January 2006 VOL.15 NO.1

  2005 witnessed extraordinary growth and economic activity in
Angola. The combination of high oil prices, increased oil production, and substantial loans from China, Brazil, and other countries produced a GDP rate of around 15%, bolstered foreign exchange reserves, and stimulated growth in the non-oil sector, especially in construction, services, telecommunications, banking, diamonds and agriculture. With the projected continuation of high oil prices and further increases in oil production, the GDP rate is expected to reach 25% in 2006. At the same time, the government has made progress in bringing down the rate of inflation and stabilizing the foreign exchange rate with the hope that the inflation rate can be brought down to single digits in 2006.

The economic boom can be observed in Luanda. The hotels are jammed (experienced during my visit to Luanda in December): businessmen of virtually every nationality can be seen in the lobbies of the hotels making deals; the streets of Luanda are clogged with traffic making it imperative to space appointments in order to give enough time to get to the next meeting: airline reservations are sometimes difficult to book (though the Houston Express is a godsend to those belonging to the US-Africa Energy Association); and new office buildings and business establishments are mushrooming in downtown Luanda. Exponential growth is also being registered to the south of Luanda in Luanda Sul.

Two broad issues will dominate the agenda in 2006. The first is the course of the democratic process and the prospective elections in 2006. While progress has been made in establishing the legal framework and institutions for holding elections, no date for the elections, as of the writing of this report, has been announced. Most recently, the National Electoral Commission expressed reservations whether the registration process, originally scheduled to be completed in three months, can be completed in this time frame. If this is the case, it is likely that the elections will be pushed back to sometime in 2007. Despite these uncertainties, one point is clear. If the elections are perceived to be transparent and fair, and free of political violence and harassment, it will mark an important milestone in establishing the institutions and spirit of democracy in Angola. It will also send a clear signal to the international community that Angola is serious about bringing democratic change for its people.

The second issue relates to the economic strategy that the government intends to pursue, particularly as it relates to the management of its resources. This has important ramifications for the investment climate in Angola. Progress has been made on this front, though more needs to be done. The Angolan government continues to engage in a dialogue with the IMF and World Bank on these issues, but it is unclear whether this will lead to an agreement between the two parties. Angola does not need financial assistance from the IMF, but it would like to receive the green signal from the IMF to go to the Paris Club for debt rescheduling and receive the “seal of good housekeeping” from the international financial institutions for what has been done to promote good governance and accountability. A related question is whether Angola intends to adhere to the Extractive Industries Transparency Initiative (EITI), where it currently has observer status. Up to now, the government has taken the position that it wants to deal first with the IMF before fully engaging with the EITI.

Despite the progress that has been made on many fronts, obstacles remain in creating a more friendly investment climate in Angola. The difficulties have been chronicled in various reports. The problems include, among other things, the length of time, red tape and expense involved in registering a company; difficulties of obtaining land titles; and concerns regarding Angola’s non-adherence to international arbitration treaties and weakness of the judicial system. Others point to the problems encountered with the fiscal police, and the more mundane problems of getting a visa, an airline reservation, or finding a hotel room. While there is little question that Angola will continue to grow, the real question is how quickly and equitably it will grow for its people. As the Finance Minister recently stated, seldom has a country at the same time faced such immense challenges and immense opportunities.

 

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