US embassy cable - 04KINSHASA1558

UNCLAS SECTION 01 OF 02 KINSHASA 001558 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: AGOA, EAID, ECON, ELAB, ETRD, PGOV, PHUM, PREL, CG 
SUBJECT: CONGO-KINSHASA AGOA ELIGIBILITY REVIEW 2004 
 
REF: STATE 168472 
 
1. This cable responds to reftel request for an AGOA 
eligibility review and update of the Democratic Republic of 
Congo (DRC). 
 
2. Summary. Since October 2003, the DRC has made progress in 
almost all areas listed in reftel. The DRC has maintained 
sound fiscal and monetary policies leading to broad praise 
from the IMF and World Bank and continued economic growth. 
As the DRC continues its transitional period from war to 
peace, the trade preferences granted by AGOA support the 
development of the formal economy, easing the reintegration 
of former combatants. Given that the DRC was mired in an 
openly declared civil war until July 2003, the progress made 
in one year is significant. End Summary. 
 
MARKET BASED ECONOMY 
 
3. The DRC is currently working with the World Bank to 
develop and implement a private sector development plan. 
This will involve the eventual privatization of many defunct 
and bankrupt state-owned enterprises. Several mining 
parastatals are already in joint-venture negotiations with 
major multinational mining corporations. Private sector 
development is a key objective of the Congolese government 
as a means to foster economic growth. Additionally, the 
exchange rate has freely floated for two years without 
significant government intervention. 
 
RULE OF LAW/POLITICAL PLURALISM/RIGHT TO DUE PROCESS 
 
4. Although the judicial system is still far from Western 
standards, the GDRC has made an effort to work with 
bilateral and multilateral donors to develop capacity 
building programs for the law enforcement and judiciary 
systems. Military and police training are improving the 
quality of Congolese law enforcement. Belgian and French 
trainers have, respectively, helped develop an entire army 
brigade and a rapid intervention police group. French 
Cooperation Agency and the EU are also working with the 
Ministry of Justice to improve the Congolese judicial 
system. 
 
5. Political pluralism is in a state of rebirth at present. 
The Transitional Government includes representatives from 
the political opposition in both the legislative and 
executive branches. There is no serious oppression of 
political parties and a variety of print and electronic news 
sources provide for a broad range of political debate. 
 
ELIMINATION OF BARRIERS TO U.S. TRADE AND INVESTMENT 
 
6. The GDRC is working with the World Bank to improve the 
investment climate in the DRC. New investment, mining, 
forestry and labor codes provide modern legal foundations 
for doing business in the DRC. Implementation of these laws 
is done on an ad hoc basis with the aid of the World Bank. 
For example, at Matadi and Kinshasa, the World Bank designed 
"Guichet Unique" provides a one-stop shop to pay all customs 
and port fees electronically. The National Investment 
Promotion Agency (ANAPI) also serves as a facilitator for 
investors exploring opportunities in the Congo. The DRC does 
not have any barriers specifically erected against U.S. 
trade or investment. 
 
ECONOMIC POLICIES TO REDUCE POVERTY 
 
7. The GDRC recently submitted its draft Poverty Reduction 
Strategy Plan (PRSP) to the IMF for review. The three main 
axes of the PRSP are peace consolidation, macroeconomic 
stabilization and pro-poor economic policies, and community 
led initiatives. The GDRC intends to put USD 80 million of 
funds liberated by HIPC debt relief to use in social 
spending and poverty reduction programs. (Note. Neither the 
Ministry of Plan - which handles the PRSP - nor the 
Presidency has given specifics on a timeframe for dedication 
of the funds. End Note.) Post does not expect that 
implementation of the PRSP will come in the near term. 
Meanwhile, per capita income has increased approximately USD 
10 since 2002, reaching USD 98 per year. Purchasing power 
has slightly increased as evidenced by increased purchases 
of staple food products. Sound monetary policy is helping to 
keep the exchange rate stable and give a modicum of security 
to the local population. 
 
SYSTEMS TO COMBAT CORRUPTION 
 
8. The Congolese government suffers from rampant 
institutionalized corruption. Civil servants are poorly paid 
or not paid at all. This environment breeds opportunistic 
behavior, and it is unlikely to fade away in the near 
future. Pressure by the World Bank and IMF to reduce 
government payrolls will help to make better use of salary 
budgeting giving less incentive to accept bribes or 
negotiate payments for services. 
 
9. In the past year, the GDRC has held several seminars to 
discuss anti-corruption. Most high-level government 
officials recognize that Western countries are interested in 
reducing corruption and make sure to mention that they are 
working toward that goal. The GDRC continues to work on 
several anti-corruption initiatives with NGOs such as the 
International Foundation for Elections Systems (IFES), 
National Democratic Institute (NDI) and Innovative Resource 
Management (IRM). However, no formal program or system has 
been established to fight corruption. 
 
PROTECTION OF WORKERS RIGHTS 
 
10. The New Labor Code, drafted with World Bank assistance, 
guarantees workers rights per International Labor 
Organization (ILO) standards. It quite often goes beyond the 
basic rights under the ILO and imposes heavy requirements on 
the employer, such as lodging, medical and transportation 
stipends. However, application of the law is not consistent. 
Workers in unions have the right to strike but must often 
resort to obtaining the support of the Minister of Labor to 
make headway with employers. As in most less developed 
countries, working conditions in industrial factories and 
mines, at times, do not meet Western hygiene and safety 
standards. However, the majority of the Congolese population 
(approximately from 80-90 percent) works in the informal 
sector and does not fit into a traditional employer-employee 
relationship. 
 
COMMENT AND RECOMMENDATION 
 
11. Post recommends that the DRC remain eligible for all 
aspects of AGOA, except the textile provisions. (Note. The 
DRC does not yet have an approved visa scheme for textiles. 
End Note.) The DRC is emerging from a six-year period of 
war. The Transitional Government is cautiously moving to 
implement new laws to foster investment and economic 
development and to reduce poverty. Although AGOA benefits 
are not fully enjoyed by the DRC due to a general 
unfamiliarity of the program, the DRC could begin to take 
advantage of the initiative in the future. AGOA has the 
potential to aid in the development and growth of the formal 
sector of the DRC economy, which is a stated goal of the 
GDRC. End Comment. 
 
MEECE