US embassy cable - 04KINSHASA1477

UNCLAS KINSHASA 001477 
 
SIPDIS 
 
STATE FOR USITC, L.SCHLITT 
 
E.O. 12958: N/A 
TAGS: EAID, ECON, ETRD, OTRA, CG 
SUBJECT: RESPONSE TO USITC REQUEST FOR INFORMATION 
 
REF: A. STATE 137500 
 
     B. KINSHASA 1407 
 
1. The following replies to USITC request for information 
relating to its study on U.S.-Sub-Saharan African Trade and 
Investment. 
 
2. Since the inauguration of the Transitional Government in 
July 2003, the DRC has made progress in moving from a war to 
a peace economy in most of the country. Government control is 
being slowly extended to former rebel controlled provinces 
and tax receipts are increasing. Although politically 
difficult, some reforms are taking place. Fiscal and monetary 
discipline are largely maintained. The exchange rate has 
remained stable in both the formal and informal market over 
the past year and inflation has dropped to single digits. 
Many challenges remain: Political reintegration of the Kivus 
and parts of Oriental Province into Kinshasa's control as 
well as preparations for elections are priorities for the 
international community. The remainder of paragraph 2 follows 
the same format as paragraph 5 in Ref A. 
 
A. From 2003 to present, there have been no major changes in 
DRC economic, trade or investment policies. In 2002, 
legislation drafted in concert with the World Bank was 
approved by the GDRC and provided new Mining, Forestry, Labor 
and Investment Codes. Implementation of these laws is done on 
a case-by-case basis as businesses bring questions and 
disputes to the government. The sole U.S. policy with 
potential to directly impact the DRC is AGOA III. Although 
the DRC is AGOA eligible for all but the textile provisions, 
local knowledge of AGOA is limited. The majority of exports 
to the U.S. under AGOA consist of petroleum. 
 
B. The DRC is a member of EMAC, COMESA and SADC. There have 
been no major developments affecting the DRC within these 
groupings. 
 
C. Although the World Bank has begun to apply its Private 
Sector Development Plan for the DRC, the restructuring of 
state-owned enterprises is moving very slowly. No 
privatization plans have begun in earnest. Political 
difficulties frustrate progress on privatization. State-owned 
enterprises are considered by many Congolese to be the 
patrimony of the country. Privatization, especially sale to 
foreign corporations, is widely viewed in a negative light. 
Futhermore, state-owned enterprises are historically a source 
of income for government officials. Loss of direct access to 
these resources is not very palatable, and the GDRC continues 
to try to hold onto its parastatals for as long as possible. 
 
D. Post is unaware of any AGOA related investments or 
non-traditional export developments. Government reform 
efforts have included proposing anti-corruption and 
anti-money laundering legislation. Port security and customs 
clearance procedures have been improved over the last few 
months. The process for granting mining concessions has also 
been improved through the installation of the World Bank 
designed Cadastre Minier - Mining Concessions Authority (Ref 
B). On the initiative of the Belgian government, discussions 
have begun on reactivating the Great Lakes Economic 
Community. This is still in a very nascent stage. 
 
E. Economic Counselor accompanied a team from the Corporate 
Council on Africa on an AGOA sensitization tour of the DRC 
during October 2003. Most major cities were covered. The 
presentation was well received by local business communities. 
This tour, and AGOA in general, also grabbed the high-level 
attention in the GDRC, including that of President Kabila and 
of one of his advisors. The new Foreign Minister has also 
expressed interest in AGOA directly to the Ambassador. 
However, a funamental misunderstanding still remains among 
many Congolese who believe that AGOA is a bilateral aid 
program, rather than an investment and export incentive 
program. 
MEECE