CHAPTER FOUR: ECONOMIC GOVERNANCE AND MANAGEMENT __________________________________________________________________________ Box 4.1: The cotton sector Benin’s economy is highly dependent on cotton as it contributes about 40% to the country’s exports and about 90% to agricultural revenue. During the past 10 years, production has hovered around 334,000 tons, while the 2004-2005 farming season had a record production of 427,000 tons. The lowest production, of 191,000 tons, was recorded in 2006-2007. The cotton sector is managed by three private associations. These are the AIC, the Association Professionnelle des Egreneurs du Bénin (APEB), and the Groupement Professionnel des Distributeurs d’Intrants Agricoles (GPDIA). The partnership between these three associations was often marred by inter-association conflicts and financial scandals – to the extent that the state had recently to intervene in order to compensate many cotton producers and to settle financial claims between the partners, leading to considerable sums of money being disbursed. The government aims to increase production in the next two years to 320,000 tons and 500,000 tons respectively and, in the medium term, to increase the rate of cotton processing from 3% to 30% by rehabilitating textile factories. Benin was commended for the excellent quality of its cotton fibre, estimated respectively at 27 98.17% of production in 2005-2006, and 97.91% in 2006-2007 . Private sector activities at various levels and support from some TFPs (including the World Bank, the French Development Agency (AFD) and the European Union) account for the increases in the proportions of income for producers from 2% to 25%. However, the world cotton market is crippled by the fact that the industry is heavily subsidised by major producers from industrialised and emerging countries and, in the case of Benin, through the smuggling of materials from neighbouring countries and those further away. This is weakening the cotton processing industries established in the country. The CRM thinks that obstacles to the survival of the cotton sector in Benin can only be eliminated through the creation of a predominantly private subregional partnership (which focuses on the creation of a regional cotton stock market) and the introduction of a special tax on cotton applicable to all the countries concerned. 384. The government has, in its new GPRS for the 2007-2009 period, defined a baseline scenario. This is a costed reflection of the various sectoral strategies to be implemented in order to accelerate growth and reduce poverty during this period, while maintaining macroeconomic stability (in levels of inflation and in targeted and sustainable deficits). In these strategies, growth will be accelerated by diversifying production, by reinforcing economic and social infrastructures, and by strengthening good governance. 385. Although the CSAR has not stated this, it should be noted that, with regard to liberalisation, the government has adopted a more attractive investment code and has tried to improve the business environment. However, these measures have not attracted significant direct foreign investment, mainly because of constraints relating to the legal and judicial framework and administrative barriers to private investment. 27 Strategic development orientations of Benin for 2006-2011, Emerging Benin. 141