Burundi Economy

25 January 2010
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MACROECONOMIC PANEL

Burundi is landlocked state  and is a poor country in natural resources. Even the manufacturing sector is underdeveloped for which the main economic resource of the country appears to be agriculture, which is divided into subsistence farming maize, millet, sorghum, cassava, potatoes, beans and coffee plantation agriculture, cotton and tea. In particular, coffee is about 90% of the value of exports.

Domestic demand is met by the products derived by the farmer and fishery practiced it still rudimentary systems.

The primary sector employs over 90% of the workforce, providing nearly 50% of GDP.

Mineral Resources are scarce and little exploited, but the recent discovery of deposits of nickel Musongati could, in the short term, change this situation.

Small quantities of gold and tungsten are extracted in the mines of Muyinga.

In the capital there are small installations and textile factories, of beer, cigarettes, sugar, shoes and cement.

Burundi joined the East African Community (EAC), which should increase regional trade ties.


BUSINESS OPPORTUNITY FOR ITALIAN COMPANIES

High investment opportunities exist  in agriculture, encouraged by a very fertile soil and abundant rainfall.

Exports in  Burundi are about certain agricultural products such as coffee, tea, cotton, fruit and vegetables (tropical fruit, cut flowers, vegetables and herbs), sugar, beverages, tobacco, sugar cane, tomatoes and palm oil .

In Burundi there is however an objective difficulty for the preservation and packaging of foods due to poor knowledge of methods and the lack of technology.

Burundi is rich in mineral deposits and precious metals.
Recent studies confirm many reserves of nickel, cobalt, platinum, iron, titanium and vanadium.

There are programs of facilitation and investment promotion in order to facilitate safe and attractive investment in the country.


INDUSTRY

The typical industrial sector is mainly that of the food industry.

The industry is mainly focused on the transformation of agricultural raw materials.

The district of Bujumbura is the hub of industrial activity. The industrial sector contributes around 18% of total GDP.

We talk about the processing of coffee, tea, cotton, timber and edible oils. There are many small industries that produce everyday items such as shoes, blankets, furniture, soap, metal products and insecticides.

Also the minerary is a key sector in Burundi, but  its potential has not yet been fully used.

The construction sector represents a new perspective. Several construction projects were initiated in Bujumbura. The industrial sector has suffered a wave negative during the war and the consequent imposition of sanctions. In this sense, the growth of the domestic market was baulked .But we can not disregard the fact that the growth of the industry depends on the availability of   infrastructure poorly developed as well as on political instability.


MINING RESOURCES

Burundi has many deposits of minerals and precious metals including: nickel, copper, cobalt, platinum, iron, titanium and vanadium. There are also large deposits of uranium, gold, oil, rare earth oxides, peat, phosphate, lead, etc..


SECTORS IN EXPANSION  

Agriculture is the engine driving the Burundian economy.

It serves as a stimulus for industrial development facilities in particular, energy infrastructure, transport but also of new information technologies (ICTs).


INVESTMENT LAW

An investment law was approved by Parliament. Besides the traditional advantages in taxation and foreign exchange, the Code provides:

• The freedom of free enterprise;
• freedom of residence and property rights;
• equality between citizens and foreigners in terms of acquisition of property;
• Free transfer of capital, revenue and profits;
• a guarantee against expropriation and nationalization illegal and arbitrary;
• recognition of the jurisdiction of the International Center for Settlement of Disputes, etc..

Parallel implementation has been placed in an investment program to improve basic infrastructure, which will increase the country's position in the ranking of the best sites concerning investment.

This program will include: a substantial increase of the offer of energy with the aim of meeting the needs of new investors and strengthening and upgrading of roads linking the corridors of trade between Burundi and neighboring countries.


THE INDUSTRIAL ZONES

In Burundi industrial zones were created with the objective to promote export productions.

Incentives for investment in free zones include tax relief or exemption from regulation industry, exemption of import and export rights, abolition of rules that require foreign investors to involve local partners, net guarantees against expropriation, insurance physical security and access to effective communications and transport network.


THE TAX SYSTEM

The tax system is based primarily on indirect taxes, which represent about 75 percent of total tax revenue.
The indirect taxes are:

• The transaction tax (TT), which generates a significant amount of revenue for the government, set at 17% (similar to 'value-added tax) and which is demanded at the border crossing;
• the service tax set at 6%.

Other than those on personal income and corporation tax in the country there are also taxes on imports, goods and services:

Imports are taxed in four categories:
• 0% for basic products;
• 5%, generally applied on the equipment;
• 15% applied to the import intermediate (semi) and means of mass transportation;
• 30% applied to imports of consumption.

In addition to import duties, imports may be subject to additional fees:

• service fee of 6%.

Then there is the Value Added Tax (VAT) amounting to 18%.
With respect to taxes on exports are zero rated.


TRADE AGREEMENTS

Burundi has signed agreements with Italy to avoid double taxation.
Are also in force the following agreements and bilateral treaties:
• Cotonou Agreement;
• ICSID (arbitration facilitated by the World Bank);
• New York Convention on Recognition and reinforcement of international arbitration.


CUSTOMS DUTIES

Until recently, Burundi has practiced a relatively closed trade regime characterized by high tariff and non tariff barriers. Many non-tariff barriers were abolished in 1990, while the structure of import tariffs have been revised for the first time in 2003. In particular, the reform there has been a reduction of the maximum tariff from 100% to 40%. Later in 2005 the tariff rate was again reduced to 30%.

Burundi as a member of the East African Community (East African Community - EAC), signed a protocol aimed at establishing basic free trade area among member countries in East Africa, a true common market come into force from July 2010.


PRIVATE PROPERTY

Everyone has the right to property. No one shall be deprived of his possessions except in the public interest in cases and manners established by law.

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