Burkina Faso: November 1998
Burkina Faso should scale down State intervention in the production and marketing of its major exports and eliminate the prohibitions and special authorizations applicable to these products.
PRESS RELEASE
PRESS/TPRB/89
13 November 1998
Continued liberalization in Burkina Faso Should sustain its economic growth
Burkina Faso should scale down State intervention in the production and marketing of its major exports and eliminate the prohibitions and special authorizations applicable to these products.
A new report by the World Trade Organization, the first one on Burkina Faso's trade policies and practices, states that these measures run counter to the objective of diversifying and promoting exports fixed by Burkina. The report notes that in 1991 Burkina Faso embarked upon large-scale trade reform which, together with the devaluation of the franc of the Communauté financière africaine (African Financial Community), has helped to boost the international competitiveness of some Burkina products and the growth of real GDP since 1994. The report points out, however, that extensive trade liberalization efforts still have to be made in order to promote exports with a view to sustainable economic growth.
The WTO Secretariat's report and the general policy statement submitted by the Government of Burkina Faso will be used as a basis for the review of Burkina Faso's trade policies and practices, which will take place at the same time as the review of Mali, on 18 and 20 November 1998.
The report notes that, as a result of the structural adjustment programmes undertaken by Burkina Faso in 1991 with the support of the International Monetary Fund, the structure of import duties has been simplified, some non-tariff obstacles eliminated and inflation kept in check. The performance of government finance and the current balance has been less successful. Burkina's exports, mainly cotton, livestock products and gold, are affected by fluctuations in world prices and only cover about half of imports, resulting in a chronic deficit in the trade balance. This is a contributory factor in the structural deficit of the current account, sustained by the negative balance in services caused by large outgoings for freight, insurance and interest on the external debt, which have increased as a result of the devaluation of the CFA franc.
Burkina Faso imports its heavy equipment from developed countries, especially France, and its petroleum products from Nigeria and Côte d'Ivoire. Burkina Faso's exports enjoy the preferential treatment given to developing countries by the European Union and developed countries.
Burkina Faso is a founder member of the West African Economic and Monetary Union (WAEMU), the Economic Community of West African States (ECOWAS), and has signed bilateral trade agreements and investment agreements with several countries.
Burkina Faso's import duties are among the highest in the WAEMU. The simple arithmetic average of import duties is 31.1 per cent, with a minimum of 6 per cent and maximum of 37 per cent. In addition, Burkina levies a value added tax of 18 per cent and excise duty on domestic products and imports. Products of the mining industry, timber, transport equipment, scientific equipment and non-electrical machinery are the least taxed. The rate of import duty on other products is near or at the maximum level.
Agriculture accounts for almost 40 per cent of Burkina's real GDP and over half of its export earnings. Cotton is the main export product and supplies 40 per cent of these earnings. Burkina Faso exports cotton principally to Switzerland, Mauritius and Indonesia. As a result of the various reforms implemented by the Burkina Government and the devaluation of the CFA franc, cattle exports to other countries in the subregion have increased sharply. The devaluation of the CFA franc has also helped to accelerate agricultural reform by making certain local products more competitive. As a result of the improvement in world prices and producer prices, cotton exports have also risen.
The report notes, however, that the objective of promoting exports conflicts with measures aimed at the valorization of certain products and food self-sufficiency. For example, raw sheep and goat hides and skins cannot be exported, even though domestic industries do not have the capacity needed to process all those produced. Likewise, the special authorizations required for the export of shea nuts and cereals, for reasons of food self-sufficiency, make Burkina's participation in international trade in these goods unstable.
Gold is mainly exported to France and accounts for around 10 per cent of export earnings. The new Mining Code in force since 1997 gives the same advantages to nationals and foreigners. The marketing of products of the mining industry has been liberalized and non-tariff barriers abolished. The mining sector is the sector in which tariff protection is lowest.
The manufacturing sector is not highly developed and consists of around 60 plants which mainly manufacture food products and textiles, principally for the domestic market. The structure of import duties and the high cost of inputs, however, hinder the international competitiveness of manufactured goods produced locally. This sector enjoys the greatest tariff protection.
The services sector provides over 40 per cent of real GDP and is dominated by trading activities. Burkina's commitments under the General Agreement on Trade in Services (GATS) are limited and do not cover certain services unilaterally liberalized by Burkina under structural adjustment programmes. A dynamic informal sector accounts for around 25 per cent of GDP and 80 per cent of non-agricultural employment.
The new Investment Code entered into force in 1995 and was amended in 1997 with the objective of promoting productive investment to assist Burkina Faso's economic and social development. It guarantees domestic and foreign enterprises the same rights and obligations and gives export-oriented enterprises many advantages.
The report states that intellectual property rights in Burkina are protected by the Bangui Agreement, and also by a 1983 Order on copyright. Counterfeiting mainly concerns manufactured products, including medicines, and has become much more common following the devaluation of the CFA franc. Notwithstanding the existence of legislation, the measures taken to combat counterfeiting remain limited.
The report concludes that the additional costs due to high import duties will be reduced when the CET enters into force and it should help to lessen nominal tariff protection in Burkina and eliminate distortions due to exemptions, which are sometimes of an ad hoc nature and do not act as any kind of incentive to investors, particularly foreign investors. Burkina's imposition of technical standards for around a dozen products and of a safeguard clause for sugar, even though it did not reserve this right, shows that the WTO Agreements should be made better known in Burkina and that technical assistance should be made available. This could help to ensure that the liberalization efforts already made by Burkina are not jeopardized.
Note to editors
The reports by the WTO Secretariat and the Government of Burkina Faso will be discussed by the WTO Trade Policy Review Body (TPRB) on 18 and 20 November 1998. The WTO's TPRB conducts a collective evaluation of the full range of trade policies and practices of each WTO Member at regular periodic intervals and monitors the trends and developments that may have an impact on the global trading system. The Secretariat's report covers all aspects of Burkina Faso's trade policy, including domestic laws and regulations, the institutional framework, trade policies by measure and by sector. Since the WTO came into force, the "new areas" of services trade and trade-related aspects of intellectual property rights are also covered.
The summary observations in the Secretariat's report and extracts from the Government's report are attached. The full text of these reports are available from the WTO Secretariat on request (telephone No. 41 22 739 5019). They are also available for journalists in the Newsroom of the WTO Website (www.wto.org). Together with the report of the TPRB's discussion and the Chairman's summing up, these two reports constitute the full review of Burkina Faso's trade policy, which will be published in due course and will be available from the WTO Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992), Australia (1989, 1994 and 1998), Austria (1992), Bangladesh (1992), Benin (1997), Bolivia (1993), Botswana (1998), Brazil (1992 and 1996), Cameroon (1995), Canada (1990, 1992, 1994 and 1996), Chile (1991 and 1997), Colombia (1990 and 1996), Costa Rica (1995), Côte d'Ivoire (1995), Cyprus (1997), the Czech Republic (1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the European Communities (1991, 1993, 1995 and 1997), Fiji (1997), Finland (1992), Ghana (1992), Hong Kong (1990 and 1994), Hungary (1991 and 1998), Iceland (1994), India (1993 and 1998), Indonesia (1991 and 1994), Israel (1994), Jamaica (1998), Japan (1990, 1992, 1995 and 1998), Kenya (1993), Korea, Rep. of (1992 and 1996), Lesotho (1998), Macau (1994), Malaysia (1993 and 1997), Mauritius (1995), Mexico (1993 and 1997), Morocco (1989 and 1996), Namibia (1998), New Zealand (1990 and 1996), Nigeria (1991 and 1998), Norway (1991 and 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the Philippines (1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 and 1996), Slovak Republic (1995), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 and 1994), Switzerland (1991 and 1996), Thailand (1991 and 1995), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994 and 1996), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).
The Secretariat’s report: summary
TRADE POLICY REVIEW BODY: BURKINA
FASO
Report by the Secretariat – Summary Observations
Burkina Faso is a least-developed country (LDC) in West Africa and has been independent since 5 August 1960. In the late 1960s, Burkina embarked upon an interventionist Marxist-Leninist type of economic policy based on national control of the economy and a large measure of State participation through State enterprises operating in priority sectors. The persistent drought that affected Burkina Faso in the 1970s, the second oil crisis in 1979-1980 and large wage increases in the 1980s added to Burkina Faso's "natural" (particularly financial) problems as a land-locked least-developed country and highlighted the limitations of its economic policy.
In order to overcome the crisis, in 1983 the Government took a number of budgetary measures (reducing Government spending and increasing revenue), as well as trade measures (in particular, more protection for the industrial sector). Some of these measures foreshadowed the reorientation of the country's economic policy, but they did not suffice and in 1991 Burkina Faso undertook its first structural adjustment programme with the support of the International Monetary Fund. This programme reflected the Government's determination to abandon State intervention, and its objectives were to open up the economy and increase participation by the private sector. It comprised inter alia an adjustment plan for the transport sector and another for agriculture and livestock farming; reforms were also undertaken in the financial sector, and in the social field, including health and education.
The reforms have made it possible to simplify the customs tariff, eliminate specific import duties and reference prices, and remove some non-tariff barriers (prior and special authorization for exports and imports, quotas, licences, price controls and monopolies) for a large number of products. Prior import declarations, however, have been introduced. In parallel with the various reform measures, the devaluation of the franc of the Communauté financière africaine (African Financial Community), which went from CFAF 50 to CFAF 100 to the French franc, has boosted the international competitiveness of some Burkina products and the growth of real GDP since 1994. For example, cattle exports to other countries in the subregion, especially in the franc zone, have increased sharply. As a result of better world prices as well as producer prices, cotton exports have also risen. Inflation has been kept in check, but performance in the area of government finance and the current balance, as well as in the industrial field, has been less successful.
Agriculture accounts for almost 40 per cent of Burkina's real GDP and over half of its export earnings: cotton is the main export product and supplies 40 per cent of these earnings. Burkina Faso also has mineral (gold, ferrous and non-ferrous ores) as well as energy resources although to date only small quantities have been discovered. Gold accounts for around 10 per cent of export earnings. The manufacturing sector is not highly developed and consists of around 60 plants which mainly manufacture food products and textiles, principally for the domestic market. Trading activities predominate in the services sector, which provides over 40 per cent of real GDP. The dynamic informal sector accounts for around 25 per cent of GDP and 80 per cent of non-agricultural employment.
Exports are affected by fluctuations in world prices (mainly for cotton, livestock products and gold) and vagaries of climate (cotton and livestock products). Exports cover only about half of imports, resulting in a chronic trade deficit. There is also a chronic deficit in the services balance caused by large outgoings for freight and insurance services as well as interest on the external debt, exacerbated by the devaluation of the CFA franc. The current account thus suffers from a structural deficit.
Burkina Faso's main trading partners are France and Côte d'Ivoire; Switzerland and Indonesia have also been important outlets for Burkina's products in recent years. Burkina Faso exports cotton principally to Switzerland, Mauritius and Indonesia, gold to France, hides and skins to Spain and Italy, and live animals to countries in the West African subregion, specifically Côte d'Ivoire and Ghana. Heavy equipment is imported from developed countries (especially France). Petroleum products are generally imported from Nigeria and Côte d'Ivoire. Burkina's imports from Côte d'Ivoire also include cement, fruit, food and chemical products, paper board and salt.
Under the 1991 Constitution (revised in 1997) Burkina Faso is a multiparty democracy. The President of the Republic is elected by universal suffrage for a renewable term of seven years. As the holder of executive power, he defines the broad outlines of State policy and appoints the prime minister. Upon the latter's proposal, he also appoints the other Members of the Government. The Government drafts and implements policies. Parliament comprises two houses, the National Assembly, which adopts legislation, and the House of Representatives, which plays an advisory role. An Economic and Social Council expresses an opinion on draft legislation, orders and decrees transmitted to it. It may also, on its own initiative, draw to the attention of the President of the Republic any reforms which it believes would promote Burkina's economic and social development.
Since 1991, Burkina Faso has implemented many institutional and regulatory reforms with the aim of creating a more favourable business environment for the development of economic and financial activities. The application of the provisions in the Treaty on the Organization for Harmonization of Business Law (OHADA) should lead to a revision of some of the laws and regulations governing trade and investment in Burkina Faso. In addition, the implementation of the WAEMU Treaty should strengthen these provisions and bring them more into line with Burkina's commitments under the WTO Agreements.
A new Investment Code entered into force in 1995 and was amended in 1997. Its objective is to promote productive investment to assist Burkina Faso's economic and social development. It guarantees domestic and foreign enterprises the same rights and obligations and gives foreign natural or legal persons the freedom to transfer capital and wages. Enterprises wishing to take advantage of these provisions must, however, keep their accounting books in Burkina Faso, give first preference for jobs to Burkina citizens, utilize services by domestic enterprises as a priority, and protect the environment. Like the Investment Code, the new Mining Code in force since 1997 gives the same advantages to nationals and foreigners wishing to invest in the mining sector in Burkina Faso. Within the framework of the WAEMU, a community Investment Code is expected to be introduced in 1998. In principle, this should lead to the elimination of duty and tax exemptions on imports of capital goods, which are subject to low rates of duty under the Common External Tariff (CET).
Burkina Faso became a Member of the WTO on 3 June 1995, although the GATT had been applied de facto since Burkina Faso became independent in 1960. In the Uruguay Round, Burkina Faso undertook several commitments in the form of binding of import duties and modes of supply of certain services. It grants all its trading partners at least most-favoured-nation treatment (MFN). It has benefited inter alia from the special and differential treatment granted to least-developed countries, notably in the form of exemptions or delayed implementation of certain provisions, and it should benefit in particular from the strengthening of rules and disciplines in the multilateral trading system in sectors such as agriculture, including livestock, which are important for the country. Burkina hopes that the integrated programme launched by the WTO and other organizations at the High-Level Meeting held in Geneva in October 1997 will go beyond the technical assistance objectives therein: Burkina's main concern is to increase and diversify production so as to be able to take better advantage of the opportunities available as well as those which should result from the continued liberalization at the multilateral level.
Burkina Faso is a founder member of the West African Economic and Monetary Union (WAEMU). This organization's aim is to create an economic union through the convergence of macroeconomic and sectoral policies and the harmonization of member countries' fiscal legislation; monetary integration, with a common central bank, the Central Bank of the West African States (BCEAO) and currency (the African Financial Community franc (CFAF)) has already been achieved. The structure of the CET has already been defined and implementation should start in July 1998, ending in January 2000, by which date the customs union should be completed. Burkina is a member of the Economic Community of West African States (ECOWAS) whose Treaty also envisages the creation of a customs union; however, the timetable for establishing the union has not been respected. Burkina Faso signed the Fourth Lomé Convention and receives aid from the European Union (EU). It is a beneficiary of the Stabilization System for Export Earnings (STABEX); a large number of its exports to the EU enjoy non-reciprocal preferential treatment in the form of exemption from import duty. Burkina's products also enjoy (non-reciprocal) preferential access to markets in developed countries outside the European Union under the Generalized System of Preferences.
Burkina has signed bilateral trade agreements with the Democratic People's Republic of Korea, Cuba, India and Tunisia. It has also signed an investment agreement with Germany and begun negotiations on similar agreements with Belgium, Canada, China, Malaysia and the Netherlands. As at May 1998, Burkina Faso had not been involved in any dispute settlement proceedings under the GATT, the WTO or any other trade agreement signed by it.
Trade policy instruments and their impact
Burkina Faso's trade policy is essentially based on duties and taxes. It adopted the Harmonized System Nomenclature on 15 February 1992. The trade reforms carried out under the structural adjustment programmes have simplified the structure of import duties. Nevertheless, Burkina's import duties are among the highest in the WAEMU. They consist of a uniform customs duty of 5 per cent, a fiscal import duty of zero, 4 or 26 per cent, a statistical tax (TS) of 4 per cent, and a special intervention tax (TSI) of 2 per cent; the customs service considers the latter two taxes to be payment for services rendered. The simple arithmetic average of import duties (i.e. all the above-mentioned duties and taxes) is 31.1 per cent, with a minimum of 6 per cent (for products only subject to the TS and the TSI) and a maximum of 37 per cent. There is only a narrow dispersion of import duties and they show a generally negative escalation from semi-finished to finished products. Products of the mining industry, wood products, transport equipment, scientific equipment and non-electrical machinery are taxed the least. For other products, the rate of import duty is near or at the maximum level.
In addition to import duties and taxes, a Community Solidarity Levy of 0.5 per cent is imposed on behalf of the WAEMU and a community levy of 0.5 per cent for the ECOWAS on imports from non-member countries of these two organizations. An additional tax of 7.5 per cent is imposed on imported sugar under a safeguard scheme set up by Burkina in March 1998. Value added tax (VAT) of 18 per cent and excise duty are also imposed on domestic products and imports: the tax on tobacco, cigars and cigarettes produced locally is 13 per cent and on imports 95 per cent, thus giving Burkina enterprises manufacturing these goods additional protection of 112 points. Export duties and taxes were imposed until 1991, but they have nearly all been abolished. The only export tax still in effect in Burkina is the special contribution to the livestock sector (CSE), which applies both to exports and to domestic sales of livestock products.
Under the Uruguay Round, Burkina Faso bound customs duties applicable to agricultural products (like other Member countries of the WTO) and to products in Chapters 45, 46, 47 and 49 of the Harmonized System at a ceiling rate of 100 per cent. Other duties and charges on imports of these products were bound at 50 per cent. The tariffs bound thus cover a relatively limited number of products; they also give Burkina Faso considerable room for manoeuvre due to the wide gap between the rates of duty bound and those applied. With the implementation of the CET, the WAEMU Commission intends to renegotiate the tariff concessions of all its member countries, including the concessions that appear in old schedules of products which were bound at a time when these countries were colonies.
In 1995, the number of products subject to technical standards was lowered from 40 to 10. Burkina has also dismantled most of the quantitative restrictions on imports. The prohibitions still in place are for reasons of security, health or compliance with international agreements signed by Burkina Faso. Imports whose f.o.b. value is CFAF 500,000 or more are subject to a Prior Import Declaration (DPI) under the Import Verification Programme. Imports whose f.o.b. value exceeds CFAF 3 million are subject to preshipment inspection by the Société générale de surveillance (SGS). With the exception of the provisions in trade agreements it has signed, Burkina Faso does not have any comprehensive legislation on rules of origin. It does not have any domestic legislation either on anti-dumping, countervailing or safeguard measures.
Burkina's authorities have made the promotion of exports one of the key elements of their trade policy. This strategy has been implemented by the adoption of a new Investment Code (amended in 1997) which confers many investment and operational advantages on exporting companies. These benefits are in the form of total exemption from customs duties and taxes and internal taxation; the operational benefits are permanent. The permanent reduction of 50 per cent of industrial and commercial profits tax given to these companies during the operational phase rises to 75 per cent if they use local raw materials accounting for at least 80 per cent of all the raw materials directly used in manufacturing. The establishment of free zones is also envisaged. In addition, VAT on exports is zero-rated with a view to possible reimbursement of the VAT paid on inputs and production factors used to manufacture exports. Exports of raw sheep and goat hides and skins are, however, banned and exports of shea nuts and cereals are subject to special authorization.
Following the devaluation of the CFA franc in 1994, the prices of a large number of products were liberalized in Burkina Faso: under the new law on competition, the prices of goods and services are free and are determined solely by market forces. Nevertheless, the prices of petroleum products, essential generic medicines, tobacco, cotton (producer price), school materials, and public utility tariffs (water, electricity, telecommunications) are still regulated. There have been delays in implementing the programme on restructuring State enterprises. Among the enterprises which enjoy a monopoly or have exclusive rights in their particular fields of activity are those which Burkina Faso considers "strategic". There are 15 of these, and they are present in most sectors.
In Burkina Faso, intellectual property rights are protected through the Bangui Agreement on Industrial Property signed by around 15 African countries (the African Intellectual Property Organization (AIPO) was set up under this Agreement) and by the 1983 Copyright Order together with its implementing texts. Work is in hand at the AIPO to bring the provisions of the Bangui Agreement into line with the obligations of WTO Members under the Agreement on Trade-Related Aspects of Intellectual Property Rights. In Burkina Faso, counterfeiting mainly affects manufactured products, including medicines, and has developed significantly following the devaluation of the CFA franc. Despite the existence of legislation, the measures taken to combat counterfeiting are limited. Counterfeit goods can only be held at the border if the right-holder concerned makes a complaint. The inadequacy of the means used to combat fraud and counterfeiting and of the cooperation among the various services involved (particularly the police and customs services) is one of the problems faced in implementing the relevant provisions in Burkina. An action programme has been drawn up to improve the protection of copyright.
The reforms undertaken by Burkina Faso in 1991 have affected sectors of activity in different ways. In the mining sector, they have been underpinned by the adoption of a more liberal Mining Code that is more attractive to private investment. The marketing of products of the mining industry has been liberalized and non-tariff barriers abolished; the mining sector is the sector in which tariff protection is lowest.
As occurred in the mining sector, the devaluation of the CFA franc has helped to accelerate agricultural reform, the competitiveness of certain local products being strengthened by the new parity. Sugar remains protected by several measures, including a special safeguard clause not announced by Burkina (Article 5 of the WTO Agreement on Agriculture). A State company, la Société sucrière de la Comoé, has a monopoly of sugar imports and is the only producer in the country. Sugar is also subject to technical barriers in the form of standards, together with some other products: preserved foodstuffs of animal origin, wheat flour, edible vegetable oils, milk, rice, cold curing vulcanizing glues, pesticides, insecticides and by-products; type R6 or R20 saline electric batteries, and tyres and inner tubes. In addition, import duties on agricultural products remain relatively high. The ban on exports of raw sheep and goat hides and skins, State intervention in production and particularly in the marketing of certain products, especially cotton, and the special authorizations required for the export of shea nuts and cereals all raise doubts concerning their relevance to the objectives of diversification and promotion of exports on the one hand and improving the living conditions of the rural population on the other.
The manufacturing sector enjoys the greatest tariff protection, just in front of agriculture. The structure of import duties is not, however, favourable to development of Burkina's manufacturing sector, which explains the use of exemptions, even on an ad hoc basis. In addition to the structure of import duties, the high cost of certain inputs due to the price of energy (including electricity and fuel) and transport hinder the international competitiveness of manufactured goods produced locally. The devaluation of the CFA franc did not manage to redress this situation, which is compounded by the remnants of the import substitution strategy: for a long time, this strategy was underpinned by State intervention through State-owned enterprises, some of which are still active and provide basic services such as telecommunications. A large percentage of the so-called strategic enterprises are active in the services sector. The delays in carrying out the privatization programmes also explain the strong presence of State companies in this sector. In addition, Burkina's commitments under the General Agreement on Trade and Services are restricted to certain aspects of the supply of services and do not cover services unilaterally liberalized by Burkina under the structural adjustment programmes.
Trade policies and foreign trading partners
The trade reforms under way in Burkina Faso are part of the structural adjustment programmes launched in 1991. Although liberalizing reforms have been carried out in the import sector, a great deal remains to be done to promote exports, which are the heart of the country's major economic objective, namely, export-based sustainable economic growth. Some measures in force in Burkina Faso, especially in the area of trade policy, conflict with this objective as formulated. Burkina's land-locked situation already constitutes a natural barrier to international trade. In addition to being land-locked and having an inadequate communications network with the outside, the high cost of transport is also the result of landing and handling fees at Ouagadougou airport and the State monopoly of supply and even in certain cases distribution of energy. These factors work to hamper the international competitiveness of Burkina's exports.
In the agricultural sector, the objective of diversifying and promoting exports conflicts with measures aimed at the valorization of certain products and food self-sufficiency. For example, raw sheep and goat hides and skins cannot be exported, even though domestic industries do not have the capacity needed to process all those produced. Likewise, the special authorization required for the export of shea nuts and cereals for reasons of food self-sufficiency (even if that is not the official reason) make Burkina's participation in international trade in these goods unstable, even if only potentially. Consequently, these authorizations do not help to guarantee market shares for the development of such exports. Neither do they encourage Burkina's producers who, if local prices were more profitable, would not feel the need to export their goods, particularly in view of Burkina's landlocked situation.
The additional costs due to high import duties will be reduced when the CET enters into force. It should help to lessen nominal tariff protection and eliminate distortions due to exemptions, which are sometimes of an ad hoc nature and do not act as any kind of incentive to investors, particularly foreign investors. Lastly, Burkina's imposition of technical standards for around a dozen products and of a safeguard clause for sugar (for the time being), even though it did not reserve this right under Article 5 of the Agreement on Agriculture, show that the contents of the WTO Agreements should be made better known in Burkina and that technical assistance should be made available to ensure that they are respected. This could help to ensure that the liberalization efforts already made by Burkina Faso are not jeopardized, especially following the entry into force of the WAEMU arrangements, which should increase competition by products from neighbouring countries.
Back to topGovernment report
TRADE POLICY REVIEW BODY: BURKINA
FASO
Report by the Government
Introduction
Burkina Faso has an area of 274,200 km2. It is one of the least-developed countries on the African continent. Currently estimated at around 10.5 million, its population is increasing at a rapid 2.8 per cent per year. The result is that more than half of the Burkina population is now under 20 years of age.
The country has limited natural resources and is exposed to the vagaries of the Sahelian climate, which means insufficient and uneven rainfall. It is also land-locked. Its economic infrastructure is under-developed and many remote regions are virtually isolated during the rainy season. Another major handicap is the lack of energy resources. The country's principal local resource remains its flora, the over-exploitation of which is currently threatening the environment. Other energy sources are of foreign origin (hydrocarbons) and are available at very high prices.
Burkina Faso nevertheless has some assets that offer hope of overcoming under-development and launching a process of sustainable growth. The first is doubtless its human resources, often reputed to be disciplined and hard-working. The second is political stability and relative social peace achieved by a Government which, since 1987, has instituted sweeping political and structural reforms constantly guided by the quest for consensus. With the adoption of the Constitution of 2 June 1991, Burkina Faso became a pluralist democracy.
General trade policy objectives
Since 1991, Burkina Faso has carried out a series of economic reforms designed to end Government involvement in the competitive sectors and liberalize the economy. The private sector is now recognized as the engine of economic growth, which must remain above 5 per cent per annum if Burkina Faso is effectively to launch sustainable development. The Burkina Government strategy of private sector development is intended to create a competitive and productive economy driven by that sector.
The Government's general objectives in this regard are:
? To liberalize trade;
? to improve the regulatory framework for the creation and exercise of private enterprise by both nationals and foreign investors;
? to enable business to develop within a dependable legal framework in line with international standards;
? to put in place measures for rapid adaptation to the rules of the West African Economic and Monetary Union (WAEMU) and the WTO;
? to facilitate speedy adjustment to economic trends by making employment laws more flexible;
? to enhance the productivity and efficiency of private-sector support institutions, especially those run directly by the State;
? to combat fraud and corruption;
? to institute permanent and fruitful dialogue with the private sector;
? to reduce the cost and/or improve the quality of Government-run public services;
? to provide better conditions of corporate financing in general and for small- and medium-sized enterprises in particular;
? to lighten the tax burden on the formal sector;
? to ease customs duties on inputs;
? to strive to provide enterprises with more modern and efficient services;
? to foment the technical upgrading of the local workforce;
? to step up the creation and restoration of serviced industrial zones;
? to continue to develop serviced zones for different activities;
? to encourage the reduction of some transport costs;
? to improve the efficiency and fluidity of Burkina Faso’s roadways.
General description of the import and export regime
The importation, exportation or re-exportation of non-prohibited goods is free. The following legal instruments govern the general import and export regime: Ordinance No. 91-069 of 25 November 1991 and its Implementing Decree No. 94-014 of 25 November 1991 and Law No. 15/94 of 5 May 1994 on competition and consumption. This Law institutes an autonomous advisory body, the National Competition and Consumption Commission (CNCC), which oversees the functioning of the rules of competition in the economy and ensures consumer protection. It authorizes the Minister for Trade to regulate prices provisionally under the conditions established by decree or dictated by crisis or emergency situations that may interfere with the free play of market mechanisms.
Import licensing has been eliminated as part of the measures taken under the structural adjustment programme. For health reasons, however, the importation of some products is banned, an example being asbestos-based products.
Decree No. 98-118/PRES/PM/MEF of 31 March 1998 instituted a 1 per cent levy of the f.o.b. value of goods subject to prior import declarations to cover the cost of the import verification programme.
The export of Burkina products merely requires authorization from the Business Promotion Centre. For statistical purposes, cereal exports are subject to an export declaration (Notice to Exporters No. 96-002/MCIA of 1 March 1996). Shea nuts are also subject to special authorization for the same reasons. The export of raw goat or sheep skins is prohibited (Notice to Exporters No. 95-453/MICM/SG/DGRS of 7 July 1995). This provisional measure is fully consistent with the aims of the policy to promote and valorize livestock by-products and with that of supporting the initial stages of the privatization process.
Implementation of trade policy
Trade policy measures implemented in Burkina Faso
Since 1991, Burkina has been steadfastly following a policy of economic liberalization that culminated in a major customs tariffs reform in 1992, with the enactment of Law No. 12/92/ADP of 22 December 1992.
Under this Law, imported goods are divided into three categories, the first containing essential and special goods, the second, intermediate goods (raw materials and capital goods), and the third, all other products (not falling into the two preceding categories).
This classification was based on product affinity and their degree of processing, and was mindful of the need to promote domestic production units, safeguard domestic industry and prevent certain products from increasing the tax burden.
Under the new tariff, import duties and charges include:
? Customs duty (DD): 5 per cent, flat rate;
? Fiscal Import Duty (DFI): 0 per cent, first category;
? Statistical Fee (STAT): 4 per cent, flat rate; 4 per cent, second category;
? Community Solidarity Levy (PCS): 1 per cent, flat rate; 26 per cent, third category;
? Value Added Tax (VAT): 18 per cent for the second and third categories; 0 per cent for the first category;
? Special Intervention Tax (TSI): 1 per cent.
Since 1 January 1993, tax has been applied ad valorem across the board to import and export products. Pursuant to Regulation No. 02/97/CM/UEMOA of 28 November 1997 adopting the Common External Tariff (CET), the DFI rates were modified by Ordinance No. 98-001/PRES of 9 July 1998. The new rates are 0 per cent, 5 per cent and 20 per cent for categories I, II and III respectively. The TSI has been scrapped. Excise taxes under the customs tariff schedule remain in force (VAT, taxes on soft drinks, coffee, tea and tobacco). The STAT has also been retained at 4 per cent. The DFI is three-tiered and varies according to product classification.
The documents required for customs formalities are the importer's card, the purchase invoice, the invoice showing the insurance premium, the certificate of origin, the customs valuation certificate and, if necessary, the phytosanitary certificate.
Customs valuation and preshipment inspection
The prevailing customs valuation method is based on the transaction value of the goods. The customs valuation principles that presently apply in Burkina Faso are based on Article 22 of the Customs Code. A system of compulsory preshipment inspection of goods has been in operation since 1992. Accordingly, all imports must comply with the formalities of the inspection company, which are:
? Preparing an import application for any invoice in excess of CFAF 3 million (maritime transport);
? having the goods checked before loading;
? producing the definitive invoice after inspection;
? obtaining a customs valuation certificate that must be submitted to the customs authorities when the goods are being cleared.
In the event of undervaluation, the inspection company rejects the values shown on the invoice and makes the necessary adjustment in the light of the information available to it in the country of importation or based on the value of similar products. Any adjustments are mentioned on the customs valuation certificate.
Ongoing trade liberalization under the customs adjustment programme
Between 1966 and 1990, the Burkina economy was tightly regulated under an economic strategy that relied on the public sector for investment and growth. The hoped-for results did not materialize. Since 1991, Burkina Faso has been implementing an economic liberalization programme with IMF and World Bank support. The Government's objective in that framework has been to foster an environment favourable to private initiative. Accordingly, steps were taken such as the elimination of import licensing, the removal of import and export restrictions and the realignment of laws and regulations to suit the new and highly liberal economic environment.
Trade policy is but one component of a broader policy encompassing investment, transportation, tourism, financial services, and a legal and regulatory framework for fostering and developing business and employment. These elements are all interrelated and interdependent insofar as they help to ensure the prosperity of the population as well as sustainable economic growth.
During the 1980s, low national income and economic under-development had prompted the Government authorities to embark on a voluntaristic development policy characterized by increased public investment in both infrastructure and the production sector. Household savings and corporate profits were too low to generate sufficient resources to meet investment needs. That explained the public sector share of over half of total gross fixed capital formation.
Yet these endeavours were not enough to offset the effects of a very high rate of population increase (almost 3 per cent per annum) and the structural weaknesses stemming specifically from insufficient savings and a chronic trade deficit (average rate of coverage of imports by exports being 35 per cent). The various adjustment programmes launched since 1991 in conjunction with the IMF and World Bank have been designed to stabilize the economy and restore conditions for sustainable growth and to improve the management of public finances.
To boost the population's earnings and accelerate the development of human resources and production potential, the Government used a letter of intent to set out a policy strategy for sustainable human development. The principal objectives of this policy for the 1998-2000 period may be summed up as follows:
? Ensuring average real GDP growth of at least 5.5 per cent between 1998 and 2000;
? containing annual inflation at 3 per cent per annum;
? reducing the external deficit on current account, excluding grants, to 10 per cent of GDP by 2000;
? stabilizing public sector investment at around 13 per cent of GDP in the 1990-2000 period and the component financed by domestic budgetary resources at 2.7 per cent of GDP for the same period;
? improving social infrastructure and increasing life expectancy from the current 48 years to 57 years by 2005;
? fomenting the private sector by reinforcing the legal system so as to provide an atmosphere of greater security for private sector activity;
? strengthening the role of women in the development process;
? continuing to overhaul the banking system;
? developing and diversifying export potential;
? completing the liberalization of the export and import sectors;
? pressing ahead with the programme of reform of public enterprises;
? conducting an exhaustive survey of Government holdings in enterprises and a strategic analysis of the Government's portfolio;
? opening the telecommunications sector to competition and putting in place a strategy for the partial privatization of ONATEL;
? pursuing regional economic integration;
? completing Burkina Faso's integration into the multilateral trading system managed under the WTO agreements.
To these ends, the Government has undertaken to promote investment and domestic saving while redirecting investment towards priority sectors.
Between 1998 and 2000, export value is expected to increase by an annual average of 19 per cent and volume by 13 per cent, mainly owing to a steady increase in cotton output. In parallel, the external debt roll-back under the initiative to assist poor debt-ridden countries will restore the debt service / export ratio to a sustainable level. With the support of partners, the triennial investment programme will be pursued within the terms of the macroeconomic framework of reforms between 1998 and 2000, designed to enhance the Government's capacity to manage and rationalize its expenditure.
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This trade policy report shows that Burkina Faso is pursuing its economic liberalization programme unflinchingly. In that context and in order to create a more business-friendly institutional climate, the ongoing reforms within WAEMU, OHADA and the WTO will continue and the relevant adjustments will be made for their implementation in Burkina Faso.
Actions for the coming three years will cover:
? The drafting of a Community Investment Code;
? the effective harmonization of Government finance statistics;
? the application of the West African Accounting System (SYSCOA) and the Treaty of the Organization for the Harmonization of Business Law in Africa (OHADA);
? the application of the Common External Tariff;
? multilateral surveillance and the accompanying penalties;
? implementation of the actions under the integrated ITC/UNCTAD/WTO programme;
? the inauguration of a Centre for Business Formalities (single window) is almost a reality, aimed at bringing the public and private sectors closer together;
? streamlining administrative procedures, improving the Institutional Code, adapting laws and regulations to the new, highly liberal economic environment all have a single purpose: to foster a climate in which a liberal economy will thrive;
? the sound management of a liberal economy calls for more entrenched democracy, better governance and the furtherance of structural reforms.