Country Report Central African Republic October 1998 Main report

Economy: Substantial advances are to be made towards privatisation --

Privatisation owes its place in the ESAF programme to donors' desire to break, or at least weaken, the link between clientilist politics and economic management, an issue that goes well beyond the simple question of improving enterprise efficiency and financial performance. A significant part of the political elite shares this point of view, though one must wonder how many are genuinely motivated by a desire to change the system and how many are simply resentful of Mr Patasse's control of the levers of patronage. The top privatisation priorities are telecommunications, power and the state petroleum company, Petroca, though fuel stocks will be placed in the hands of a new joint-venture company, Sogal, in which the state would hold a stake of up to 25% for a transitional two- to three- year period. The IMF has set a deadline of end-1999 for completing the disposal of the power and telecommunications parastatals. Preparatory work for these privatisations has already started. The ESAF agreement also commits the government to transferring the CAR's two main commercial banks, the Union bancaire en Afrique centrale and the Banque meridien BIAO-Centrafricaine, to the private sector.

-- but regulation is required

A natural accompaniment to the privatisation programme is the implementation of a more transparent regulatory system, to create an open playing field for investors. The ESAF accord envisages reform of the judicial system and the introduction of new labour and mining codes. These are likely to be more liberal, reducing the burden of red tape encountered by business. However, doubts persist as to whether a new regime will genuinely be implemented and, if so, whether it will be any more effective in ensuring a fair and less corrupt framework of commercial law. To some extent the shape of the new business law environment will depend on the evolution of ongoing efforts to promote a harmonised legal code for the region.

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