2011 Investment Climate Statement - Chad
Openness To, and Restrictions Upon, Foreign Investment
In 2010, Chad began to emerge from a decade-long period of regional violence and instability. A January 2010 peace accord between Chad and Sudan is the first agreement, of several previously signed, that shows promise of ending the proxy war between the two countries carried out through respective rebel movements. Throughout the year, the Chadian government focused on domestic and development issues. Elections – legislative, presidential, and communal – are scheduled for 2011. Political reconciliation with former armed rebels, exiles and regime opponents continues. While development is again slated to be the top national priority in 2011, Chad’s low rankings on most development and other indices highlight the tremendous needs and challenges of this country. The state system is weak and the judicial system non-functioning in some locations. Political turmoil and instability could yet spill over from Sudan and CAR. Extremists and transnational criminals transit Northern Chad to and from Niger and Nigeria. A travel advisory for American citizens remains in effect. With a population of over 11 million (80 per cent of whom are engaged in subsistence farming or herding) and a per capita income for 2010 estimated at USD 691, this land-locked and inaccessible nation is, and will remain for some time, a poor and undeveloped market. Still, improvements are beginning to occur, providing hope that Chad will one day offer more to investors. For example, there are two telecommunication projects under way on the part of the government to increase Chad’s connectivity: a project to bring fiber optic cable from a sub-marine location in the Gulf of Guinea to the capital and then to major cities around the country; and government participation in the Central African Backbone project to link Chad with fiber optic networks in Nigeria and Sudan.
The general climate for investors is mixed. The Government of Chad officially encourages foreign investment, particularly from regional partners in the Economic and Monetary Community of Central African States (CEMAC), the Economic Community of Central African States (CEEAC) and the Organization for the Harmonization of Business Laws in Africa (OHADA), associations of mainly non-anglophone African nations. These groups seek to standardize tax policy, customs practices, and commercial law and in the case of CEEAC, support a free trade zone of member states. Chad, wrapping up a year as rotating Presidency nation of both CEEAC and CEMAC, is working to improve the Central African business and investment climate in accordance with organizational goals. Chad has no national anti-investment laws or regulations. Formal policies regarding investment review/screening are rudimentary and used in an ad hoc manner. Bureaucratic requirements involving several different ministries slow down the foreign investment process, but approvals are routinely granted without discrimination against foreign firms. In 2010, the GOC took the first step to streamline the process of establishing new businesses by creating a National Investment Agency to act as a one-stop shop for all required approvals across the government. The agency is still becoming operational.
Chad adopted a new Investment Charter in 2008 to offer incentives for foreign companies interested in establishing operations in Chad. President Deby hosted the first-ever OHADA Summit in December 2009, with the aim of encouraging all member states to adopt an enhanced OHADA Investment Arrangement that offers benefits beyond those in Chad’s 2008 national Investment Charter. The Charter and the subsequent OHADA Arrangement, which went into effect in Chad in January 2010, have together brought Chad into closer compliance with WTO and WCO standards. Chad is a member of both organizations.
According to the 2008 Investment Charter, foreign firms are given three years of tax-exempt status. Export taxes have largely been eliminated, and a value-added tax has been adopted throughout the CEMAC region that in principle allows goods to circulate duty-free among member states. (In practice, bribery and corruption impede the free flow of goods.) The IMF is assisting Chad to improve public revenue management, including development and implementation of tax policy.
The most ambitious and innovative foreign investment initiatives under way in Chad are in the petroleum sector. Exxon Mobil (40 per cent private equity) leads Esso Chad, a consortium also including Chevron Texaco (30 per cent) and Petronas Malaysia (30 per cent), which has invested more than USD 8 billion (USD 641 million of which was invested in 2010) to export crude oil reserves near Doba, in the southern part of the country. Oil production began in 2003, with the completion of a pipeline through Cameroon (financed in part by the World Bank) linking Chadian oil fields with an offshore terminal in the Gulf of Guinea.
Chinese firms are also expanding oil exploration efforts. One of them, the China National Petroleum Company (CNPC), is a 60 per cent partner in a joint venture with the Chadian National Hydrocarbon Company (40 per cent). The multi-faceted project includes exploitation of oil fields in Bongor, south of N’Djamena, whose output will feed a refinery that the Chinese are also building some 45 kilometers north of the capital. Expected to go online in mid-2011, the refinery is projected to produce 20,000 barrels a day. CNPC is building the pipeline to connect fields to the refinery, and will also use the Esso pipeline.
In the past, the Chadian government reserved some sectors of the economy for state ownership, including cotton, sugar, electricity/water and telecommunications. The government invited foreign ownership into the state telecoms company, Sotel, this year and has privatized 18 other state enterprises and liquidated 14 others in recent years. Some of the resulting firms have been plagued by mismanagement, and the privatization effort does not seem to be being pursued vigorously for the time being, although newer telecommunications methods, including mobile phone and internet services, are private and highly competitive.
Foreign firms are invited to participate in international tenders for privatization of parastatal enterprises; these are generally announced in local newspapers, and are shared informally throughout the business community. Few foreign firms have responded, so little information is available on acquisitions, mergers or takeovers.
Generally speaking, Chad’s commercial climate suffers from limited infrastructure, chronic energy shortages, high energy costs, a scarcity of skilled labor, a high tax burden (after tax-free incentives have expired) and corruption. Transport costs are high. Most of Chad’s roads are still unpaved and can become impassable during the rainy season, although one-third of all road-paving has occurred since 2008, and more is slated for the near term, eventually making some currently-inaccessible regions easier to reach. That very little English is spoken in Chad, and that French commercial interests have predominated here in the past, have also discouraged U.S. investors. Still, Chad’s private business community is increasingly trying to diversify commercial contacts to include U.S. partners. Since mid-2009, the government has been engaged in a nation-wide anti-corruption campaign that has attracted broad public support. Its impact on the business climate remains to be seen.
Chad’s positions in standard rankings for openness to doing business:
Transparency International’s Corruption Index
171 out of 178
Heritage Foundation’s Economic Freedom Index
159 out of 179 (37 of 46 in Sub-Saharan Africa)
World Bank’s Doing Business
183 out of 183
MCC Government Effectiveness
-0.58/2.0 (11th percentile)
MCC Rule of Law
-0.60/2.0 (8th percentile)
MCC Control of Corruption
-0.61/2.0 (11th percentile)
MCC Fiscal Policy
9.2/10 (95th percentile)
MCC Trade Policy
55.6/100 (7th percentile)
MCC Regulatory Quality
-0.39/2.0 (29th percentile)
MCC Business Start Up
0.792/1.0 (5th percentile)
MCC Land Rights Access
0.528/1.0 (28th percentile)
MCC Natural Resource Management
41.71/100 (12th percentile)
Conversion and Transfer Policies
There are no restrictions on transfer of funds into Chad, but any individual who wishes to transfer money exceeding USD 1,000 out of Chad must seek approval from the Ministry of Finance. Additional requirements exist for companies intending to send more than USD 800,000 out of the country. Approvals are routine, although the Ministry has occasionally restricted capital outflows for temporary periods. There was no report of any such restriction being levied in 2010. Businesses can gain advance approvals for regular money transfers.
Chad is a member of the Communaute Financiere Africaine (CFA) zone. This, coupled with its participation in CEMAC, guarantees the convertibility of CFA francs into Euros at a fixed rate. Since 2002, the rate has been 655.99 to the Euro. In 2010, the exchange rate for the dollar fluctuated between 440 and 550 FCFA, as a function of the performance of the dollar against the euro.
Expropriation and Compensation
There has been no known government expropriation of foreign-owned private property in recent years. In 2006, the GoC threatened to replace the two minor partners in the Esso Chad consortium with Chad’s own national oil company, but the parties settled.
Article 41 of Chad’s Constitution prohibits seizure of private property except in cases of urgent public need. A 1967 Land Law prohibits deprivation of ownership without due process, and stipulates that the state may not take possession of expropriated properties until 15 days after the payment of compensation. In 2008 and 2010, Chadian authorities evicted families from their homes in N’Djamena on grounds that they were occupying land needed for infrastructure projects. Some but not all of those evicted had ownership papers and have gone to court to challenge what they believe to be lack of due process; those cases are pending. In 2010, the GOC provided compensation to persons with land title, although owners complained that compensation was not sufficient to allow them to reestablish residences elsewhere. Relocating often meant starting from scratch: building on a vacant lot, digging a well, installing a generator if funds were sufficient. There were no reports of expropriation of foreign-owned land during recent evictions, although some foreign nationals had to move homes or offices on very short notice.
Chad’s legal system and commercial law is based on the French Civil Code, with an admixture of traditional law and supra-national arrangements as agreed among the memberships of CEMAC, CEEAC and OHADA. The OHADA Investment Arrangement, with provisions for securities, arbitration, dispute settlement, bankruptcy, recovery and other aspects of commercial regulation, was due to take precedence over national business laws in 2010 but has not yet gone into effect. The OHADA Arrangement spells out rights for approved creditors in various categories (e.g., the Chadian Treasury, wage earners, etc).
Chad’s court system is theoretically capable of handling investment disputes, but it has relatively little experience and is still developing competence and reliability. Judges are appointed by the Chadian President without National Assembly confirmation, potentially making them vulnerable to influence from the executive branch. We know of no recent cases where executive pressure was brought against judges dealing with commercial issues. Monetary judgments are usually awarded in local currency, although they can be awarded in dollars or euros when disputes concern transactions initially made in foreign currency.
In 2005, Chad announced plans to establish five commercial tribunals to share information on business law and to settle disputes. In 2010, all five were functioning (N’Djamena, Abeche, Bongor, Moundou, and Sarh). The N’Djamena tribunal has dealt with cases brought by foreign companies. Firms not satisfied with judgments in these tribunals have recourse to OHADA’s regional court in Abidjan; several Chadian companies have pursued dispute-settlement through the OHADA mechanism. CEMAC established a regional court in N’Djamena in 2001 to hear business disputes, but this body is not widely used.
Contracts and investment agreements can stipulate arbitration procedures and jurisdictions for settlement of disputes. If both parties are in agreement and provisions do not run counter to Chadian law, Chad’s courts will respect the judgments of U.S. or other foreign courts. In the absence of specification, the accepted principle is that jurisdiction belongs in the nation where a given agreement was drafted. This principle applies to disputes between companies and the Chadian government. The government and Esso used international arbitration in 2010 to resolve a tax dispute and both sides have abided by the decision.
Bilateral judicial cooperation exists between Chad and certain nations. In 1970, Chad signed the Tananarive Convention, covering the discharge of judicial decisions and serving of legal documents, with eleven other former French colonies (Benin, Burkina Faso, Cameroon, CAR, Congo-Brazzaville, Gabon, Cote d’Ivoire, Madagascar, Mauritania, Niger and Senegal.) Chad has similar arrangements in place with France, Nigeria and Sudan. Chad is a member of the International Center for the Settlement of Investment Disputes (ICSID, also known as the Washington Convention.)
Investment incentives can be negotiated, but the government's flexibility is limited by OHADA and CEMAC agreements. Based on Chad’s national Investment Charter, which went into effect in 2008, the government has offered three-year tax-exempt status to all foreign firms as an investment incentive. The possibility of special tax exemptions exists for some public procurement contracts. A special preferential tax regime applies to contractors and sub-contractors in the major oil projects. In the past, the government occasionally offered low license fees or rent in addition to ad hoc tax exemptions. Incentives tend to increase with the size of given investments and likely job creation; several foreign investors have negotiated and received tax exemptions and preference for various projects Plans have been proposed for a credit guarantee fund for investment projects but nothing has been implemented. Investors may address inquiries about possible incentives to the Ministry of Commerce.
There are generally no performance requirements imposed on foreign investors. Foreign firms are officially required to employ local workers for 98 per cent of their staff, although in practice this law has not been applied due to the scarcity of skilled labor. Firms can formally apply for permission from the Labor Promotion Office (ONAPE) to employ a greater percentage of expatriates than the formally-allowed two per cent if they can demonstrate that skilled local workers are not available.
Work permit fees for foreign employees were long set at the equivalent of USD 1000 per year. In 2009, the GoC signed two decrees effectively raising these fees considerably. The first stipulated that work permit fees would be equivalent to the first-time monthly salaries of foreign workers. The second required firms wishing to hire foreign employees to demonstrate that finding local skilled workers was impossible and to present files of local candidates not selected for given jobs to the GoC for review. Exxon protested these decrees and was given a reprieve. Final implementation is still on hold but some foreign companies reported that the increased fees were being applied informally and inconsistently.
There are no known discriminatory requirements for visas or residence permits that would have the effect of inhibiting foreign investors. CEMAC arrangements, once put into place and adhered to regionally, will increase free movement of people and goods, including by streamlining entry and customs procedures.
Foreign firms are able to participate in research and development programs, but the Chadian government lacks funds for such programs, with the result that foreign donors generally pay for them.
Right to Private Ownership and Establishment
Chadian law guarantees the rights of foreign and domestic entities to establish and own business enterprises and to engage in remunerative activities. The national Investment Charter of 20008 offers the possibility of full foreign ownership to all companies in Chad, with the exception of national security or strategic industries. One large state-owned enterprises, CotonChad (the state-run cotton concern), is slated to be privatized but is not private yet. STEE (the electricity/water company) declared bankruptcy in 2010 in preparation for privatization. Foreign participation in upcoming privatization tenders will be sought.
Protection of Property Rights
Property rights, including intellectual property rights, are protected by the Chadian Civil Code, but Chad has a limited capacity to enforce them. OHADA arrangements put into place in 1998 improved existing property laws, including those dealing with mortgages, making them consistent with French commercial law.
The office of "Direction de Domaine et Enregistrement" in the Ministry of Finance is responsible for recording property deeds and mortgages. In practice, this office only asserts authority in urban areas; rural property titles are managed by traditional leaders. Chadian courts frequently deal with cases of multiple deeds to the same property, indicating that problems with the existing title registration system remain unaddressed. In cases of multiple titles, the earliest usually has precedence. Fraud is common in property transactions. As part of the Chadian government’s generalized series of anti-corruption efforts under way since mid-2009, the Ministry of Infrastructure has put in place a computerized system designed to help detect false property titles.
Chad is a party to the 1958 Paris Convention and the 1977 Bangui Agreement on IPR. The Bangui agreement groups together 16 other francophone African nations in the African Intellectual Property Rights Organization (OAPI). Chad adheres to OAPI rules within the abilities of its limited administrative capacity. The Ministry of Trade and Industry has established an office to register copyrights, as well as a branch office of OAPI to process patent applications (valid in all OAPI states). In 2000, Chad's National Assembly adopted a 1999 OAPI standard on IPR designed to bring member states into compliance with the WTO's TRIPS agreement, which specifies protections for software, literary works, sound recordings, and industrial patents.
In 2005 the Chadian government established an office charged with protecting authors’ rights. While the office now exists, there are no specific personnel to conduct investigations. Although prohibited, counterfeit watches, sports clothing, footwear, jeans, audio materials, cosmetics, perfumes, and other goods are readily available on the Chadian market. These products are not produced locally but are imported, often informally.
Transparency of the Regulatory System
No provisions in Chadian law or any multilateral regimes affecting Chad impose discriminatory provisions that might discourage foreign investment. But bureaucratic procedures for opening a business are cumbersome and slow, consisting of as many as 15 steps and visits to several agencies and ministries. In 2010, the GOC created a National Investment Agency to streamline the process and provide a single point of contact for businesses and investors. The agency is not yet operational, although its existence is a step in the direction of "clear rules of the game."
The heavy tax burden that has traditionally been imposed on formal-sector businesses discourages investment and puts informal sector competitors at an advantage. The Chadian government is working with the IMF, EU and other multilateral institutions to develop and implement a more transparent and competitive system. Efforts are being made in regional institutions and via technical assistance from the IFIs and EU in the aim of simplifying tax laws and streamlining government procedures. The World Bank helped the GoC to computerize and modernize its customs service, including by creating an up-to-date statistics database.
Efficient Capital Markets and Portfolio Investment
Chad's financial system is generally sound and unhindered by restrictive regulation, but it is quite limited in size and in variety of services. There is no capital or money market in Chad, nor sophisticated financial products. A limited number of financial instruments are available to the private sector, including letters of credit, short- and medium-term loans, foreign exchange operations and some long-term savings instruments. The International Finance Corporation is prepared to add funds through existing banks if demand develops.
Chad’s banking sector improved after undergoing internal reforms in 1990 to streamline lending practices and reduce the volume of bad debt. Chad’s three largest banks have been privatized: ECO BANK (formerly BIAT), Société General Tchad (formerly BTCD) and CBT (formerly BDT). Two Libyan banks have recently established themselves in Chad: BCC (formerly la Banque libyenne) and BSCIC, along with one Nigerian Bank (UBA). A number of European banks have long maintained offices here. Credit is available from commercial banks on market terms, which are expensive, often at rates of 16 to 25 percent for short-term loans. Medium-term loans are difficult to obtain, as lending criteria are rigid. Many large businesses maintain accounts with foreign banks.
Regulations and financial policies generally do not impede competition in the financial sector. Legal, regulatory and accounting systems pertaining to banking are relatively transparent and consistent with international norms. Chad’s banking sector is regulated by COBAC (Commission Bancaire de l'Afrique Centrale), a regional agency. Chad began using OHADA’s accounting system in 2002, bringing its national standards into harmony with accounting systems throughout the region. Several internationally-known accounting firms have personnel in Chad. There is no effective regulatory system to encourage or facilitate portfolio investments.
There are two nascent stock markets in the region. CEMAC countries established a small regional stock exchange, known as the Central African Stock Exchange, in Libreville, Gabon, which began trading in 2006. Cameroon, a CEMAC member, launched its own market in 2005. Neither exchange is well-capitalized, nor are Chadian companies are listed on either.
Some French firms and agencies appear to benefit from "cross-shareholding" and "stable shareholder" arrangements, thus limiting opportunities for other foreign investment and acquisition in Chad’s parastatals and in the financial sector. These practices are facilitated by the fact that there is no stock market for trading shares. The best-known case involves French participation, through the firm GEO-COTON, in Coton Tchad (the cotton parastatal). SONASUT/CST (privatized Chadian sugar concern) has a major French partner, SOMDIAA. Société Générale Tchad (affiliated with the French Société Générale) took over the former Chadian National Bank, BTCD, in the early 2000s.
Competition from State-Owned Enterprises (SOEs)
As noted above, sectors of the Chadian economy including cotton and energy remain state-controlled, although most are slated for privatization. No existing state-owned enterprises are solidly profitable at this stage, although they have Boards of Directors. The cotton parastatal reports to the Ministry of Agriculture; in late 2009 it received a new director with a reputation for good management. The energy parastatal, formerly known as the STEE (Société tchadienne de l'éléctricité et des eaux) was divided into constituent parts for water and energy in 2010, as its history of poor management and unwieldy size as a single entity effectively made it un-privatizeable. The GoC hopes to attract foreign investors to the two new but still state-controlled entities. Esso Chad, the large private consortium, has been permitted to develop Chad’s petroleum resources since 2003. Esso’s royalty and tax payments to the GoC have amounted to between 55 and 70 per cent of total government revenues over the past three years.
A more recent and still-evolving development in the energy sector is the China National Petroleum Company’s joint venture with the Chadian National Hydrocarbon Company, a state-owned enterprise and minority interest in the joint venture with the Chinese. The initiative was launched in 2008 in the aim of supplying Chad’s internal petroleum requirements through a Chinese-built refinery and the project is expected to begin operations this year. In concert with the Chinese involvement in the energy sector, the Chinese very recently held a groundbreaking ceremony for a 150M USD industrial zone whose companies, set to include gas bottling and plastics manufacturing, will depend on input from the refinery.
The general relationship between the China National Petroleum Company and its Chadian state-owned partner seems to be one of cooperation rather than competition. Further cooperation will be necessary for the Chinese-Chadian joint venture to adhere to Esso’s high standards of environmental protection and financial transparency.
Cooperation rather than competition seems to characterize other Chinese investments in Chad, which are taking place primarily in the infrastructure sector (road paving and reconstruction of buildings – including the National Assembly – destroyed in 2008 rebel attacks.) Chad has no sovereign wealth funds.
Corporate Social Responsibility (CSR)
Most Western firms operating in Chad are aware that they bear a burden for social responsibility, given extremely low local standards of living here when compared with those that prevail in countries of origin. Western firms are generally committed to extensive staff training efforts, purchase of local goods where possible, and donation of excess equipment to charity. Esso Chad, involving the largest U.S. commercial presence in Chad, follows exemplary employment practices, provides safe and healthy conditions for its workforce, hews to responsible environmental protection practices, contributes to local science and technology, and complies with local, international and U.S. laws, as well as with OECD guidelines.
Chad suffered its most recent period of political instability from 2005 to 2008, in connection with the Darfur crisis in neighboring Sudan. Eastern Chad, where there was a UN peacekeeping operation until the end of 2010, remains less stable than the capital. On and off throughout the country’s 50 years of independence, armed rebel groups have sought to overthrow the government and bring about regime change by force. The current president of 20 years came to power in such a manner. In 2006 and 2008, Chadian rebels entered the capital but were repelled by the Chadian military. In 2009 Chadian rebels clashed with the Chadian national army in Eastern Chad. The January 2010 agreement between the Governments of Chad and Sudan committed the two nations to ceasing support for respective rebels and to ending the proxy war waged since 2005. The GoC has signed agreements with a number of rebels, and several commanders and many rebel soldiers returned to Chad in the course of 2009 and 2010, although others continue to state that they intend to fight the regime. Meanwhile, interethnic violence and violence between nomadic and pastoral groups persists, and tensions between local Chadian populations and refugees from Darfur (270,000) and CAR (57,000) continue, essentially over use of scarce natural resources.
Chad was more stable and secure in 2010 than the previous years, but the variety of regional challenges that the nation faces means that stability is fragile. Elections in 2011 could usher in opportunities for good governance and economic progress, but if their results are contested, domestic unrest could ensue.
Corruption is a persistent and widespread problem in Chad, which ranked seventh from the bottom on Transparency International’s 2009 Index. As in other developing countries, low salaries for most civil servants, judicial employees, and law enforcement officials, coupled with a weak state system and tolerance for bribery, have contributed to corruption. Still, public acceptance of corruption has dropped significantly in the past several years. In 2009, the Chadian government launched investigations of ten high-ranking officials, including several cabinet ministers and the then-Mayor of N’Djamena. President Deby, in many public addresses to the nation throughout 2010, pledged to continue the campaign to eliminate corruption from Chadian public life, criticized the practice of taking liberties with public goods, and promised prosecution of those who accepted kickbacks or demanded bribes. Despite this verbal expression of commitment. charges against those indicted in 2009 were dropped for lack of evidence in mid-2010.
Corruption exists at all levels of government, along with impunity, particularly for those in uniform. Street crime, sometimes committed by individuals in uniform, and ad hoc road-blocks are often reported. Foreign firms often employ large private security detachments. Corruption has traditionally been pervasive in the customs and tax enforcement services. In some cases, tax and customs authorities may facilitate evasion only to return later to pursue the infractions they facilitated. The IMF has provided considerable technical assistance to regularize tax and customs procedures and root out abuses.
Some judicial authorities are assumed to be subject to influence, and legal clerks sometimes obstruct procedures to elicit bribes. The Government Procurement Office and Infrastructure Ministry are viewed as prone to cronyism in selection of projects and awarding of contracts. But in an election year (legislative contests are set for February 2011 and a presidential election in April 2011) the GoC is highly conscious of this sort of criticism and desirous of projecting a clean image. The Infrastructure Ministry’s website contains considerable information on methods of financing and contracting.
Government procurement that is underwritten by multilateral organizations or international donors generally requires guarantees of transparency, but there remains the potential for manipulation of the process. Otherwise, the use of sole-source vice competitive award contracting by the government creates a non-transparent environment that provides cover for abusive practices. One prominent local NGO tries to track government expenditures of oil revenue.
Chad is not a signatory of the OECD anti-bribery convention, but a February 2000 anti-corruption law stipulates penalties for corruption. In addition, Chad also adheres to the African Union Convention on Preventing and Combating Corruption.
Bilateral Investment Agreements
The U.S. has neither an investment treaty nor a tax code treaty with Chad. Chad has signed bilateral investment treaties with approximately a dozen other countries, most of them in Africa. The government does not share the list of countries or details of the treaties, but the Ministry of Commerce has indicated that the treaties establish general mechanisms for governments to facilitate dispute resolution.
OPIC and Other Investment Insurance Programs
OPIC has in the past issued political risk investment insurance to Pride-Forasol, which provided early oil field drilling services for the Doba oil project. The overall oil project has dramatically increased the level of U.S. investment in Chad, and it may increase the potential for OPIC to support projects in other sectors. The U.S. Export-Import Bank has guaranteed USD hundreds of millions in U.S. exports for the Doba project. Other OPIC investment insurance guarantees have been limited but successful. OPIC is also considering investment insurance for CRISTA Ministries, an NGO affiliated with World Concern.
Chad is a member of the Multilateral Investment Guarantee Agency (MIGA). The OHADA Investment Arrangement includes provisions to establish an Investment Guarantee Fund, but this has not yet been accomplished. The French investment guarantee agency, COFACE, has guaranteed a number of investments in Chad. The annual average exchange rate is 500 FCFA = 1 USD. Given that the CFA is fixed to the euro, any devaluation or depreciation of the rate is illustrative of changes in the euro-dollar rate.
Chad has a shortage of skilled labor in most if not all categories, but there is an increasing pool of university graduates able to fulfill many entry-level management and administrative functions. As structural adjustment programs have effectively frozen much government recruitment, educated workers have increasingly turned to the private sector in search of employment. Skilled workers are nevertheless a very small percentage of the total labor pool. About 80 percent of the labor force is engaged in subsistence activities such as fishing, farming and herding. Unskilled and day laborers are readily available. Low wage levels reduce incentives for investment in labor-saving technology. Very few workers speak any English, although a small but increasing number of university graduates and business professionals have some English skills. Acceptable translators and interpreters are available.
Chadian labor law derives from French law and tends to be far more protective of workers' rights than U.S. law. Labor courts are also quite sympathetic to workers, so it is important for companies to follow rigorously all requirements for hiring and especially firing workers. Labor unions exist and operate independently from the government. There are two main labor federations, the “Confederation des Syndicats Libres du Tchad” and the "Union des Syndicats Tchadiens" (UST), to which most individual unions belong. Most small Chadian businesses operate in the informal economy, where labor laws are widely ignored.
Duty-free zones are under discussion among Chad and its neighbors/partners in regional organizations, but none exist for now. Duty free goods used to be available at the N’Djamena International Airport, but this is currently not the case.
Foreign Direct Investment Statistics
Chad does not release foreign direct investment figures. Nonetheless, it is clear that oil activity has dramatically increased the level of FDI in Chad. Esso Chad, the consortium in which Exxon Mobil and Chevron Texaco participate, has invested over USD 8 billion in the Doba exploration and pipeline project since its inception in 2003. Of this, USD 641 million was invested in 2010.
French firms remain prominent, having historically been the biggest foreign investors in Chad. The current interests of French firms include cotton, sugar, electricity generation, construction, transportation, banking and hotels. The French firm Vivendi has been awarded a contract to build a new electrical power station in N’Djamena. The capital currently has three power stations, but they often suffer generation or transmission problems and outages are common. The concerns GEO-COTON in the cotton sector, SOMDIAA in sugar, the Bollore Group in shipping and delivery, CFAO in auto distribution, Maestria in paint manufacture, Bouygues and Cegelex in construction, and Novotel and Meridien in hotels, are some well-known current French investors.
The PRC establish diplomatic relations with Chad in 2006. The Chinese-Chadian oil refinery north of N’Djamena and exploration effort near Bongor is estimated to have involved an investment of USD 1 billion since 2008. A USD 150 million Chinese-developed industrial zone is being planned to complement Chinese petroleum projects. In addition to the refinery and oil exploration project, Chinese firms (whose own status as private or state-run is not always clear) have invested in construction, road paving and cement manufacture. Some smaller Taiwan firms remain active in Chad, despite Taipei’s loss of diplomatic relations, and many Chinese and Taiwan-run restaurants are present here.
A U.S. firm has recently been awarded a large contract to build public housing and abattoir on the outskirts of the capital. Another U.S. firm was contracted to lay fiber optic cable from Chad’s southern border up to the capital; it has plans to build a brand-name hotel and residence complex. Libya has built a hotel, several banks and other properties, is invested in trucking, has purchased a majority share in the state-owned telecommunications company, and plans a modern grocery store. An Indian firm, Team-9, was until recently invested in the Chadian textile industry, proving spinning equipment. The same Indian concern manufactures tractors and is said to be considering building canning and juicing factories. The acquisition of a regional mobile phone company, Zain, by Indian-owned Airtel, gives India another entry into the Chadian market. An Egyptian company has been awarded a major road improvement contract for a project northeast of N’Djamena. A Nigerian firm runs a bank, and a Cameroonian firm holds majority shares in another bank. A few Lebanese traders remain from the era when they were numerous in Chad.