2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report

Openness to Foreign Investment

The Government of Niger (GON) welcomes foreign private investment and considers it to be critical to economic growth. Under the Investment Code revised in 2000, industrial investments enjoy tax and customs exemptions, and in some cases exemptions from value added tax (VAT). Other tax benefits are possible, but terms must be negotiated with the GON’s Ministry of Commerce, Industry and Promotion of Young Entrepreneurs, on a case-by-case basis. Most investors benefit from special tax treatment and tariff protection for periods that vary with the level and location of investment. The Investment Code contains no provisions for screening and guarantees equal treatment to foreign investors regardless of nationality.

The Investment Code offers advantages to sectors the GON deems key to the country's economic development: energy production, mineral exploration and mining, agriculture, food processing, forestry, fishing, low-cost housing construction, handicrafts, hotels, schools, health centers, and transportation. Total foreign ownership is permitted in most sectors except energy, mineral resources, and sectors restricted for national security purposes. Foreign ownership of land is permitted, but requires authorization from the Ministry of Equipment and Territorial Management.

In mid-2006, the GON created the National Council of Private Investors (CNIP) charged with reviewing Niger’s investment climate and performance and proposing specific actions to address the GON investment priorities. The list of proposed reforms included many factors that are widely recognized as critical for entrepreneurial development:

- the number of procedures required for starting a business;

- the length of time required for starting a business;

- the administrative costs of starting a business;

- the number of import tariff rates;

- the total corporate tax rate as a percentage of gross profits;

- other corporate taxes.

By 2008, the GON had taken modest steps to improve business conditions:

- reduced the trade register fees;

- reduced the length of time to obtain a trade register for both nationals and foreigners by reducing the number of procedures ;

- reduced the cost of starting a business;

- cancelled the payment of the annual subscription at the Chamber of Commerce ;

Barriers to investment include the limited domestic market, high transportation costs, and a slow and cumbersome government bureaucracy. Niger's low literacy rate and weak education system limit the availability of trained labor and service providers. English is not widely spoken.

According to the International Finance Corporation’s “Doing Business” analysis for 2010, starting a new business in Niger takes 17 days and requires 9 different procedures. Niger ranks near the bottom in terms of ease of doing business, and the regulatory environment is a significant barrier to private-sector growth.

Niger – Economic Indices

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Measure

Year

Index/Ranking

TI Corruption Index

2010

2.6/123

Heritage Economic Freedom

2010

52.9/129

World Bank Doing Business

2010

173

MCC Government Effectiveness

2010

.15

MCC Rule of Law

2010

.28

MCC Control of Corruption

2010

.12

MCC Fiscal Policy

2010

-1.6

MCC Trade Policy

2010

71.8

MCC Regulatory Quality

2010

.21

MCC Business Start UP

2010

.908

MCC Land Rights Access

2010

.526

MCC Natural Resource Mgmt

2010

40.14

Conversion and Transfer Policies

As a member of the CFA, Communaute Financiere Africaine ("franc zone"), the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU), Niger has benefitted from a foreign exchange system that is free of restrictions on payments and transfers. However, ECOWAS suspended Niger from the organization in October 2009 because of the political machinations of the former government. Although Niger is still suspended, this has not affected transfer policies.

Investment capital and income can be transferred to and from Niger via banks and international financial intermediaries. Euros and dollars are convertible for any amount of CFA at local banks, but reverse transfer or conversion of more than CFA 2 million (approximately $4,250) to dollars or euros requires authorization from the Ministry of Finance. International investors have not reported difficulty with such transfers.

Expropriation and Compensation

The Investment Code guarantees that no business will be subject to nationalization or expropriation except when deemed "in the public interest" as prescribed by the law. The Code requires that the government compensate any expropriated business with just and equitable payment.

In 2009, the GON unilaterally terminated the operating license of DATAPORT, a consortium of foreign investors from Libya and China that had purchased the national telecommunications provider Sonitel when it was privatized in 2002. Claiming the foreign firms failed to meet the terms of the original agreement regarding to investment in new equipment and additional capacity, the GON cut the term of the operating license from fifteen years to seven years and two months. The GON regained full control of SONITEL and SahelCom, its cellular subsidiary, on February 20, 2009. The GON announcement did not address the issue of compensation for the joint-venture partners.

In early 2010, the Minister of Communications stated that the GON would cut the duration of two mobile phone operators' licenses because of poor service. The fifteen-year license awarded to Kuwaiti telecommunications firm Zain in 2000 was cut by five years. According to the Minister, the license accorded to Zain was reduced by five years until a return to the agreed level of service quality. The second mobile company is Moov, the brand name of the West African mobile operator Atlantique Telecom, majority owned by Abu Dhabi-based Etisalat. A fifteen-year license awarded the company in 2000 was cut by three years.

Dispute Settlement

While Niger’s court system protects property and commercial rights, the administration of justice can be slow. The Investment Code provides for settlement of disputes and indemnification by arbitration or by recourse to the World Bank’s International Center for Settlement of Disputes on Investment.

Niger is a member of OHADA, the Organization for the Harmonization of Business Law in Africa (Organisation pour l’Harmonisation Afrique des Droits des Affaires). The OHADA Treaty aims to harmonize business laws in sixteen African countries by adopting common rules adapted to their economies, by setting up appropriate judicial procedures, and by encouraging arbitration for the settlement of contractual disputes. The OHADA Treaty regulations on business and commercial law include the definition and classification of legal persons engaged in trade; procedures for credit and recovery of debts; means of enforcement; bankruptcy; receivership; and arbitration.

In 2009, the GON signed two bills to create the Arbitration Center (Centre de Médiation et d’Arbitrage), which is charged with settling routine business disputes and a Business Center (Centre de Gestion Agréée) for helping businesses transition from the informal sector into the formal sector. Both centers are expected to open by February 2011.

Performance Requirements and Incentives

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding foreign direct investments. Incentives do, however, increase as the size of the investment and number of jobs created increase. The Investment Code offers generous, VAT-inclusive tax exemptions, depending on the size of the business. Potential tax exemptions include start-up costs; property, industrial and commercial profits; services and materials required for production; and energy use. Exemption periods range from ten to fifteen years and include waivers of duties and license fees.

Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. Private entities can freely establish, acquire, and dispose of interests in business enterprises. Legally established private-sector companies have the same access to markets, credit, and other business operations as do public enterprises (parastatals). As noted above, foreign ownership of land is permitted, but requires authorization from the Ministry of Equipment and Territorial Management.

Protection of Property Rights

Niger is a member of the West African Intellectual Property Organization (Organisation Africaine de la Propriété Intellectuelle, OAPI), which establishes the legal framework for protecting intellectual property and approves requests for registration. Protection is initially granted for ten years and is renewable for up to an additional ten years.

As a signatory to the 1983 Paris Convention for the Protection of Industrial Property, Niger provides national treatment under Nigerien patent and trademark laws to foreign businesses. Niger is also a member of the World Intellectual Property Organization (WIPO) and a signatory to the Universal Copyright Convention. In practice, however, the government lacks the capacity and resources to enforce copyright violations, and counterfeit CDs and videocassettes are readily available in most cities. Trade secrets can be adequately protected within individual business agreements in Niger.

Despite limited resources, the Niger Copyright Office and Niger Customs make occasional efforts to enforce copyright laws, and have arrested counterfeiters and seized audio cassettes, CDs, DVDs and a disc burner. Given the profitability of copyright infringement, such episodic enforcement efforts are not a significant deterrent.

Transparency of Regulatory System

Revisions to the Investment Code in 2000 reduced bureaucratic obstacles to foreign investment and enlarged the scope of industries accorded special incentives to include air transportation and the construction and equipping of hotels. The GON now approves an investment thirty days from the date of application. Nevertheless, investors should be prepared for delays caused by the inter-ministerial approvals. While efforts continue to make the tax laws more transparent, investors find it useful to specify financial obligations, such as tax liability, in individual business agreements.

In 2006, the GON revised the Mining Code to offer specific incentives beyond those listed in the Investment Code: a five-year income tax holiday for large mines (two years for small mines) and exemption from customs duties on imported equipment for use in mineral exploration or mining operations. An updated Petroleum Code, based on international standards, was adopted in 2007.

A multi-sectoral regulatory agency (Agence de Régulation Multisectorielle, ARM) established in 2004 has oversight over telecommunications, water and electricity pricing.

Niger was accepted in 2007 as a Candidate Country for the Extractive Industry Transparency Initiative (EITI). In March 2010, Niger applied to extend its deadline for completing EITI validation. A draft validation report was submitted to the EITI Board in June 2010 and a final report was due in December 2010. On December 14, 2010, the EITI Board designated Niger, as an EITI Candidate country that is “Close to Compliant.” Niger was granted six months (until June 12, 2011) to complete the remedial actions needed to achieve compliance. The Board retains the right to require a new validation if the remedial actions are not completed within the next six months.

Efficient Capital Markets and Portfolio Investment

GON policies do not limit the free flow of financial resources. Credit is allocated on market terms, and foreigners do not face discrimination, but the Nigerien banking sector is poorly developed, inefficient and expensive. All the local banks are subsidiaries of banks based elsewhere in the region; no American or European banks operate in the country. Generally, only well-establish businesses obtain bank credit as the cost of credit in Niger is high and banks offer only a limited array of financial instruments -- letters of credit and loans.

Political Violence

Former President Mamahou Tandja had been due to retire on December 22, 2009, after finishing the second of two five-year terms of office, the maximum permitted under the 1999 constitution. Instead, he engineered a national referendum to rewrite the constitution and remove term limits, and granted himself three additional years as president before the next elections. Public opposition to these initiatives was muted by intimidation, until February 18, 2010, when a coup led by mid-level military officers removed the Tandja government. The transition government under the coup leaders has committed to restoring democracy by April 2011, and the process is proceeding on schedule.

Between 2007 and late 2009, a predominantly Tuareg group known as Mouvement des Nigeriens pour la Justice (MNJ) disrupted northern Niger by attacking military forces and laying landmines along highways. The resulting insecurity devastated Niger's tourist industry and deterred investment in mining and oil. The GON initially labeled the MNJ members as criminals and traffickers and refused to negotiate with them until Libya brokered a deal that included economic incentives to reintegrate MNJ fighters. Students demonstrate seasonally to protest either economic changes or unpaid scholarships.

Corruption

The GON publicly acknowledges that official corruption occurs and is making efforts to address it. The problem of corruption is compounded by a poorly financed and trained law enforcement system and weak administrative controls. Other major underlying causes of corruption are extreme poverty, low salaries, the politicization of the public service, the influence of traditional kinship, ethnic, and family ties on decision-making, a culture of impunity, and a lack of civic education. Continued pressure from foreign donors, civil society and NGOs led to some progress in the fight against corruption. Foreigners are instructed not to pay bribes to any policemen, border guards, or other government officials. Bureaucratic processes are slower than U.S. standards, but this is due more to inefficiency and lack of information technology than to corruption.

Bilateral Investment Agreements

Although Niger signed a bilateral investment agreement with the United States in September 1962, foreign investment in Niger is predominantly French or has some French participation. The Investment Code makes no distinction based on investors' countries of origin. The GON welcomes foreign direct investment, regardless of its source.

OPIC and Other Investment Insurance Programs

Niger is eligible for OPIC coverage but OPIC has not been involved in any Niger investments to date. Sectors for potential investment guarantees include gold and other mineral mining and processing, petroleum production, fruit, vegetable and meat processing, semi-finished hide production and small-scale manufacturing. The Export-Import Bank (Ex-Im) has a number of programs in place specifically geared towards helping sub-Saharan manufacturers expand their business by financing U.S. exports of manufacturing equipment and services. In 2006, the Ex-Im credit committee awarded Niger an insured five-year loan worth about $700,000.

Labor

The supply of skilled workers, technicians, and professionals is limited. There are 85,000 salaried formal sector workers (2009 data), just under half of whom are employed in the public sector. Five-sixths of the population makes a living from agriculture, herding, petty manufacturing, handicrafts or informal trading. Wages are low.

Labor-management relations are generally good. The National Federation of Labor Unions (Union Syndicale des Travailleurs du Niger) is well organized and occasionally presses its monetary demands (mostly for civil servants and parastatal workers) with limited strikes. However, high rates of unemployment and the threadbare state of public finances limit USTN's leverage. Labor law and practice in the formal sector conform to ILO principles.

Foreign-Trade Zones/Free Ports

Niger has been a member of the WTO since 1996 and as such is committed to trade liberalization and opening its markets to foreign investments. Local products and traditional handicrafts of WAEMU origin enter duty free, together with a limited number of industrial products from producing enterprises approved by the WAEMU Commission. According to estimates by the IMF, only one third of the WAEMU’s intra-community trade is completely duty free due to the relatively low level of industrialization of members. Under the provisions of the African Growth and Opportunity Act (AGOA), most Nigerien non-textile and apparel exports may enter the United States duty free. In December 2003, it was determined that Niger qualified for textile and apparel benefits provided under AGOA. Niger qualified for Category 9 of AGOA in 2006, which mostly allows the entry of hand woven fabric into the United States duty free. (The United States has suspended Niger’s AGOA eligibility until democracy is restored.)

Niger is landlocked and relies on the Port of Cotonou as a primary seaport. In April 2010, the GOB imposed a new import duty on good destined to Niger, leading to a boycott of the port by Nigerien merchants. Many Nigerien importers have recently shifted their trade to the port of Lome.

Foreign Direct Investment Statistics

The GON actively seeks foreign private investment and considers it key to restoring economic growth and development. In 2007, foreign direct investment substantially increased – especially in the mining sector. More than 120 mineral exploration and development permits to companies from twelve countries were awarded in 2007. The pace of new permits slowed in 2008, but the earlier permits are under active development.

Official statistics show Niger's second largest trading partner, after France, to be Nigeria. Nigeria, however, is Niger's largest trading partner when informal trade is included. South and East Asian countries also provide food (rice from Thailand) and inexpensive manufactured goods (from China, India). Niger also has trade relations with Japan, Germany, Saudi Arabia, the Gulf States, the Netherlands, the United Kingdom, Ivory Coast, Ghana, and Benin.

Foreign Investments (2007):

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Name

Product

Millions US$

Year

Country

UNILEVER

Soap

0.4

1967

Cote d’Ivoire, England

Somair

Uranium

6.9

1968

France (AREVA)

Sonichar

Coal

11.0*

1975

France

Cominak

Uranium

6.3

1978

France (AREVA), Japan, Spain

Braniger

Brewing

3.1

France

SEEN

Water

2.2*

2001

France

Telecom

Telecom

68.4

France

SOMINA

Uranium

334.7*

2008

China

Imouraren

Uranium

1,500.0*

2008

France (AREVA)

Refinery

Oil

980.0*

2008

China

*2008 Data
Note: 2007/2008 data are the most recently available

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