Working to diversify political and trade relationships

After decades of building and reinforcing strong economic and diplomatic ties with Europe, Gabon has been looking to diversify its foreign relationships. By seeking new trade partners, the country intends to leverage its stability and economic growth to support a larger regional role.

Bilateral relations with France are among the strongest of Gabon’s diplomatic ties, although they have been subject to ups and downs in recent years. Nonetheless, the two countries have exchanged frequent state visits, and over 120 French businesses are active in Gabon, with their production accounting for about half of Gabon’s exported goods. According to the UN Conference on Trade and Development (UNCTAD), France is the primary supplier of goods to Gabon, while Gabon is the second-largest recipient of French foreign direct investment on the continent. Ties between the two countries extend to military relations as well. For example, in early 2014, French defence minister Jean-Yves Le Drian outlined a new strategic military approach indicating that Libreville would become the largest of France’s three permanent forward operating bases in Africa, with roughly 1000 troops.

Development Partners

Unsurprisingly given its ties to France, Gabon also maintains solid economic and political relations with the EU. For instance, the EU’s 2008-13 cooperation strategy injected some €49m into education and professional training programmes and governance reform, focused on key sectors such as transport, mining and natural resources. The 2014-19 strategy is similarly expected to focus on issues such as specialised professional training, mining governance, environmental protection and regional economic integration. As a member of the Central African Bloc, Gabon has also been working to negotiate an EU Economic Partnership Agreement (Accord de Partenariat Économique, APE), which would significantly expand its export markets by reducing tariffs and improving market access.

At the same time, Gabon is working to diversify away from traditional development partners. Firms from South Korea (KT Networks, Samsung) and Singapore (Olam) have taken a key stake in new industrial projects. The US has become the second-largest importer of Gabonese energy products; President Ali Bongo Ondimba visited Washington in 2011 and is due to return in August 2014.

South-South Development

Moreover, emerging markets are playing an increasing role in Gabon’s foreign policy, and the government has accordingly been keen to strengthen economic relationships specifically with emerging countries. While visiting Libreville in 2011, Abdullah G ident, signed several agreements with President Bongo Ondimba, including new agreements on tourism cooperation, taxation, investment promotion and protection, defence and health cooperation.

Further afield, Gabon is developing relations with South Korea, where the president recently attended a summit and series of high-level meetings with public and private sector representatives during a visit in March 2012. China in particular has become a critical trade partner over the past decade. Political links were established following Gabon’s renunciation of Taiwan’s diplomatic status in 1974, and since then the two countries have exchanged a number of high-level visits. Indeed, China has established a foothold in several sectors within Gabon, including mining, petroleum, construction and public works. Recent disputes with Chinese mining and oil firms, the China Machinery Engineering Corporation and Addax Petroleum, respectively, have been resolved with limited blowback, and Chinese investment is set to grow further. Morocco too has emerged as a partner in the effort to develop Gabon’s non-hydrocarbons economy. The kingdom has considerable expertise to bear on priority sectors such as agriculture, industry, professional education and tourism. The two countries signed 24 new economic and political accords at a bilateral economic summit in March, and their partnership is increasingly seen as a model for south-south development.

Regional Integration

Gabon is also working to take on a leadership role in the regional governance body, the Communauté Économique et Monétaire de l’Afrique Centrale (CEMAC). The six CEMAC member states benefit from a common currency and shared financial markets, and nominally enjoy an open circulation of people and goods. Gabon, which houses the stock exchange, is one of the more active members of the bloc and is a contributor to regional initiatives. Gabon is also a member of the African-led International Support Mission to the Central African Republic (Mission internationale de soutien à la Centrafrique, MISCA), established in December 2013. Roughly 550 Gabonese troops are serving in a MISCA mission to help resolve the conflict. As the fighting dragged on, in January 2014 CEMAC headquarters were temporarily transferred from Bangui to Libreville. The conflict has also put on hold recent efforts to adopt a regional policy of free circulation. For now, therefore, the prevailing trend has turned to one of protection rather than opening.

The incidence of pirate attacks is also picking up in the Gulf of Guinea. In July 2013, pirates hijacked an oil tanker and its 24-man crew near Port-Gentil, the first such attack in Gabonese waters in five years. In his strategic policy announcement in March 2014, Prime Minister Daniel Ona Ondo, who took office in January 2014, stressed the importance of reinforcing border security, both to prevent illegal immigration by land and to protect Gabon’s coastal waters.

Foreign Investment

Foreign direct investment totalled €3.1bn during the 2010-12 period. As part of the Emerging Gabon scheme, the government is investing in infrastructure across the country. Preparations ahead of the Cup of African Nations, held in 2012, dominated the agenda in 2011, including the construction of the Friendship Stadium in Libreville, an upgrade to the Libreville airport, and the construction of new roads and interchanges in the capital.

Infrastructure Priorities

The transport, energy and housing sectors have now come into the spotlight for government and private sector investment. The National Agency for Public Works (Agence Nationale des Grands Travaux, ANGT) has declared its intention to manage 175 projects worth a total of around €15.5bn over the next five years. More than half of the funds will be spent on transport projects, with the remainder going towards the energy, education, telecommunications and housing sectors. The ANGT is actively seeking out partners from the private sector in these areas. Meanwhile, international institutions like the African Development Bank and the World Bank are also investing in Gabon.

In addition to this, the government has created two special economic zones (SEZs) in partnership with the global supply chain management firm Olam International: one outside Libreville at Nkok and the other at Port-Gentil on Mandji Island. The SEZs will offer significant incentives to companies that wish to invest in Gabon, including tax holidays, no Customs duties, guaranteed labour, subsidised electricity and other incentives. So far, the SEZs have drawn interest mainly from Asian firms.

Energy Focus

After months of negotiations, Gabon signed seven exploration and production-sharing contracts in August 2014, which it hopes will spur new exploration in deep-water offshore blocks and generate up to $1.1bn in new investment, according to estimates from Gabon’s oil ministry. Following licence awards at the end of 2013, the ministry announced on August 8 that it had signed contracts (Contrat d’Exploration et de Partage de Production, CEPP) with six companies including Impact (UK), Repsol (Spain), Marathon (US), Noble Energy (US), Petronas (Malaysia) and Woodside (Australia).

Gabon pumps roughly 240,000 barrels per day (bpd) in 2013. However, this is down from a peak of 370,000 bpd in the late 1990s due primarily to maturing fields, which means the offshore blocks could mark a notable turnaround for the sector. Although the government has accelerated its plans to diversify the economy in the past five years to reduce its dependency on crude exports, by spending heavily on infrastructure, hydrocarbons continue to underwrite the economy. Oil-related activities account for roughly half of total government revenues.

Lifting Roadblocks

Gabon’s 10th tender round was initially scheduled for October 2010, but plans were put on hold while the government worked on drafting a new hydrocarbons code, which was passed in June 2014 and recently adopted. The petroleum code carves out a larger role for the state as well as allowing it the option to capture a greater share of oil revenues. It seeks to clarify investment and production sharing terms, as well as the role reserved for Gabon Oil Company (GOC), which will have the right to purchase a 15% share in all new oil contracts.

The tender was held in October 2013, when a total of 13 offshore oil and gas blocks were provisionally awarded to 11 companies, which represented a significant step forward for the sector. Investor interest in Gabon’s offshore play has peaked in recent years thanks to geological similarities with the east coast of Brazil. Important offshore discoveries have been made in the pre-salt layer, as well as sizable discoveries elsewhere along the Gulf of Guinea. Since then, the conclusion of the seven new CEPPs has proven to be a complicated process with discussions dragging on for nine months and several contract drafts, according to press reports.

The government has sought to take a more robust approach to auditing and managing the sector in recent months, which has meant that the roster of companies eligible to negotiate production-sharing contracts has changed since October 2013. Thirteen firms were initially declared eligible for negotiations. However, three junior firms were dropped from the list in May 2014, after the ministry concluded they would be unable to finance offshore drilling projects, although one since argued its case and has inked one of the seven CEPPs.

Creating a more transparent business environment is an integral part of the state’s economic diversification plan. The government has been working with the World Bank to improve regulations and bureaucratic efficiency. It has implemented land reforms, overhauled the national property register to reduce the time it takes to get property titles, and created the ANGT to oversee and speed up large public works projects. A streamlining of other bureaucratic tasks, including 48-hour processing for residence permits, has further improved the business climate. The government has also drafted new laws and regulations to govern public-private partnerships and public procurement, as well as signing on to the African Peer Review Mechanism of the African Union.