US embassy cable - 05KINSHASA1717

C O N F I D E N T I A L SECTION 01 OF 02 KINSHASA 001717 
 
SIPDIS 
 
DEPT OF TREASURY FOR OPIC 
 
E.O. 12958: DECL: 10/13/2015 
TAGS: ECON, EFIN, PGOV, CG 
SUBJECT: VP BEMBA UPBEAT ON POST-TRANSITION ECONOMY 
 
REF: A. REF: A: KINSHASA 1195 
     B. B: KINSHASA 1485 
     C. C: KINSHASA 1672 
     D. D: KINSHASA 1642 
     E. E: KINSHASA 1665 
 
Classified By: Classified By: Econs Couns G. Groth for reasons 1.4 b/d 
 
 
1.  (C)  Summary.  At an October 4 meeting with the 
Ambassador and Economic Counselor in his office, Vice 
President Jean Pierre Bemba was upbeat and optimistic about 
the DRC economy and ostensibly about prospects for 2006 and 
the post-elections period.  He laid out the GDRC stance on 
the ongoing teachers' strike, saying that the government 
could only do so much, given the budget figures.  On 
elections, Bemba opined that more than 20 million voters 
would ultimately be registered, and that this would be 
achieved before the scheduled December 18 constitutional 
referendum.  Bemba affirmed he will support European Security 
Mission proposals to reform military pay and support.  End 
summary. 
 
2.  (C)  Ambassador thanked Bemba for the help and support of 
his office for the recently signed agreement between 
Phelps-Dodge and the GDRC for the exploration and 
exploitation of the Tenke-Fungurume copper/cobalt concession 
in Katanga Province (ref A).  Bemba described the GDRC's 
actions as its "duty" and acknowledged that finalizing the 
agreement had taken longer than everyone had hoped.  He was 
convinced that this agreement would lead to other 
investments, especially after the transition period. 
 
3.  (C)  Bemba was upbeat and optimistic, and predicted an 
economic "boom" following elections in 2006.  He noted the 
current stability of the exchange rate and the reduced 
inflation rate since 2003, when it hit 150 percent.  (Note: 
Post market basket estimates put inflation in 2005 at about 
30 percent; Central Bank calculations put it at 26.5 percent. 
 Most of this occurred in the first half of 2005 End note.) 
Bemba predicted that inflation for 2006 would only be in the 
single digits.  He also predicted that economic growth would 
go from an estimated seven percent in 2005 to ten percent in 
2006, citing the signs of increased economic activity visible 
in Kinshasa: more vehicles on the roads, more construction, 
and more ships at the port. 
 
4.  (C)  Bemba noted two sectors he felt important to future 
economic development: the liberalization of the insurance 
industry (Note: the GDRC is currently discussing ending the 
insurance parastatal monopoly. End note.), and the further 
reform of the banking sector.  Prospective new banking laws, 
he said, would allow banks to modernize and to play a more 
active, intermediary role in the economy. 
 
5.  (C)  Ambassador laid out the current state of debt 
reduction on DRC debts owed to the U.S.  Bemba thanked the 
U.S. for the recently signed debt reduction (ref B) Bemba 
went on to put forward an optimistic scenario of GDRC revenue 
projections, starting with USD 560 million in 2004, USD 800 
million in 2005, and predicting USD 1 billion for 2006. 
(Note:  Bemba was talking about the GDRC's own receipts, and 
noted that the annual budgetary contributions from the 
international donor community could double these figures. 
End note.)  These estimates agree with the budget minister's 
recent projections.  Bemba predicted that by 2010, the GDRC 
would be taking in about USD five billion in receipts 
annually. 
 
6.  (C)  Ambassador asked about Bemba's views on the current 
teachers' strike, which continues despite GDRC efforts to 
resolve this salary dispute (ref C and D).  Bemba indicated 
that if it had been up to him, he would have done things 
differently, but said that the government had ultimately laid 
out the current budget figures for the striking unions and 
told them what was possible.  He revealed that the IMF 
communicated to the GDRC its appreciation of the government's 
efforts to resolve the strike, but that the IMF also 
expressed concern that any settlement with teachers would 
have an effect on negotiations with other striking civil 
servants.  Bemba ridiculed the idea of paying teachers USD 
200 per month, saying that this would cost over USD 300 
million per month and would amount to nearly 10 percent of 
the budget.  (Note: Vice President Z'Haidi Ngoma had last 
year promised wages of USD 208 per month to unhappy 
government workers.  While the promise bought time, it 
represented a completely unrealistic commitment that is now 
causing problems.  End note).  He said that the government 
can raise teachers' salaries by 25 percent in 2006, although 
any increases above original 2006 projections would 
necessitate decreases elsewhere in the budget.  He accused 
unnamed persons of wanting to politicize the issue, by way of 
explanation for outbreaks of violence at some private schools 
and at teachers' union meetings. 
 
7.  (C)  Ambassador raised elections, (ref E) noting that 
nearly 15 million have registered already.  Bemba predicted 
that at least 20 million voters would eventually register, 
and that the constitutional referendum would have to take 
place on December 18 without fail.  Ambassador responded that 
any delay would hurt the transition, and that it is very 
important to ensure that the referendum is held in time for 
extension of the Transition period (needed prior to December 
31), and for the general electoral calendar to be observed. 
The final total registered to vote is less important than 
ensuring that all eligible Congolese have the opportunity to 
register, and the overall integrity of the election process. 
 
8.  (C)  The Ambassador emphasized the need for more progress 
in security sector reform, specifically rapid approval and 
implementation of the extensive proposals prepared by the 
European Security Mission (EUSEC) for reforms to provide 
regular pay and support to FARDC troops.  Bemba asserted that 
he fully supports the proposals, but opposition among senior 
FARDC officers is holding things up in the Supreme Defense 
Council.  Bemba agreed that it would be a good idea for the 
International Committee to Accompany the Transition (CIAT) to 
broach this subject at the next meeting with the Espace 
Presidentiel (President Kabila and the four Vice Presidents), 
and said he would be prepared to support the EUSEC report in 
that forum. 
 
9.  (C)  Comment.  Vice President Bemba is perhaps overly 
optimistic about inflation, growth, and government receipt 
figures, but his observations about improving investment and 
economic activity seem reasonable.  With regard to the 
teachers' strike, he neglects to mention that he originally 
signed on to the pledge to pay teachers up to USD 200 per 
month, an idea which he now rejects.  Bemba blustered a bit 
that if he were in charge of the teacher negotiations - or 
elections for that matter - things would be fine, a typical 
Bemba stance.  Contrary to rumors of a pending visit to the 
U.S. in the wake of the Phelps-Dodge signing, Bemba said 
nothing of any desired American travel.  In fact, Bemba's own 
political position is weakening, in part a reaction within 
his party to his rather authoritarian style, and he probably 
intends to concentrate for the time being on the home front. 
End comment. 
MEECE