Comoros Island
Institutional structure and basic data
Area: 2,235 sq km
Capital: Moroni
Main cities: Domoni, Fomboni, Mutsamudu
Official name: Union of the Comoros
Form of Government: Federal Republic
Head of State and Government: President IKILILOU DHOININE, elected in December the 26th, 2010
Foreign Minister: Ahmed Ben Said Jaffar
Legislative System: unicameral.
The Federal Assembly is composed of 42 seats, with deputies elected for five-years terms.
Legal system: French and Muslim law in a new processing code.
Suffrage: Universal for citizens over 18 years of age.
Participation in International Organizations: ACT, ACP, AfDB, AFESD, AL, CCC, ECA, FAO, FZ, G-77, IBRD, ICAO, ICRM, IDA, IDB, IFAD, IFC, IFRCS (associate), ILO, IMF, IMO, INOC, Interpol, IOC, ISO (subscriber), ITU, NAM, OAU, OIC, OPCW (petitioner), UN, UNCTAD, UNESCO, UNIDO, UPU, WHO, WMO, WTO (candidate).
Population and social indicators
Population: 739.917 (2013, World Bank)
Population growth rate: 2,766%
Life expectancy at birth: 63 years
Ethnic groups: Arab, Bantu and Indo-Malagasy minorities.
Religions: Muslim 99.80% - mainly Sunni profession with a small minority (about 5%) of Shiite profession, Catholics 0.20%.
Languages: Arabic (official), French (official), Shikomoro (mixture of Swahili and Arabic). French is the official administrative language used in schools, courts and law.
Main Political Parties: Front National pour la Justice or FNJ (Islamic opposition party) [Ahmed Abdallah MOHAMED Ahmed Aboubacar, Soidiki M'BAPANOZA]; Rassemblement National pour le Développement, or RND (governing party) [Ali Bazi SELIM].
Currency: Comorian franc
Major credit cards are accepted, but only in few shopping outlets and hotels.
Exports: vanilla, cloves, essential oils, copra.
Per capita income: USD 532
Prefix from Comoro to Italy: 0039
Prefix from Italy to Comoro: 00269
Time zone: GMT + 3
Historical Background:
The Comoros is a sovereign archipelago island nation in the Indian Ocean located at the northern end of the Mozambique Channel off the eastern coast of Africa between northeastern Mozambique and northwestern Madagascar. The name 'Comoros' comes from the Arabic word Qamar i.e. “moon” and the islands are known in Arabic as Juzur At Qumur, meaning "islands of the moon”.
The Union of the Comoros is a former French colony, originally composed of four main islands: Grande-Comore, Anjouan, Moheli and Mayotte. In 1975, France organized a referendum for self-determination in the archipelago, which allowed the islands to gain independence. Among the islands, only Mayotte refused independence to acquire the status of Collectivité Territoriale under French sovereignty. This political status is halfway between a department and an overseas territory, with an elective form of local government and local regulatory authority. During time, tensions arose between the Comorian Ministry of Foreign Affairs and the French authorities, which didn’t manage to engage in constructive dialogue.
This allowed for the return of Mayotte under the federal authority of the archipelago. Therefore, a referendum was held in 2010, with the approval of the French parliament, which changed Mayotte’s status in overseas department.
The political history of post-independence Comoros is characterized by the frequency of coups d'état –more than 21, considering both actual and attempted ones-, strong political conflicts and autonomist movements. A certain degree of stability was achieved only after the 1996 presidential elections: the winning party, Union Nationale pour la Démocratie aux Comores (UNDC), called for a referendum on a constitutional reform, inspired by the French presidential model. The positive result of the referendum legitimized the extension and strengthening of the presidential power in matters of defense and foreign policy, as well as the merge of the President’s and Prime Minister’s office. Short thereafter, the UNDC grouped the party formations favorable to its policies in the Rassemblement National pour le Dévelopement (RND), marginalizing the opposition forces from the government. The situation was relieved only after Taki’s death in November 1998, when the new President Massonde, opened the dialogue with the marginalized opposition forces, grouped in the Forum pour le Redressement National (FRN) and led by Abbas Djoussouf, old political enemy of Taki. The opposition agreed to join in the government and Djoussouf was appointed Prime Minister, but he carried out a policy of marginalization of the leading exponents of the DNR.
Meanwhile, in July 1997 Anjouan and Moheli Islands announced secession, requesting France to be re-integrated as a Collectivité territoriale. Paris refused the request, but the situation triggered a new political crisis in the archipelago. Djoussouf management of the crisis further worsened the discontent in the military and allowed opposition parties to organize a violent anti- Anjouanian campaign among the population.
The African Union pushed for the organization of a conference in the archipelago with the aim to stabilize the situation with a formal agreement. The conference was eventually held in April 1999 and led to the ratification of the Antananarivo Agreement, which grouped Grande-Comore, Moheli and Mayotte in a new confederation led by a president to be elected on a rotating basis. Anjouan refused to sign the covenant and the separatists’ decided unilaterally to submit to a referendum on the future political structure of the island. This resulted in violent demonstrations and attacks to the Anjouanese population in the other islands. In this climate of political instability Colonel Assoumane, supported by the army, seized power in a coup in April 1999 and suspended the constitution.
Conscious of the urgent need for the country to reobtain a democratic government, the European Union decided to apply Art. 366a of the Lomé Convention -this Article allows for the suspension of cooperation with countries violating basic obligations concerning democratic principles and fundamental rights-. At the same time, both AU and EU condemned political developments in Anjouan, expressing support for the territorial integrity and political sovereignty of the Comoros.
In August 1999, separatists imposed themselves in the elections for the Legislative Assembly of Anjouan. Both diplomacy and sanctions seemed to be unable to solve the situation and the African Union started organizing a military intervention. Despite this, Assoumane eventually managed to reach an agreement with the separatists in Anjouan. In the Fomboni Agreement Anjouan pledged not to demand independence, or another status similar to Mayotte Island.
Internal policy
After a period of coups and secession attempts, in 2001 the Union of Comoros adopted a new constitution, which established the “Union of the Comoros”. The country was given a higher autonomy which was reflected in the political structure of the Union, composed of a president and a government, with a mandate of four years, and by a parliament, with a mandate of five years. The constitution was further changed in May 2009, in order to simplify the administrative structure of the Union -considering that every island also has its own president, government and parliament-. This positively affected power distribution between the federal government and the ones of the islands. The new Constitution allowed for federal law to take precedence over the individual islands, further ensuring the exclusive competence of the Government of the Union on issues such as nationality, external relations, currency, national defense and foreign investment, while allowing every island to manage its own domestic affairs.
Since the current Union president, Ikililou Dhoinine, came to power in 2011, Comoros has enjoyed greater political stability. However, there are numerous potential threats to stability in 2016-17. The main risk relates to the presidential election—expected in early 2016—which is likely to be fiercely contested and divisive. The rotating presidency is a particular source of contention. Under the 2001 constitution, the succession to Mr Dhoinine is dictated by a power-sharing system in which the presidency rotates through the main islands: Grande Comore, Anjouan and Mohéli. Mr Dhoinine is from Mohéli, and his predecessor, Ahmed Abdallah Sambi, was born on Anjouan. This means that the next president should hail from Grande Comore. However, Mr Sambi, who gave up power in 2011, is seeking to run for another term. Mr Sambi's bid faces fierce opposition from his political rivals, as it challenges the accepted order of succession. The government has urged the Constitutional Court to rule on the issue. If it does so, it is likely to uphold the current power-sharing system, implying that a Sambi candidacy is unlikely. However, the debate is aggravating inter-island tensions further, as well as raising questions over the rigid nature of the current constitutional provisions.
However, there are a number of potential threats to stability in 2015- 16. After the 2015 legislative elections, held in January 25 and February 22, it is expected to slow down the pace of reform and intensified political tensions, since no party has secured a clear majority. The presidential elections, which should take place at the end of 2015/beginning of 2016, there is also expected to be fiercely contested and divisions. In addition, power struggles and divisions within the army will continue and the possibility of further attempts at destabilization. Disputes between the islands and 'a recurring theme in the Comorian politics. The presidency is another potential source of contention. Under 2001 constitution, the succession to Mr. Dhoinine is dictated by a sharing system in which the wheel chair through the main islands: Grande Comore, Anjouan and Moheli. Mr Dhoinine is to Moheli, and his predecessor, Ahmed Abdallah Sambi, was born in Anjouan, which means that the next president should come from Grande Comore. President Dhoinine, meanwhile, will seek to extend its influence to the end of his term, after putting allies in civil and military key posts.
The risk of public disorder is high with high unemployment and frequent shortages of food and basic services such as water and l 'energy. There is also the political and socially sensitive to the privatization of state-owned enterprises (SOE), which was launched as part of the Comoros to obtain debt relief under the Heavily Indebted Poor Countries (HIPC).
International Relations
Comoros—a former French colony—will retain strong ties with France, its main bilateral donor and trading partner, despite tensions over Mayotte, an island that forms part of the Comoros archipelago but remains under French control. Relations will be underpinned by France's importance to Comorian economic policy (the French Treasury guarantees the Comorian franc) and the military cooperation pact
between the two countries, under which France is committed to building military capacity in Comoros. Chinese influence is growing, however. In February 2015 Comoros and China signed a military assistance agreement worth US$4.6m, and a Chinese firm, China Communications Construction Company, has won a contract to build, and manage, port facilities in Mohéli. Relations were further cemented at a bilateral meeting between both presidents in early December. Given Comoros's aid and investment needs, we expect Mr Dhoinine's successor to maintain his open-door foreign policy. This policy has led to growing commercial and diplomatic ties with India, Qatar, Dubai, Kuwait, and both the US and Iran. It has also resulted in Comoros joining the Indian Ocean Rim Association for Regional Cooperation, an organisation that seeks to strengthen trade and investment links between coastal states bordering the Indian Ocean. Comoros is also expected to remain on good terms with other countries in the region. In April 2015 Tanzania and Comoros held the first meeting under a bilateral economic forum designed to strengthen relations by abolishing trade obstacles and facilitating freedom of movement.
Strengthening of Commercial Ties between Tanzania and Comoros
In April 2015 Tanzania and Comoros held the first meeting under a bilateral economic forum designed to strengthen relations by abolishing trade obstacles and facilitating freedom of movement. During the meeting, the President of Comoros, Ikililou Dhoinine, declared in its opening speech that the economic reforms in the archipelago will strengthen the economic ties between the two countries. The Foreign Minister of Tanzania, Bernard Membe, urged the business community to take advantage of the growing opportunities for business and investment in Tanzania and the Comoros. On an official visit to the Comoros in 2014, the President of Tanzania, Jakaya Kikwete, had already stressed the importance of a strong economic partnership between the two countries, and pledged to improve bilateral trade relations.
Comoros currently receive large investment flows from the Middle East. The government of Comoros has struggled to attract new investors because of the shortage of energy and frequent restrictions in the telecommunications sector. It’s likely that the shortage of electricity will remain the biggest obstacle to convince the Tanzanian companies to invest in the Comoros. In an attempt to address these problems, Mr Dhoinine presented alternatives such as geothermal energy. However, a growing budget deficit (which seems to reach '3.9% of GDP in 2016 from 0.7% in 2014) and the increase in expenditure on public infrastructure make it difficult for the government to carry out these projects. With a growth rate of 7% per year in 2015-19, Tanzania could lead to business opportunities and much needed investment in the Comoros. Fahmi Thabit, president of the Unione des chambres de commerce et d'industrie d'agriculture, pointed out that the economic forum would help to formalize economic ties. Tanzania in particular, has strong incentives to strengthen trade links and remove visa restrictions to create new investment opportunities for companies in the Comoros and Tanzania increase the current export volumes, estimated at 0.53% of total exports in 2014. The organization of this forum confirms the efforts of Tanzania, along with other countries such as Kenya and Zambia, to strengthen cooperation with Comoros and to strengthen trade links in the region.
The International Monetary Fund Mission in the Union of the Comoros
An IMF mission visited Comoros in mid-December as part of continued discussions over a potential programme under the IMF's Rapid Credit Facility (RCF). The mission reported a worsening of the economic situation in the Comoros. The crisis in the electrical sector, in particular, with persistent shortages and outages extended has adversely affected the economic activity and tax revenue. The implementation of the Public Investment Programme (PIP) slower than expected also contributed to the slowdown in growth. The difficult budgetary situation has been exacerbated by an increase in the wage bill and the government was never behind with the payment of public sector wages and salaries by mid-2014.
At the end of the mission the IMF reported that the economic situation has worsened in the Comoros. The crisis in the electricity sector, characterized by persistent shortages and extended outages, adversely affected the economic activity and tax revenue. The slowdown in growth has also been favored by the implementation of the Public Investment Programme (PIP) and the difficult budgetary situation has been exacerbated by an increase in the wage bill.
The mission revealed a decrease in economic growth in 2014. Inflation appears remaine moderate, although it is difficult to prove and to quantify data and prices collected from November 2014. However, the appreciation of the dollar vis-a-vis the euro, because of the strong dependence from and low substitutability of imports, led to an intensification of the pressures on the balance of payments and international reserves. The immediate prospect for the economy of the Comoros is still bleak. While purchasing new generators should improve the supply of electricity, the crisis in the electricity sector is far from being fully resolved. In addition, the public investment program continues to encounter delays in the financing and execution. In this context, the IMF mission estimated that growth will remain weak in 2015.
The Comorian authorities have also requested the support of the International Monetary Fund to deal with the difficult economic situation, in the form of a disbursement under the RCF program combined with monitored personnel. This proposal would be considered by the Executive Board of the IMF in late October 2015.
Macroeconomic Framework
Recent economic developments, such as the slowdown in growth and the depreciation of the Comorian franc, indicate a deterioration of the economic situation. The economy shows signs of recovery after years of political instability, getting economic growth to 3.5% in 2013; since then the conditions got worse with a slowdown in growth to 2.1% in 2014. Serious deficiencies in the supply of electricity and slow progress in the implementation structural reforms dragged on all sectors of the economy.
The slowdown of growth has been accompanied by a rapid depreciation of the Comorian franc by about 24% since June 2014, testing import capacity of this economy (which is heavily dependent on imports) and increasing pressure on domestic prices.
Economic Politics
The latest credit extended to Comoros by the IMF (of about US $2.37 Million) guaranteed by the IMF was successfully completed in late 2013. The IMF demanded the approval of a subsequent program to be conditional on the commitment of the Comorian authorities to reform public finances. Although the Comorian Government has reiterated its commitment to implementing the suggested reforms were not completed, the will to implement this agreement seems to be eroded by the forthcoming presidential elections.
The budget deficit is expected to increase to 2.8% of GDP in 2015 compared to 0.7% of GDP in 2014, despite the food and oil prices are low. In 2015 the government's targets included an overall budget deficit –including grants- of Cfr2.4bn (US $ 5.3 million), which equates to approximately 1% of forecasted GDP in 2015. One of the main sources of government revenue which is also decreasing in recent years is the grant of citizenship –for a fee- to foreigners making large investments in the country.
Monetary policy is dictated by the comparison of the Comorian franc to the euro, which is important to anchor inflation. The Central Bank of the Comoros sets its policy rate at 1.5% above the index of the average exchange rate. The real GDP growth is estimated at 3.4% in 2014, and is expected to collect a 3.5% in 2015 and 3.6% in 2016.
Economic activity will be mainly supported by investment, in particular in the construction sector, thanks to the fiscal space created by HIPC with debt cancellation. If political stability remains intact and progress will be made to improve the business environment, foreign direct investment (FDI) from the Middle East is expected to increase, as well as tourism, negatively affected by chronic political instability and poor infrastructure.
The African Development Bank (AfDB) and the World Bank have agreed on concessions of respectively US $ 20 million and US $ 5 million, to improve access to energy and to finance power grid restauration. In November 2014, the AfDB also announced the allocation of US $ 6 million as a budget support to assist the government in the reformation plan of the energy sector, and US $ 480,000 to support the development of a geothermal project. In the water sector in March 2015, the Comoros and the power company “Ma Mwe” began talks with the Logistics & Supply Unit to provide an additional supply of 25 MW in order to reduce the shortage of the country's energy.
Average inflation in 2014 was 2.9%. The weakening of the food and oil prices in 2015 partially offset the impact of currency depreciation against the dollar. Inflation is expected to remain at a 2.5% average in 2015 and 2.8% in 2016. The exchange rate of the Comorian franc was pegged to the euro at Cfr492: € 1 since 2000. The exchange rate is guaranteed by the French Treasury, and this should be maintained in 2015-16.
The current account deficit is reduced from an estimated 9.8% of GDP in 2014 to 8.6% of GDP in 2015, due to the fall in oil prices, before rising to 9% of GDP in 2016. Assets export, consisting mainly of cloves, ylang-ylang and vanilla, will continue to be dwarfed by imports of goods, dominated by oil and rice.
Regulations
Despite significant progress in 2014 in improving the business environment, the Comoros has fallen by three points in the 2015 World Bank Doing Business report, from place 156 in 2014 to 159 place (out of 189) in 2015. The country declined in 5 of the 10 indicators that make up the report: starting a business relationship, the electricity, the transfer of ownership, obtaining loans and paying taxes. The Comoros saw an improvement only on a single criterion, investment protection, due to the enhancement of the rights of shareholders enacted by the Union of Chambers of Commerce.
As for the public procurement code adopted December 29, 2011, its implementation is not yet effective.
The laws and regulations are theoretically operational, but they remain unimplemented because of numerous appeals. Less than 10% of public contracts go through the new code, while the two institutions created by the reform of public procurement regulation as well as management control of public contracts are not yet functional.
Comoros’ Commercial Code is globally respected by the authorities, while tut the justice sector continues to be a major concern for investors. However, the country has consistently improved its score in the Index of Economic Freedom (45.7 in 2012, 47.5 in 2013 and 51.4 in 2014). Licensed activities remained the same, but monopolies have been stopped for several products. The country adopted a more transparent tax code and the authorities have put in place an institutional arrangement for the dialogue with the private sector.
Since 2012, the Comoros adopted a new Labor Code repealing and amending certain provisions of the 1984 Act. The code is flexible and has few businesses constraints. Salaries are free, but there are plans to set a minimum wage by decree. The legal working hours are 40 per week and compulsory leave is kept to two and a half days of work per month. The employer is obliged to pay between 2.5% and 5.0% of gross salary to the National Fund of Social Security for social spending.
The land property regime poses real problems for investors. There is no land registry and the land status is put in place with legal and customary religious practices. However, the government intends to speed up land registration and authorized the federal registration for a flat fee of only 10,000 Comorians Francs (KMF). The economy suffers from a lack of essential basic infrastructure (water, electricity, telephone and roads) and is also affected by the lack of a special economic zone.
