CONTRIBUTIONS OF FINANCIAL MARKETS TO INDUSTRIAL OUTPUTS OF CAMEROON (Group assignment towards partial fulfilment of assessment in the subject of Emerging

Issues Regarding Risk Mediation in Financial Markets and Regulatory Systems)

Submitted By:
Roll Numbers 793-800 Business Law (Hons.) UG Semester VIII National Law University, Jodhpur

Submitted to:
Dr Rituparna Das, Faculty of Law.

National Law University, Jodhpur Winter Session (January-May 2014)

I. INTRODUCTION Cameroon has experienced stable economic growth over much of the past decade and now features a relatively diversified economy, with services representing about 46.4 percent of GDP in 2011. Real GDP growth averaged 3.4 percent a year between 2002 and 2007. However, economic performance has been negatively affected by the global economic and financial crisis which led to disruptions in mining and energy investments and falling global demand and prices for many of the country's main exports (particularly in oil, timber and rubber). As a result GDP growth decreased from 3.4 percent in 2007 to 2.6 percent in 2008 and 2 percent in 2009. Economic activity has however picked up in 2009 and 2010 with GDP growth of 2.9 and 4.2 percent respectively with positive projection (4.7 and 5.0 percent) for 2012 and 2013. Cameroon's financial system is the largest in the Economic and Monetary Community of Central Africa (CEMAC) accounting for about half of regional financial assets. The financial sector, characterized by excess liquidity, heavy concentration of loan and deposit activity and a low level of financial innovation is largely dominated by foreign banks. Non-bank financial institutions play a minor role, with the public insurance and pension systems in difficulties, and the publicly owned postal bank and real estate finance institution both struggling with insolvency. Problems in the legal enforcement of guarantees and the land tenure system also hamper the utilization of real estate as collateral, further constraining the expansion of the financial sector. Major Cameroon Industry Sectors Some major Cameroon industry sectors are:

Mining: Cameroon has rich deposits of Bauxite; it however, lacks the essential infrastructure to leverage on this mineral reserve. The country also has limited reserves of gold and diamond. It produces 12,000 ct of diamonds and 20,000 oz of gold annually.

Oil: As per 2008 figures, Cameroon produces approximately 82 thousand barrels per day, which is 0.1% of the worlds total production. The country has oil reserves of 400 million barrels along the Niger delta basin, based on 2004 survey. As per UN figures, 30% of the total oil production get smuggled through Nigeria.
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Manufacturing: The manufacturing sector is not completely developed in the country. There are only a few big industries in the manufacturing segment. Most consumer goods are imported from the EU nations and China.

Chemical: Pharmaceutical and chemical process industries are gradually emerging in the country. This sector has also attracted a major share of foreign investment.

Cameroon economy is fueled by other industry sectors as well, such as automotive, construction, food processing, engineering and real estate. However, these sectors have small contribution to the national GDP. To sustain long-term growth, Cameroon has to focus on strengthening non-mineral sectors.1

II. DSE and Financial Markets Commission The Douala Stock Exchange (DSE) is being established with the strong support of the President of Cameroon. The countrys 11 banks hold 5% each of the equity in the exchange, the remaining 45% being owned by other institutions such as insurance companies. The Netherlands FMO is a 5% shareholder of DSE.

The DSE is a joint stock company, and was formally inaugurated on 23 April 2003. It has in place a trading system provided by 3V of France, with technical assistance from the Tunis Stock Exchange. Clearing and settlement is to be provided by Socit Gnerale, and the Central Share Registry by the Caisse Autonome des Amortissements (CAA). It is anticipated that companies will begin to be listed on the DSE in the second half of 2003.

The Cameroon Financial Markets Commission (FMC) was legally established in December 1999, with the basic mission to protect investors savings and ensure a proper functioning of financial markets. Its three main objectives are to:

1. guarantee appropriate protection of savings invested in securities and any other financial instrument;

http://www.economywatch.com/world_economy/cameroon/industry-sector-industries.html

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2. increase investors awareness through adequate information and public education regarding financial markets and investments; and

3. supervise, and apply proper surveillance of, the stock exchange and other market participants, and ensure appropriate and ethical conduct of their actions in financial market transactions and operations. There are currently 15 banks operating in the country; banking sector soundness has deteriorated in recent years, stemming from protracted violations of prudential regulations, and further exacerbated by the global economic and financial downturn. While banks generally hold excess reserves and large levels of unutilized liquidity, capitalization is low and the ratio of non-performing loans (NPLs) to total loans has increased. While six out of the eleven largest banks remain foreign owned, the sector has experienced a gradual retrenchment of foreign banks over the past 10 years due to excess domestic bank liquidity, lack of bankable projects, and bouts of social unrest. Private credit by deposit money bank remains limited and well below CEMAC average, despite having increased from 9.3 in 2008 to 11 percent in 2011 (as a percentage of GDP). Although bank credit to the non-government sector increased, representing about 65 percent of all lending, the economy is dominated by short-term loans, which account for approximately 65 percent of the total, with medium-term loans accounting for 32 percent and long-term loans for only 3 percent. Overall access to credit remains very low, and below CEMAC average. The penetration rate, defined as number of borrowers per 1,000 adults has almost doubled in 2009, reaching almost 17 percent but it it still below SSA average (excluding South Africa).While the microfinance sector has gradually expanded in recent years, penetration levels remain relatively low and the sector's development is constrained by a loose regulatory and supervisory framework for microfinance institutions (MFIs). $ Due to the integration of Cameroon in the CEMAC region, regional laws govern most of the country's financial system, often rendering legal procedures cumbersome. Accounting requirements are not yet fully in line with International Financial Reporting Standards (IFRS). Authorities have however recently stated intentions to reform the country's banking and financial sectors in efforts to deepen financial intermediation, and intend to finalize the implementation of a central credit registry, introduce new financial instruments targeted
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towards SMEs, and set up a judicial court to tackle commercial matter and improve the enforcement of contracts. While CEMAC countries jointly launched a common regional Stock exchange in 2008, Cameroon has also set up its own stock market, the Douala Stock Exchange. However, market infrastructure development to support the expansion of capital markets lags behind issuing plans and regional auction mechanisms and dealer-type systems to support both the primary and secondary market are not yet fully in place. Furthermore, a cash and debt management framework is not yet established at the Treasury, hampering budget financing through government debt securities. The stock market capitalization reached XAF 97 billion in 2011, with only three companies active on it.2 As a member of the CEMAC, Cameroon shares a common currency, Central Bank-the Bank of Central African States (BEAC), and joint monetary policy with other member states. The fixed income market is also regionally integrated. Under CEMAC, national treasuries are allowed to issue Treasury bills and bonds through weekly and monthly auctions. But government securities markets have yet to take off in the region; as of mid-2010 there was no significant track record of bond issuance, with no recent issuance of treasury instruments, and only one outstanding government bond on the market (issued by the Republic of Gabon). Cameroon has however announced plans to start issuing government securities in the domestic market in the near future. As of March 2013, Fitch and Standard and Poor's each gave Cameroon long-term sovereign debt ratings of B- and B, and B and B for local and foreign currency respectively. 3

III. MICROFINANCE SECTOR Due to increasing attention from international bodies, donors and policy makers, microfinance the world over has entered into a principal phase of development. Practitioners of microfinance have referred to it as the last hope for the poor and are currently divided between those who favour profitability and the second camp combining profitability and

2 3

http://www.mfw4a.org/cameroon/cameroon-financial-sector-profile.html https://www.devex.com/projects/tenders/capacity-building-of-the-financial-markets-commission-incameroon/104996

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social dimension. Other major players within the financial system, such as commercial banks until recently looked at microfinance as a market niche. Attitudes continue to evolve as developing countries strife at incorporating microfinance into the mainstream financial system. In the phase of this global evolution, top performing Microfinance Institutions (MFIs), are being restructured, their income stream widened and are no longer dependent on subsidies to strife. Many have become profit making institutions as a result to transparent and access to different sources of financing. In Cameroon microfinance services is no longer reserved for the social Non Governmental Organisations (NGOs) as the boundary between microfinance and commercial banking activities are becoming blurred. In its traditional microfinance form, the route of formal microfinance activities can be traced back in 1963 following the creation of the first cooperative savings and loans institution (Credit Union), at Njinikom in the North West region of Cameroon by a Roman Catholic clergy. Development of microfinance institutions and their activities remain blurred until the early 1990s when President Paul Biya in order to incorporate the elites and various interest groups into his New Deal Policy passed the remarkable law No. 90/053 of 19 December 1990 relating to freedom of associations, and Law No. 92/006 of 14th August 1992 relating to cooperatives, companies and common initiative groups. Another major contributing factor to the growth and development of microfinance activities in Cameroon can be linked to the banking crisis in the late 1980s that resulted to the closure of branches of commercial and developmental banks in rural areas and some cities. Many top executives lost their jobs, some were dismissed. Some of these executives and employees formed cooperative credit unions that function like mini banks. As microfinance activities gained heavy weight in the financial system of the country, the roles of different stakeholders became clearly defined as the supervisory authorities configured MFIs within the national territory. Network of MFIs: Made up of institutions developed endogenously such as MC2, CAMCCUL (Cameroon Cooperative Credit Union League), The Self Directed village Savings and Credit (CVECA) supported through the decentralised rural credit project of the Ministry of Agriculture and Rural Development with the support of BICEC and two other
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French institutions. Two independent MFIs created by individuals and located mostly in urban areas, 3NGOs with development projects, agro industrial activities and credit component. The case of SODECOTON, and South West Development Authority. The Microfinance Environment of Cameroon Data from the Banking Commission of Central Africa States, industry sources confirmed by various focus groups show that the activity of microfinance is growing rapidly in Cameroon. In the phase of growing consolidation and restructuring in 2006, there were about 490 MFIs in Cameroon (down from the 656 MFIs previously identified in 2000) with about 1052 outlets (against 700 in 2000). The customers/members then stood at about 849030 which were up compared to the less than 300 000 customers registered in 2000. Growing interest, closer supervision and monitoring resulted into strengthening equity base that rose from FCFA 3billions in 2000, to FCFA 19.9 in 2006 and today, according to market intelligence and industry sources total equity sits around FCFA 23,5billions. Capitalization ratio for MFIs continues to grow although; CAMCCUL the market leader is disproportionately represented. Demand of Microfinance With a population of about 19.8million and being the most populated country in CEMAC, the microfinance industry of cameroon continues to record an impressive growth in terms of members and account holders with current market intelligence estimate estimated at close to 1,4million account holders. Thanks to vigorous reform programs launched to develop and enforce an adequate regulatory framework, measures put in place by the ministry of finance to protect depositors and strengthening internal control system put in place in some of these institutions in partnership with stipulated external auditors. According to current central bank statistics, 52% of MFIs are located in urban areas as opposed to just 48% in rural areas. The distribution of branches of MFIs member institutions is disproportionate with three of the ten regions of cameroon-the North West, Littoral and Centre regions counting about 60%, while the South West, the West and Extreme North controls 28% of the number of MFIs. Today, within the network of microfinance institutions, cooperatives, and some common initiative groups carrying out savings and credits, it is estimated there are about 1.5million accounts. This number is significant when compared to the almost same level of accounts registered in the commercial banking sector. However, access to financial services in
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cameroon is deemed very low compared to other parts of Africa particularly when compared to the rest of developing countries.The situation is made worst as most MFIs limits their branch network in urban areas. Microfinance institutions just like their commercial banking counterparts are concentrated in the cities of Bamenda, Douala and Yaound, although most of these institutions had their origin from indigents from the North West and Western regions of the country. Yaound, Douala and Bamenda remain the most concentrated cities with MFIs branches. Moost villages and some semi urban areas are yet to feel a touch of MFIs. This is due to poor road infrastructures, little or no telephone coverage, lack of electricity supply and low level of security. This is particularly sad as close to 50% of the countrys population live in rural areas and an estimated more than 60% is dependent on agriculture and farming for their livelihood. Swot Analysis of the Sector STRENGTHS The approach adopted by MFIs operating under an umbrella institution like CAMCCUL, and the MC2-ADAF is relatively good for the financing of members activities and rural development. Some MFIs charge reasonable interest rate that is commensurate to the low bargaining power of the poor and suit the poverty alleviation objectives they strife to fulfill the demands. MFIs have accumulated an important volume of deposits. Organized traditional leadership structures in rural and semi urban areas. Excellent landscape for tourism in some rural areas-Menchum fall, lake Nyos Fertile soil and favorable climate to boost agriculture in rural areas Pasture land for cattle, sheep and milk production Existence of thousands of cattles, sheeps to be fattened Attractive and diversified local folklores Excellent telephone coverage-MTN Orange in some rural areas Diverse Socio political groupings-Connected to other local markets Tens of developmental partners, hundreds of CIGs & NGOs

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WEAKNESSES

and the MC2-ADAF is relatively good for the financing of members activities and rural development. to the low bargaining power of the poor and suit the poverty alleviation objectives they strife to fulfill

andscape for tourism in some rural areas-Menchum fall, lake Nyos

-MTN Orange in some rural areas -Connected to other local markets

ket road networks to facilitate sales and transportation of agricultural products

revalence of HIVs with negative preconception

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ransformation ratio with respect to COBAC prudential norms

COBAC, poor portfolio quality

of some developers Problems in Microfinance sector On the 18th of February COFINEST a major microfinance institution collapsed sparking protest in the height of the growing unrest and the second wind of change in North of Africa. Thanks to the timely intervention of the government who through the Ministry Finance, promised to reimburse depositors and pay the February salary of the institution close to 300 employees. Cofinests solvency problems were first revealed in December 2007 when Banking Commission placed it under provisional administration after control team from COBAC disclosed a number of irregularities ranging from substantial non performing and insider loans worth about FCFA3.6billion. All efforts made to turn around the image and activities of the institution failed because of the limited power of COBAC. Again as mentioned by the regulatory authority, the shareholders owed the institution FCFA5billion, almost 10times more than what is stipulated by the prudential norms on insider lending which led the Minister of Finance to accuse the shareholders of embezzlement. According to the secretary general of COBAC at the time Idriss Ahmad Idriss, despite efforts made by the supervisory authorities and institutions to certify microfinance in Cameroon, the sector remains fragile and suffers from a total disorder that makes it difficult to control. This led the finance minister of Cameroon at the time to promise the public the government would put in place a system to control and closed down all institutions not adhering to the rules. Cameroon MFIs face several constraints related to loan collection and the realization of collateral. Very few of the hundred MFIs register collateral officially given lack of knowledge and expensive procedures to register. As a result, MFIs have difficulty realizing
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collateral through the courts. When clients have loans from banks and MFIs, the banks are generally better positioned to seize collateral. As a positive step, the draft OHADA uniform act on cooperatives provides simplified measures for collateral registration and processing. But little or no efforts are currently being done to sensitise the institutions. The matter is made worst as Cameroon MFIs do not have access to the national credit bureaus and some experts fear this will cause more problems as banks begin to lend more to small businesses. Again, licensing MFIs is not an easy process in Cameroon. Licensing MFIs is a dual responsibility shared between COBAC and the monetary authority-the ministry of Finance. The ministry of finance receives applications, conduct an initial review and submit them onto COBAC for approval within three months. 4 After reception, COBAC issues a positive or negative opinion on the application within three months and the Ministry then formally issues the license or the rejection to the MFI. Although, the Ministry of Finance is not in a position to override any decision from COBAC, it must explain any rejection of application by COBAC. Here, COBAC makes the licensing decisions, while the monetary authority executes them by issuing licenses and closing down unauthorized MFIs.

IV.OIL AND GAS SECTOR The rebound in the economy initiated following the 2008/09 financial crisis continued in 2012, with growth estimated at 4.9%, versus 4.1% in 2011. Supported by higher oil production and strong domestic demand tied to the launch of large infrastructure projects, this positive performance should continue in the 2013-14 period. In 2012, budgetary policy remained expansive with increased investment spending and spending on subsidies. According to estimates, the budget balance should remain in deficit, at 3.5% of gross domestic product (GDP), compared to a deficit of 2.7% in 2011. The monetary situation was characterised by a fall in net external assets (NEA) and an increase in domestic credit. Inflation, which should reach 3% (compared with 2.9% in 2011), can be explained by electricity price increases as well as the impact of flooding on harvest stocks. With a 32.6% share of exports, oil remains the main export. Estimates based on 2012 first-quarter
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http://www.microfinancegateway.org/gm/document1.9.57347/The%20Microfinance%20Market%20of%20Cameroon.docxFinal.docxfinal2012.pdf

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performances indicate that several external balances will remain in deficit. The debt level remains manageable, with a ratio of public debt stock/GDP of around 16.7%. Cameroon has abundant natural resources. However, revenues obtained from the exploitation of these resources, and from oil in particular, have not been sufficiently channeled into structural investments in infrastructure and the productive sectors. The decline of the agricultural and forestry sectors in the countrys economic structure over the past decade attests to this. Recently, the State has undertaken steps aimed at reviving the productive sectors, particularly by strengthening infrastructure. While efforts to maintain

macroeconomic stability are continued, poor governance persists and impedes the optimal use of public resources for the countrys socio -economic development.5

V. MANUFACTURING SECTOR By Sub-Saharan standards, the Cameroonian manufacturing sector is relatively diversified, being the most diversified within the Central African Economic and Monetary Community (CEMAC) zone and comparable to that of Cte dIvoir e. The UNIDO industrial statistics database (INDSTAT)2004 version, 3-digit level, Revision 2) mentions some 205 industrial enterprises, generally small to medium-sized businesses, with a workforce of almost 53,000. Most of these enterprises work exclusively for the domestic market: manufactured exports are still undeveloped, constituting less than 10 per cent of total exports. Domestic-market orientation of industry,3 widespread State control over economic activity and exchange-rate overvaluation have long been factors in preventing enterprises from capturing export markets. A major step towards macroeconomic adjustment and international competitiveness was taken with the devaluation of the CFA franc in January 1994. The chemicals, petroleum refineries, rubber and plastics industries group ranks second, withalmost 17 per cent of MVA, 41 % of manufacturing employment and 9% of manufactured exports. Petroleum refining still has a substantial MVA share but has considerably declined since1995.Cameroonhas a relatively advanced rubber industry, which employs a large workforce. By contrast, the chemicals sector as such still

http://www.africaneconomicoutlook.org/en/countries/central-africa/cameroon/

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occupies a limited position;Cameroon produces mainly pharmaceuticals and cosmetics, including perfumes and soaps.

The post-colonial period was marked by protectionism: From independence in 1960 to 1976, the country underwent a process of industrialization with import substitution by local production aimed at a market protected by tariff barriers and quantity restrictions. That period saw the emergence of local entrepreneurs, often under monopoly arrangements, with no particular requirement as regards improving competitiveness. There was also the active industrialization phase, driven by vigorous economic growth through petroleum production, from 1977. Prey to the fall in the price of oil and primary commodities, the economy in 1984 entered a period of recession,which was to last ten years. Per capita income plummeted almost 50 per cent during that period The development of Cameroons industrial base largely reflects three phases of a voluntarist industrial policy, whose implementation has to date suffered from the vicissitudes of the economic climate. Resumption of growth has enabled enterprises to envisage restoring production plant and winning foreign markets but the aftermath of the recession is still in evidence. In addition to the constraints affecting all sectors, Cameroonian industry is facing specific difficulties such as unchecked competition from imports, with the liberalization of the domestic market internal weaknesses in output, technology acquisition marketing and management; poor links between industry and the institutional sector ; financing difficulties of SMEs; low levels of development of services to industry; an embryonic system of standardization and metrology; and, more recently, electricity supply difficulties, which have reduced effective capacity utilization in industry and increased production costs. The current relative economic stability and necessity to consolidate recent economic gains by rapid integration in the world economy offer a new basis for formulating an industrial policy capable of supporting growth at a time when local and foreign investors are displaying renewed interest in the region as a whole . Even though in over ten years since devaluation of the CFA franc the industrial structure has not fundamentally changed, there is nevertheless evidence of a will to move forward, with the institution of the new regulatory environment

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and efforts to modernize the production system with the adoption of new governance and management techniques.6

VI. CAPITAL MARKETS The financial integration in the region includes two regional stock exchanges: the Bourse des Valeurs Mobilires d'Afrique Centrale (BVMAC, in Gabon) and the Douala Stock Exchange (DSX, in Cameroon). The main participants are the governments, public and semipublic companies and international companies. Oversight is provided by the Commission de Surveillance du March Financier dAfrique Centrale (COSUMAF). The rapid growth of the insurance sector could have a positive impact on the development of the stock exchanges. Their effective functioning fosters investments made by insurance companies in the markets in the shortterm through public bonds and in the medium and longterms through debt issued by private companies. The origin of the market in Douala began in a project sponsored by CEMAC having to do with creating stock exchanges in Gabon and Cameroon. CEMAC is the abbreviation for Economic and Monetary Community of Central Africa. The Douala Stock Exchange was created in December 2001. The first listing was Socit des Eaux Minrales du Cameroun (SEMC), a subsidiary of the French company Castel Group. The Douala Stock Exchange (DSX in abbreviation) is the official market for securities in Cameroon. It is located in Douala. DSX is owned by APECCAM, (the Credit Association of Cameroon); by Cameroonian corporate interests; and by the government. It is similarly governed: Administration Board: APECCAM : 7 seats Corporate : 2 seats Government : 1 seat Other : 1 seat
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http://www.unido.org/fileadmin/media/documents/pdf/tcb_industrial_performance_cameroon.pdf

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Until 2006, its sole listing was (SEMC). Now it also includes Socit Africaine Forestire et Agricole du Cameroun (SAFACAM). The capital markets sector is still in its infancy. Again the fight between Cameroon and Gabon does not help the development of a regional stock market. As of today we cannot considered the DSX as a fully functioning stock exchange. The main regulator is the Financial Markets Committee (Commission des Marchs FinanciersCMF), which is a regional body that was legally established in 1999 and whose objectives are to protect investors savings and monitor the financial markets of the XAF zone. CMF has sole authority to approve securities for listing on the exchange. As is the case for the CFA West Africa zone which has a common stock exchange (the Bourse Rgionale des Valeurs Moblires BRVM), the Central African Region also sought to establish a common stock exchange. However, initial plans were temporarily shelved, as no agreement could be reached between the member countries regarding a host country.

VII. MINING SECTOR Cameroons major commodity is petroleum, which provides 50% of Cameroons exports. Geologically, Cameroon is characterised by Archaean basement, Proterozoic volcano sedimentary packages (similar to that of the auriferous Birimian Belt of West Africa) and several late stage intrusive phases. Cameroon also has extensive bauxite reserves, but requires substantial infrastructure development in order to exploit them. Potential bauxite reserves exist at Minim Martap and Ngaouanda deposits, located in the remote northern parts of the country. These two deposits have an estimated combined resource of 1 100 Mt of bauxite. Chinas Gansu Corporation has intentions to develop a 2 000 Mt bauxite deposit which would provide bauxite to Cameroons largest aluminium smelter at Edea. Currently the Edea smelter obtains bauxite from Guinea. Numerous artisinal gold workings are known (producing around 1500 kg/year), but it appears that no modern exploration methods have been used to locate Cameroons primary gold potential. Alluvial gold production is derived purely from elluvial and alluvial workings. To date no primary deposits have been successfully located. However, work carried out by the BRGM suggests that gold mineralisation is related to the volcano-sedimentary belts
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characteristic of the Birimian belt in Niger, Burkina Faso and Mali. Artisinal mining accounts for around 45 000 oz/year. Lom River Gold Corp (formerly Lorica Resources Inc) from Canada has an option to obtain a gold prospect in south eastern Cameroon. The resources mined in Cameroon are quite limited, with annual artisanal production of around 20,000 oz of gold and 12,000 ct of diamonds, and various building materials. The government is currently examining the assistance it gives to the artisanal mining sector. Alucam is Cameroon's largest company, and its aluminium smelter is producing and exporting some 90,000 t/y of aluminium from bauxite imported from Guinea. Cameroons geological and mining sector has two objectives. The scientific objective is under the responsibility of the Ministry of Scientific and Technical Research, which oversees a variety of research institutes in the areas of geology and geophysics, hydrology, and energy. The industrial objective is promoted by the Ministry of Mines, Water and Energy, which also has the responsibility for the national geological survey through the Direction of Mines and Geology (still divided in two departments, for Geology and for Mines). The central administration of the Ministry of Mines is comprised of:

the General Secretariat the Mines and Geology Directorate the Water Directorate the Energy Directorate the General Affairs Directorate

The legal framework for Cameroons companies follows French law. The Mining Code consists in a law (1964) which regulates mineral substances, and another law (1978) which defines taxes, royalties and mining taxes. The latter was supposed to define the fiscal framework for mining, but this did not happen. Other fiscal laws are necessary for the regulation of this sector and, as a result, investors have to negotiate on a case by case basis the establishment of companies. This results in turn in a very heavy administrative burden, which jeopardises sometimes the evaluation of investment opportunities for which decisions must be made quickly. In summary, the mining sector is still not a priority in Cameroons development strategy. Currently, the Ministry of Mines is in the process of revising the Mining Code, with the help
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of the World Bank, and aims at presenting a new code in 1998. The intent is to decrease the role of the State in mining operations as well as its discretionary powers, and at the same time to increase its role as a supervisor and regulator of the mining sector. Environmental aspects will also be addressed by the new code. According to the Investment Code, a Cameroon company must be established, with more than 35% of capital owned by Cameroon citizens, before investments are allowed in the countrys activities. National subsidiaries are allowed 7 VII. FORESTRY SECTOR Cameroon has an estimated population of 17.8 million for a total land area of 475,442 km2, including 6,000 km2 of water. A population growth rate of 2.7% and growing urbanization, estimated at 54% of the population, are putting growing pressure on land, which has doubled since 1975 (UNDP, 2008). Cameroon's economy is based on agriculture and livestock (44% of GDP), industry (16%) and services (40%) (CIA, 2008). The contribution forestry (accounted within agriculture and livestock) to the GDP is estimated at 6.5%. The total area covered by dense productive forests is estimated at 16,467,570 ha (Ebaa Atyi et al.,2009). The tropical humid forests are mainly exploited for timber, firewood and nontimber forest products, while forests in the north are mainly used for firewood and non-wood products (MINEP, 2007). In general the forest resources are the property of the State; however, forest exploitation is conducted in the field by private individuals and industrial enterprises that received timber harvesting titles from the government. There are 9 types of legal timber harvesting titles (Table 2.1) in Cameroon that can be grouped as follows: The exploitation permits, which include three types of titles: the timber exploitation permit, the special products exploitation permit and the firewood exploitation permit. The exploitation permits are granted for one year and are non renewable, they allow exploitation or collection of well defined quantities of forest products in a given area. These products may
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http://www.mbendi.com/indy/ming/af/ca/p0005.htm

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be special products, or volumes of raw timber not in excess of 500 m, or firewood and poles extracted for profit. The authorizations which consist of two types of titles: the personal cutting authorization and the wood recovery authorization (rescue cutting and wood collection). A personal cutting authorization is issued for the benefit of an individual for non-profit personal use to collect quantities of wood that cannot exceed 30 m gross. Timber recovery authorizations may be issued as part of a development project likely to cause disruption or destruction in a forest. These permits are only issued after a prior environmental impact assessment has been conducted by the applicant in compliance with norms set by the environmental authority. The community forests are granted for a maximum area of 5 000 ha. Logging takes place on behalf of the community, governed, by sales of standing volumes, personal logging authorization, or by permit, in accordance with a simple management plan approved by the forest authority. Industrial exploitation using heavy machineries for skidding and log transportation is forbidden in community forests. Only artisanal and semi-industrial techniques for which felled trees are sawn on the felling spot are allowed. During Cameroon's recent economic resurgence, financial services have flourished, growing by 10 percent in 19992000. Total market resources increased from CFA Fr646 billion in 1999 to just over CFA Fr800 billion in 2000. Banking services are dominated by branches of several multinational banking groups such as Socit Genrale, Crdit Lyonnais, and Standard Chartered Bank. During the late 1990s, Cameroon's largest state owned bank, Banque International du Cameroun pour l'Epargne et le Crdit (BICEC), was privatized and another multinational, Groupe Populaire, took a controlling share. The banking sector expects continuing growth to be fueled by further privatization and rising investments associated with the ChadCameroon pipeline project.

VIII. LEGAL INSTRUMENTS GOVERNING FIANCIAL MARKETS

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In Cameroon, various pieces of legislation govern business activities and corporate financing. The most important of these are Law 90/031 of August 10 1990, which governs commercial activities in Cameroon, and Decree 93/720 of November 22 1993, which restricts the application of the 1990 law to commercial activities. To this national legislation should be added regional or community legislation, especially that of the Organization for the Harmonization of Business Law in Africa, better known by its French name, Organization pour lHarmonization du Droit des Affaires en Afrique (theOhada). The Ohada has a lot of legislation relating to commercial activities the two that relate to corporate financing are the Act Relating to Commercial Companies and Economic Interest Groups, and the Act Relating to General Commercial Law. All this legislation allows companies to finance their business operations. Financing for private companies is achieved through their members, while limited liability companies and government owned enterprises can seek financing from banks through loans or the securities market. The principal piece of legislation governing the Cameroonian securities market is Law 99/015 of December 22 1999 (the 1999 Law), which establishes and organizes Cameroons financial market. To this principal piece of legislation should be added Decree 2001/213 of July 31 2001 (the 2001 Decree), relating to the organization and function of the Financial Market Commission, and Decision 02/002 of December 3 2002, relating to the general regulations and functioning of the financial market. Both of these are supplementary enactments to the 1999 Law. The 1999 Law creates a financial market in Cameroon based in Douala. It also sets out and regulates the various financial instruments and investment services available, and regulates the activities of the entire financial market. To regulate the securities market, the 1999 Law established the Financial Market Commission (the Commission), the supervisory body responsible for ensuring the smooth functioning of the market. The Commission has powers to investigate wrongdoing and hand down penalties. The 2001 Decree spells out the organization and function of the Commission. The Commission is made up of eight members who are appointed by presidential decree for a five-year term of office, renewable once. The Commission is chaired by a competent personality, also appointed by Cameroons president. Its members comprise two representatives of the Ministry of Finance, two qualified personalities put forward by the minister of justice that are chosen on the basis of their competence in legal matters, one
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representative of the stock investment companies recommended by their professional association, a representative of credit establishments recommended by their professional association, and two financial experts chosen on account of their competence and upon the recommendation of their professional association.Cameroons securities market is well structured. The legal instruments relating to the market protect the shares and interest of every market participant.

IX. FINANCIAL MARKETS AND ECONOMIC OUTPUT- CONCLUSION The Cameroon government sold its last stateowned bank in January 2000, the last step in a major Banking system restructuring. Four new private banks have begun operations since 2000, and there are now ten banks in the sector. The Central African States Bank (in French, BEAC) regulates the sector through the Regional Banking Commission, COBAC. COBAC has the authority to take disciplinary action. Both COBAC and the Cameroon Ministry of Finance and Budget must license banks, and there are special regulations for smallscale credit cooperatives. A national stock exchange in Douala was inaugurated in the second quarter of 2003 but has not yet begun trading operations. The financial sector in Cameroon comprises 10 commercial banks, 11 nonbanking financial establishments, some 652 micro finance institutions and an increasing number of foreign exchange bureaus. The banks operate in the country within the regulatory framework of the central banks Banking Commission: the COBAC that has laid outstringent prudential rules. Despite the current excess liquidity of the banking system, granting of credit, excluding bad loans, is far below the minimum annual increase of 30% needed to satisfy the countrys financing requirements. The financing deficit of the economy stems from the narrowness of the market and the high proportion of bad debts as well as the difficulties banks have had to realize guarantees, and cause the enforcement of court decisions in litigation cases. Banking activity is also marked by a high level of conservatism. The COBAC survey of 2000 identified the existence of 652 micro finance institutions in the country. At the time, the microfinance sector represented about 7% of the potential market and it granted credits representing 4.3% of total loans made by the banking sector. These
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figures have increased considerably in recent years (the present number is estimated at more than 1,000), though accurate statistics are not available. The insurance sector is regulated and supervised by a regional body, the Interprofessional Committee of the Insurance Market (Confrence Internationale des Marchs dAssurancesCIMA) established on July 10, 1992 in Yaounde (Republic of Cameroon) and includes the following countries: Benin, Burkina, Cameroon, Central Africa, the Comoros, Ivory Coast, Gabon, Equatorial Guinea, Guinea Bissau, Mali, Niger, Senegal, Chad and Togo. The CIMA Treaty came into effect on February 15, 1995. The regulatory body of the CIMA is the Regional Commission of Insurance Control (CRCA) whereas the Council of Ministers is the supreme body. Since the reform of insurance laws in 1998, CIMA has revoked the licenses of four insurance companies, privatized one stateowned insurance company and liquidated the only reinsurance company in Cameroon. Despite a recent strong growth in the life insurance segment, the insurance industry in Cameroon is dominated by nonlife insurance sector.

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