billion Frs. CFA. Transportation and Cornunications

62. The past decade has seen a substantial improvement and expansion of transport in the Cameroon. Wlhile port facilities may be rated as good and airports and the railways as adequate, there are marked deficiencies in road transport and produce is still head-loaded long distances to the main roads and markets.

1/ Fonds d'Aide et de Coop6ration, Paris. - 15 -

63. Cameroon has four seaports handling 1.2 million tons of merchandise a year. Douala, with berths for eleven ocean-going ships, situated at the terminus of the Cameroon railway system, is by far the most important port, writh an existing capacity of 1.1 million tons but operating at only about 80% of capacity. Completion of the present improvement works is planned to increase capacity to 1.5 million tons per year. Studies are being made of the possibilities for developing Bota as a future deep-water "avant-port" to Douala but, wThile the technical possibilities appear to be promising, it is difficult to foresee the economic justification for a second modern port until the new patterns of trade and movements stemming from the completed Trans-Cameroon Railway have had time to emerge.

64. The state-owned meter gauge railway operates two single lines extending outward from the port of Douala. The north line runs 100 miles to N'Kongsamba and the eastern line 200 miles to Yaounde. After years of deficit operation, the locomotives were completely dieselized in 1958 arnd as a result the railway now operates at a small profit. Passenger traffic has shown only marginal increases over the past ten years but merchandise has more than doubled to a figure of 134 million ton/kms in 1961/62. Work is about to commence on the actual construction of the first 200-mile section from Yaounde to Goyoum of the proposed Trans-Cameroon Railway, planned eventually to link Yaounde to N'Gaoundere, 450 miles, wTith further possibilities of extension to Doba and Fort Archambault in Chad. Funds allocated for the first section total $23 million, financed by FED 1/ ($15 million) and AID ($8 million). FAC is providing a further $6 million for ancil- lary building and works and rolling stock. A further short extension from, .banga, on the Douala-141'Kongsamba lines to 1Kurnba in the Test is being financed by the Railways. 65. Of a total of over 31,000 kilometers of roads, only 750 kms. are tarred and barely 4,500 are all weather roads. The motor vehicle population at the end of 1962 was about 35,000, including cars and buses, which is not high for a country of this size. At present several regions have no direct connection by road or rail and in many others bad weather can result in considerable disruption of the economy. The Plan provides for an annual outlay on roads and bridges of some 2.3 billion francs, and the finance of many of these projects is already assured by FAC, FED, and AID and Germany.

66. Preparations are under way to install a new radio-telephone link between Yaounde and Douala wnhich wrill permit simultaneous transmission of 24 radio-telephone communications. It is now necessary to refuse 50 requests per day for telephone service. Both Douala and Yaounde enjoy automatic dia] telephone systems. The post and telegraphic services are operated as a normal government department under the Federal Government.

Education

67. Education is still largely the responsibility of mission and other private schools. The total number of children of school age is estimated at 800,000 and about 55% attend primary school. This figure ranges from 95% in the principal urban cities down to less than 4% in some parts of the north, and about a third of the enrollees are girls. Some 10,000 children attend secondary schools, but the proportion who complete the course

1/ Fonds Europeen de D6veloppement, Brussels. - 16 - averages less than 20%. Vocational training institutes, including six teacher training schools, exist, and there are over sixty centers for technical education. There are also some 600-700 students in institutions of higher education abroad and to meet the need for a domestic center for higher education, a university has been established at the end of 1962. The most serious deficiency in the educational system is the serious lack of trained teachers. Over 70% of primary school teachers are untrained pupil teachers and with barely 2,000 qualified secondary school leavers coming forwrard each year, little impact is likely to be made on the number of qualified teachers employed in view of the need for secondary school graduates throughout the government and economy.

Public Administration

68. The wages and salaries of administrative services have increased by over 200% in the period 1951 to 1959 and now account for over 3% of the gross domestic product, or 12% of the money GDP. While there has been a substantial increase in the number employed in the government sector over the last ten years, the growth in recent years also reflects wage increases prior to 1958, and the progress of Cameroonization. The size of administrative services arises in part from over-costly structure of government and the duplication of activities and in part from very low productivity stemming from over-rapid Cameroonization and the virtual absence of middle and executive grades. - 17 -

Ill. TRADE AND PAY!INTS

A. External Trade and Payments 1/

69. The crucial factor in the economy of the Cameroon is its dependence on the export of a few primary products for which production tends to outpace demand on the world market. Cocoa, coffee, bananas, timber, cotton and rubber constitute 60% or more of exports. In addition, there have been growming exports of tea, palm products, groundnuts, and cocoa butter, while aluminum exports now account for about 20% of the total. The exports of primary products generate about 40% of money income. Prices of coffee, cocoa and bananas are depressed at present and there is little prospect that they will rise in the near future. The world surplus of coffee and the Cameroon's participation in the International Coffee Agreement have also prevented Cameroon from selling its full harvest since 1959. Among the export products only rubber, cotton and palm products seem susceptible to large-scale increases in production although it may also be possible to expand output of forest products when the railway is extended into the eastern part of the country.

70. Both recorded imports and exports have increased remarkably since 1950, imports from 11 billion CFA francs ($63 million) to 28 billion CFA francs ($112 million) in 1962, and exports grew from 9.5 billion CFA francs ($54; million) to 30 billion CFA francs (120 million) in 1962.

71. Imports of consumer goods accounted for about 60% of total imports in 1950 and 5C% in 1962, food products alone accounting for 30%, while capital goods accounted for 30% and 20% respectively, and raw materials and inter- mediate goods, for 10% and 20% respectively. Changes in the pattern of imports are, however, rather significant. There has, therefore, been a de- crease in the proportion of capital goods and consumer goods, and an increase in the share of raw materials imported into the country.

1/ Cwing to the reservations necessary in interpreting the figures of West Cameroon after conversion into CFA francs some comments have had to be restricted to the East Cameroon. The statistics of external trade and the balance of payments are incomplete, due mainly to the omission of "traditional" trade across land frontiers, the lack of precise details for West Cameroon trade and other balance of paymentstbansactions, and for the East the absence of many details of transactions with other members of the franc zone. Available statistics have been rearranged in accordance with the principles of the I1MF balance of Payments Manual. - 18 - Table 3. External Trade (Billion CFA)7

Imports Exports Balance East West Total East West Total East We st Total

1950 10.6 0.5 11.0 8.2 1.3 9.5 -2.4 +10.9 -1.5 1952 18.6 1.0 19.6 l1.0 1.9 13.0 -7.6 + 1.0 -6.6 +o.6 195h 16.3 0.8 17.1 15.2 2.4 17.7 -1.0 + 1.6

1956 16.7 1.0 17.7 13.2 2.1 15.2 -3.5 + 1.1 -2.4

1958 22.4 1.7 24.2 24.3 h.1 28.4 +1.9 + 2.3 +h.2 1960 20.4 2.4 22.8 24.0 5.9 29.9 +3.5 + 3.6 +7.1 +2.8 1961 23.7 3.8 27.5 24.2 6.1 30.3 +0.5 + 2.3

1962 25.1 3.2 28.3 25.5 4.4 29.9 +o.4 + 1.2 +1.6

72. As a result of the development programs carried out since 1947, East Cameroon's balance of trade showed consistent deficits from 19h5 until The large development expenditures in the public sector and investment 1958. in- in the private sector led to a high level of imports. By 1956, private vestors had decided to adopt a wait-and-see attitude. By 1958, there was also a notable slowing down in public investment. In that year, a good cocoa harvest and favorable cocoa prices caused exports to exceed imports for the first time since the war. The level of imports remained depressed in the succeeding two years, reflecting the decline in investment activity, and the effects of devaluation, and favorable trade balances occurred in both years.

73. Foreign trade is heasiily oriented to the franc zone and within the as franc zone towards France. Special marketing arrangements with France, well as French aid programs, capital development and technical assistance, have all played an important role in this. Over two-thirds of exports are there. sold in the franc zone and a similar proportion of imports originate Other members of the Common Market provide the next best market and source of supply; between 15 and 20 per cent of Cameroon's foreign trade is wfith non-French members of the European Economic Con'-munity. The sterling area provides about 8% of imports and takes about 15$ of exports. Cameroon has enjoyed a surplus with the EEC and France during the last few years,although this has tended to fade, and a deficit with the franc zone as a whole until 1959. There is a smaller deficit with the dollar zone, and a sizeable surplus with the sterling area. 74. Neither the devaluation of August 1957 nor the subsequent devaluation in December 1958 which were in step with the devaluations of the French franc, contributed to any expansion of exports to non-franc countries or, apparently, to more than a temporary contraction in imports. - 19 -

75. The slight favorable balance on visible account which the Cameroon has enjoyed since 1959 has been offset by the balance of invisible transactions and the balance of payments on current account has been unfavorable. On capital account there have been substantial inward flows from FA.G, FED, Caisse Centrale, the American AID, Germany and, to some extent, Great Britain, for investnment in the public sector and in the case of the Caisse Centrale, in the private sector. In recent years there appear to have been substantial amounts repatriated by foreign enterprises and individuals operating in Came- roon. Private capital is still leaving the country, but to what extent it is difficult to estimate.

B. Trade Relations

76. As a result of its association with France, Cameroon has enjoyed privileges in the French mark^et in the form of guaranteed prices, preferential duties, import quotas and even direct subsidies. The purely financial gain represented by the differentials between French market prices and world market prices is estimated at some 2.0 billion francs CFA for 1961 or 7% of total exports in that year, the latest year for which full details are available. This excludes the benefit accruing to the Cameroon from the existence of an assured source of financial assistance to local stabilisation funds and of an assured or protected market for somae crops of limited marketability and notably bananas.

77. Prior to independence, Cameroon was coimnitted to the open-door principle of non-discrimination towards other countries, in accordance with its trusteeship status. On achieving independence, the Cameroon renounced any obligation to continue this principle. On the 1st of July 1962 it introduced a new discriminatory tariff in conjunction with the Equatorial Customs Union1which permits imports from the Common Market and the 12 members of OWYCE-duty free. In addition to the newT import duty, there already exists a "droit d'entree" averaging from 14-20%o and a turnover tax averaging 15-l7V, both of which are of a fiscal, non-discriminatory nature. Special transitional arrangerrents applied to irports into ilest Cameroon, which were subject to a tariff about 60-65% of that of East Cameroon. These arrangements were to be discontinued in October 1963 following the withdrawal of the substantial preference (equivalent to 15% in 1962) previously enjoyed by the lWest Cameroon's banana exports into Great Britain.

78. Under the Second Convention of Association with the European Economic Community, which has still to be ratified to become effective, Cameroon's exports to the EEC will benefit from a progressive elimination of tariffs, but at the same time exports into France will gradually lose the benefit of a closed and protected market with the progressive eliniina- tion of quantitative restrictions and support prices provided for in the new Convention.

79. The Cameroon's foreign exchange requirements, as a member of the franc monetary area, are subject to control, in the case of trade by impo- sing a ceiling on total imports from outside the franc zone and by guaranteeing either a minimum volume of imports of selected products from France or a maximum ceiling for imports of the same products from outside

1 Organisation Africaine et Kalgache pour la Cooperation Economique. -20- the franc zoP.e. Although specific ceilings on total imports from outside the franc zone appear to be established, these have never been fully utilized and in case of necessity would probably prove somewhat flexible. An annual import program, distinguishing three general zones: the Common Market, Eastern Europe, and Other Countries, is prepared in the light of the ceiling to be applied to total imports from outside the franc zone and the needs of the Camercon. The franc zone requirements are unrestricted and as an associated member of EEC, the Cameroon has also removed any quota restrictions on imports from these countries.

80. The import licensing system operated to apply these controls forms part of the broader system of exchange control established in East Cameroon in the late 30's and patterned very closely on that operated until recently by France4 The operation and extension of the s::stem of exchange contro'l and import licensing since independence has given rise to considerable hardship and criticism of partiality in the issuance of licences, especially in West Cameroon. Although criticism centers mainly on the inadequate provision made for the administrative work involved in applying the regulations, the conse- quent delay in obtaining imports from non-franc areas and the abnormally high prices resulting from scarcity, there has also been discrimination in favor of African traders, many of whom have frequently lacked the resources necessary to utilize their licences, and a further deterioration i:2 the supply position on this account. A system of export licensing is also in effect, designed mainly to exercise some control over the registratihn of foreign exchange earnings. v 21 -

IV. FINANCE AND DEVELOPMENG PLANNING

A. tMloney and Credit

81. The unit of currency is the CFA franc, issued by the Banque Centrale des Etats de l'Afrique Equatoriale et du Cameroon. It is tied to the French franc in the fixed ratio of 1 franc CFA equals 0.02 French francs and trades at a rate of 246 CFA francs equal 1 U.S. dollar. The Central Bank issues notes for all participating countries, and has recently begun to issue separate currency notes for each country. The foreign exchange reserves of the five participating countries are held centrally by the Central Bank but a separate account is maintained for Cameroon. France guarantees unlimited conversion of the CFA franc into French francs and other currencies of the franc zone. The external reserves of Cameroon are low and over the last eight years have averaged 2.3 billion francs CFA or barely 10% of the average annual import bill. On 31 December 1962 they totalled 5.0 billion francs (including an estimated share of the total franc investments of the five member countries). This represented only 16% of total imports in 1962.

82. The Bank is authorized to extend short and medium term credit to the private sector but not to government. Global rediscount ceilings for each local bank and other enterprise eligible are determined by the National Monetary Committee for Cameroon, but the Central Bank retains the powrer to vary discount rates.

83. Money supply over the last seven years has grown at about the same rate as increase in GDP. Currency in circulation amounted to 10.5 billion francs CFA at the end of 1962 and deposit money 10.7 billion francs, a total of 21.2 billion francs CFA or 28% of GDP in the monetary sector.

84. Cameroon is dependent to a large extent on expatriate banks to provide its credit and banking services. There were 6 French, 2 British and a local Cameroon bank operating in Cameroon. With the exception of the British banks, the credit operations are largely dependent on the rediscount facilities offered by the Central Bank.

85. In addition to the commercial banks, there are three public credit institutions: the Banque Camerounaise de Developpement, the PJest Cameroun Development Agency, and the Caisse Centrale de Cooperation Economique, Paris. The commercial banks and the Development Bank are responsible for about 70% of total short term credits, the Caisse Centrale for about 60% of long and medium term credits, Cameroon Development Bank about 35% and the commercial banks the small residue of 5%. Most of the long term credits are financed by foreign funds.

86. The Caisse Centrale makes a valuable contribution to the economy by extending both long and short term loans to both the public and private sector and in addition to participation in its capital also provides a substantial part of the loan capital of the Development Bank. The volume of loans outstanding at the end of 1962 amounted to 18.7 billion francs CFA, public authorities accounting for 10.6 billion francs, public enterprises 5.2 and private enterprises 2.9. The WTest Cameroon Development Agency is - 22 -

financed almost entirely in the form of grants from either the West Cameroon Marketing Board or Government. The Agency appears to have dissipated almost half of its resources in schemes which are unlikely to make a net contribution to the economy.

87. The Banque Camerounaise de D6veloppement (BCD) is a national devel- oprnent bank in which the government holds 61% of the capital totaling one billion francs, Caisse Centrale 31% and the Banque Centrale 8%. Established in 1960 to take over the functions of the former Credit du Cameroun, it is charged with providing credit for the development of industry, agriculture, handicrafts, commerce, animal husbandry and fishing, the purchase of consumer goods, and the development and diversification of cooperation. It is also authorized to accept and utilize deposits, grants, and loans and to rediscount long and short term credits with the Central Bank.

88. The BCD is the principal agent of the government for industrialization and the provision of agricultural credit. The concentration of these two functions under one management does not appear to have worked satisfac- torily, while inclusion of responsibility for certain types of consumer credit detracts from the potential operating efficiency of the Bank and its creditworthiness to potential external lenders. Since the Bank will have to rely on attracting capital from external sources in quite substantial amounts these factors are likely to become increasingly important. The effect of the present trend toward further diversification of the Bank's responsibilities is reflected in a large increase in loans granted for real estate, with agriculture and handicraft industries falling in importance. There also appears to have been a very sharp rise in the volume of loans in default. Of the total of 2.2 billion Frs. CFA in loans outstanding at the 30th of June, 1962, 0.4 billion, or 20%, were in default and over 75% of these arose during the year 1961/62. Furthermore, real estate accounts for 47% of the total volume of loans defaulted and rural credit for about 37%.

89. The government exercises effective control of the Bank which may be too close to allow the BCD to operate on sound revenue-earning lines. Furthermore, it may also be unwise to concentrate such a wide field of financial responsibilities under the control of a single management.

B. The Budget

90. There are now three governments, each with its own operating budget and capital budget. Capital expenditures financed by external funds are not usually included in the normal budgetary system but are included under the Development Plan, 1961-65, and the capital budget covers at most 10% to 20% of investment in the public sector.

91. The budgets of the two State Governments are subject to approval by the Federal Government, and any deficit on current account, and the funds required to finance the equipment budget are dependent on appropri- ations by the Federal Government. The operating and equipment budgets of the Federal Government are balanced by current and capital subventions from FAC and using up the reserve funds available. - 23 -

92. Extra-budgetary accounts exist for the railways and ports which are subject to the approval of the Legislative Assembly. As part of the extra- ordinary effort made by the Ministry of Finance this year to provide for a balanced budget for 1963/64, tl-he allocation of revenue from taxes on petroleum and motor vehicle licences to a Road Fund, earmarked for the finance of maintenance Xworks and capital expenditures on roads and bridges, has been discontinued. This revenue will be credited to ordinary revenue in the future and the accumulated funds have been utilized in part to balance the current budget.

93. Certain operational expenditures of the services of the French Government in the Cameroon are met directly by the French Government. These represent for the most part the salaries of French technical assistance personnel who can be regarded for the most part as filling a gap in the Cameroon Civil Service. The amount must be of the order of one billion CFA francs. Other expenditures by France in the Cameroon are the cost of maintaining her defense and other military support facilities and pension payments to veterans of the French A-rmy.

94. The first federal budget - year 1962/63 - provided for an excess of expenditures over revenue of 1.8 billion CFA francs, which had to be covered by subventions from the French Government of 1.3 billion francs and a wiwithdrawal from reserve funds for the balance. The federal budget 1963/64, submitted for approval of the Federal Assembly in May 1963, provides for ordinary receipts to be balanced by ordinary expenditures without external assistance at a level of 22.3 billion CFA francs. The capital budget expenditures continue to require a substantial contribution from the French Government of 1 billion francs CFA, the remaining 900 million CFA francs required for equipment expenditure being financed from drawrings on Cameroon Government reserve funds. The French Government subvention is, however, scheduled to disappear in the budget for 1965/66, falling by 50% for 1964/65.

95. The current budget, 1963/64, for the East Cameroon is 6.7 billion, the 7w'est Cameroon 1.9 billion and for the Federal Government 13.7 billion. 96. On the revenue side, a series of rises in taxes have raised receipts from a total of 11.9 billion francs in 1960/61 to around 22.3 billion fore- cast for 1963/64. This probably represents about 18% of GDP or 30% of money GDP. The Government has continued to rely heavily on indirect taxes, which in l963/64 will account for 60% of total revenue. This share has remained substantially unchanged since 1956. This tax record must be regarded as a notable one. The rise in indirect taxes may cause an increase in consumer prices of as much as 10% in the course of the year alone. There is considerable doubt, however, that current revenues can in fact be raised to the budgeted level in spite of the rise in tax rates - the economy is not that buoyant and the rates may be becoming contra-productive. It is quite likely that a subsidy for the current budget will continue necessary.

97. Expenditures have increased since 1957 at an average rate of 20% per annum. In 1958 the civil disturbances commenced and the budget for 1959 was affected by the need to increase allocations to the armed forces. Expenditure on these, 323 million francs in 1957, increased to 3.5 billion francs in 1961/ 1962 at which figure it appears to have stabilized. The cost of the other - 24 -

services also went up quite rapidly and now include a partial contribution to the local costs of the French Government technical assistance personnel formerly maintained and paid for entirely out of French Government funds. The contribution provided for in 1963/64 amounts to 360 million francs CFA out of an estimated figure of total costs of over 1 billion francs.

98. Part of the reasons for the increase in costs was the establishment, at the time of independence, of a third,federal,governmnent without any apparent reduction in the costs of the federated governments. This inherently expensive development also increased seriously the demand for qualified government personnel at a time when these were already in very short supply, following the departure of non-Africans, and the Civil Service has had to make do with an abnormally high number of inexperienced officials. Because of this and other demands on the small number of qualified staff of the right caliber, the machinery of government has been stretched to its limit and in many fields, when it has not ceased to function, it has become seriously inefficient and expensive.

99. Despite the high cost of existing services the Government will have to give urgent consideration to the need to expand the essential services on which the successful execution of its development program will largely depend and, in particular, the services for agriculture, public works and education. To do this will require the most rigorous reappraisal of, and economies in existing services of a non-productive nature and a marked increase in the efficiency of civil servants promoted under the policy of Cameroonization. Without the measures necessary to achieve this it is difficult to see h&i the Government can hope to achieve and maintain a balanced budget and an increased development progrzm. A beginning on this was made in 1961 with the withdrawal of rent-free housing and free transport for senior officials, Deputies and Ninisters whilst wages and salaries have been kept unchanged despite some pressure for increases. There is, however, room for further economies of this nature.

C. Development Planning

100. The main sources of public investment in Cameroon during the period 1950 to date have been French public funds supplemented by capital expenditure financed from extra-budgetary funds of the Cameroon Government. The investment totalled approximately 100 billion francs CFA, over two-thirds of which was financed by French public and semi-public funds, about 10% by extra-budgetary funds, and the balance of about 2 billion francs per year by foreign capital in the private sector.

101. The First Development Plan, 1961-65, of the independent Republic, was compiled by a team of French experts organized under the direction and responsibility of the Minister of Finance. The various commissions brought into the planning forum representatives of all the administrative services affected of agriculture, industry, commerce and banking, and also those of the trade unions and employers organizations.

102. The objectives of the Plan are to provide the basis for and form part of a general program of development aimed at doubling the national income in the next twenty years, 1960-1980. This target requires an average annual increase of 4-1/2% in GDP. In fact, the annual rate of growth in real GDP in the period 1951-1959 was probably about 4%.The Plan's target of an annual increase - 25 -

of 3h%in GDP in the period 1961-1965 is somewhiat more ambitious than it appears since by 1961 the rate of growth in export earnings had already started to decline and the level of planned investment per year was unlikely to be any higher than in the past. Actual investment has been well below the average over the past 10 years. The Plan provides for a total expenditure of 53 billion francs CFA over five years, or an annual rate of just over 10 billion francs per year, which is only slightly higher than the average of the earlier period. The Plan allocates 47% of total expendilture to infrastructure, (in wnhich the railway extensions figure most prominently) 20L to agriculture, 115 to other production, 17% to social investment, and some 5 to preliminary and feasibility studies.

103. A 'ieakness of the Plan appears to be the omission of any of the detailed studies necessary to associate any of the projects with a specific contribution to an increase in production. TJith the exception of the brief statement of the global objective, no details are given in the Plan document of the macro-economic framew,ork within which the Plan wsas drawn up. There is no attempt to distinguish between investment in the public and private sectors or to indicate systematically the size and nature of financial assistance to be provided by government to the private sector. No hint is given of the likely impact of individual projects or of a sector plan on the volume of output, employment and productivity of the sector, and no assistance is given in evaluating the contribution of the program to economic development. There is, furthermore, no summary of the physical resources and manpower required for the Plan's implementation. This leaves the impression of a cata- logue of potential projects with varying degrees of inter-relationship but with little or no association between the timing of proposals in different sectors or from year to year. Agricultural development is the key to the successful achievement of the global objective of the Plan and to the general principles underlying this, but the Plan provides for investment in agriculture some 2 billion francs per year, over half of which is represented by private investment of farmers and the other half covers government expenditure on extension services, training and preliminary studies. It is already clear that the first is unrealistic and the latter inadequate.

10. In terms of finance, Cameroon may be able to find most of the external funds required for investment in the public sector. External aid commitments, over what was obviously a period of transition and readjustment, from 1959-1962, amounted to more than 20 billion francs CFA, or an annual average commitment of over 5 billion francs. It seems probable that total aid from FAC, FED and AID may be expected to average some 5 billion francs per year for the remainder of the Plan period. Cameroon is also in a position to borrowT from the Clisse Centrale for approved investments in enterprises of a more remunerative nature. The contribution to investment from domestic saving remains a question mark; enterprises and households and the government would have to contribute an average of from 4 to 5 billion francs per year, to complete the financial resources required for the Plan. Part of this would take the form of autonomous investment, given a suitable political and economic climate but the remainder wTould depend on the introduction of new methods for mobilizing savings. - 26 -

105. The Department of the Plan, under the Ministry of Finance, appears to be seriously understaffed and lacking in the technical resources required to supervise the execution of the Plan, to collate information on projects under preparation in various Ministries, to coordinate proposals and determine priorities, and even to exercise any financial control or maintain an up-to-date progress report on the Plan. The division of responsibility for economic policy formulation and economic planning between the Ministry of National Economy and the M1inistry of Finance does not facilitate decision making, coordination and effective action, nor the objective evaluation of the progress of the Plan. Added to this is an extreme shortage of expert technicians and advisers on whom the preparation of the present Plan obviously depended very heavily.

106. There is an urgent need for strengthening the staff of the central planning secretariat and the staff of those MInistries and government agen- cies concerned with project preparation and evaluation, and their subsequent execution or supervision. A strong agricultural service, public works organization and educational planning unit are particularly important in this respect. These are the key departments for preparing and implementing development projects and without adequate advice based on the departments' own direct experience there is likely to be a growing under-utilization of available funds. Of all these, the agricultural service and decisions on agricultural policy should have top priority since the economy essential'ly depends on what the farmers can produce and sell. - 27 -

V. ECONOI{tC PROSPECTS

107. Of the uncertainties that beset any economic appraisal of the Cameroon, the most important are those connected with the expansion of agricultural export earnings, the confidence of non-African enterprise in the preservation of political stability and a satisfactory business environment, the efficiency of government services and the rate of integration of the two federated states.

108. Despite the relative range and diversity of its agricultural export products, these are still few in number. For some of them, coffee, cotton, bananas, palm oil and groundnuts, the Cameroon has enjoyed, on its exports to France, a substantial premium above world market prices, estimated at some 2 billion francs CFA in 1961, while the West Cameroon has lost its Z7.10 sh. per ton preference on its main export, bananas, to the United Kingdom as of October 1, 1963. However, under the terms of the new Convention between EEC and the associated countries, Cameroon must expect to lose the benefits resulting from the system of quantitative restrictions and support prices prevailing in the French market. It can of course expect to benefit from entry into the larger market represented by EEC and the protection afforded by the application of EEC's common external tariff to imports from other competing primary producing countries not associated with EEC. These benefits are, nevertheless, likely to be seriously limited in the case of cocoa and bananas which are generally not of top quality. (Owing to the objections of Germany and Italy to the duty free entry of bananas from the associated countries, the application of the free trade area provisions to bananas has been suspended indefinitely.)

109. In recent years the world market prices of all these commodities have fluctuated considerably and it is impossible to foresee any increases; for most products, some decline seems to be inevitable. In the case of the two principal export commodities, coffee and cocoa, there may well be production or export limitations. Given the local conditions of production and the prospects of the world market, considered commodity by commodity, it seems unlikely that the Cameroon can increase its export receipts by much more than 2% per annum over the next five years, without a radical change in priorities and government initiative. A change of this nature will depend on the government's early acceptance of the over-riding importance of a rapid expansion of production for export, of the energetic pursuit of possible measures to achieve such an expansion, and of the need to distinguish between the pattern of long term agricultural development and the more urgent short term requirement of increasing export earnings and government revenue.

110. About the only immediate possibility open to the government of increasing production for export is to attempt to increase productivity and cash returns from such staple products as cocoa, coffee, bananas and palm products as well as rubber and cotton, despite their market limitations. The study and implementation of measures designed to increase yields and improve collection and evacuation, improve competitiveness in world markets, strengthen connections with existing markets and develon new ones, merits the highest priority in terms of effort and - 28 - financial resources. The Cameroon cannot afford to remain dependent on most of its existing export products for its long term development and prosperity but the rapid introduction of the necessary measures, in cooperation with private enterprise, might be expected to open up the possibility of again reaching an annual rate of increase in export earnings of as much as 3 to h% which would carry the economy through the period of adjustment to a more permanent and a more appropriate pattern of agricultural production. The authorities in the Cameroon, however, appear to have been rather slow in taking the initiative to promote a programme of short term re-adjustment.

111. The contribution of other sectors to growth is likely to be relatively unimportant. It may be assumed that the output of subsistence crops will, as in the past, expand a little more rapidly than population, or slightly more than 2% per annum. There are long term possibilities for the development of large scale ranching and a potential export trade; timber exports on the other hand offer prospects for continuing expansion at a rate of about 5% per annum. The latter is likely to depend, however, on government regulation of the industry, a substantial improvement of road and rail links from the forest areas to the ports, and the active participation of foreign private enterprise. 112. The scope for increased manufactures is essentially limited to the production of selected import substitutes. However rapid the increase in output of manufactures may be, its small size means that its absolute contribution to overall growth is likely to be restricted for many years. There is scope for development of a wide variety of light manufactures to meet local demand and to replace imports as well as to carry agricultural processing to more advanced stages. But, very little is likely to be achieved within the next five years in the absence of the most determined efforts to reassure private enterprise that overseas investments can enjoy a remunerative return in a favorable business environment. The harmonization of industrial development with neighboring countries also offers some possibility for developing a small number of large scale industries dependent on larger markets than the Cameroon or its neighbors can supply individually. But these possibilities are likely to depend on a more highly developed transport network than can be achieved in the immediate future.

113. With a population increasing at 1% to 1-1/2% per annum, an estimated annual increase in export earnings of some 2% per annum and generally unfavorable terms of trade, it is unlikely that the real increase in gross domestic production can exceed 2% per annum. Even this low rate assumes a favorable political conjuncture, continued internal stability combined with closer integration of all regions and the re- tention of external confidence and that of non-African enterprises already operating in the Cameroon. This is likely to have an important influence on the volume of external financial resources made available to the Cameroon. - 29 -

114. The confidence of non-African enterprise in Cameroon and foreign governments and investors generally is likely to depend on the government's clear understanding of its own role and its ability to carry out the responsibilities it takes to itself. There has been a tendency for the government to play an increasing role in the economy through government regulations and controls and in expanding government participation in the productive sectors. However, a centralized economy with significant public participation requires well-staffed government services of high caliber if it is not to act as a serious obstacle to the conduct of ordinary, everyday business activities or to discourage private investment and inhibit new initiative. The government service in Cameroon is still embryonic and a significant number of gaps exist in its structure. With few exceptions, Ninistries and Departments are not adequately staffed, and little resources are available for the study and investigation of the more long term requirements of the economy, or to coordinate the services and powers at the disposal of the government. In its efforts to mobilize the potential assets of the economy, therefore, it is important that the government appreciate the true limitations of the human resources at its disposal.

115. Many of the existing gaps in the public service arise from the premature departure of expatriate civil servants. The successful achievement of the targets for development would appear to be dependent on the earliest possible recruitment of the trained technical and professional personnel required. In the field of planning, for instance, there is already a recognizable shortage of technical expertise to carry approved projects through the various stages of planning and implementation. There is also a growing shortage of projects for which the preliminary investigations and feasibility studies have been completed or are in progress.

116. The need for non-Africans to undertake some of the executive burden of government activities is likely to remain in some degree for at least another decade. The progress of the economy depends much on the success achieved by the government in administering an efficient government service, and without a substantial increase in the number of effective civil servants as well as in the number of technical advisers, the machinery of government is likely to slow down even further.

117. It is important that the Government should decide as speedily as possible on the extent to which it will be possible to achieve savings by integrating the federal and federated government services into a single unitary service. At the same time a survey of the manpower requirements of a new civil service should be carried out in conjunction with a survey of the existing human resources available. The enquiry might also consider such points as the extent of government participation in enterprises and government activities in the private sector with a view to enabling the government to lay down more clearly the broad lines of its future policy in these fields. The government should bear in mind that with proper encouragement it should be possible to interest foreign private enterprise in largerscale, agricultural development, development of the meat industry, timber extraction and establishment of small scale industries. This would save the government's tying up limited financial resources in these sectors. - 30 -

118. In view of the reservations about the buoyancy of government revenue in 1963-1964 and the rather discouraging export prospects, it would be advisable for the Government to think more in terms of increase in revenue at a rate of the order of three quarters of a billion francs per year for the next 3 or 4 years and to plan its current expenditure accordingly. This would naturally have repercussions on the Government's choice of policy in the sectors outlined above. Furthermore, in view of the limited possibilities for the development of a capital market, and the probable limits to private investnent, it would be advisable for the government to plan for a current surplus sufficiently large to provide a reasonable volume of domestic savings for economic development.

119. In view of the serious economic problems arising from the existence of two federated states separated by a customs barrier with different income-cost structures and burdened with a costly form of federal government, the study and introduction of measures to secure the integration of the two economies should receive high priority. This is not at present the case. Many of the problems are difficult, but some, such as:

- the method and timing of the removal of the existing customs barriers and the measures necessary to re- establish a normal market equilibrium between the income-cost structures of the two economies without further dislocation and hardship;

- the future functions and responsibilities of the Cameroon Development Corporation, including its method of organization, management and ownership, would be suitable for reference to small teams of independent expert advisers selected from Cameroon and from abroad. These are all problems wihich impede integration and future policy-making and from which the Cameroon Government could usefully benefit from impartial advice. More immediately, greater priority could be given to the improvement of communications between the two states and particularly between the Federal and State governments.

120. The prospects for the economy for the immediate future are uncertain since they depend on the wfillingness of the government to re-examine its economic policy, and on the speed with which it can determine and implement the immediate measures necessary, particularly in the key agriculture sector, to maintain progress for the next 3-5 years of readjustment. In the public sector, the government must seek, not merely the initial objective of balancing the budget but also to re-shape its financial policies and to ensure that through the size of its current surplus a substantial contribution can be made, in due course, from domestic savings to the financing of economic development. This, in turn, would depend on improvements in taxation and methods of collection, introduction of strict measures of economy in current expenditure, and recognition that the role the government can play in controlling the economy and in the degree of participation in the productive sectors will have to be strictly limited, not only by the financial resources available, but also the human resources. The establishment of an efficient government service is, however, likely to depend also in the short run, on a much less restrictive policy in the recruitment of - 31 - non-Africans, and even more so if the targets for develoDment are to be brought within reach within the foreseeable future. Acceptance of the need for such measures to ensure the maximum utilization of available resources, and acceptance of a policy of forbearance on the part of the government, is essential to the gradual establishment of a period of continued expansion and balanced growth, accompanied by a steady improvement in living standards. Bven after the acceptance and successful application of these measures, improvement is unlikely to be very rapid or spectacular in a country with such limited resources, and in the absence of any significant improvement in primary commodity prices on the world market.

Capacity to Carry Debt

121. The uncertainties affecting Cameroon's future are many. On the other hand Cameroon has gone through its initial independence period evidencing a substantial degree of political maturity. There seems to be willingness to consider reasonable policies and to make a strong development effort. Cameroon is well endowed in its infrastructure apart from certain deficiencies in roads and education.

122. At the end of June 1963 the public debt of Cameroon was estimated to amount to 11.1 billion francs CFA ($44 million). All of this debt is external, 10.9 billion francs CFA due to France and 0.2 billion francs CFA to the United Kingdom. The great majority of it bears interest at 1% or in the case of some commercial and industrial loans at rates as low as 3-3 1/2%. In 1963/64 the debt service payable abroad is estimated to amount to some 500 million francs CFA or 0.4% of gross domestic product or barely 2% of export earnings. Over the next few years the Cameroon can hope for a large volume of aid in the form mainly of grants, or loans bearing low or nominal rates of interest, which should not add significantly to the existing level of debt service charges.

123. On the other hand, in the field of export earnings East Cameroon will have a difficult adjustment to make to lower prices for her goods in the French market, and West Cameroon for the loss of the Commonwealth preference in the U.K. market, whilst the prospect for Cameroon exports in general are such that an unfavourable balance of trade may well develop in the course of the next three or four years. Furthermore, the normal increases in current expenditure arising from development investment are likely to out pace the possible increases in tax yields, even combined with decreases in less essential expenditures, and it is difficult to foresee the possibility of a balanced budget being achieved. Unfortunately also, much of what is needed to accelerate economic development -expanding essential services in agriculture, public works, education- would require further increases in current expenditures.

124. To conclude: the main need of Cameroon is for technical assistance and further financial assistance closely associated with the priority sectors (agriculture, roads, education) which will help to assure not only that they secure priority in investment but that the necessary support in the form of government policies and current expenditures will be provided. The present external debt charges are not large, about 2% of export earnings. However, in the light of the uncertain export prospects, the problems of the current - 32 - budget and the major adjustments facing the economy, any substantial increase in external debt on conventional terms would not appear to be wise in the near future. At the same time, while Cameroon would appear to qualify for aid on non-conventional terms on the basis of poverty and of perfornance so far, the potential for improved development policies is sufficiently great to warrant the conclusion that any such aid sliould be closely geared to further improvements in such policies.