VP BEMBA UPBEAT ON POST-TRANSITION ECONOMY

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