RESPONSE TO USITC REQUEST FOR INFORMATION

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