2009 Index of Economic Freedom

Quick Facts

Population:

• 18.9 million

GDP (PPP):

• $31.2 billion
• 0.3% growth
• 0.1% 5-year compound annual growth
• $1650 per capita

Unemployment:

Inflation (CPI):

• 2.1%

FDI Inflow:

• $253.4 million

Côte d’Ivoire’s economic freedom score is 55, making its economy the 119th freest in the 2009 Index. Its score is 1 point higher than last year, reflecting significant increases in trade freedom and fiscal freedom. Côte d’Ivoire is ranked 21st out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world average.

Côte d’Ivoire is one of the largest economies in the region and has relatively high scores in government size, monetary freedom, and financial freedom. Government expenditures are low, but in light of the unstable economic environment, this is likely a sign of government weakness rather than efficiency. Inflation is moderate, but the government subsidizes certain basic goods.

Political instability makes it difficult to invest in Côte d’Ivoire even though the state nominally welcomes capital. Commercial regulation and bureaucratic red tape are burdensome. The average tariff rate is moderate, but imports are subject to substantial non-tariff barriers. Property rights are not secured by an independent judiciary, and corruption is debilitating. Despite some improvements in tax administration, budget management has been strained by expenditure increases in the form of subsidies to the electricity sector and delayed tax collection from the national oil company.

Background Back to the top

Côte d’Ivoire is the world’s leading cocoa producer. The economy relies on cash crops, and the agricultural sector, which employs more than 60 percent of the population, accounted for 28 percent of GDP in 2005. After years of political instability, much economic activity, including regional trade, has moved to the informal sector, and most businesses operate far below capacity. Civil war erupted in 2002, splitting the nation between a rebel-controlled North and a government-controlled South. A tenuous peace was reached in 2003. Under the 2007 Ouaga-dougou Accord, Côte d’Ivoire was reunified, U.N. peacekeepers withdrew from the cease-fire line dividing the country, and new elections were scheduled.

Business Freedom 45.8 Back to the top

The overall freedom to conduct a business is seriously restricted by Côte d’Ivoire’s regulatory environment. Despite efforts to increase transparency, red tape and bureaucracy persist. Starting a business takes an average of 40 days, compared to the world average of 38 days. Obtaining a business license requires more than the world average of 18 procedures and 225 days. Closing a business can be costly and prolonged.

Trade Freedom 70.4 Back to the top

Côte d’Ivoire’s weighted average tariff rate was 7.3 percent in 2006. Import fees and taxes, some services market access restrictions, minimum price floors for some imports, import prohibitions and restrictions, import authorization requirements for certain goods, corruption in customs and government procurement, and weak enforcement of intellectual property rights add to the cost of trade. Fifteen points were deducted from Côte d’Ivoire’s trade freedom score to account for non-tariff barriers.

Fiscal Freedom 58.1 Back to the top

Côte d’Ivoire has high tax rates. The top income tax rate is 60 percent, and the top corporate tax rate has been reduced to 25 percent. Other taxes include a value-added tax (VAT) and a tax on interest. In the most recent year, overall tax revenue as a percentage of GDP was 15.3 percent.

Government Size 87.6 Back to the top

Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 20.3 percent of GDP. Social and political instability have prevented meaningful progress in priva-tization.

Monetary Freedom79.1 Back to the top

Inflation is moderate, averaging 3.0 percent between 2005 and 2007. The government regulates the prices of pharmaceuticals, petroleum products, and public-sector goods and services, and cocoa and coffee prices and quotas are part of a price stabilization program. Ten points were deducted from Côte d’Ivoire’s monetary freedom score to account for policies that distort domestic prices.

Investment Freedom40.0 Back to the top

Foreign and domestic investors are treated equally. There is no investment screening, and investment incentives are offered in various areas. Corruption and burdensome contract enforcement inhibit investment. Residents may hold foreign exchange accounts with the approval of the government and the Central Bank of West African States (BCEAO), and non-residents may hold them with BCEAO approval. Transfers to countries other than France, Monaco, and certain regional countries require government approval. Other transfers are subject to requirements, controls, and authorization, depending on the transaction. Many capital transactions are subject to government authorization. Freehold tenure outside of urban areas is difficult, and most businesses opt for long-term leases

Financial Freedom60.0 Back to the top

The financial sector is dominated by banking. The regional BCEAO governs banking and other financial institutions. There were 20 commercial banks and three other financial institutions in 2007. The largest banks include foreign ownership and are more reliable in the unstable climate. The financial system remains functional, but commercial banks in rebel-controlled areas are closed. The government has sold its shares in smaller banks and has only minority holdings in several larger institutions. Trading on the Côte d’Ivoire–based regional stock market is minimal despite 45 company listings.

Property Rights30.0 Back to the top

The judiciary is constitutionally independent but slow, inefficient, and subject to executive branch, military, and other outside influence. Judges serve at the discretion of the executive, and it is common for judges who are open to bribery to distort the merits of a case.

Freedom From Corruption21.0 Back to the top

Corruption is perceived as pervasive. Côte d’Ivoire ranks 150th out of 179 countries in Transparency International’s Corruption Perceptions Index for 2007. Government corruption and lack of transparency affect judicial proceedings, contract awards, customs and tax issues, and the accountability of the security forces.

Labor Freedom57.8 Back to the top

Côte d’Ivoire’s burdensome labor regulations hinder employment opportunities and productivity growth. The non-salary cost of employing a worker is relatively low, but dismissing a redundant employee is costly. Regulations on work hours remain rigid.