R EST R I CTE D FILECOPY ReportNo. AF-67a Public Disclosure Authorized Thisreport was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracyor completeness.The report may not be published nor may it be quoted as representing their views. INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT INTERNATIONALDEVELOPMENT ASSOCIATION Public Disclosure Authorized THE ECONOMY OF GABON Public Disclosure Authorized May 15, 1968 Public Disclosure Authorized Africa Department CURRENCY EQUIVALENTS $ U.S. 1 = CFAF 247 CFAF 1= U. S. cents 0.4 $ U. S. 1 million = CFAF 247 million CFAF 1 billion = $ U.S. $,048,580 This report is based on the findings of a miission to Gabon (May-June 1967) consisting of Nessrs. de lelde, Van Nimmenand Amselle. TABLE OF CONTENTS Page No. BASIC DATA .......................................... SUMMARY AND CONCLUSICNS........ *......................... i - iii I. GRIERAL BACKGROUND 1 II. ECONOMIC SITUATION 6 Economic Growth and Structure .... 6 Foreign Trade and Balance of Payments 8 Pu.blicFinance 1i Money and Banking 16 Prices and Wages ....... ...... .... 19 III. ECONOMIC PROSPECTS ...................... 21 A. Overall Plan Targets ...... 21 B. Production . ............. 23 Forestry ... 24r Mining.... .26 Manufacturing 28 C. Infrastructure ...... ....... 29 Transportation........................... 2(9 Telecommuications . ......4............ 30 ElectricPower .................... 30 Education * ********** 31 D. The Overall Outlook.......................... ** 31 Output ..................... ..... ...... ... 31 Exports and Imports ............. .. *., 33 InvestmentMagnitudes and Feasibility ..... 33 Financing of the Public Sector ..... ***.... 36 Foreign Debt .*.....*****.... **'.*....*.. 38 - ii - APPENDICES A. Agriculture, Livestock and Fishing B. Forestry C. Mining D. Manufacturing E. Transportation F. Statistical Appendix MAPS GABON BASIC DATAl Area : 267,000 square kilormeters Population : 468,oooin 1966 of wbich 8,000 non-Africans Rate of growth : 0.6% per a num Density : 1.8 per km Political Status : Independentsince August, 1960. Monetary or Customs Area Membership Joint Central Bank for Equatorial Africa and Cameroon (BCEAEC) Central African Customs and Economi.cUnion (UDEAC) Joint African and Malagasy Organi.zation(OCAM) Associatemenber EEC Gross DobnesticProduct : 55.3 billion CFAF in 1966 Rate of growth (1960-66) : 9.7% at current market prices (in real terxns,1960-66) : 4.3% Per capita GDP : U.S.$ 479 in 1966 U.S.$ 440 in 1965 Percentageof GDP at Factor Cost 1966 1963 Mines 18.1% 14.3% Agriculture :14.1% 17.7% Commierce 10.0% 11.3% Transport 9.7% 7.9% Forestry : 8.8% 12.2% Construction : 8.8% 5.8 Manufacturingand energy 5.9% 6.251 Average Percentage of GDP at YiarketPrices 1965 1960-55 Total consumption(private and public) 67% 61% Gross investment (private and public) : 24% 32% Gross domestic savings 33% 39% Exports 52% 13% Imports :43% 36% External balance on goods and services (resourcesurplus) 9% 7% Investment income payrent and private transfer abroad 18% n.a. Government tax revenue : 21% 18% BASIC DATA: Page 2 Annual Average Money, Credit and Prices Dec. 31, 1966 Rate of Change 1960-66 Money supply (billionCFAF) 8.6 + 7.6% Time deposits (billion CFAF) : 0.6 +38.0% Commercial bank credit to private sector (billion CFAF) : 8.7 +20.0% Cost of living index (1960 = 100): 136.9 + 5.14% Public Sector (in billion OFAF) Total governmentrevenue (Prel.) : 13.3 +19.4% Government current expenditures : 10.9 +17.8% Surplus 2.4 +30.0% Government development expenditures 1.9 +24.0% Net public borrowings - 0.2 1967 million External Public Debt (in billion CFF) U.S.$ Debt outstanding December 31, 1967 : 18.5 75.0 Total annual debt service : 2.1 8.3 Debt service ratio : 7.0% of projected 1968 exports 1966 Average Annual Change Balance of Payments (in billion CFAF) 1964-66 Total exports : 26.6 + 7.8% Total imports 18.6 +10.2% Net invisibles : - .8 + 2.7% Net current accountbalance : + 2.2 * 2.4% Commodity Concentration of Exports 1966 Average (1960-66) Wood products : 38.9% 51.6% of which: Okoume logs 25.6% 34.9% Plywood and veneer : 8.2% 10.7% Manganese 34.1% 19.8% Uranium 8.1% 8.6% Crude oil : 14.9% 15.2% Gross Foreign Exchange Reserves 1966 1960 U.S,$mmillion at end of year 10.8 9.5 BiiSIC D`T, : Page 3 IMF Position (U.S.$ millions) 1966 1963 Quota 8.0 7.5 frawings - - Gold tranche .78 6 SUMEARYAND CONCLUSIONS 1. Gabon is a relatively large equatorial country, covering 267,000 square kilometers, but with a very small population amounting to hardly half a million people. This makes it one of the least densely pepulated ceuntriesin Africa. Seventy-fivepercent of the country's area is coveredwith dense tropical rain forests,which are only partly penetrated by means of navigablewaterways and a thinly spread network of roads. The climate is generally hot and humid. The population growth rate is still very low. 2. Gabon became independentin August 1960. It originallyhad two principal political parties, the Bloc D&mocratiqueGabonais which was the ruling party, and the Union Démocratiqueet Sociale Gabonaise (UDSG),wJhich led the opposition. After an unsuccessfulcoup d'état by the oppositionin 196h, the leader of the UDSG was imprisoned and the party dissolved. Although the country has since remained a one- party state, the governing party has made progress in reconciling the oppositionand has apparentlylaid the foundationfor greater political stability. 3. The economy is based primarily on the extraction of timber and minerals. Agricultureis little developed, largely owing to gener- ally poor soils, transport difficultiesand the availabilityof other opportunitiesto earn money incomes. Agriculture,cattle raising and fishing only account for 15 percent of Gabonts GDP even though well over 70 percent of the active population are nominally engaged in agri- culture,primarily on a subsistencebasis. In terms of foreign exchange earnings the contribution of agriculture is even smaller. Coffee (Robusta$ and cocoa, the two major agricultural exptrt items, accounted jointly for only h percent of export receipts in 1960, and still less - 1.5 percent - in 1965. h. The market economy has the characteristic features of an economic enclave, largely doninated by foreign enterprisewhich to- gether with government gives rise to vîrtually aIl of the employment. Foreign private investment and enterprisehave taken the lead in de- velping lumbering,mining, building and trade. In 1962 these four sectors together directly accountedfor over 45 percent of GDP and 69 percent of the wages paid out to Africans,and they contributed more than 40 percent of the government1s ordinary revenues. 5. In the current decade there has been a gradual shift in the relative impçrtance of timber and mineral products. During the tfifties, timber and timber products provided over 70 percent of Gabonts export earnings. Under the impact of a gradual depletion of the coastal forest zone, increased extraction of uranium, the development of manganese output and a significant expansion of petroleum production, the relative contribution of timber products to foreign exchange has nov fallen to less than h0 percent. In the light of the important oil discoveries which have been made in the last couple of years, it may be expected that petroleum production will continue to grow from 1.45 million tons in 1966 to a level of around 4 million tons by 1968-1970. Important and rich iron ore reserves still await exploitation. - ii - 6. The exploitation of Gabonls natural wealth has enabled the country to reach a high level of gross output per capita, equivalent in 1966 to about $480. However, a large part of the income generated by this output is transferred abroad in the form of returns on foreign investment and remittances by the considerable number of foreigners living in the country. In 1966 transfers of investment inc.ome and indi- vidual earnings were probably more than CFA? 10 billion as compared with a GDP of around CFA? 55 billion and commodity exports of CFAF 26 billion. 7. Until recent years the rapid development of the country's natural wealth has made for a very impressive rate of growth. Although estimates in real terms are difficult to make, it is probable that the economy expanded at a rate of areund 15 percent in the period 1956 to 1960. In the period 1960-1966 this rate probably dropped to around five percent per annum; and in the last few years it has probably been well below this level because the output of timber, manganese and uranium has risen but slowly. The level of investment, high throughout the whole period, has also apparentlyfallen off in the last few years, though in 1966 it was still estimated at about a quarter of GDP. Private investment has been dominant, though public investment,largely in infra- structure,has risen sharply since 1961. 8. The country is now attempting to carry out a developmentplan extendingover the years 1966 to 1970 inclusive. This envisagesa total investment of CFA? 90.3 billion offwhich 54.1 billion would be in the private sector and 36.2 billion in the public sector. A rough analysis made by the MLssion indicates that actual investmentwill probably only be a little over CFAF 66 billion of which nearly CFAF 39 billion is likely to be private. Most of the anticipatedshortfall is occasioned by the probable failure to realize a large pulp project which would entail a large amount of private and also related public investment. 9. The public investmentprogram appears on the whole to be well conceived. Ivostof it is ftcused on transport and communications which are of key importance to the country. A small but essential part is devoted to education, a field in which great progress has been made in the past but where improvements and expansion are still neces- sary, particularly with respect to teacher training, secondary schools and vocational training centers. 10. With the continuedhelp of foreign grants and loans which have been availableon a rather generous scale in the past,Gabon should be able to finance its developmentprogram.