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Cameroon: Economic Stagnation Blamed On High Production Costs
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The Post (Buea)
3 March 2008
Posted to the web 3 March 2008
Leocadia Bongben
The Director of Economic Affairs at the Ministry of Finance, Lazare Bela, has said the high costs of production hinder the economy from picking up even after the country reached the completion point of the Heavily Indebted Poor Countries Initiative, HIPC-I.
Bela was speaking during the presentation of the results of a study on the impact of costs on the economy at the Yaounde Mont Febe Hotel, recently.The Director argued that in order to fight poverty, the economy must have a strong and sustained growth for a long period of time.
He said investment is expected to be above 25 percent for the economy to pick up. He regretted that the economy is staggering despite Cameroon's rich potentials.Bela maintained that not only is the cost of raw materials high, but that despite measures taken by government the prices of basic commodities continue to skyrocket.
The study was conducted in relation to the drop witnessed in the country's Gross Domestic Product, GDP.The weak economic potential has been attributed to weak investment, economic crises and the structural adjustment programme. Investment that was pitched at 24.8 percent from 1981 dropped to 16.7 percent in 2006.
Presenting the study, Sylvie Eyeffa Ekomo of the Macro-Economic Synthesis Unit, indicated that some enterprises spent 60 percent of their finances in the acquisition of raw materials such as in the petroleum refinery, 88.2, rubber production 60.7 percent, flour 67. 6 percent and construction materials, 66 percent. However, the study revealed that the weight of taxation on enterprises is quite negligible.
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The Economic experts indicated that reducing costs could enable enterprises to be competitive and benefit from the comparative advantage offered by the relatively low salary level. The argument goes that a cost reduction would produce positive effects on the health of enterprises and consequently on the economy.
The experts recommended the exploration of means to reduce costs for enterprises, while government was urged to provide an enabling environment for private sector development through the consolidation of public-private sector dialogue.
It was also recommended that access to finances for investment be facilitated, the financial market be made dynamic and a Small and Medium Size Enterprises bank be created.
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