Production of raw cotton in Cameroon slipped to 194,000 metric tons this season, down more than 11% from the 218,000 tons produced in 1996-97, due to poor rainfall and more planters leaving the sector.

Officials at Cameroon's state-run cotton company, Societe pour le Developpement du Coton (Sodecoton), say that 14,000 tons of cotton have been smuggled this season across the border into neighboring Nigeria by sellers eager to avoid high tax rates at home.

According to Sodecoton's director-general, Mohamed Iya, a heavy tax burden has also created a shortage of cash in the sector. Cameroon's cotton is subject to an export tax of between 10 per cent and 13.5 per cent, impairing its competitive position on the world market.

On top of that, farmers complain that some local mayors aretaking it on themselves to impose an additional tax on moving cotton across local government borders.

"If we're not careful," said Iya, "having to pay a tax on moving cotton could cause a social implosion."

Cotton provides a livelihood for more than 300,000 farmers in the arid north of Cameroon.

For Sodecoton itself, the refusal by the government as part of a tax clampdown to pay up some 3 billion CFA francs (XAF) in tax credits further complicates matters. Smuggling this season cost the Cameroon exchequer an estimated XAF4.56 billion. ($1=XAF 598)

Sodecoton's sales have also been hit by Asia's financial crisis, creating a build-up of stock at the company's warehouses in Ngaoundere in the north and at the port of Douala. Cameroon exports much of its cotton to the southeast Asia - particularly South Korea, Malaysia and Taiwan.

Moreover, privatisation of Sodecoton still appears to be blocked, three years after a decision was first taken to sell the company. The government wants to launch a tender forSodecoton but first it must sort out a legal wrangle with private shareholders, SMIC (Societe Mobiliere d'Investissement du Cameroun).

The dispute centers on SMIC's purchase three years ago of a 48% stake in Sodecoton from a number of public sector organizations, including state holding company SNI (Societe Nationale d'Investissements) and the now-dismantled cocoa and coffee marketing board, ONCPB (Office National de Commercialisation des Produits de Base).

The Cameroon government argues that the sale was done outside the legislatory framework for privatizations. SMIC, for its part, claims that the transactions were entirely legal.

The state still holds 22 per cent of Sodecoton directly, while another 30 per cent is controlled by the French textile group, CFDT (Compagnie Francaise pour le Developpement des Textiles).