Sustaining Reforms for Inclusive Growth Public Disclosure Authorized in Cameroon A Development Policy Review Public Disclosure Authorized Public Disclosure Authorized Florence Charlier and Charles N’Cho-Oguie Public Disclosure Authorized Sustaining Reforms for Inclusive Growth in Cameroon Sustaining Reforms for Inclusive Growth in Cameroon A Development Policy Review Florence Charlier and Charles N’Cho-Oguie Authors With Armand Atomate, Mohammed Bekhechi, Yann Burtin, Ananda Covindassami, Alain Ebobissie, Mourad Ezzine, Isabelle Huynh, Jean-François Marteau, Eleodoro Mayorga, Carole Megevand, Pierre Pozzo di Borgo, Chantal Reliquet, Miriam Schneidman, David Tchuinou, Giuseppe Topa, Richard Verspyck, and Ali Zafar © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: [email protected] All rights reserved 1 2 3 4 12 11 10 09 This volume is a product of the staff of the International Bank for Reconstruction and Develop- ment / The World Bank. 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Title: New resolve to sustain reforms for inclusive growth. HC995.R468 2008 338.96711’07—dc22 2007044812 Cover painting: “A Quand mon Pays?” by Guy Wouete, Cameroon. Cover design: Naylor Design. Contents Acknowledgments xi Abbreviations xiii Executive Summary xvii Introduction 1 Part I: Growth and Poverty 5 1 Growth Performance: A Historical Overview 9 2 Poverty and Social Development: A Long-Term Assessment 33 Part II: Creating a Competitive Environment for Deepening Growth 51 3 Strengthening Macroeconomic Policies and Public Finance Management 57 4 Deepening Trade and Financial Policies within the Regional Framework 113 5 Improving Infrastructure Services 139 Part III: Strengthening the Social Sector and Enhancing Inclusiveness 165 6 Investing in People 167 7 Strengthening Sector Policies through an Integrated Approach 185 v vi Contents Part IV: Improving Governance and Supportive Institutions 209 8 Promoting an Effective and Participatory Decision-Making Process 215 9 Strengthening the Judicial System 227 Part V: Medium-Term Prospects for Growth and Poverty Reduction 231 10 Medium-Term Prospects for Growth and Poverty Reduction 233 Bibliography 247 Index 253 Boxes 1.1 Was Dutch Disease in Cameroon Inevitable? 15 1.2 Sources of Growth: What Are the Contributions of Factors and Productivity? 25 II.1 2006 Investment Climate Assessment 52 II.2 2006 Investment Climate Profi le 53 3.1 The Costs of Untimely Relaxation of Structural Reform: How Cameroon Missed the HIPC Completion Point 58 3.2 Are Forest Tax Revenues Benefi tting Local Communities? 65 3.3 A New Income Tax that Favors Poor Wage Earners 69 3.4 Progress in Public Finance Management since the HIPC Decision Point 73 3.5 Budget Tracking Survey in the Health Sector 79 3.6 The Expenditure Chain 84 3.7 Key Features of Cameroon’s Petroleum Sector 95 3.8 Cameroon’s HIPC Completion Point and Multilateral Debt Relief Initiative 104 3.9 Using the Subregional Bond Market to Finance Budget Defi cits 107 4.1 Cameroon’s National Competitiveness 114 4.2 Creating a Business-Friendly Environment: Lessons from India 116 4.3 Cameroon’s Incomplete Trade Liberalization Agenda 119 4.4 Successfully Restructuring the Banking and Insurance Sectors 122 4.5 Restructuring the Financial Services Provided by the Postal Service 128 Contents vii 5.1 Cameroon’s Electric Power Sector at a Glance 142 5.2 Cameroon’s Lom Pangar Dam Project 145 5.3 Priority Programs in the Road Sector 150 5.4 Cameroon’s Road Fund 151 5.5 Performance-Based Maintenance and Management of Roads 152 5.6 The Yamoussoukro Declaration 154 5.7 Using Smart Subsidies to Deliver ICT Services in Remote Areas 163 6.1 Progress in Outreach Activities for Core Health Interventions 178 7.1 Liberalizing the Cocoa Market in Cameroon, Côte d’Ivoire, and Nigeria 190 7.2 Improving the Forestry Sector with an Ambitious Reform Program 197 7.3 Awaiting Implementation of Environmental Laws 205 8.1 Making, Managing, and Implementing Good Policies 219 8.2 What Makes an Information Strategy Successful? 223 8.3 Increasing Accountability through Participatory Activities: Lessons from Brazil, India, and South Africa 224 8.4 The Community Development Program 225 9.1 How Does Corruption Affect Growth and Foreign Investment? 227 9.2 Strengthening the Judicial System 229 10.1 Cameroon’s Macroeconometric Model 233 10.2 Cameroon’s Macro-Micro Simulation Model 241 10.3 Assessing the Impact of Short- and Long-Run Shocks to Income Distribution and GDP Growth Using the 123PRSP Model 243 Figures 1.1 Ratio of per Capita GDP in Cameroon to per Capita GDP in Selected Other Countries, 1970–2004 9 1.2 Annual GDP and Nonoil-Related Growth, 1970–2005 18 1.3 Annual Change in Oil Revenues, 1970–2005 19 1.4 Evolution of the Structure of the Economy, 1990–2005 21 1.5 The Structure of the Economy, by Sector 23 1.6 Share of Transport in Total Expenditures by Wholesalers, by Product 32 2.1 Child Immunization Rates in Cameroon, 1991–2004 43 2.2 Incidence of Stunting, Wasting, and Underweight in Cameroon, 1991–2004 44 2.3 Use of Maternal and Child Health Services, by Income Quintile, 2004 45 3.1 Composite ICRG Risk Ratings in Selected Countries, 1990–2006 58 viii Contents 3.2 Total Government Revenue, Oil Revenue, and Nonoil Revenue, 1999–2005 62 3.3 Sources of Nonoil Government Revenue, 2005 64 3.4 Composition of Forestry Tax Revenue, 1991 and 2003 64 3.5 External Debt, 1999–2006 103 6.1 Average Years of Education in Selected Countries, 2005 168 6.2 Relation between Number of Students and Number of Teachers in Public Primary Schools, 2002/03 174 6.3 Relation between Unit Cost of Primary Education and Primary School Pass Rate, 2002/03 175 6.4 Distribution of Public Funds for Health Service Delivery, by Region, 1997/98 and 2000/01 180 7.1 Production, Wholesale, and Retail Price of Crops in Yaoundé and Douala 189 7.2 Forestry Sector: Areas under Management Plans 199 IV.1 Governance Indicators, 1996 and 2005 211 IV.2 Governance Performance in Cameroon Relative to Other Low-Income Countries and Countries in Sub-Saharan Africa, 2005 212 IV.3 Governance Indicators in Selected Countries, 2005 213 10.1 The Medium-Term Expenditure Framework: Sector Budget Shares, 2001–15 239 10.2 Energy Scenario, 2000–15 244 10.3 Public Financial Management Scenario, 2000–15 245 Tables 1.1 Ratio of per Capita GDP in Cameroon to per Capita GDP in Selected Countries, 1970–2004 10 1.2 Average Annual GDP Growth and Manufacturing Share of Output in Selected Countries, 1960–2005 11 1.3 Macroeconomic Performance in Cameroon, 1970–2005 12 1.4 Annual GDP Growth and Sectoral Contributions to Growth, 1970–2005 22 1.5 Investment and Capital Effi ciency in Selected Countries, 1978–2004 27 1.6 Average Annual GDP Growth, per Capita GDP, Foreign Direct Investment, and Aggregate Domestic Savings in Selected Countries, 1975–2004 27 1.7 Cost of Doing Business in Selected Countries 29 1.8 Domestic Resource Cost of Various Crops 30 1.9 Marketing Costs of Plantains, Corn, and Potatoes 30 Contents ix 1.10 Indicators of Competitiveness in Industry 31 2.1 Decomposition of the Change in Poverty Incidence: Growth and Redistribution Effects, 1996 and 2001 34 2.2 Depth of Poverty, 1996 and 2001 34 2.3 Incidence of Poverty, by Occupation of Household Head, 2001 35 2.4 Incidence of Poverty, by Gender and Education of Household Head, 1996 and 2001 35 2.5 Incidence of Poverty, by Region, 1996 and 2001 36 2.6 Gross Enrollment Rate, by Level of Education, 1990–2003 38 2.7 Primary School Repetition, Completion, and Gross Enrollment Rates in Selected Countries, 1990 and 2005 39 2.8 Net Primary Enrollment Rates and Total Public and Private Education