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Cablegate: Investment Climate Statement Appendix 2004

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 KINSHASA 001407

SIPDIS

STATE FOR EB/IFD/OIR, STATE PASS TO USTR, COMMERCE PASS TO
CIMS NTDB WASHDC

E.O. 12958: N/A
TAGS: ECON EINV KTDB PGOV PREL CG OPIC
SUBJECT: INVESTMENT CLIMATE STATEMENT APPENDIX 2004

REF: STATE 141379

1. Per Reftel, Post submits ICS appendix below.

DEMOCRATIC REPUBLIC OF CONGO: July 2004 Appendix to 2003
Investment Climate Statement.

This appendix serves as an update to the 2003 Investment
Climate Statement for the Democratic Republic of Congo. It
has been provided to assist investors in the interim period
resulting from the U.S. Government's decision to begin
publishing the Country Commercial Guide (of which the
Investment Climate Statement is a chapter) on a calendar
year basis, in January instead of August.

The United States Government has reviewed the 2003
Investment Climate Statement for the Democratic Republic of
Congo, and has noted the following changes that have
occurred since its publication. In most circumstances, if a
portion of the Investment Climate Statement has not been
modified in this appendix, it is because the U.S. Government
is satisfied that it continues to accurately reflect the
state of affairs in the Democratic Republic of Congo as of
July 2004.

Openness to Foreign Investment
------------------------------

Since 2003, two positive developments have marginally
improved the investment climate in the Democratic Republic
of Congo. First, the Port of Matadi has almost completed
upgrades to comply with International Shipping and Port
Facility Security guidelines, as mandated by the
International Maritime Organization. This combined with
slightly improved functioning of the "Guichet Unique" - a
one-stop electronic customs and fees payment bureau
developed by the World Bank - allow for greater ease in
transport of goods to the Democratic Republic of Congo.

Second, after one-year of operations, the Cadastre Minier
(Cami - Mining Concessions Authority) appears to be
functioning reasonably well. Although currently not
accepting new applications, major international mining
companies have lauded Cami's performance to date. Decisions
appear to have been made fairly and according to the law.

Conversion and Transfer Policies
--------------------------------

The Congolese Franc continues to remain stable at
approximately 390 Francs to the U.S. dollar. Exchange rates
on the informal market in the former rebel controlled areas
(Equateur, Kivus and Oriental Provinces) have largely
converged with those of the former government controlled
areas (Kinshasa, Katanga, the Kasais and Bas-Congo
provinces).

The IMF believes the Congolese Central Bank (BCC) has done
an adequate job managing monetary policy. It was able to
release larger denomination 200 and 500 Franc notes during
2003-2004 without experiencing bouts of speculation against
the Franc.

Expropriation and Compensation
------------------------------

In early-2004, one claimant under the U.S.-Zaire Bilateral
Investment Treaty won a settlement from the International
Center for the Settlement of Investment Disputes (ICSID).
However, the claimant has not yet been able to collect the
payment from the Congolese government.

Nevertheless, threats of expropriation or of a
disadvantageous "revision" of a contract or concession are
always present.

Dispute Settlement
------------------

No significant changes since 2003.

Performance Requirements and Incentives
---------------------------------------

No significant changes since 2003.

Right to Private Ownership and Establishment
--------------------------------------------
No significant changes since 2003.

Transparency of the Regulatory System
-------------------------------------

Only one significant change in the regulatory environment
has taken place since 2003. The establishment of the
aforementioned "Guichet Unique" at Matadi (and also at
Kinshasa) has helped to streamline customs and fees payments
when importing or exporting goods. The "Guichet Unique" is
not yet fully functioning - some government services are
still trying to escape incorporation into the system and
technical/electronic difficulties resulting from poorly
trained personnel - however, it is a step in the right
direction.

Capital Markets and Portfolio Investment
----------------------------------------

No significant changes since 2003.

Political Violence
------------------

Congo has suffered periodic bouts of widespread looting
initiated by the military, including in 1991, 1993, and 1996-
1997. There was also limited widescale looting initiated by
civilians in 2004. Due to civilian frustration as well as
poor military pay and discipline, the possibility of future
widespread looting cannot be ruled out.

In June 2003, a transitional government was established to
prepare the country for multi-party elections in 2005 or
2006. The central government exercises limited control in
eastern Congo, and armed skirmishes continue in parts of
Katanga, Orientale, and North and South Kivu provinces.

Corruption
----------

No significant changes since 2003.

Bilateral Investment Treaties
-----------------------------

No significant changes since 2003.

OPIC and Other Investment Insurance Programs
--------------------------------------------

OPIC is currently accepting applications for political risk
insurance for companies operating in the Democratic Republic
of Congo. It is presently reviewing several applications
submitted in the first half of CY 2004.

Labor
-----

No significant changes since 2003.

Foreign Trade Zones/Free Ports
------------------------------

No significant changes since 2003.

Foreign Direct Investment Statistics
------------------------------------

The following are Congolese Central Bank (BCC) estimates of
FDI for 2001 and 2002. The quality of these statistics is
undetermined.

Total Flows (U.S. dollars million):

2001 2002
In DRC: 82.0 141.1
Abroad: 0.0 16.5
Net: 82.0 124.5
------------------------------------
Source: BCC Annual Report 2002-2003

MEECE

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