(SBU) BRAZZAVILLE IN BRIEF: DECEMBER 31, 2009: BUDGET,

UNCLAS SECTION 01 OF 03 BRAZZAVILLE 000368 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV EFIN PREL CF CH ELAB PINS SUBJECT: (SBU) BRAZZAVILLE IN BRIEF: DECEMBER 31, 2009: BUDGET, EITI, "POOL" SECURITY, LABOR TROUBLE, CHINA GRANT BRAZZAVILL 00000368 001.2 OF 003 1.(U) Following is the last Brazzaville in Brief for 2009: Index/Topics -------------- --Congo Doubles Its Budget --Congo Unlikely to Comply with EITI Validation Deadline --Ex-Rebel Takes Government Job --Labor troubles Loom --China Offers $7.6 Million to Congolese Hospitals --Congolese Statue of Liberty Unveiled 2.(SBU) Congo Doubles Its Budget -------------- The Congo legislature has adopted a calendar/fiscal year 2009 budget projecting revenue 2,815 billion CFA (approximately $6.25 billion at an exchange rate of 450 CFA to the dollar), doubling last year's budget of 1,412 billion CFA ($3.1 billion). Fully 78% of the budget will be financed by oil revenue, based on an expected 124% increase in oil revenue in 2010 compared to ¶2009. (Note: The revenue projection is based on a relatively conservative price assumption of USD 60/barrel during the coming year and the fact that several new oil production streams will come online in 2010.) The budget posits an overall growth rate of over 12 percent in 2010, with a slight augmentation of inflation as well. On the expenditure side, government spending is divided into three broad categories: Current Operating Charges: 793 billion CFA francs (1.72 Billion USD) (28 pct ofrevenue) Investments: 661 billion CFA francs (1.47 billion USD) (24 pct of revenue) Budgetary savings: 1,361 billion CFA francs (3.02 billion USD) (48 pct of revenue) Line items: Within the Current Operating Charges category, the three largest line items (descending order by amount) are: Financial management, economic monitoring, and governance - 308 billion CFA francs, or 38 percent of total expenditure. Social sector (education, health, employment and culture) - 196 billion CFA francs, or 24 percent of government expenditure. National Defense - 137 billion CFA francs, or around 17 percent of expenditure. The second broad category, investment, is allocated 661 billion CFA. This includes large infrastructure projects, which fall under President Sassou's "Road to the Future" campaign to modernize and rebuild the country. With respect to the third category, savings, over half of the budget will be allocated to "savings" to be invested for later use, and thus does not fall within the rubric of government spending. This category was described to the Ambassador by the Minister of Finance as a "future fund" against the day when petroleum revenues begin to decline. It represents fully 48 percent of the Congo's expected total government revenue for 2010; government expenditure for current operations and investment is just 52 percent of expected income. Comment: Despite the enormous budget increases, one of the major problems plaguing the Congolese government has been its inability to spend money and to spend it wisely. One of the reforms being put in place under the HIPC initiative is procurement reform, designed to make the system more transparent and to reduce opportunities for corruption. We are seeing signs that uncertainty and a learning curve on the new bureaucracy to review procurement and issue "no objection certificates" (designed by consultants engaged by the World Bank) is beginning to add additional hurdles to government spending, on top of procurement mechanisms already known to be slow, inefficient, and (formerly) corrupt, resulting in unfinished infrastructure projects and hospitals and health clinics without any medicines. End comment. 3.(U) Labor troubles Loom -------------- As the budget and the revenue and spending increases therein were debated over the past two months, multiple trade unions have threatened to strike over salary and other issues. We believe this increased labor activism is related to several factors: 1) the rapid growth of economic activity in the urban areas of the Congo (where most of the population lives); 2) as mentioned above, the vast amounts of money expected to be available to the government in 2010 from increased revenues, and 3) the expected (now ongoing) review of the "truce" agreed between the government and the unions several years ago, to limit the wage bill during the quest for HIPC debt relief. BRAZZAVILL 00000368 002.2 OF 003 A general strike was threatened and called off in early December by civil service unions (over a temporary transport subsidy for government employees that expires today, December 31). The national railway union also threatened but did not call a strike not only over wages but also security issues along the rail line (see below). The latest union to threaten a strike is the union representing the workers of the national civil aviation agency (ANAC, by its French acronym),which is responsible for operating the airports in Congo in addition to its regulatory role. The ANAC union leadership is upset that the Government signed a 25-year concession deal with a Lufthansa subsidiary to manage the airports at Brazzaville, Pointe-Noire and Ollombo. The union issued a statement this week calling for a one-week strike to begin on Monday, December 4, and expressed its annoyance at being invited to attend a ceremony announcing the concession to the private firms without having been informed or consulted about this action. (Comment: Our expectation is that the government will hold the line on salary increases until spring, by which time it will have achieved debt relief and will be less constrained by the Fund/Bank requirements for fiscal discipline. At that point, the door will be open at least slightly for government concessions to union demands. End comment.) With respect to the ANAC strike threatened, we will advise its implications for our operations; if it is not called off over the weekend, arrivals and departures are likely to be disrupted next week, since ANAC controls all aspects of the operations of the two international airports. 4.(SBU)Congo Unlikely to Comply with EITI Validation Deadline -------------- -------------- -------------- An impeccable source involved in the preparations for the Extractive Industries Transparency Initiative (EITI) has told us that Congo is "unlikely to comply with the March 9, 2010 deadline" for EITI validation. There are several factors causing this delay, including the requirement to undertake a communication campaign to educate the public about EITI, as well as to select a "validator" to come to Congo to conduct the review. The validator may arrive in January to begin consultations, but the information campaign has not yet been planned and, more importantly, the second report on EITI progress which is due December 31, 2009 (today) has not been submitted. Comment: Congo's focus has been on the related matter of debt relief under HIPC, which seems likely to occur in January, 2010 with "completion point." The EITI process is closely related, in that the completion point conditionality included a large component of petroleum revenue transparency and reform. It would be embarrassing for the IMF and the World Bank to recommend to their boards in January that Congo reach completion point based on the nascent reforms, only to fail with EITI validation two months later. From the Congolese point of view, beginning the process was the important part, to demonstrate to the IMF and World Bank that the government has good intentions with regard to transparency, and we note that EITI participation is not a condition under the Bank/Fund HIPC effort. End Comment. 5.(SBU) Ex-Rebel Takes Government Job -------------- -------------- The head of Congo's "Ninja" rebels, Frederic Bintsamou (aka Pasteur Ntoumi) has finally arrived in Brazzaville to assume his role as senior official in the national peace building office. For over a decade, Ntoumi had remained in the "Pool" region south of Brazzaville while various fitful negotiations to disarm and reintegrate the Ninjas took place; he was named nearly three years ago to his senior position and allocated an office and a residence, but refused to come to Brazzaville out of concern for his security, demanding a large force of loyalist guards accompany him, which the government refused. In the past six months, there has been a resurgence in banditry and violence. Former Ninjas, some of whom were not under Ntoumi's control, had been stopping cars along the road between Pointe Noire and Brazzaville to demand bribes. On several occasions they stopped Brazzaville-Pointe Noire trains to steal cargo, extort money, and commit violence against passengers. In the face of this increasing lawlessness, President Sassou appointed pool-origin former "Prime Minister" Isidore Mvouba to head a committee to resolve the situation of the Ninjas. Persuading Ntoumi to come, finally, to Brazzaville (with a smaller-than-demanded guard force) is the most high profile action thus far in the plan to quell violence in the Pool. (Comment: It may be that Ntoumi no longer controls the armed groups and individuals who are these days contributing to the insecurity of the pool; indeed, he told a press conference this week that since he has come to Brazzaville, no one can accuse him of responsibility for BRAZZAVILL 00000368 003.2 OF 003 the banditry in the Pool. To finish the job of pacifying the Ninjas will require a large amount of money, for law enforcement and restoration of government in the region, to buy back weapons, and provide subsidies for the reintegration of the large number of youth who have taken up "ninja" banditry since the war. End Comment.) 6.(U) China Offers $7.6 Million for Congolese Hospitals -------------- -------------- -------------- In its latest high profile infrastructure project, China and the Congo signed a $7.6 million deal to build hospitals in Brazzaville and Pointe Noire. According to press accounts, this is a grant, not/not a loan as part of the existing infrastructure credit, and has been linked by the Chinese government to the implementation of the announced aid grants from the recent China-Africa summit. Nevertheless, we expect that the actual construction will be done by one of the many Chinese construction firms represented in Congo. 7.(U) Congolese Statue of Liberty Unveiled -------------- -------------- President Sassou Nguesso presided over the unveiling of several new statues in central Brazzaville this week. The statues, representing first president Fulbert Youlou, early Vice President Jacques Opangault, and "Liberty," were fabricated in South Korea at a cost of $1.5 million. They had been veiled on their plinths in the center of major roundabouts downtown for several months. The largest statue is "Liberty," a 2.5 meter female African figure with right arm raised, on the spot where the first Congolese workers unions organized their strikes during the "trois glorieuses" in August, 1963. (Comment: That particular labor unrest, ironically, led to a military coup and jail for Fulbert Youlou and the rest of his government, and set the stage for the emergence of a long period of Marxist repression in this country. End comment) EASTHAM