Chad has oil; everything changes

African nation aims to break cycle of history and bring in Korean investments

The central African nation of Chad is turning a new page in its external policy by building ties with old partners, hoping that they can help develop the country into a modern state.

“Links between Chad and (South) Korea go back to 1961, but these links have distanced themselves due to our political turmoil,” remarked Chad Economic and Planning Minister Mahamat Ali Hassan to The Korea Herald.

Hassan was in town recently to bring forward the months of negotiations between his government and local agencies, organizations and big business.

High on his agenda was the accord between Chad and the Export-Import Bank of Korea.

He explained that everything depends on this deal. Once the accord is signed, it would pave the way for Korean companies to start operating in Chad by not only conducting business but also helping to secure vital Chad government contracts for the development of countless infrastructure projects.

According to the Korea International Trade Association, trade between both countries is miniscule but grew to $5.3 million in 2009, a 112 percent increase from the previous year.

But that light dimmed last year when, during the first 11 months of 2010, trade dropped to $2.8 million.

Hassan hopes that things will change with the new developments that are currently being worked on.

First and foremost, the accord between Chad and EXIM Bank will make it possible for the bank to start financing options for future projects in Chad.

While in town, Hassan signed a general memorandum of understanding with Korea Telecom to develop several projects; a deal that will only move forward after EXIM Bank and Hassan’s ministry ink a deal.

Hassan returns to Chad with a solid agreement signed with the Korea Finance Corporation and Kyungdong Construction.

One strong area of interest for Korean firms is Chad’s oil reserves, estimated at 1.5 billion barrels.

Oil production came on stream in late 2003 with exports commencing the following year.

Since 2000, a consortium of U.S. and Malaysian companies has been extracting oil from wells in the south of Chad and sending it to market via a pipeline through Cameroon to the Gulf of Guinea.

Chinese companies are also expanding exploration efforts and are currently building a 300-kilometer pipeline and the country’s first oil refinery.

Yet, one of the major questions that remains in the minds of foreign investors looking to operate in Chad is the security situation.

Throughout its history, the landlocked country has been marred by infighting amongst Chadian factions on the one hand and, more recently, its deadly proxy war with Sudan on the other.

A year ago, Chad and Sudan signed a peace accord which, according to both sides, would end the proxy war by breaking with rebel clients, normalizing relations and securing their border through joint military cooperation.

“I would like to reassure Koreans that the security situation in Chad has really improved,” he said. “For those who visited Chad 10 years ago, they would not recognize the country today.”

Another possibility Hassan is touting is the usage of their 30,000 hectares of arable land.

Cotton, cattle, and gum arabic provide the bulk of Chad’s non-oil export earnings.

“The Chad of today offers many prospects and possibilities. Korean companies should not miss this train because now, there are more and more international firms using Chad as a foothold into central Africa,” he said.

Hassan added his government passed important legislation to safeguard foreign investments.

Chad’s growing oil economy has been attracting more interest internationally, especially from foreign oil companies. However, the government has been finding it difficult to attract foreign direct investment into other sectors of the economy, which also includes travel and tourism.

The one benefit that resulted from the decades of political instability, rebellions and wars is that their natural tourism resources have been preserved, noted Hassan.

“Our tourism plan is to show our considerable riches to the world,” he said.

Tourism in Chad is a relatively minor industry with most travelers attracted to its Zakouma National Park.

“We are probably the only country in Africa with such a large diversity of animals, from the smallest to the largest,” he said.

Yet their poor infrastructure, limited transportation and high cost of travel are other reasons why their tourism industry is suffering.

Hassan would also like to see more Korean companies invest in this sector.

Recently, the Korean Foreign Ministry accredited an ambassador to Chad from the embassy in Yaounde, Cameroon’s capital.

In Seoul, Hassan and his government appointed an honorary counsel to head operations during the absence of the Chadian ambassador in Tokyo.

“We have a need for the technology from developed countries, and we know that they need our resources, so give us a hand so that we can both benefit,” he said.

By Yoav Cerralbo (yoav@heraldcorp.com)