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Cablegate: Congo-Kinshasa Agoa Eligibility Review 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 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

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