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Soldiers of the Ivory Coast presidential guard patrol as they arrive at the port of Abidjan, Ivory Coast January 18,2017. REUTERS/Luc Gnago

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By Joe Bavier

ABIDJAN (Reuters) - Ivory Coast's President Alassane Ouattara has seduced foreign investors with his single-minded focus on economic reform and growth but entrenched problems within the security forces threaten to undermine a much-lauded recovery.

Split from 2002 to 2011 between rebels in the north and government forces in the south, Ivory Coast has since become one of the world's fastest growing economies and is regularly cited as a model of post-conflict renewal.

But that narrative was dealt a major blow this month when thousands of soldiers, mostly former rebels who battled for years to get Ouattara into power, mutinied and seized control of the country's second biggest city.

The government capitulated rapidly and met demands for bonus payments the soldiers said they were promised when fighting to oust former President Laurent Gbagbo, who lost a disputed election to Ouattara in 2010 but refused to quit.

While many foreign investors are looking past the uprising as a relatively minor hiccup, analysts and diplomats see it as warning of more trouble to come, not least because it was the second mutiny in three years and has triggered similar revolts by security forces left out of the deal.

"It's not enough just to focus on the economy and attract investors. What's happening in the army should be the government's priority," said International Crisis Group's (ICG) West Africa analyst Cynthia Ohayon. "Ouattara's own stability is at stake."

ALL CARROT, NO STICK

The immediate issues date back to the aftermath of the civil war in 2011 that ended nearly a decade of geographical division in Ivory Coast and put Ouattara in power.

Thousands of former rebels who backed him became part of the army, as well as other branches of the security forces, the forestry service, customs offices and the prison system, rubbing shoulders with former foes.

But six years, on the country's security apparatus remains riven by factions.

In 2011, analysts said the new administration needed to get a grip on the situation quickly by imposing discipline, vetting the rank and file to trim the army down to a size in keeping with Ivory Coast's few external threats and controlling the stockpiles of weapons amassed in recent years.

Analysts say this did not happen because rebel commanders, some of whom led the 2002 uprising that split the country, remained in control of much of the army through parallel chains of command that Ouattara shied away from breaking.

With little leverage or control over its own military, the government's approach has been to throw money at flare-ups, as it did with a similar mutiny in 2014, and do little else.

"Right now all these deals are all carrot and no stick," said a regional security official.

Ouattara now finds himself hostage to his army with little option to pay up, said ICG's Ohayon, but that is an unsustainable and potentially expensive strategy fraught with risks.

"Where are they going to find all the money if you keep having groups of soldiers rising up demanding more money?" Ohayon said. "If you look at what happened in 1999, it started off as a mutiny. It ended as a coup and then there were years of crisis."

TIDE LIFTS ALL BOATS

Ouattara's focus on the economy above all to make things better harks back to the tactics employed by the country's founding President Felix Houphouet-Boigny, who ruled after independence from France in 1960 until his death in 1993.

He encouraged millions of migrants from neighbouring countries to come and work the land. That transformed the country into a giant agricultural machine, exporting cash crops and using the proceeds to build motorways and skyscrapers.

Ivory Coast remains the world's biggest cocoa producer and investment in infrastructure following the years of crisis has helped the economy expand at an average annual rate of nearly 9 percent from 2012 to 2015.

An economist by training, Ouattara has been governor of the Central Bank of West African States and a deputy managing director at the International Monetary Fund.

"He's using a strategy that a rising tide lifts all boats. If you can just push through, the economic improvements will take care of the rest," said one Abidjan-based diplomat.

Yet despite the abundance of luxury cars and new shopping malls in the commercial capital Abidjan, few have seen the benefits of the near double-digit growth and many Ivorians are losing patience.

Teachers went on strike in November. Civil servants walked out last week demanding nearly $400 million in back wages and students took to the streets on Monday.

But the army is the most pressing risk, and the country's history shows it is ignored at its peril.

BRIGHT FUTURE AT RISK

Under Houphouet-Boigny, Ivory Coast maintained very close ties with Paris, including an agreement that France would ensure its internal and external security. Given that, he did little to create a working military with a sense of loyalty to the state.

And it was the military that first undermined the veneer of stability Houphouet-Boigny had maintained in a region plagued by coups and civil wars elsewhere.

"They always relied on the French for protection. So the military became, and continues to be, an employment organisation," said the regional security official.

Since 1990, Ivorian soldiers have staged no fewer than 11 mutinies, according to data compiled by Maggie Dwyer, a research fellow at the University of Edinburgh.

A pay dispute in 1999 degenerated into Ivory Coast's first coup d'etat, which ousted President Henri Konan Bedie and installed a military junta.

In 2002, northern soldiers decrying discrimination within the army and Ouattara's exclusion from a 2000 presidential election tried to overthrow President Gbagbo. They failed, but the putsch sparked the civil war that rent the country in two until the next civil war in 2011.

Today, soldiers complain they must pay for uniforms out of their meagre salaries. At bases in Abidjan, not far from the construction sites for a luxury marina and high-rise apartment blocks, they grow vegetables to supplement their diets.

The latest revolt was carried out by many of the same soldiers who were paid off after the 2014 mutiny. But again the government cut a deal - and fired the heads of the army, police and gendarmerie for good measure.

Ivorian authorities have not released details but mutiny leaders say the deal included a payment of 12 million CFA francs ($19,400) in bonuses to some 8,400 former rebel fighters - a hefty price tag of some $160 million, if true.

While the government probably had little choice but to capitulate to avoid the mutiny spiralling out of control, ICG's Ohayon said such payoffs were no substitute for the more difficult but absolutely essential military reforms required.

First off, the settlement exposes the government's susceptibility to blackmail and has already encouraged similar revolts this week by jealous soldiers who did not participate in the mutiny and were not paid off.

Looking further ahead, the risk that factions within the army could be mobilised to support rival political camps ahead of the 2020 presidential election remains.

Ouattara has said he will step down and jockeying for position by pretenders such as Guillaume Soro, the former head of the northern rebellion, is already underway.

None of this bodes well for Ivory Coast's long-term political stability and what many investors had viewed as its bright economic future.

"You don't even know on your own staff who is with them," one senior army officer said after the latest revolt exposed the depth of the divisions within the ranks.

"Even if during the day out of respect one might say he is with you, at night he's with them.

(This version of the story removes reference in par 39 to removal of two-term limit for president)

(Additional reporting by Ange Aboa; editing by David Clarke and Ralph Boulton)

Reuters