As a key element in the achievement of sustainable long-run growth, investment is given top priority in the development of the WAEMUď s economic policy. On average, rates of investment in the WAEMU are comparatively low.¹² A major objective of the regional investment code in preparation, which is intended to replace all existing codes in member countries, is to promote investment through simpler and more transparent rules. It also seeks to correct discriminatory practices that are based on the type of economic activity, the nationality of the beneficiaries, and the size of the relevant enterprises. Another objective is to avoid the distortions associated with exemptions from customs duties and other indirect taxes. In the view of the IMF staff, however, the project as it now stands does not go far enough in the direction of eliminating exemptions, notably those on customs duties on equipment and investment goods as well as those on the value-added tax on imports and local goods and services.

To promote the development of the private sector, WAEMU countries have decided to create a privately owned regional securities exchange, which is expected to become operational in mid–1998. Given its wide regional base, the securities exchange should increase the number of companies currently listed on the national stock exchange operating in Abidjan. It should also facilitate the implementation of WAEMU countriesď privatization programs and help raise small investorsď participation in the financing of enterprises. The necessary supervision of financial markets will be ensured by the Regional Securities and Exchange Council, created in 1996 by the WAEMU Council of Ministers. Its mandate includes not only supervising all activities of the exchange, but also regulating and authorizing all financial instruments issued by borrowers on the market.

The bias in favor of tax exemptions that still exists in the draft common investment code—which the IMF staff has urged the authorities to correct promptly—appears to represent a vicious circle inherent in the preferential regimes put in place over a number of years in all WAEMU countries. The narrowing of the tax base resulting from such preferential regimes leads to excessively high nominal rates of taxation—reducing peopleď s incentives to produce and invest—and these high tax rates, in turns, provide a strong incentive for firms to seek tax exemptions. Thus, the staff has impressed on the WAEMUď s regional and national authorities the need to move forcefully and simultaneously to cut exemptions and reduce import duties in the context of the common external tariff as complementary steps to improve incentives and raise the efficiency and the fairness of the tax system.

An important element of the strategy adopted by WAEMU member countries is to fully harmonize business laws through the Treaty on the Harmonization of Business Laws in Africa (OHADA), adopted in October 1993 by 15 African countries (all the CFA franc countries and Comoros). It is designed to unify business laws, promote arbitration procedures to resolve contractual conflicts, and improve the professional training of magistrates and their auxiliaries. It calls for a framework of rules to apply to all corporate and individual businesses, a set of rules for the use of guarantees and other forms of collateral in support of business transactions, procedures governing the resolution of bankruptcy proceedings and loan recovery, and accounting laws applicable to enterprises. WAEMU members have made progress toward achieving these objectives, notably with the establishment of a regional court of justice and arbitration in 1997 and the recent entry into force of three Uniform Acts, adopted in 1997 by the OHADA Council of Ministers. These acts, which do not require further approval and are directly enforceable in all member countries, go a long way in the direction of full harmonization of business laws in the WAEMU. They will soon be complemented by two additional acts, which were adopted by the Council of Ministers in April 1998. These acts establish simplified procedures for loan recovery and a framework for settling liabilities in cases of bankruptcy; they are expected to come into force on July 10,1998 and January 1, 1999, respectively. The recently created regional court of justice and arbitration can hear all cases related to the implementation of the Uniform Acts, and its decisions are enforceable in all the countries that have ratified the OHADA Treaty.

In parallel to the efforts made to harmonize business laws, the WAEMU authorities decided, in September 1996. to launch a regional project aimed at creating a common accounting framework for all nonfinancial businesses and corporations. The Système comptable ouest africain, which is expected to become fully operational by January 1, 1999, will ensure that all accounting systems used in the region generate information that is both reliable and capable of meeting the requirements and needs of all users.

Efforts to create a set of comparable economic indicators for countries in the WAEMU have already produced a harmonized index of consumer prices based on a common methodology. Other projects involve the harmonization of fiscal data, external and domestic debt, national accounts, and balance of payments. A uniform analytical framework for the public finances has been put in place, and progress is being made in compiling balance of payments and monetary statistics with technical assistance from the IMF. These are important steps that should now be followed by efforts to improve and harmonize national accounts data. To assist in the preparation of other key economic aggregates, WAEMU members, together with other member countries of the CFA franc zone, created a regional statistical office, which became operational in 1996. Its role is to advise and provide technical support to national statistical agencies in the preparation of aggregate data and to assist in conducting surveys and studies in key areas, such as the informal sector. With assistance from external donors, the office is currently lending support to member countries in institution building; harmonization of statistical nomenclatures; national accounting compilation methods; and studies on competitiveness, economic trends, and the contribution of informal businesses to overall economic activity.

The WAEMU treaty specifies a number of areas of common interest to its member countries. Specific sectoral policies need to be put in place in these areas to facilitate the achievement of the countriesď macroeconomic policy objectives: human resource development, transport and telecommunications, environment, agriculture, energy, industry, and mining. Work on some of these areas (especially transport and communications) has recently begun in coordination with donors, notably the World Bank and the European Union, but it will take some time before concrete results can be achieved.