ECONOMY

Despite a fast-growing economy largely due to a major oil boom, Angola ranks in the bottom 10% of most socioeconomic indicators. The International Monetary Fund (IMF) estimates that Angola's real GDP increased by 16% in 2008. Angola is still recovering from 27 years of nearly continuous warfare, and it remains beset by corruption and economic mismanagement. Despite abundant natural resources and rising per capita GDP, it was ranked 157 out of 179 countries on the 2008 UN Development Program's (UNDP) Human Development Index. Subsistence agriculture sustains one-third of the population.

The rapidly expanding petroleum industry reached its Organization of Petroleum Exporting Countries (OPEC) cap of 2 million barrels per day (bpd) in 2008. However, Angola’s production was subsequently cut to 1.64 million bpd in January 2009 by an OPEC mandate in response to plummeting oil prices. Angola's crude oil production is now the second highest in Africa. Crude oil accounted for 83% of GDP, 95% of exports, and 83% of government revenues in 2008. Angola also produces 40,000 bpd of locally refined oil. Oil production remains largely offshore and has few linkages with other sectors of the economy, though a local content initiative promulgated by the Angolan Government is pressuring oil companies to source from local businesses. The government is also pressuring oil companies to increase the number of Angolan staff.

Block 15, located offshore of Soyo, currently provides 30% of Angola's crude oil production. ExxonMobil, through its subsidiary Esso, is the operator with a 40% share. In 2005, Block 15's second major sub-field, Kizomba B, came online producing at about 250,000 bpd. BP, ENI-Agip, and Statoil are partners in the concession. Chevron operates Block 0, offshore Cabinda, which provides about 20% of Angola's crude oil production. Its partners in Block 0 are Sonangol (the Angolan state oil company), TotalFinaElf, and ENI-Agip. In 2007, Block 0 had a total production of 370,000 bpd, and drilling activity continues at a high level. Chevron also operates Angola's first deepwater section to go into production, Block 14, which started pumping in January 2000 and produced 105,000 bpd in 2006.

TotalFinaElf brought the first Kwanza Basin deepwater blocks on line with production from its Block 17 concession that began in February 2002. Inauguration of the Dalia oilfield in December 2006 combined with the Girassol field already in operation brought Block 17's total production to approximately 500,000 bpd as of July 2007. Total expects to begin drilling in new oilfield Pazflor in 2009, bringing production to a peak of 700,000 bpd by 2011. Exploration is ongoing in ultra-deep water concessions and in deepwater and shallow concessions in the Namibe Basin. BP made the first significant ultra-deepwater find in its Block 31 concession in 2002 and had reached nine significant discoveries by the end of 2005. BP shipped its first crude from the Plutonio oilfield in Block 18 in 2007 and ultimately expects Plutonio to average 200,000 bpd in full production. Marathon also drilled a successful well in its Block 32 ultra-deep water concession. TotalFinaElf operates Angola's one refinery (in Luanda) for sole owner Sonangol; plans for a second refinery in Lobito with projected production of 200,000 bpd are moving forward, with KBR selected to do the front-end engineering and design work. There are plans to increase capacity of the Luanda refinery from 40,000 bpd to 100,000 bpd. Chevron, Sonangol, BP, Total, and Eni are developing a $4-5 billion liquefied natural gas plant at Soyo, now under construction by Bechtel, expected to start production in 2012.

Exports to Asian countries have grown rapidly in recent years, particularly to China. In late 2004, China's state oil company Sinopec entered the market, offering two separate $1 billion signing bonus offers on two offshore blocks. Sinopec has also formed a partnership with Sonangol to operate Block 3/05 (formerly Block 3/80), whose operation was transferred from Total to Sonangol. Sonangol will seek to expand its operation of onshore and shallow water blocks. This includes the northern block of Cabinda's onshore concessions, which since the reduction in hostilities with separatist forces is now open to exploration. Sonangol and Sinopec will also be eyeing future concession rounds, particularly for 23 blocks in the Kwanza Basin onshore area and the relinquished parts of Blocks 15, 17, and 18, currently operated by Exxon, Total, and BP. In 2008, Angola was China’s second-leading source country for crude oil by volume, importing 599 million barrels valued at U.S. $59.900 billion, up 19.3% year on year.

Diamonds make up most of Angola's remaining exports, with yearly production at 6 million carats. Diamond sales reached approximately $1.1 billion in 2006. Despite increased corporate ownership of diamond fields, much production is currently in the hands of small-scale prospectors, often operating illegally. Only eight large-scale mines are operating out of a total of 145 concessions. In June 2005, De Beers signed a $10 million prospecting contract with the government's diamond parastatal, ending a 4-year investment dispute between De Beers and the government. The government is making an increased effort to register and license prospectors. Legal sales of rough diamonds may occur only through the government's diamond-buying parastatal, although many producers continue to bypass the system to obtain higher prices. The government has established an export certification scheme consistent with the "Kimberley Process" to identify legitimate production and sales. Other mineral resources, including gold, remain largely undeveloped, though granite and marble quarrying have begun.

In the last decade of the colonial period, Angola was a major African agricultural exporter. Because of severe wartime conditions, including extensive laying of landmines throughout the countryside, agricultural activities came to a near standstill, and the country now imports over half of its food. Small-scale agricultural production has increased several-fold over the last 5 years due to demining efforts, infrastructure improvements, and the ability of returnees and internally displaced persons (IDPs) to safely return to agricultural areas, yet production of most crops remains below 1974 levels. Some efforts at commercial agricultural recovery have gone forward, notably in fisheries and tropical fruits, but most of the country's vast potential remains untapped. Recently passed land reform laws will attempt to reconcile overlapping traditional land use rights, colonial-era land claims, and recent land grants to facilitate significant commercial agricultural development.

An economic reform effort launched in 1998 was only marginally successful in addressing persistent fiscal mismanagement and corruption. In April 2000, Angola started an IMF staff-monitored program (SMP). The program lapsed in June 2001 over IMF concerns about lack of progress by Angola. Under the program, the Government of Angola did succeed in unifying exchange rates and moving fuel, electricity, and water prices closer to market rates. In March 2007, the government announced it was not interested in a formally-structured IMF program, but would continue to participate in Article IV consultations and other technical assistance on an ad hoc basis.

In December 2002, President dos Santos named a new economic team to oversee homegrown reform efforts. The new team succeeded in decreasing overall government spending, rationalizing the Kwanza exchange rate, closing regulatory loopholes allowing off-budget expenditures, and capturing all revenues in the state budget. New procedures were implemented to track the flow of funds between the Treasury, Banco Nacional de Angola (the central bank), and the state-owned Banco de Poupanca e Credito, which operates the budget. The Angolan Government adopted a new investment code. Concerns remain about quasi-fiscal operations by the state oil company Sonangol, continued oil-backed commercial borrowing by the Angolan Government, and inadequate transparency and oversight in the management of public accounts. The Angolan commercial code, financial sector law, and telecommunications law all require substantial revision.

Angola is the third-largest trading partner of the United States in sub-Saharan Africa, largely because of its petroleum exports. U.S. exports to Angola primarily consist of industrial goods and services--such as oilfield equipment, mining equipment, chemicals, aircraft, and food. On December 30, 2003, President Bush approved the designation of Angola as eligible for tariff preferences under the African Growth and Opportunity Act (AGOA).

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