DRC'S INPUT FOR 2007 PRESIDENT'S REPORT ON AGOA

UNCLAS SECTION 01 OF 02 KINSHASA 000299

SIPDIS

SIPDIS

DEPT FOR AF/EPS (JPOTASH)

E.O. 12958: N/A
TAGS: ETRD ECON AGOA CG
SUBJECT: DRC'S INPUT FOR 2007 PRESIDENT'S REPORT ON AGOA

REF: SECSTATE 22438


1. (U) Post submits the following in response to reftel.

Market-Based Economy/Economic Reform/Trade Barriers
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2. (U) The DRC's development of a market-based economy is
progressing slowly. The exchange rate has floated freely for four
years without significant government intervention, although
fluctuations of as much as twenty percent have occurred during
periods of political uncertainty, particularly since mid-2006.
Private sector development is a key GDRC objective under the
newly-installed government, in partnership with international
financial institutions. Privatization stalled under the Transitional
Government. The IMF's formal Poverty Reduction and Growth Facility
Program (PRGF) with the DRC lapsed in March 2006 and an informal
Staff-Monitored Program has been in place since, pending negotiation
to reestablish the PRGF.


3. (U) The DRC does not have any specific barriers against U.S.
trade and investment. The GDRC has ratified key international
intellectual property rights (IPR) conventions, but lack of
enforcement and a weak judicial system often result in inadequate
domestic IPR protection. The GDRC welcomes foreign investment in
principle, but it is often difficult and time-consuming to obtain
final government project approval. Degraded infrastructure and
complicated, opaque taxation schemes discourage investment. The
GDRC, however, is working with the World Bank to improve the
investment climate. Investment, mining, forestry, and labor codes
provide modern legal foundations for doing business in the DRC, but
their implementation is uneven. Several multinational mining
corporations, including one U.S.-led consortium, are developing
large-scale projects, with planned investments totaling billions of
dollars over the next ten years. The U.S.-DRC Bilateral Investment
Treaty (BIT) governs investment and trade disputes, although the DRC
has yet to pay any arbitration awards in favor of American
companies.

Political Pluralism/Rule of Law/Anti-Corruption
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4. (U) Political pluralism exists without government interference.
The multiplicity of parties in the Government risks limiting
productive dialogue, although parties have aligned themselves into
large, loose coalitions. Representatives from several parties fill
legislative and executive branch positions. A variety of print and
electronic news sources provide a broad range of political debate.
Around 17 million Congolese voted in the July 30, 2006 round of
presidential and National Assembly elections. The second round on
October 29, 2006 included provincial elections and a run-off between
two presidential candidates. The National and Provincial Assemblies
have begun meeting, and the Senate is expected to begin work before
the end of March.


5. (U) The international community continues to support and
encourage the GDRC to focus on implementing the rule of law and on
combating corruption, and President Kabila and Prime Minister
Gizenga have explicitly stated that combating corruption is among
the new government's highest priorities. The GDRC is working with
bilateral and multilateral donors to develop capacity- building
programs for the law enforcement and judicial sectors. The judicial
sector is extremely weak, often corrupt, and due process is not
regularly afforded, particularly in connection with pre-trial
detention. International efforts to provide military and police
training are improving the quality of Congolese law enforcement.


6. (U) The GDRC suffers from institutionalized corruption, which is
difficult to overcome because of inadequate civil servant salaries
and decades of lack of accountability. Multilateral and bilateral
donors, including the U.S., fund anti-corruption efforts, as the
GDRC has yet to establish its own effective program or system. The
newly-formed government, however, has identified anti-corruption
activities as a key priority. Donors continue to work with the GDRC
to accurately determine the actual number of civil servants and
military in an effort to reduce and be able to meet the government's
payroll.

Poverty Reduction
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7. (U) The GDRC has gradually increased its level of pro-poor
spending. The GDRC began implementing its Poverty Reduction
Strategy (PRSP) in July 2006. The GDRC's USD billion 2006 budget
initially allocated about USD 520 million for social spending and
poverty reduction programs. The GDRC, however, was forced to reduce
that amount after bilateral and multilateral partners postponed
interim debt relief and suspended budgetary assistance and support
following the March 2006 lapse of the GDRC/IMF PRGF program.


KINSHASA 00000299 002 OF 002


Labor/Child Labor
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8. (U) The GDRC generally does not interfere with the activities of
the 300-plus unions in the DRC, and it usually respects their right
to strike. Unions are not normally influential enough to obtain
meaningful concessions from the government or the private sector.
An estimated 80 to 90 percent of the Congolese workforce is in the
informal sector, and therefore does not benefit from the nominal
labor law protection. Many employers do not provide working
conditions that meet Western health and safety standards,
particularly in the industrial and mining sectors.


9. (U) The GDRC has ratified key ILO Conventions against forced and
child labor (Conventions 29, 105, 138 and 182). The Labor Code,
enacted in 2002, requires that workers be 16 and have completed
primary school. However, the GDRC has made few if any meaningful
efforts to combat these problems due to the lack of capacity and
political will. Hence, child labor persists, particularly in the
mining and informal sectors, although NGOs pressure the government
and employers on this issue.

MEECE