CHAD

COUNTRY OVERVIEW

LOCATION AND SIZE.

The former French colony of Chad, a landlocked country located in northern Central Africa, is more than 3 times the size of California. The country has an area of 1,284,000 square kilometers (495,755 square miles), with a land boundary length of 5,968 kilometers (3,708 miles). Neighboring countries are Niger, Nigeria, and Cameroon to the west; Libya to the north; Sudan to the east; and the Central African Republic (C.A.R.) to the south. Lake Chad in the southwestern part of the country is the largest body of water in the Sahel region. Chad also has the Tibesti mountain range in the far north, some smaller mountains in central Chad, and a few hills near the southern and western borders. Most of the country is desert or savanna with limited rainfall, although there are moderately temperate areas in the south. Chad's capital, N'Djamena, is in the southwestern part of the country.

POPULATION.

In July 2001, the population of Chad was estimated at 8,707,078, an annual growth rate estimated of 3.29 percent. The birth rate is estimated at 48.28 per 1,000 people and the death rate at 15.4 per 1,000 people. Most of the population, half of which is under the age of 15, lives in several southern provinces where high rainfall makes farming and animal husbandry easier. About 1 percent lives in the arid upper half of the country extending into the Sahara desert. Population density varies between 0.15 persons per square kilometer (0.39 per square mile) in the northern province and 61.7 persons per square kilometer (154 per square mile) in the Logone Occidental province.

OVERVIEW OF ECONOMY

Chad's economy is primarily agricultural. Most of the population engages in subsistence farming and animal husbandry, producing food mainly for their own consumption. Chad depends on 3 commodities—cotton, cattle, and gum arabic (a gum from different African trees, used as an emulsifier in pills and candies)—for its export revenues. During the past 30 years, Chad's economy has been seriously damaged by chronic political instability. Its development has also been hindered by high energy and transport costs due in part to its geographic position. The beginning of a major oil project in southern Chad in 2000 offers an opportunity for Chad to diversify its economy and stimulate further growth.

The country's export commodities are subject to fluctuations in production and price levels. Cotton and cattle have been Chad's main exports before independence in 1960, but during the 1990s gum arabic emerged as a third major export commodity, making Chad the world's second biggest exporter after Sudan. Chad's economy has been vulnerable to swings in cotton prices, and when these fell during the 1980s, the economy suffered. Prices recovered during the 1990s, but production levels continue to vary according to the annual rainfall.

Armed conflicts and continuing tensions between ethnic, religious, and regional groups have severely damaged the economy. After independence in 1960, Chad was governed by the authoritarian leader, Francois Tombalbaye, until he was assassinated in 1975. Tombalbaye's death was followed by a decade of turbulence as several armed groups from different regions vied for control. The situation reached a climax in 1979 when a truce broke down between 2 principal armies stationed in N'Djamena, leading to further conflict and increased tensions between Muslim and Christian southerners. By the early 1980s, Hissein Habre, a ruthless northern dictator, managed to consolidate his power. He ruled until 1990, when he was ousted by Idriss Deby, a former deputy. These years of violence and political instability have damaged Chad's infrastructure and seriously impeded its economic development.

Economic progress has also been hindered by several other constraints. Chad is seriously handicapped by its landlocked position; exports and imports must pass through Cameroon where widespread corruption inflates transport costs. Energy prices in Chad are among the highest in the world, and variable rainfall causes frequent deficits in food production. Heavy taxes, corruption, and the lack of an independent judiciary have discouraged foreign investment. These issues continue to limit commercial opportunities in Chad.

Like other poor countries with limited resources, Chad must import many goods and is dependent on foreign aid. Although the country's overall burden of debt is low by the standards of developing nations, the government relies on foreign donors to finance most investment projects. The European Union (EU), notably France, provides the largest share of foreign aid aimed toward health, education, and transport. Multilateral lending agencies, the United Nations (UN), the International Monetary Fund (IMF), and the World Bank also supply assistance to encourage improvements in government management and social services. Chad has a small industrial sector that produces paint, fruit juices, roofing, and a few other products mainly for domestic consumption, and depends on foreign suppliers for fuel and consumer goods.

As in many other developing countries, Chad's economy includes a thriving informal sector. Many entrepreneurs conduct commercial activity without official structure or permits and do not use organized accounting. Informal commerce ranges from individual vendors peddling their wares on the streets of N'Djamena to major business entrepreneurs transporting thousands of tons of gum arabic. Many businesses neglect to register their companies to avoid the high taxes imposed on formal businesses. The informal sector is hard to measure, but many observers estimate that most of Chad's economic activity is conducted by informal businesses.

During the late 1990s, Chad collaborated with the World Bank and the IMF to implement structural adjustment programs aimed at liberalizing the economy and improving government management. These programs have had some success. By 2000, most of Chad's state enterprises had been privatized and opened up to competition. In the rural water supply sector the former state-owned monopoly was converted into a private company and the water supply business opened to other competitors. The government has also managed to limit spending and meet some of its budgetary targets.

Chad's economy will receive a huge boost from the Chad-Cameroon Development project. A consortium (businesses working together) led by Exxon will invest US$3.7 billion in building production facilities, a pipeline, and associated infrastructure to export over 1 billion barrels of crude oil reserves in southern Chad. The World Bank has played a role in providing financing for the governments of Chad and Cameroon to invest in this project. In return for this financing, the World Bank has obtained agreements from the 2 governments that they will closely monitor environmental conditions and revenue management, issues of serious concern in the region. When oil starts flowing in 2004, the project is expected to double Chad's government revenue. More importantly, this project may stimulate investment in food processing and other promising sectors as local businesses satisfy demands created by the project.

POLITICS, GOVERNMENT, AND TAXATION

Chad's government continues to be dominated by a powerful president and his Patriotic Salvation Movement (MPS) party. After decades of civil war and regional clashes, Chad made some progress in increasing political freedoms and establishing democratic institutions during the 1990s. Nevertheless, elections have been marred by irregularities, and power remains concentrated in the president and his ruling Zaghawa clan. Chronic corruption and human rights abuses have contributed to a resurgence of armed conflict in the far north. These problems have seriously dampened Chad's economic climate and have forced the government to divert scarce resources into military expenditure.

To explain local politics, Chadian political observers have coined an often-quoted dictum: "A man's strength lies in his cooking pot." In such a poor country, vulnerable to famine, politicians ally themselves to the party that can best fill their "cooking pot." The ruling MPS has thus used its control over highly coveted civil service jobs to co-opt many rival parties and develop a nationwide membership. Some opposition parties support a more decentralized federal structure, but most parties rely on regional and ethnic loyalties and do not espouse ideology.

Chad is gradually trying to overcome a legacy of socialism inherited from France. Until recently, state companies enjoyed monopolies over major sectors, and lack of competition encouraged mismanagement and corruption in these companies. The government has privatized Chad's 2 largest banks, its rural water supply company, and its meat packing plant, as well as many other companies. State enterprises continue to control the cotton, electricity, and telecommunications companies, but these companies are due for privatization. The IMF and the World Bank have been helping the government to reduce its direct involvement in the economy.

High taxes and customs duties are another handicap to private business. Because there are so few formal businesses from which tax can be raised, the government must tax these firms heavily to acquire a modest amount of revenue. Corruption is also a major problem in tax collection and customs agencies. The government has, however, made efforts to reduce certain taxes and harmonize its tax and customs system with those of other countries in the Central African Economic Community (CEMAC).

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Chad's infrastructure is exceptionally poor even by standards in other developing countries. Decades of civil war have taken their toll, and improvements have proceeded slowly. The road system is unpaved and vulnerable to erosion. Mismanagement of government-run power and communications monopolies slowed the development of infrastructure in these essential sectors. Chad's people have limited access to power, electricity, telecommunications, water, and other modern services fundamental in developed societies. Nevertheless, some improvements are expected as the government liberalizes energy and telecommunications sectors and gradually improves the transport infrastructure.

Transport costs are high, and most of Chad's roads are unpaved dirt or laterite (red soil found in humid tropical and subtropical areas) that can become impassable during the rainy season and make some regions inaccessible. According to the U.S. State Department's 2001 Country Commercial Guide for Chad, less than 10 percent of 6,200 kilometers (3,853 miles) of roads in Chad were paved in 2000. Road conditions can vary widely according to the seasons.

Electricity and water services are confined to the capital, N'Djamena, and a few regional capitals. Even in these limited areas, electricity is extremely expensive and services are often cut off. Urban electricity and water supplies have long been provided by a state company, Société Tchadien d'Eau et d'Electricité (STEE), that has suffered from chronic corruption and mismanagement. As this company is privatized, there is hope that utility services will improve and prices will be lowered. In rural areas, most people rely on traditional wells with little or no protection against surface water contamination. Because of the absence of latrines and other human waste disposal systems in rural areas, there is a high incidence of water-borne diseases.

Chad ranks with those countries in the world that have the lowest density of telephones, televisions, and Internet users. According to the World Development Indicators for 2000, Chad has 1 television set per 1,000 people. Advertisements from the telephone company, Soteltchad, at the end of 2000 estimated that Chad had 10,260 telephones and 1,020 Internet subscribers. The country has 1 television station that is run by the state and a governmentally-run radio station which broadcasts from several regional capitals. Both the television and radio stations provide information from the government's perspective. Although there are several newspapers circulating in the city of N'Djamena that offer differing political views, the news does not reach Chad's mostly rural and illiterate population.

ECONOMIC SECTORS

Agriculture is the backbone of Chad's economy. In 1998, the World Factbook estimated that agriculture, fishing, and herding accounted for nearly 40 percent of the GDP and occupied 80 percent of the workforce. Agriculture continues to dominate Chad's economy, accounting for 44 percent of the GDP, but this figure alone does not convey the importance of agriculture and animal husbandry to the society. An estimated 85 percent of Chad's population relies primarily on these activities for its livelihood. In the agricultural sector, cotton accounts for half of Chad's export earnings and cattle provide most of the remainder. In addition, Chadians produce several crops and animals for their own consumption.

Chad has developed a small industrial sector that produces electricity, beverages, soap, oil, paint, and construction materials. Most of these goods are consumed domestically, while further industrial ventures have been impeded by high production costs and Chad's limited market. Industry accounted for 14 percent of GDP in 1998, according to the World Factbook. The petroleum sector is expected to grow dramatically in coming years as proven oil reserves of over 1 billion barrels are exploited in southern Chad.

The service sector is limited in size and in different services, although it accounted for 46 percent of GDP in 1998. According to the U.S. State Department's Country Commercial Guide, the banking sector had an estimated US$100 million in total deposits in 2000. The cost of credit is high, reflecting the risk to bankers. Medical services are rudimentary, limited by scarcities of human and material resources.

AGRICULTURE

Agriculture and animal husbandry employs 85 percent of the country's workforce but only contributes 44 percent to the GDP. While cotton, cattle, and gum arabic provide most of Chad's export revenue, farmers also produce several subsistence crops for domestic consumption.

Farming methods are traditionally simple, and irrigation and mechanical equipment are rarely used. Farmers work their fields by hand or use cattle to till the soil. Competition for land between farmers and cattle-herders has caused conflicts in rural areas.

Cotton employs an estimated 2.5 million Chadians and provides half of Chad's export revenue. Over the past decade, production of raw cotton has varied between 94,000 tons and 260,000 tons. Production levels depend primarily on variations in annual rainfall, and the cotton sector has been affected by fluctuations in world prices. During the 1980s, low cotton prices caused the state cotton company, Cotontchad, to lose money for several years until it modernized its ginning factories and prices recovered. In addition to ginned cotton, Cotontchad produces oil and soap from cottonseed.

Chad's second leading export is cattle, most of which travel overland to Nigeria. Cattle-herders lead a semi-nomadic lifestyle, migrating north during the rainy season and traveling south in search of green pastures during the dry season. These migrations often bring them into conflict with farmers when cattle damage crops. Cattle-herders travel in small groups but are well armed to defend against hostile farmers. Camels, donkeys, goats, and sheep are also farmed, primarily for domestic use or consumption. These animals also represent savings and a measure of wealth in rural areas where money is scarce.

The country's main subsistence crops include grains, oilseeds, tubers, and several leafy vegetables (legumes). Millet and sorghum are the major staples of the local diet. These grains are also widely used to produce bili-bili and arghi, 2 popular alcoholic beverages. Chad produces between 600,000 and 1,100,000 tons of grain per year, most of which is consumed locally. Peanuts, groundnuts, and sesame are Chad's principal oil seeds and are also primarily for local consumption. Farmers grow several tubers, including manioc and sweet potatoes.

In the 1990s, gum arabic production soared, and Chad solidified its position as the world's second largest producer of this commodity. Chadian gum arabic production rose from fewer than 6,000 tons in the early 1990s to approximately 18,000 tons in 2000. Gum arabic is exported to Europe, the United States, and other industrialized nations, where it is used in soft drinks, pharmaceuticals, and many other products. Chadian gum is tapped by small-scale harvesters from wild acacia trees throughout the semi-arid Sahel region.

INDUSTRY

Chad has a small industrial base that mainly supplies its domestic market and contributed 14 percent of GDP in 1998. Industries manufacture construction materials, beverages, and a few other products for the local market. A textile mill produced fabric for several decades but was unable to compete with foreign imports. A consortium of oil companies is investing in a major oil project in southern Chad, which is expected to provide a boost to the economy. The high costs of energy and transport have impeded new industrial ventures, yet if these constraints can be eased and improved access found to Nigeria's market, the potential exists to process more raw commodities.

MANUFACTURING.

Based in Moundou, Chad's most important industrial company, Cotontchad, gins cotton and manufactures soap and oil from cottonseed. Cotontchad also has ginning operations in several large southern towns. In addition to Cotontchad, Moundou has a cigarette company and a firm that assembles agricultural equipment. In N'Djamena, several companies produce paint, metal roofing, fruit drinks, mineral water and cookies. Chad's third largest city, Sahr, hosts a sugar production factory and an idle textile mill.

PETROLEUM.

Chad's petroleum industry will be extremely important in the short-term future. There are plans to exploit 2 known petroleum deposits: a small reserve of high-grade oil north of Lake Chad and a much larger deposit of heavy crude oil in the Doba Basin of southern Chad. A consortium led by Exxon will employ up to 4000 workers and invest US$3.7 billion to exploit over 1 billion barrels in the Doba basin. Further exploration is planned to determine whether more reserves can be exploited.

MINING.

A South Korean company, AFKO, recently began building a factory to extract gold reserves near the southern town of Pala. Chad is known to hold deposits of bauxite, iron ore, uranium, tin, and tungsten, but further research is necessary to determine whether these resources can be extracted.

SERVICES

Chad's service sector is limited, although it contributes an estimated 49 percent of the GDP, up from 46 percent in 1998. Privatization and improved management practices have strengthened financial services, but they remain limited in size and in the services they offer. Retail sales are conducted primarily in the informal sector. Chad holds some potential for tourism, but instability and lack of infrastructure have prevented the development of this sector. Some firms in the capital, N'Djamena, have seen a proliferation of computer service firms, offer insurance, accounting, and computer services. Several international firms offer accounting services, tax advice, and business consultancy services, but the market for these services remains limited as long as most Chadian entrepreneurs remain in the informal sector.

FINANCIAL SERVICES.

Chad's banking sector is small by international standards. With US$100 million in deposits and limited capital investment, Chadian banks have little money to lend. Much of their capital finances the cotton-buying season for Cotontchad. For other businesses, credit is expensive and difficult to obtain. Short-term credit can cost 18 to 26 percent and long-term credit is rarely available.

RETAIL.

The retail business is conducted primarily in the informal sector. Thousands of vendors wander in Chad's urban streets searching for buyers for their wares. In addition, thousands of small stores and roadside stands sell limited varieties of household goods. In rural and urban areas, many vendors gather in a network of small markets where perishable goods are sold.

TRANSPORTATION.

Transport of goods is managed by many informal sector operators. Small vehicles and large semis carry passengers and merchandise between N'Djamena and different regional centers. Most vehicles are old and break down often.

INTERNATIONAL TRADE

Chad's principal trading partners are the EU countries and neighboring CEMAC countries. France has been Chad's largest trading partner, accounting for 41 percent of imports. Nigeria and Cameroon are probably Chad's next biggest trading partners, although much of this trade goes unrecorded by customs officials. The 2 countries export many consumer products to Chad. Cotton exports usually go to Portugal and other EU countries, while most beef exports go to Nigeria. Gum arabic has traditionally been exported to France and other EU countries, but increasing volumes now go to the United States.

For decades, Chad has run large trade deficits, importing far more than it exports. In 1999, exports were estimated at US$288 million against imports of US$359

million. By 2000, the World Factbook estimated that exports had reached US$172 million and imports, US$223 million. When money flows out of Chad to purchase these exports, foreign donors compensate for this flow by sending money back into Chad for investment in development programs. In 1997, Taiwan promised US$125 million and the African Development Bank, US$30 million.

MONEY

As a member of the Central African Franc Zone, Chad underwent a 50 percent devaluation of its currency in early 1994. Unlike other CFAF countries, however, Chad benefited little from this devaluation, which raised inflation for two years but failed to stimulate export volumes. Chad has otherwise benefited from a stable currency.

In Chad's domestic markets, inflation and deflation are seasonal occurrences. Food prices fall during the harvest season and usually rise by at least 100 percent during the rainy season. Chad's markets are volatile, and prices vary from day to day and week to week. At the end of each month when civil servants are paid, prices for prized consumable goods such as fish and chicken rise for a short while as suppliers take advantage of a brief rise in demand.

POVERTY AND WEALTH

In the United Nations Development Program 's World Development reports, Chad's Human Development Indicator has increased from 0.29 in 1990 to 0.393 in 1999, placing it among the 10 poorest countries in the world. In the benchmarks used to measure poverty (literacy rates, access to health care, access to clean water, etc.) Chad has ranked among the poorest countries in Africa.

Chad's population can be divided into rural and urban classes. In rural areas, farmers and animal herders construct their own housing and produce most of their own food but earn little monetary income. In urban areas,

small business people practice an array of trades. The civil service constitutes Chad's upper class, though its employees are poorly paid by international standards. A small class of diplomats, international aid workers, high-ranking government officials, and a few private sector managers occupy topmost wage scale.

Urban and rural classes are closely linked by Chad's extended family traditions. Poor rural farmers will often send children to live with comparatively wealthy urban relatives to study in urban schools. And wealthy urbanites often send money in return for foodstuffs as a means of helping out less fortunate rural relatives. Given the lack of social security programs, the poor, the elderly, and the handicapped usually depend on members of their extended family for support.

WORKING CONDITIONS

Working conditions, too, differ between rural and urban areas. Farmers rely on family members, including small children, to help labor in the fields and harvest the crops. Animal herders have a different lifestyle, migrating seasonally between northern and southern pastures. Monetary wages are low for unskilled workers, averaging less than a dollar per day. More educated workers can earn substantially more, but the scarcity of jobs tends to drive down wage rates. Chad's labor code is adapted from French laws that are protective of workers, but workers in the informal sector are not covered by these rules. Several unions have been formed to represent different workers, but their influence is limited.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1891. France begins colonizing Chad.

1900. Decisive battle between France's Major Lamy and Chad's Rabah marks the French victory over the Chadian leader. Both Lamy and Rabah die during the battle.

1960. Chad gains its independence from France. Francois Tombalbaye becomes Chad's first president.

1975. Tombalbaye is assassinated.

1979. Civil war erupts in N'Djamena.

1982. Hissein Habre consolidates power in N'Djamena.

1990. Idriss Deby takes power by military force.

1996. Constitution is voted on by referendum. Presidential elections are held.

2000. The Chad-Cameroon oil production and pipeline project begins.

FUTURE TRENDS

Provided Chad's civil unrest is resolved, Chad's economy could improve. The boost expected by the oil production project in the southern Doba Basin region will help in the service sector as well, creating transportation jobs in particular. The construction phase began in October 2000 and is due to finish by 2004. Once production begins, this Exxon-led project will double current government revenue. The increased revenue will allow Chad to invest in social programs and reduce its dependency on foreign donors. Chad should experience improvement in other parts of the economy as well, especially in the cotton industry, which is scheduled to be privatized over the next several years. Despite the improved economic prospects for Chad, political stability remains the most important factor for economic progress in the country.

DEPENDENCIES

Chad has no territories or colonies.

BIBLIOGRAPHY

Economist Intelligence Unit. Country Report: Cameroon, Central African Republic and Chad, 2nd Quarter, 1999. London: Economist Intelligence Unit, 1999.

"Chad at a Glance." World Bank Group. <http://www.worldbank.org/data/countrydata/aag/tcd>. Accessed January 2000.

"Chad Country Brief." World Bank Group. <http://www.worldbank.org/data/countrydata/aag/tcd>. Accessed January 2000.

"Chad Data Profile." World Bank Group. <http://www.worldbank.org/data/countrydata/aag/tcd>. Accessed January 2000.

Embassy of Chad in the United States. <http://www.chadembassy.org>. Accessed October 2001.

International Monetary Fund. <http://www.imf.org/external/country/TCD/index>. Accessed January 2000. "Tchad." Marché Tropicaux Special Edition. May 28, 1999.

U.S. Central Intelligence Agency. World Factbook 2001. <http://www.odci.gov/cia/publications/factbook/index.html>. Accessed October 2001.

U.S. Department of State. FY 2001 Country Commercial Guide: Chad. <http://www.state.gov/www/about_state/business/com_guides/chad>. Accessed December 2000.

—Alexander Gazis

CAPITAL:

N'Djamena.

MONETARY UNIT:

Central African franc (CFA Fr). 100 CFA Fr equals 1 French franc. There are coins of 5, 10, 25, 50, 100, and 500 CFA Fr. In the local marketplace, money is expressed in terms of "riyal," a unit equal to 5 CFA Fr. Thus 500 CFA Fr equals 100 riyal.

CHIEF EXPORTS:

Cotton, cattle, textiles, gum arabic.

CHIEF IMPORTS:

Machinery and transportation equipment, industrial goods, petroleum products, foodstuffs, textiles.

GROSS DOMESTIC PRODUCT:

US$8.1 billion (purchasing power parity, 2000 est.).

BALANCE OF TRADE:

Exports: US$172 million (f.o.b., 2000 est.). Imports: US$223 million (f.o.b., 2000 est.).