CAMEROON: TOUGH TIMES AHEAD

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00552R000100040003-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 27
• Document Creation Date: December 22, 2016
• Document Release Date: January 27, 2011
• Sequence Number: 3
• Publication Date: February 1, 1983
• Content Type: REPORT

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Intelligence
Cameroon:
Tough Times Ahead
ALA 83-100/3
Februarn 1983
Copy 268
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Cameroon:
Tough Times Ahead
A Research Paper
This paper has been prepared by
Office of African and Latin American Analysis.
Comments and queries are welcome and may be
addressed to the Chief, West and East Africa
Division, ALA,
Directorate of Operations
Secret
ALA 83-10013
February 1983
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Cameroon:
Tough Times AheadF_~ 25X1
Key Judgments Cameroon has been a model of economic progress and political stability
Information available since it gained independence in 1960 because of the careful use of the
as of 29 December 1982 country's resources and the effective leadership of former President
was used in this report.
Ahmadou Ahidjo, who resigned in November 1982. Despite this strong
past performance, however, we believe the country will face significant
economic challenges over the next few years as a result of less favorable in-
ternational economic conditions and an overly ambitious domestic develop-
ment program. Cameroon's newly installed President, Paul Biya, will be
required to make and impose tough economic decisions to keep the country
on a strong development track.
Cameroon's historically strong development effort received a major boost
in late 1977 when the country became an oil producer. Production is
currently around 100,000 barrels per day and brings in almost $1 billion in
foreign exchange annually. We anticipate these oil earnings could increase
to $1.6 billion by mid-decade
Optimistic Cameroonian Government officials are counting on this oil
money to help finance an $8 billion investment program through 1986 that
is critical to maintaining the country's economic health. The program
includes agricultural projects, port construction, and exploitation of miner-
al resources, such as petroleum and natural gas. Government planners
project real economic growth to average 7 percent through the mid-1980s.
We believe the Cameroonian economy cannot support a development plan
of this magnitude, and that real economic growth is not likely to average
more than 5 percent-approximating the historic average-over the life of
the plan. In our opinion, manpower and transport deficiencies will limit the
country's ability to absorb the rapid infusions of capital and equipment
required by the plan. The country's cumbersome bureaucracy will also
retard Cameroon's capacity to implement the plan.
Even if Cameroon could overcome these constraints, we expect financial
deficits will jeopardize completion of the plan. The program, written in
1979-80, anticipated the continuation of a strong world oil market and
positive global economic growth. Since this assumption proved incorrect
we believe that government revenues are substantially overestimated.
Secret
ALA 83-10013
February 1983
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We also believe Yaounde will fail to locate overseas financing for all of the
$4-5 billion that-considering the softer oil market-we project it will
need to complete the Ian.
the Mexican and Brazilian financial crises
are making Western bankers much more conservative in lending to Third
World governments. In addition, France-Cameroon's primary donor and
foreign investor-has financial problems of its own and would be hard
pressed to come up with the volume of funds we forecast as needed.
We expect that Cameroonian officials will approach the United States for
help, either on their own initiative or at the request of the French.
Comments by senior Cameroonian officials indicate that Yaounde, capital-
izing on what it believes are recently improved ties with Washington, will
look to the United States for economic aid, particularly to fund agricultur-
al projects. Cameroon also is likely to expect private US investment to
increase significantly as a result of the groundwork laid by the US trade
and investment mission in 1982.
As traditionally inward-looking Cameroon seeks new sources of interna-
tional financing over the next few years, it is possible that it could turn also
to the Soviets or Libyans, but we believe this is not likely. Cameroonian
leaders in and out of government are strongly anti-Soviet and anti-Qadhafi.
Also, with the country needing large-scale economic rather than military
assistance, there seems virtually no likelihood that Moscow or Tripoli will
succeed should they woo the new government.
We believe the government within the next two years will be forced to cut
back its development program because of financing difficulties. Cutting the
plan, however, will carry not only economic but political risks. Biya will
have to be especially careful of the reaction of English-speaking-and oil-
rich-western Cameroon, where residents have long resented what they
believe to be second-class treatment by a French-dominated bureaucracy, a
problem rooted in Cameroon's dual colonial legacy. Spending cuts will
affect housing and other public services, and the government's inability to
satisfy popular expectations could contribute to urban unrest
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Steady Progress
A. Cameroon's FY 1982-86 Development Plan
B. Making the Most of Oil
C. Methodological Notes on Economic Forecasts
3. The Fifth Five-Year Development Plan, FY 1982-86
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Figure 1
Road
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Airfield
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Western region
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EQUATORIAL
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Cameroon:
Tough Times Ahead
The Economy-A Synopsis
Steady Progress
Under the Ahidjo regime, Cameroon experienced
moderate, broad-based economic expansion between
independence in 1960 and 1975, according to US
Embassy sources and data provided by the Interna-
tional Monetary Fund (IMF). Led by gains in local
food and export crops, real growth averaged 4.6
percent annually through the mid-1970s. Ahidjo's
favorable agricultural pricing policies helped double
the production of cocoa and coffee-Cameroon's prin-
cipal exports during the 1960s-to account for over
half of export earnings. Cameroon became the fifth-
largest producer of cocoa and ranked high among
coffee exporters during this period. Moreover, Camer-
oonian farmers diversified their exports to include
cotton, rubber, bananas, palm kernels, peanuts, tobac-
co, and tea. Cameroon even retained its status as a net
food exporter, a rarity in black Africa.
The most dramatic progress, however, was made in
manufacturing, which, according to US Embassy
sources, averaged an impressive I1-percent annual
expansion during the period. Led by agricultural
processing, the industrial contribution to GDP had
risen from 10 percent in 1960 to 16 percent by 1975.
We believe this performance was spurred by preferen-
tial treatment given to both domestic and foreign
investors under Cameroon's liberal investment code,
which allowed, among other benefits, duty-free im-
ports of raw materials and machinery and exemption
from taxes on products and profits for three to 10
years. Numerous industries also were developed to
produce a wide variety of consumer goods, including
shoes, textiles, soap, and paper containers.
Yaounde, during the first 15 years of independence,
relied heavily on its former colonial ties to France to
develop the modern sector. France was Cameroon's
major trading partner and aid donor, providing both
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Cocoa
Coffee
Cotton
Export bananas
Palm kernels
Peanuts
Rubber
Sugar
Tea
Timber
Tobacco
Bauxite deposit
Aluminum refinery
Hydroelectric plant
Petroleum refinery
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generous financial and technical assistance for con-
struction projects, marketing facilities, and improved
agricultural production and education. French man-
agers dominated banking, foreign trade, industry, and
plantation agriculture. Membership in the French-
backed Central African Customs and Economic
Union (UDEAC) also facilitated trade between Cam-
eroon and other member African states because of the
shared convertible currency.
Weathering World Market Price Fluctuations
Like many LDCs, Cameroon benefited from the
tropical products boom in the mid-1970s, which
helped the country pull out of the world oil shock of
1973-75. Our analysis indicates that increased cocoa
and coffee revenues and Western donor assistance
were the primary forces behind the growth in real
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Table 1
Cameroon: Selected Financial Indicators
Trade balance
40.5
31.2
Exports (f.o.b.)
828.1
1,078.5
Of which:
Coffee
400.4
320.1
356.1
299.4
235.0
220.0
Oil
25.0
265.0
720.0
1,100.0
850.0
Imports (f.o.b.)
787.6
1,047.3
1,314.7
1,550.4
1,735.0
1,800.0
Current account balance
-109.4
-187.0
Foreign exchange reserves
(yearend)
42.4
52.3
a Estimated.
b Projected.
GDP, which climbed from 1.5 percent in 1975 to 4.0
percent yearly during 1976-78, approximating the
average of the previous 15 years. Even with the more
rapid growth, according to the IMF, inflation re-
mained manageable largely because Yaounde's re-
strictive credit policies and public-sector wage re-
straints damped consumer demand without crimping
investment. In fact, Fund reports indicate surging
public and private outlays boosted average annual
domestic investment to 20 percent of GDP during
1976-78, 5 percentage points above the share at the
start of the decade. Although our analysis indicates
investment-induced borrowing caused the external
debt-largely to France and the United States-to
top $1 billion by 1978, the debt service ratio remained
low at only 8 percent (see table 1).
The Impact of Oil
Cameroon began pumping oil in late 1977 at an
offshore field operated by a French-US consortium
and by the end of 1978 was a net oil exporter. The US
Embassy reports that while many other LDC econo-
mies began to sputter in the late 1970s in the face of a
global commodities slump, Cameroon easily weath-
ered the decline as it began to benefit from oil
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First Five-Year Plan: 1961/62-1965/66
Cameroon's first plan was prepared by two private
French consulting firms and covered only French-
speaking Cameroon. When reunification occurred in
October 1961, the program was subsequently extend-
ed to the whole country. This plan emphasized
agricultural production, roads and railways, and
social projects. Total planned investment amounted
to $148 million (current dollars).
Second Five-Year Plan: 1966/67-1970171
Although the second plan was written primarily by
French consultants, it was the first to use various
planning structures at the local, department, provin-
cial, and national levels. It was also the first plan to
set up a program to achieve Ahidjo's goal of doubling
per capita income by 1980. The plan was known as
the Farmer's Plan. Education, transportation, and
industrialization efforts were also emphasized. Total
spending amounted to $462 million.
We believe Cameroon has been more successful than
West Africa's two other major oil producers-Nigeria
and Gabon-in managing its oil windfall. US Embas-
sy reporting indicates the government has employed
oil money and other financial resources to build up
other sectors of the economy, specifically agriculture
and industry. As a result, by the end of 1981 econom-
ic growth had topped 6 percent for the third year in a
row. Oil production increased by more than 25 per-
cent to 88,000 barrels per day (b/d), while agricultur-
al output increased-although at a rate somewhat
lower than earlier years-as a result of the govern-
ment's favorable pricing policies and good weather
conditions. Industrial performance was also strong,
led by food processing activities
Third Five-Year Plan: 1971/72-1975/76
The third plan was thefirst written by Cameroonians.
Its preparation also involved more local participation
than either of the two preceding plans. The third plan
was labeled the "Plan of Production and Productivi-
ty"because of its emphasis on industrial development
and commerce. Total spending amounted to $784
million.
fourth plan amounted to $2 billion.
Fourth Five-Year Plan: 1976177-1980/81
In addition to those local elements that participated
in the preparation of the previous two plans, the
drafting of the fourth plan included village develop-
ment committees, sectoral study groups, and the
provincial and national planning commissions. The
fourth plan also brought modern methods of growth
analysis and statistics into the planning process. In
particular, the fourth plan focused on projects to
eliminate bottlenecks, especially the still acute trans-
portation deficiencies, that hinder a more rapid devel-
opment of the economy. Investment costs during the
In addition, Cameroon moved ahead in reducing its
chronic current account deficit. More than $1 billion
-in 1981 oil revenues again offset depressed cocoa and
coffee receipts. Yaounde's fiscal policies also held
nominal import growth that year to little more than
10 percent. As a result, we estimate that Yaounde had
by then contained its current account deficit to under
$200 million (the lowest since 1977), an amount easily
financed by foreign donors and bankers against the
collateral of Yaounde's oil potential. Although the
external debt climbed to $2.4 billion by the end of
1981, the 15-percent debt service ratio was still fairly
low for an LDC. Typical of many LDCs in the throes
of an oil boom, however, Cameroon began to experi-
ence increased demand-generated inflationary pres-
sures as public expectations rose sharply.
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We believe that economic growth during 1982 proba-
bly equaled 1981's impressive rate but at some cost.
The slack world oil market and increased domestic
consumption reduced oil export earnings to only about
$850 million. This downturn, along with still de-
pressed sales of cocoa and coffee, cut total export
earnings to only about $1.5 billion, down nearly $400
million from 1981 and the lowest since 1979. With
import and service charges on the rise as Yaounde
accelerated its 1981-86 development program, we
believe the current account deficit hit some $650
million, which available data indicate is the largest
since independence.
con borrowed about $400 million from various inter-
national sources. The remaining $250 million came
from an estimated $900 million in overseas oil invest-
ments that the government had been accumulating as
a financial cushion since the startup of its oil produc-
tion
The Financial Picture
Cameroon, unlike most of its West African neighbors,
has an opportunity to regain and maintain a strong
financial position over the next several years. We
believe, however, that this will require the Cameroo-
nian Government to make extensive and politically
risky adjustments in the current development pro-
gram (see appendix A). These would involve canceling
or delaying indefinitely many prestige projects that
are the basis for regional industrialization schemes.
The government would have to carry out a careful
balancing act to ensure that various interest groups,
particularly those in English-speaking West Camer-
oon, do not feel that they are suffering disproportion-
ately from budget reductions. Such changes could
probably be carried out fairly easily if Ahidjo were
still at the helm. President Biya does not have
Ahidjo's prestige, however, and in our view will be less
able to resist pressure from his supporters to maintain
Should Cameroon manage to implement the fifth
development plan as it now stands, we estimate that
the country will face a cumulative current account
deficit of $4-5 billion over the period 1982-86 (see
table 2) and will have an overall debt by the end of
1986 in excess of $6 billion.' In addition, we believe
Yaounde will be forced to draw down its remaining
$650 million financial buffer (oil earnings held
abroad)-perhaps as early as next year-just to make
ends meet. Cameroon could, as a result, be forced to
turn to the IMF for balance-of-payments assistance or
perhaps to the London or Paris Clubs for debt
rescheduling by the end of the decade.
Official Cameroonian estimates differ substantially
from our projections. Planning officials project a $2
billion cumulative surplus by the end of 1986. There
are several reasons for the discrepancy, including
what we believe are overly optimistic production and
price projections for the country's agricultural ex-
ports. The principal factor in such a large variance,
however, is Yaounde's projected rate of oil produc-
tion, a figure twice as high as that forecast by officials
of US oil companies operating in Cameroon.
apparently believes, according to US Government
officials, that oil production will not drop off until
some time in the 1990s, expect a
decline beginning in 1988 unless substantial new finds
are made (see appendix B).
In carrying out its proposed investments, the Camer-
oonian Government is counting on at least $5 billion
in loans, which would account for 60 percent of total
projected spending. According to the plan, Cameroon
expects io garner $3.2 billion in project-related fi-
nancing from international banks and private Camer-
oonian interests. Because Cameroon's domestic bank-
ing sector is still underdeveloped and the government
has shown no signs of imposing forced savings through
additional taxation, most of this amount must come
those parts of the plan of benefit to them.
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from foreign banks. Even though Cameroon currently
has a solid credit rating, we believe the government
will be unable to borrow anywhere near this amount.
Yaounde also expects to borrow $1.8 billion from
foreign government sources; $500 million from the
Franc Zone and another $1.3 billion in aid credits
from Western donors. Again, we are not optimistic
that Cameroon will be able to borrow these amounts.
The Franc Zone itself is in severe financial straits
position.
because of chronic foreign exchange shortages of the
Zone's member countries, while Western donors, es-
pecially France, are being more selective in their aid
disbursements to help restore their own financial
In addition to financial problems, implementation of
the plan will also be affected by manpower and
transport deficiencies (see appendix A). With less than
5 percent of the population possessing any technical
skills, the country has a severe shortage of qualified
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labor and must depend on expatriates, mainly French,
to fill most of the technical and managerial positions.
The transport network is grossly inadequate, with
most roads impassable during much of the year
The Political Scene
Cameroon's prospects now clearly depend on newly
installed President Biya's ability to consolidate his
power and handle the economy. Cameroonian officials
and international development experts agree that the
country's economic future requires major investments
in agriculture to maintain Cameroon's rare ability
among African states to feed itself. This, however,
would be possible only at the expense of more popular
projects in industry-such as the Kribi liquefied
natural gas (LNG) project'-and social programs
involving education, health, and housing
We are concerned how Biya will implement any
needed program cuts to minimize popular disaffec-
tion. Particularly worrisome, in our opinion, will be
the reaction of residents in English-speaking western
Cameroon, who have long resented what they believe
is second-class treatment by a French-dominated bu-
reaucracy in Yaounde. Biya is from French-speaking
southern Cameroon, and we assume that he is well
aware of the potential for local unrest if he does not
appear sympathetic to the concerns of his western
constituents. His task will be complicated by the fact
that all of the country's current oil production is off
the western coast, and we believe that regional politi-
cians are carefully monitoring how oil money is being
of cabinet ministers from the country's principal
tribes and his choice of a Muslim northerner as prime
minister-his constitutional successor-reflect his
awareness of the political need to balance his status as
a non-Muslim, southern minority tribesman.
We view Cameroon's military and internal security
forces as generally apolitical and able at least for now
to keep any antigovernment movements from taking
root. According to US defense attache reporting,
these forces are disciplined, well trained, and have a
reputation for preventing dissension. Should domestic
unrest develop, Biya, like his predecessor, will proba-
bly rely on the national police and gendarmerie--
which receive better pay and allowances than the
Army-to maintain internal order. Biya almost cer-
tainly will also adopt Ahidjo's use of the threat of
force and the promise of a share of the political
spoils-such as cabinet posts and development proj-
ects-to keep Cameroon's many disparate tribes
working together.
Still, we cannot rule out domestic unrest based-at
least in part-on economic grievances. We believe, in
particular, that the military could become increasing-
ly disenchanted with the government if spending cuts
prompt a sharp decline in economic activity and the
lower ranks are forced to support financially a grow-
ing number of family members. The military will
probably also be watching to ensure that it is not
required to bear an excessive share of the cost of any
economic slowdown.
used to improve local living standards.
Biya's track record since he assumed office in Novem-
ber is encouraging. US Embassy sources indicate that
his succession has been accepted calmly by Cameroo-
nians. In addition, Biya has used his administrative
talents to make some politically adroit moves and to
consolidate his position. In our view, his appointments
2 The Kribi project has already been scaled down by about one-third
and probably will not be developed until 1988 at the earliest. The
change in plans is the result of recent estimates by the main
developers of the project, the French firms, Compagnie Francaise
de Petrole and Elf Aquitaine, showing that Cameroon's natural gas
reserves are not sufficient to justify construction of the original
American influence in Cameroon, according to US
Embassy reporting, has grown considerably in recent
years. President Ahidjo visited Washington in 1982,
following a visit to Cameroon of Secretaries Block and
Baldrige earlier in the year. Cameroon has purchased
US military hardware and civilian aircraft, and an
increasing number of US firms and financial institu-
tions are setting up operations.
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Although many US companies have found advantages
in doing business in Cameroon, they also cite several
drawbacks:
? The need to accommodate to the French system-
language, customs, business practices-which, over
the years, has become firmly entrenched in
Cameroon.
? The increasing role of corruption.
? The ponderous redtape that limits the ability of a
company to realize a profit in under 18 months.
? The need to justify expatriate positions to Cameroo-
nian authorities and the requirement that Cameroo-
nian nationals must fill certain other positions with-
in a specified time limit.
? Finally, what businessmen see as a total lack of
communication between responsible Cameroonian
officials and US company representatives, which
results in protracted contract negotiation and rene-
gotiation.
We agree with the US Embassy's assessment that the
recent change in leadership in Yaounde provides the
United States with an opportunity to expand its role,
as Biya looks to the country's traditional benefactors
for support. This opportunity could be short lived,
however, if Washington fails to meet growing Camer-
oonian expectations for financial and technical assist-
ance. We believe Cameroonian officials assume-
because of Ahidjo's successful visit to Washington in
1982 and the trade and investment mission earlier in
1982-that Cameroon has a new, special relationship
with the United States. Yaounde, in our view, expects
substantial aid, especially in agriculture. The country
probably also expects an even larger amount of
private US investment in support of priorities outlined
under the five-year plan.
If, as we expect, US and other Western donors do not
provide aid and investment on the scale envisaged by
Cameroonian officials, we believe that Cameroon has
little choice but to reduce substantially its current
development program. Yaounde theoretically could
turn to Moscow or Tripoli for assistance, but we
believe Cameroon's pro-Western, anti-Soviet, and
anti-Libyan biases will prevent it from seeking help in
those quarters. US Embassy reporting indicates that
the present Cameroonian elite has not forgotten that
the USSR and other Communist states provided
material support for an unsuccessful tribal insurgency
by Cameroonian dissidents in the early 1960s. Even if
Biya were to approach the Soviet Union or Libya,
these countries' own economic difficulties almost cer-
tainly would prevent them from providing more than
token assistance.
Moreover, we do not believe that, in the event of a
coup, Cameroon's new leaders would seek the military
assistance that the Soviets and Libyans sometimes
offer in an effort to expand their influence with
fledgling governments. In our judgment, a new mili-
tary regime, at least initially, would continue to look
to France-the Army's traditional source of arms and
training-for help. US Embassy and
reporting indicates that the Cameroonian military has
been thoroughly screened for years to root out any
personnel with suspected leftist views
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Appendix A
Cameroon's FY 1982-86 Development Plan
The current development plan-the most sophisticat-
ed to date in preparation and democratic in terms of
participation-is targeted at consolidating the gains
of previous plans (see box), meeting more of the
economic and social demands of the Cameroonian
people, and extending the diversification of the econo-
my (see table 3). To reach these goals, the government
seeks to exploit more fully Cameroon's abundant
natural resources-particularly oil and natural gas. In
addition to developing its petroleum industry,
Yaounde wants to move ahead on several other major
programs in order to:
? Accelerate regional economic development.
? Maintain self-sufficiency in food.
? Expand the production of traditional export crops.
? Increase utilization of domestic raw materials in
industrial production
Primary Sector
The major goals for agriculture in the new plan are to
meet the country's food needs and to expand produc-
tion of agricultural exports. The government believes,
and we agree, that a critical element in meeting these
objectives is to avert large-scale or excessively rapid
rural/urban migration, which Cameroonians claim is
responsible for the disastrous agricultural perform-
ance in neighboring Nigeria. As a result, the plan's
agricultural investment strategy is aimed at making
rural life more attractive to Cameroonians. Key tar-
gets are to keep producer prices high and improve the
availability of credit, fertilizers, and other agricultur-
al extension services.
Secondary Sector
In the manufacturing sector, Cameroonian Govern-
ment officials are focusing on agricultural processing
and light manufacturing industries. The plan calls for
a significant expansion in the processing of local raw
materials and intermediate goods for both domestic
consumption and export. Continued exploitation of
petroleum reserves and hydroelectric power sources
along with development of natural gas and bauxite
also rank high on the government's industrial develop-
ment priorities list. The government anticipates an
increasing role for both foreign and domestic investors
and includes in its development strategy provisions for
revamping its investment code and tax structured
Tertiary Sector
Along with increased industrial production, Yaounde
is looking to a major expansion in commerce, trans-
port, and tourism. To enhance the role of its budding
tourist industry as a source of foreign exchange,
Yaounde plans to develop several new tourist sites and I
construct 3,000 additional hotel rooms. The govern-
ment hopes to hold several international trade fairs 25X1
and construct new warehouses, storage facilities, and
commercial markets. Other investments involve ac-
quiring trucks, railcars, aircraft, and other kinds of
transport machinery and equipment.
For communications, investment is aimed at both
improving existing facilities and expanding links both
domestically and internationally. In terms of trans-
port, investment projects include:
? Construction of 2,000 kilometers (km) of roads and
1,190 meters of bridges.
? Reinforcement of 1,200 km of roads.
? Realignment of the Transcameroonian railway.
? Expansion of Douala port to include fruit and
minerals terminals.
? Construction of a deepwater port near Kribi.
? Expansion of Douala airport to accommodate large
transport planes.
? Construction of new airports at Garoua and
Bafoussam.
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 Investment Percent
(million 1981 of Total
as $)
Table 3
The Fifth Five-Year
Development Plan, FY 1982-86
Agriculture 1,512.5 18.9
Livestock and fisheries 288.1 3.6
Forestry 96.0 1.2
Mines and power (includ- 672.3 8.4
ing oil development)
Communication infra- 1,692.3 21.1
structure
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Post offices and 246.0 3.1
telecommunications
Town planning, equipment, 1,224.3 15.3
research
Administrative 192.0 2.4
buildings
In addition, the plan envisages improving the coun-
try's internal and international telecommunications
network, upgrading the mail service, and constructing
new post office buildings.
The plan also includes new initiatives in town plan-
ning, town expansion, and development research. Ur-
ban development projects include a major expansion
in the availability of potable water and electricity,
improved drainage and sanitation facilities for Douala
and Yaounde, a 14,000-unit housing program, and the
creation of industrial zones. Development research
will highlight improving food crop production, animal
husbandry, and nutrition.
Education
Government planners hope to build the 17,000 class-
rooms and train the 20,000 teachers they anticipate
will be needed to handle the projected doubling in
school enrollment by 1986. Increased attention will
also be paid to technical and vocational education to
fill the country's needs for skilled manpower. Other
proposals include the establishment of a national
education fund and a public relations campaign to
encourage Cameroonians to become teachers.
Health
In recognition of the country's inadequate system of
health care, Yaounde has proposed a major expansion
in health services. Some of the more ambitious pro-
grams include the construction of 41 hospitals and 36
mother and child care facilities, and the training of
nearly 4,000 medical and paramedical personnel.
Preventive medicine will receive new emphasis, as will
more active participation by village communities in
good health care practices.
Education/ training 704.2 8.8
Youth and sports 112.0 1.4
Information/ culture 128.0 1.6
Health/social affairs 320.1 4.0
Youth and Sports
The primary goal of this aspect of the plan is to
enhance the ability of Cameroonian youth to adjust to
modern values while retaining some ties to their
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cultural heritage. Government officials believe this
approach is the best way to minimize the possibility of
a sharp increase in juvenile delinquency that they see
elsewhere in black Africa. Investments include con-
structing a national institute for youth and sports
(with five regional centers and three sports stadiums),
purchasing equipment, and improving existing sports
facilities.
The Fifth Five-Year Plan calls for investment totaling
some $8 billion. Financing is to be split 60/40 be-
tween public and private sources respectively (see
table 4). The largest component of public-sector fi-
nancing is budgetary savings, that is, the amount of
public revenues left after current operating costs are
covered. According to the financial plan, Cameroon
expects these savings to total $1.6 billion over the life
of the plan. Other local public resources-central
bank holdings and contributions from parastatals-
are to contribute another $1.4 billion. The remainder
of public financing will come from borrowings against
the country's Franc Zone account, $500 million; and
external borrowing, $1.3 billion. Private financing is
to supply the remaining $3.2 billion. Government
planners anticipate funds will come from inter
financial institutions and private businessmen.
As noted in the text of this paper, we believe Yaounde
will be hard pressed to come up with anything close to
the funds specified in the plan. This is largely because
Yaounde's chief benefactors-Paris especially-have
financial problems of their own and are slowing new
aid commitments. In addition, international lending
institutions are nervous about LDC lending because
of the Mexican and Brazilian financial crises. More-
over, what we see as the overestimation of oil revenues
for the period will limit the government's own domes-
tic resources available for development purposes.
We believe that aside from financial considerations,
deficiencies in manpower and transport will impede
completion of the plan. Excessive redtape and bureau-
cratic inertia will also slow the process.
Table 4
The Financial Plan, FY 1982-86
Billion 1981 Percent
US $
Total 8,004.6 100.0 25X1
Public financing 4,801.6 60.0 I
Local public financing 3,479.4 43.5
Budgetary savings b 1,586.6 19.8
Other local public resources 1,370.9 17.1
Local public loans d 521.9 6.5
External public financing 1,322.2 16.5
Loans already obtained 372.3 4.7
a Because of rounding, compoments may not add to the totals shown.
b According to the plan, these are government revenues remaining
after current operating expenses are covered.
Cameroonian officials suggest this money represents contributions
from parastatals and central bank resources.
d Cameroon can borrow up to 15 percent above their reserves on
deposit in the Central Bank of Equatorial Africa, the local Franc
Zone bank.
e We believe these are grants from the French Government.
Inadequacies in the country's transportation system
are especially worrisome. Currently, according to
Cameroon's Director of Transport, the country's
transport network consists of:
? 65,000 km of roads.
? 1,165 km of railways.
? Two principal seaports, Kribi and Douala, and two
secondary ports, Victoria and Tiko.
? One seasonal river port at Garoua.
? The international airport at Douala and 12 smaller
domestic airports scattered throughout the country.
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Although the transport network is fairly extensive (see
map), there are serious problems that affect the flow
of traffic. Except for a few roads in the major cities,
the country's road system, by far the dominant mode
of transport, is in disrepair. In addition, most roads
are made only of gravel and earth and are frequently
impassable during the rainy season. According to the
World Bank, the state-owned railway consistently
operates at a loss because of shortages of rolling stock
and locomotives and managerial and operational defi-
ciencies. Douala port, which handles 90 percent of the
country's trade, operates at only 50 percent of capaci-
ty because of poor administration and bottlenecks in
such areas as customs. Air transportation is not
reliable because of frequent delays resulting from
management and maintenance problems.
Skilled manpower shortages will also have an adverse
effect on the country's development plans. According
to the 1976 census-the last available-the Cameroo-
nian work force accounts for 40 percent of the total
population, of which the World Bank estimates that
83 percent are engaged in agriculture and lack other
skills. Of the remainder, employed by industry and
government, Embassy reporting indicates most are
also unskilled. Even those who have received several
years of education have pursued a predominantly
liberal arts curriculum with few science and engineer-
ing courses. As a result, the country is dependent on
expatriate labor-mostly French-for filling most of
the technical and managerial positions in the
economy
Agricultural development could suffer the most from
manpower and transport deficiencies. According to
AID economists attached to the Ministry of Agricul-
ture, the country's ability to feed itself is declining
because of outdated technology, rural migration, and
difficulties in moving products to markets posed by
poor roads and lack of trucks. These economists
believe that Cameroon will become a net food import-
er by 1990 largely because it will take at best a
minimum of 10 to 12 years to rebuild agriculture even
if the government moves now to address the problem.
US Embassy sources, who believe the Cameroonian
Government is aware of the farm problem, cite
Yaounde's designation of agriculture as the country's
top development priority. In addition, planners have
drawn up a series of policy initiatives that they hope
will persuade highly productive farmers either to stay
in or return to the countryside. These include annual
raises in producer prices for both food and cash crops,
increased training in advanced farming techniques,
and expanded availability of agricultural credit
Nevertheless, we anticipate serious problems in imple-
menting these projects. The absence of skilled admin-
istrative personnel, for example, will impede the abili-
ty of the government to process applications for farm
credits and to offer new extension services on a wide
scale. In addition, few Cameroonians are qualified to
be extension agents. Moreover, any increase in pro-
duction would place serious strains on the country's
already weak transport system. This is especially a
problem for perishable crops such as bananas and
cocoa. One experienced AID economist believes Cam-
eroon will be lucky to meet half of its goals for
agriculture because of these factors.
Other facets of the country's development program
will also feel the impact of manpower and transporta-
tion deficiencies, in our view. Industrial projects can
be expected, at a minimum, to fall behind schedule
due to delays in machinery and equipment deliveries
at the port and the ability of most roads to handle
heavy loads for only five to seven months out of the
year. Social projects-particularly health care and
education-will lag because of insufficient personnel,
while lack of timely deliveries of equipment and raw
materials will push back the timetable for completing
the plan's ambitious housing program
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Appendix B
Making the Most of Oil
Oil is a prominent feature in any Cameroonian devel-
opment scenario. We estimate it accounts for 50 to 60
percent of foreign exchange earnings. In addition, and
apart from official foreign exchange holdings, the
government has managed to build a financial buffer-
which we estimate to be currently about $650 mil-
lion-of oil money savings held outside the country in
foreign financial institutions
Cameroon currently produces about 100,000 b/d of
oil. By 1987, according to oil industry estimates,
production should peak at 157,000 b/d. Assuming
that real oil prices firm somewhat beginning in 1984
(see appendix C), government receipts will total some
$5-6 billion from its share of production and taxes and
royalties over the course of the current five-year plan.
The present energy chief is Samuel Libock, director of
Cameroon's national oil company, Societe Nationale
des Hydrocarbures (SNH). Although industry deci-
sions ostensibly are made by the SNH Board of
Directors, Libock clearly is the government's primary
spokesman, according to Embassy sources. During the
past several years, he has moved to tighten Camer-
oon's grip on the oil industry, to the dismay of US oil
companies operating in Cameroon:
? In December 1978 Libock announced a new law
that required the government's share of production
to be no less than 40 percent of the oil production
from each company operating in Cameroon.
? The following year, Libock asked the French oil
company Total to draft an additional agreement
regulating Yaounde's share of oil revenues. The
primary change involved an increase in the govern-
ment's share of total revenue from what we estimate
was about 75 percent to 87 percent, with the
additional amount to come out of company profits.
National oil company
president, Samuel Libock
After some modifications, the Cameroonian Gov-
ernment decided these provisions would apply to all
other companies as well. Total and ELF, another
French firm, went along with the proposal, but the
various US oil companies-Gulf, Mobil, and Shell-
Pecten-resisted, claiming that they already had
valid agreements.
? SNH then turned to ELF-the only firm currently
producing oil in Cameroon-to prepare another
agreement that would control timetables for debt
amortization and repatriation of profits by all oil
companies. Copies became available to oil compa-
nies in the spring of 1981. Only ELF, Total, and the
US firm Shell-Pecten, which shares its concessions
with ELF, have signed the new operating
convention.
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Figure 3
Cameroon: Oil Concession Areas
CA Area N
Area
of
CENTRAL
AFRICAN
REPUBLIC
Concession limit
Hypothetical equidistant line
0 30 Kilometers
i I III
0 30 Miles
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;El IElIE
Fernando
Po
Limbe
Victoria)
)UATORIA
GUINEA N
E Elf Serepca . .. . 100.0
E1 Elf Serepca 51.0
Pecten Cameroon ............................. 49.0
E2 Elf Serepca ......... ............... ............ 30.0
Wintershall Ap ............................................ 30.0
Total Explor. Prod. Cameroun 20.0
Denison Mines ............................................ 19.8
E6 Elf Serepca 48.5
Pecten Cameroon ...................................... 46.5
Soc. Nat. des Hydrocarbures...................... 5.0
G Gulf Oil Co. of Cameroon ... 100.0
O1 Gulf Oil Co. of Cameroon .. . 40.0
Elf Serepca ............... ............?..................... 34.6
Denison Mines .................. .:........................ 14.4
Total Explor. Prod. Cameroun .................... 11.0
Gulf Oil Co. of Cameroon. ............. 75.0
Total Explor. Prod. Cameroun .................... 25.0
M2 Mobil Exploration Equat. Africa............ 75.0
Total Explor. Prod. Cameroun 25.0
M3 Mobil Exploration Equal. Africa 54.1
Total Pxplor. Prod. Cameroun ..,._......_...... 18;0
Ocelot Industries ........................ ...._..,....._ 15.6
Damson OI Corporation 12.2
Elf Serepca....... ........................... _.......,...,.... 20.0
Pecten Cameroon.:. 35.0
Gulf Oil Go. of Cameroon ............................. 30.0
Damson Oll Corporation......... ................. ..... 112
Elf Serepca ..............?.......,._..................,....,. 10.0
D'ixei....._..........._ .................... ....................... 5:6
Damara Ott Ltd.....:;.,_.,_ .......... _ 2.8
Oxoco International Inc ....._ ..................._.. 2.4
Peyto Oils Ltd ,...,.,..... ..,,....._.........._,,...,..... 1.7
Suntite Oil Co. Ltd 1.3
Pecten Cameroon 40.0
Elf Serepca 10.0
T Total Explor. Prod. Cameroun ...... 100.0
TI Total Explor. Prod. Cameroun 98.0
Denison Mines ............................................ 4.0
T2 Total Explor. Prod. Cameroun .. .. 50.0
Mobil Exploration Equat. Africa .................. 50.0
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? At about the same time that the operating conven-
tion was proposed, the government announced that
it wanted 20 percent of each foreign company's
stock-in addition to its share of production re-
ceipts-which would entitle Yaounde to further
corporate profits. Gulf and Mobil refused to sign the
new operating convention in protest of the addition-
al 20-percent equity share requirement levied by
Libock. Libock in turn has demanded that Gulf
relinquish half of its most promising concession if
the company wants to continue to do business in
Cameroon. This latest move has provoked a bitter
dispute between Libock and Gulf, which could
become an important factor in determining future
US-Cameroonian relations
We believe that Libock did not act on his own in
imposing these additional restrictions. Since former
President Ahidjo frequently shuffled senior govern-
ment officials to remind them that he was in control,
it is our opinion that he would have removed Libock if
the latter were not in fact following presidential
orders in such important matters. In addition, we
believe that Ahidjo monitored very closely overall oil
policy decisions and would have moved quickly to stop
Libock from doing something not in Cameroon's
interests. For the time being, Biya-probably preoc-
cupied with consolidating his own position-seems
content to leave Libock in charge of oil policy.
In our view, Libock's decisions clearly benefit Camer-
oon in terms of increasing Yaounde's share of oil
revenues. We also believe that his actions may reflect
government concern over the short lifespan of current
oil reserves.
Yaounde expects pro-
duction start to decline some time in the 1990s.
We do not know, however, the assumptions the gov-
ernment is using in making this projection
We believe Libock's behavior could also reflect
Yaounde's bowing to French pressure. Libock could
be deliberately trying to force US oil companies out of
Cameroon, leaving the field open to French firms. US
Embassy sources report that French oil companies
relinquished to American oil concerns what are now
relatively large oil deposits in Ivory Coast and do not
intend to suffer the same fate in Cameroon. In
addition, information available to us indicates that
Libock employs Total-in which the French Govern-
ment has 40-percent ownership-as a consultant on
oil matters. Furthermore, as noted, both the new
association agreement and operating convention were
drafted by French companies, and it is our opinion
that their provisions will stretch out the time needed
by those firms yet to begin production-almost all of
these are US-to recover their investment costs. ELF,
on the other hand, has been lifting crude since 1978
and, we believe, has offset a sizable portion of its
capital outlays with revenues generated by earlier,
more generous financial arrangements.
US Embassy officers worry that Libock will make a
major blunder in investing Cameroon's oil money.
Indeed, Libock himself recently voiced similar con-
cerns to Embassy officers and has engaged the serv-
ices of a reputable US investment firm to assist him.
policy for the forseeable future will remain in short-
term assets because of financial demands associated
with the current development program.
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Appendix C
Methodological Notes on
Economic Forecasts
Fhese 25X1
Official Cameroonian data posed serious problems.
Almost all series suffer from the lack of internal
consistency and timeliness and from frequent unex-
plained changes. The five-volume FY 1982-86 devel-
opment plan spells out few assumptions for estimates
of either government revenues or expenditures. More-
over, Yaounde's persistence in keeping information on
oil earnings tightly held precludes the use of official
sources to project future Cameroonian oil production
and government revenues.
tors, we have relied principally on the International
Monetary Fund, whose annual consultations with the
Cameroonian Government and periodic publications
produce the most current and consistent series of data.
In preparing our current account estimates for 1982-
86, we first addressed Cameroon's export earnings
potential. We focused our attention initially on petro-
leum, currently the country's primary foreign ex-
change earner. Three elements-production, domestic
consumption, and international oil market trends
were examined:
projections reflect current estimates of proved re-
serves and recovery rates. We do not expect produc-
tion to be affected by international swings in oil
demand over the next several years because Camer-
oon's output is too small a share of the market.
? Estimates of domestic oil consumption reflect the
historical relationship between the country's growth
rate and resulting oil needs-a 2-percent growth in
oil consumption for every 1-percent growth in GDP.
Our consumption forecasts assume a 5-percent an-
nual growth rate in GDP during the plan. We
expect problems in implementing the plan to keep
economic growth below the 7-percent rate used by
Cameroonian planners. Moreover, a 5-percent an-
nual increase is in line with the country's post-
independence average.
? With regard to international prices for Cameroo- 25X1
nian oil, we assume that Yaounde will continue its
policy of closely tying its price to that of Nigerian
crude. As a result, we have drawn on some projec-
tions of future market trends for Nigerian and other
African crude oil to make our forecasts for Camer-
oonian oil prices.
? We assume that current oil market conditions will I
prevail through 1983. We base this assumption on a
number of unclassified projections of only a slight 25X1
recovery in major industrialized countries, resulting
in average OECD growth of about 2 percent this
year. Accordingly, we are projecting that world oil
prices will remain steady in the current $32.50 to
$33 per barrel range, with no change in existing
quality and transportation premiums. This should
allow Cameroon to hold its official sales prices in
1983 at this year's level of $33 per barrel.
? After 1983 we look for a stronger expansion in
economic growth in the major industrialized coun-
tries, which will allow oil prices to begin improving
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in real terms. Allowing for international inflation,
we estimate that Cameroonian crude could be sell-
ing for as much as $36 per barrel in 1985 and $39
per barrel by 1986.
In addition to looking at petroleum exports, we exam-
ined factors affecting future sales of coffee and cocoa,
Cameroon's other significant foreign exchange
earners:
? Cameroonian planners anticipate marked increases
in production of these crops during the next several
years, but US Embassy and IMF reports indicate
that such a performance requires immediate efforts
to replace old, unproductive cocoa and coffee trees,
and to introduce improved farming methods. At
best, any improvement in output will require five to
seven years-or beyond the scope of the current
plan-because of the length of time needed for new
trees to begin producing crops.
? Coffee and cocoa earnings will also be affected by
what we believe will be a continued world surplus of
both commodities. We project that market condi-
tions may push prices even below current depressed
levels. Consumption has stagnated because of weak
economic growth in Western economies, while pro-
duction remains high. However, a sudden change in
supply, such as happened when the freeze in Brazil
caused prices during the mid-1970s to skyrocket,
would probably result in a significant improvement
in prices.
On balance, we conclude that these factors will keep
earnings for exports of tropical products close to the
current depressed levels through 1986 even assuming
moderate increases in production. As a result, overall
export earnings will range from $1.5 billion in 1982 to
$2.3 billion in 1986.
Our estimates for the average annual increase in
import volume is driven by the comparable Cameroo-
nian plan estimate. We believe this estimate-9.3
percent annually-is conservative considering the ex-
periences of other African countries (particularly
Nigeria) in implementing ambitious development
plans and Cameroon's own previous development plan
track. Still, lacking the basis of an independent
estimate that would adequately capture the mix of
projects and services in the plan, we have accepted the
Cameroonian figure as reasonable
To this import volume gain, we added 3 percent
annually to reflect what we expect will be the average
weighted import inflation rate for the period. This
projection is based on inflation rates of Cameroon's
major overseas suppliers, suitably adjusted for expect-
ed changes-as best we can judge them-in the
yearly value of the dollar relative to the currencies of
other industrialized countries.
These assumptions result in Cameroon's merchandise
import bill rising from $1.8 billion in 1982 to nearly
$2.9 billion in 1986. Over the same period, we project
that imports of services will jump from $350 million
to $565 million. When placed alongside our forecasts
for export earnings, the result is a cumulative current
account deficit for Cameroon of nearly $5 billion
during FY 1982-86.
outstanding external debt by the end of last year
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to carry out the plan, we anticipate that cumulative
financial needs could push Cameroon's debt to at least
$6 billion by the end of 1986. This assumes full
implementation of the current development program,
a complete drawdown of the country's $650 million in
oil assets that remain deposited in overseas govern-
ment accounts, the absence of any significant net
foreign investment or grant aid, and no addition to
international reserves
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