Economic Governance in Gabon: Assessment of the Plan Stratégique Gabon Emergent on the Business Environment

The present study aims to identify the existing reforms introduced by the recent economic diversification policy of the government of Gabon called Plan Stratégique Gabon Emergent. It assesses the current stage of reforms aiming to enable the business environment. Empirical part of our research was carried out with evidence relating to the impact of regulatory reform on the business environment in Gabon. We used the World Bank Doing Business and Ibrahim Index of African Governance databases to provide indicators of the quality of regulatory governance from 2009 to 2018. Our key findings showed that the investment climate is still below the expectations. The current macroeconomic situation of the country due to the barrel price has limited the capacity of the government to finance its major reforms. Furthermore, the small size of the market weakens the potentiality of the country to attract foreign direct investments in non-extractive sectors. In brief, Gabon’s diversification model shows some weaknesses due to non-existent coherent industrial policy empowering small medium-size enterprises through an effective financial framework favorable for entrepreneurship.

Gabon is an interesting case because as despite a per capita gross national income (GNI) of US$ 7170 in 2016 (The World Bank), higher than those of most sub-Saharan African (SSA) countries, one third of the population live below the poverty line. For a resource rich country considered as Middle-Income Country with less than two million inhabitants, its poverty level is comparable to that of low-income countries and this paradox represent an interest beneficial for the literature of development studies. Many scholars have highlighted the necessity of a political will as a starting point for enabling the business environment in African countries (Kirkpatrick et al., 2006;Nnadozie et al., 2008;Kirkpatrick, 2014). Nevertheless, the outcomes of the PSGE are unsatisfactory and their impact on the business environment insufficient at two different levels. First, the administrative burden in Gabon has consistently slowed the execution of reforms planned by the PSGE. Second, lack of financial resources to support key reforms due to the weak capacity of the government in planning, negotiation and project management, has handicapped the PSGE. In other words, poor governance and management of resources has consistently affected the efficiency of the PSGE; so, it is important to further alternative financial means in the framework of public-private partnerships (PPP). From this research, some key questions arise: what are the reforms implemented by the PSGE aiming to improve the business environment? How do they impact on the economic governance? What can be done to improve the efficiency of the reforms?
The rest of the paper is structured as follows: Section 2 contextualizes the study in the relevant existing literature. Section 3 sets out the methodology and data used to assess the PSGE. Section 4 presents the key findings and discussion.
Section 5 concludes the paper and brings up the policy implications.

Literature Review
The PSGE aims to follow the pathway growth-diversification-development by reforming key economic sectors. This strategy also aims to enable the industrialization of the country; by undertaking the downstream processing of natural resources to create self-sustaining industries then contribute to a rapid socioe-conomic transformation. The dominant discourse on the economic diversification and growth points out economic institutions as key factor for the improvement of the economic governance. Many scholarships recognize the role played by the institutions in the economic development, but there are also an important range of empirical research where institutions play a minor role. In this section, we will discuss the relevant literatures for a better understanding of our case study. Hence, we organized the existing literature in two groups: the liberal institutional pluralism and the new structural economics. The former is represented by North (1990), Acemoglu et al. (2005), Rodrik (2008), andBrett (2009); and the latter by Chang (2002), Lin et al. (2011), Stiglitz andLin (2013).
The liberal institutional pluralism argues that institutions are necessary to attire investments. It emphasizes on the democratic rules and economic liberalism, thus institutional conditions for economic growth and political transformation; while the new structural economics focus on an approach that takes into account features in the analysis of economic development and the role of the government as the driver of the improvement of economic infrastructure for growth and integration of local and regional markets (Fofack, 2014).
The claim of the liberal institutional pluralism is that institutions that are the best for economic development are those that maximize market freedom and most strongly protect private property rights. The increasing demand for institutional reforms in developing countries has been encouraged and stimulated by research provided from within international organizations such as The World Bank (see Kaufmann et al., 1999Kaufmann et al., , 2003Kaufmann et al., , 2005Kaufmann et al., , 2006Kaufmann et al., , 2007aKaufmann et al., , 2008Kaufmann et al., , 2009) and supplied by academic economists (Chang, 2010). Acemoglu et al. (2001) and La Porta et al. (2008) for example argue that economic growth is the result of a good investment and this latter is promoted by institutions that protect private property rights strongly and provide maximum economic freedom. Acemoglu et al. (2005) findings brought more practical insights arguing that "Economic institutions encouraging growth emerge when political institutions allocate power to groups with interest in broad-based property rights enforcement, when they create effective constraints on power-holders, and when there are relatively few rents to be captured by the power-holders". However, the most challenging with the liberal institutional pluralism theory is well summarized by Rodrick (2012).
He notes that different institutions could have similar outcomes while in different contexts the same institutions may give rise to different outcomes.
The liberal institutional pluralism theory has been questioned by the new structural economics scholars such as Chang (2002;), Lin et al. (2011), Stiglitz and Lin (2013; claiming the synthesis of structuralism and liberal ideology without assuming a unified theory of economic development. According to Chang (2011), the direction of economic development could take a different pathway and wealth due to growth could create higher demands for political institutions with greater transparency and accountability, and also makes better institutions more affordable. Evidences from the 18 th century show that the rising of industrial capitalists supported the development of banking while the growing power of the working class led to the welfare and the protection of labor laws against the capitalists in the late 19 th and 20 th centuries in the USA (Lundvall & Lema, 2014). This approach recognizes failure of both-state and market-in the economic development because the market remains the basic mechanism for effectively allocating resources and the state intervention is needed to constantly upgrade economic infrastructure.
The quality of infrastructure plays also a key role and has a significant effect on the business environment (Oumba, 2015). Nevertheless, African countries are at the early stage of the economic development and in this regard, they need to adapt their development policy by considering the global market without neglecting the local context. Therefore, good governance and political will would improve the organization and planning of the economic development (Ndzana Olomo, 2011;Ngangoue, 2016). Reforms capable of structurally transforming the economics, ease the international insertion, enable sustainable growth and ownership, easily adaptable to the local and international context, and based on short and long-term goals are essential for the development process. Ngangoue (2016) for example suggests the export diversification and regional integration to maintain sustainable growth and economic diversification within the Economic and Monetary Community of Central African States (CEMAC) 2 . Thus, CEMAC countries would gain by improving regional institutions and further regional integration. Due to the high potential of those countries in natural resources, they should put together their potentialities in five key sectors (Energy, agro-industry, forestry, farming and fishing, and mining and metallurgy) to develop the regional market. The positive outcomes would enhance the development of regional industrial capacity of the targeted sectors, development of regional infrastructures such as the road network, create employments, boost the economic growth, and benefit to the entire African region, especially narrow markets like Gabon to enlarge its market.
Poor governance and public management have also explained the failure of SSA countries in recent years to attract more FDI and build a strong entrepreneurship policy favorable for SMEs. Brixiova and Ncubi (2013) argue that sustainable growth need both public and private investments because the reliance of growth on the public investment can have a negative effect on private investment if neglected. This is why growth in Ethiopia has slowdown from 2013 while SSA countries' growth has been driven by commodity prices and the investment in both public and private, with a robust private consumption. The reality in most SSA countries is that governments have more consideration for prestigious investments in the form of large units rather than establishing strategies and actions for the creation of SMEs. Furthermore, reforms toward SMEs are much more responses to the constraints of the donors than a voluntary and well thought initiative. In Gabon like in many resource rich developing countries, scholars (e.g., Ndzana Olomo, 2011;Gambotti, 2014;Oumba, 2015;Ngangoue, 2 Members of the Economic and Monetary of Central African States (CEMAC) are: Cameroon, Central African Republic, Chad, republic of Congo, Equatorial Guinea, and Gabon. Open Journal of Political Science 2016) point out the fact that the non-respect and dysfunctional nature of the legal framework in Africa is deplorable and constitutes the main obstacle of the harmonious development of business. Therefore, there are many African countries making reforms without any concrete change on the socioeconomic. However, the quality of the business environment depends only partly on the quality of the legal framework, so rules are insufficient to guarantee the economic development.
Yet, evidences from the liberal institutional pluralism and the new structural economics request to consider the specific institutional and structural features at every stages of the development process. Each country needs to adapt its policy tools to local conditions. In Gabon these two approaches could be complementary regarding the major constraints of the economic development such as poor governance and the deficit of infrastructure. Moreover, strengthening institutions of good governance in the African context, where poverty widespread is associated with capital flight, could raise the prospects for domestic resource mobilization in support for infrastructure development. Evidences from the World Bank Doing Business ranking and other Indexes have shown that few African countries succeeded to adapt their development policies with local conditions. As a result, most resources rich SSA countries remain dependent of commodities and did not improve their infrastructure with the outcomes of their resources. In addition, poor governance and the political situation in SSA countries did not contribute to build a transparent framework in order to improve the public management of resources. Hence, without a political will and a certain level of transparency, it is uncertain that the economic development could improve institutions in SSA countries.
In brief, like Gambotti (2014), Kirkpatrick (2014), and Gisselquist & Niño-Zarazúa (2015), we argue that the administrative burden and poor governance constitute the main weakness of SSA countries such as Gabon to enable a business environment in light of best international practices. The modernization of the administration and the improvement of the Government performance 3 could play a key role in building the base of sustainability. It would for example lead to regulatory reforms to enable the market efficiency through a supportive and stable environment for investment, private sector development, and establish conditions for economic growth and development. Major reforms of the PSGE have been delayed and could not be implemented until 2014. Yet, there is no major improvement of the business environment nor governance; instead the GDP is continuously following the fluctuation of the prices of hydrocarbon and mineral resources due to the poor economic diversification.

Methodology and Data
Empirical part of our research was carried out with evidence relating to the im-3 A standard definition of government performance is the "capacity of governing authorities to provide public goods and services" (Bratton, 2013: p. 2). Open Journal of Political Science pact of regulatory reform on the business environment in Gabon. We used the World Bank Doing Business and Ibrahim Index of African Governance (IIAG) databases to provide indicators of the quality of regulatory governance from the period from 2009 to 2018. The World Bank Doing Business provides a cross-country dataset considering ten variables: starting a business, construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and closing a business. The IIAG on its counterpart provides four indicators of governance: We organized the data throughout table and graphics and used process tracing methods and analytical narratives that examines the impact of governance on the economic performance. Our approach aims to explore the correlation between the economic governance of Gabon throughout the PSGE and the economic performance of the country. Though, the poor economic performance of Gabon in the recent years found an explanation in its dependency on commodities and the unattractive business climate of the country, therefore enabling an adequate business environment may contribute to improving economic perfor-Open Journal of Political Science mances. Hence, we found relevant to use data of the World bank Doing Business to identify reforms that are considered to have positive or negative impacts on the business environment by the ranking assessment. We took account of the ten variables of the ranking and obtained an asset to evaluate Gabon's economic governance trend over time. Whereas, the IIAG contributes to obtain a quantifiable tool to measure governance and monitor performance of Gabon on the one hand; and assess the progress over time to support the development of effective and responsive policy solutions on the other hand. The IIAG is standardized into a score between 0 and 100, the latter is the highest possible. The four components of the IIAG are used to determine the so-called Overall Governance, but for the purpose of our research we focus on two of its indicators: safety and rule of law and sustainable economic opportunity with emphasis on the latter. Though, the Overall Governance is useful to analyze the quality of regulatory governance, so it implies all the indicators of the index. The IIAG is also relevant for cross-country comparisons, but because of the difference of the social, political and economic contexts of each country, this approach has an insignificant impact on our findings. We use a comparative approach between the business environment assessment from the Doing Business ranking and the Overall Governance of the IIAG within the period 2009-2016 to build the mean of our findings. Our findings are based on the analyze of the current stage of the regulatory reforms and the macro-indicators of Gabon from diverse sources such as the World Bank, IMF, and the African Development Bank (AfDB). In our findings, we also take account of the earlier studies results on similar topics.

Investment Climate
Reforms of the PSGE are considered as a political will from the government to bring socioeconomic changes and improve the country's macroeconomic indicators. Yet, it has also shown being difficult to launch reforms that will impact positively the business environment. Falling international oil prices reduced the ability of the government to pursue its investment program. The low barrel price since 2016 had negative impact on the petroleum taxes incomes, but also on other economic activities. The public investment plan, which plays a key role in the economic diversification, is highly dependent on oil incomes. Therefore, this situation affected the government policy toward the economic diversification and also the country economic growth. In addition, low budget revenues reduce the importance of the public investment with negative outcomes for the rest of

Business Environment Constraints
Over the last decade, reforms made by the government to improve the business environment are apparently positive (see Appendix). In comparison to SSA countries that have a more attractive market, this progress is insufficient. Gabon Although Gabon has slightly improved the starting a business and getting a credit, dealing with construction permits has drastically fall from rank 60 to 149 between 2009 and 2018 (Table 1) among the 8 indicators of the Doing business ranking. Within the same period, the time for starting a business has been reduced from 58 days to 33 days, the cost of starting a business has also been reduced from 20.3% of the income per capita to 7.2%, and the minimum capital has also been significantly reduced from 30.2% of the income per capita in 2009 to 2.5% in 2018 (Table 2). Yet, this improvement is small, and the country ranked 132 out 190 on starting business. For the other indicators Gabon's ranking is between 122 and 178. The expected result of the PSGE on the economics Open Journal of Political Science by 2025-along with acceleration and economic diversification, poverty reduction, reducing societal inequalities, infrastructure development, and the sustainable management of resources for future generations-seems challenging to reach regarding the current economic development trend.
Compare to other SSA countries with a better ranking on the starting a business (Table 3), the time for creation of an enterprise needs to be reduced alongside with the other indicators of the Doing Business Ranking. Thirty-three days remain long for starting a business, so the one-stop-shop of the ANPI-Gabon carry a lot of expectations from entrepreneurs and investors. Nevertheless, the starting a business indicator solely is insufficient to enable the entire business environment. Countries with the best ranking in starting a business are not necessarily on the top of the ease of doing business. For example, among the top-five SSA countries on the starting a business (Niger, Mauritius, Burundi, Mauritania, and Côte d'Ivoire) only Mauritius is well ranked on the ease of doing business (25 th ) and the others ranked between 139 and 164 ranks.   Therefore, the government of Gabon should, in addition of easing the starting of business, further reforms of the banking system alongside with the infra- For small firms, electricity (22%), access to finance (13%), and transportation (12%) constitute the main obstacles; for medium firms, electricity (28%), transportation (17%), and corruption (16%); and for large firms, transportation (28%), electricity (21%), and the practice of informal sectors (12%).
Regional and sub-regional market integration can have positive outcomes on the pathway economic diversification of Gabon. It would enlarge its narrow market, and also improve the quality of the infrastructures such as road network and maritime transport. Through the development strategies of the African Union (AU) and the new partnership for Africa's development (NEPAD) in the Regional Integration Strategy Paper prepared by the AfDB, Gabon is expected to play an important role in strengthening regional integration among the Economic Community of Central African States (ECCAS); and benefits from a market of over 120 million people within this economic space. However, the process of the market integration is complex and requests the intensification of dialogue and actions with the governments of Central African countries.

Governance Performance and Competitiveness
The root of governance performance is based on transparency and regulation that will impact on the economic performance. Parry (2007) notes that transparency permits a clearer assessment of the past fiscal performance, current fiscal position, fiscal risks, and the future direction of fiscal policy. Recently, SSA countries are trying to catch up with the rules of the game to meet the requirements of the donors and attract investors because transparency in the end is about empowerment and trust between and among stakeholders. Transparency plays a key role in aid effectiveness, corruption, environmental degradation, enhance the well-functioning of financial markets, capital allocation, and in the efficiency of investment decisions (Durnev et al., 2009;Drabek & Payne, 2001). Though Table 4 shows that progress in economic governance needs to be sustained. The IIAG 2017 ranked Gabon 23 out of 54 countries with a score of 52.2 (slightly above average). The country has not improved much the governance during the last decade and remains at the same place as before the implementation of the PSGE for two main raisons: lack of transparency and the weak judicial capacity (see Table 4).
First, root causes for governance challenges include lack of transparency, public policy monitoring and evaluation, weak citizen oversight mechanisms and democratic culture, and a lack of institutional capacity to generate reliable data.   check on political actors as citizens are able to readily observe their actions accordingly (Coyne & Leeson, 2009). It allows also the market participants to have the information they need to allocate resources efficiently (Ball, 2009). Other scholars have in contrary emphasize on some negative outcomes of transparency and argued that mere enforcement of rules and increased transparency could lead to criminal activity (Yang, 2008;Blinder, 2004) and could create in certain cases bureaucratic burden related to an obsession with public reporting and form will be an increase in transaction cost (Standing, 2010). (e.g., ease the access to capital or loan, enhance the energy supply, improve the quality of transport infrastructures, etc.). Third, the institutional framework is weak; corruption, bribery, and bureaucracy have a negative impact on the business environment.

Conclusion and Policy Implications
This research argues that reforms from the PSGE did not bring considerable changes on the business environment in Gabon. The current macroeconomic situation of Gabon due to the barrel price has limited the capacity of the government to finance its major reforms. Furthermore, the small size of the market weakens the potential of the country to attract FDI in non-extractive sectors.
Likewise, while reforms are made to ease the starting of business, access to capital and credit remain difficult especially for SMEs and it undermines their opportunity of growth and participation in sectors that create more wealth such as the extractive sector. In addition, the government regulation, poor infrastructure Open Journal of Political Science and corruption are quite damaging for established businesses and impact negatively the business environment upstream and downstream. The literature discussed, and findings of the current study provide three main policy implications.
First, while some improvements of the business environment are costly and will take a long time to achieve, others can be achieved with few costs if there is strong political will. For example, the government can make major regulation with no cost such as making easier to pay taxes and improving the administration because the more bureaucracy, the more opportunities for bureaucrats to be involved in corruption. Moreover, the judicial system must be more efficient in punishing bribery, firms involved in corruption, and corrupt officials, hence extend the CNLCEI competencies and allow the civil society to play a role within the organization for more transparency. Second, the government has an important role to play in making the banking and financial regulations more efficient.
For example, encourage the development of MFIs that will enhance SMEs access to credit and loans; and decrease substantially the cost and interest rates of financial institutions on the other hand. Third, in order to improve the quantity and quality of the infrastructures, the government needs to further the PPPs which is a financial alternative and less costly due to the level of indebtedness of the country. This improvement implies internal and external transportation networks to connect the production hubs with the markets and extend development opportunities to every region of the country. Likewise, transportation networks will contribute to connecting Gabon with other regional markets and hence enlarge its market size. Nevertheless, in order to achieve the latter, policymakers must advocate for regional integration through ECCAS countries. In addition, the country should also improve the energetic capacity in order to meet domestic and industrial consumption without disrupting economic activities; this would boost production. In summary, Gabon's diversification model features a resource-based diversification that succeeded in Nordic countries, but this model shows some weaknesses if the process is not followed by a coherent industrial policy. But in the meantime, alongside with reforms toward the business environment the immediate concern of policymakers should be the empowerment of SMEs through an effective financial framework favorable for entrepreneurship.