DRC MAKES PROGRESS TOWARDS EITI VALIDATION

UNCLAS KINSHASA 000088

SENSITIVE
SIPDIS
DEPT FOR AF/C (CHRIS LAMORA AND LISA KORTE)
DEPT FOR AF/EPS (MARY JOHNSON)

E.O. 12958: N/A
TAGS: EFIN EMIN ENRG EPET ECON PGOV CG
SUBJECT: DRC MAKES PROGRESS TOWARDS EITI VALIDATION

REF: 09 STATE 28858


1. Summary: In 2008, the DRC became a candidate country for the
Extractive Industries Transparency Initiative (EITI),a
multi-stakeholder effort to increase transparency in transactions
between governments and companies in the extractive industries
(reftel). In order to be declared or "validated" as an
EITI-compliant country by the International EITI Secretariat, the
DRC must complete certain requirements by a March 10, 2010
deadline. The DRC has already taken some positive steps under
EITI, including the establishment of a National EITI Executive
Committee, which has met three times, on October 6, December 10 and
January 14. The National EITI Executive Committee is comprised of
representatives from the DRC government, extractive industries and
civil society organizations and is in charge of overseeing
implementation of steps the DRC needs to take in order to be
validated as a country which is compliant with the Extractive
Industries Transparency Initiative (EITI).




2. Summary continued: The third meeting of the DRC National EITI
Executive Committee was held at the Ministry of Planning on January

14. Planning Minister Olivier Kamitatu presided over the meeting,
which was attended by representatives from the government,
extractive industries, civil society organizations and the donor
community. During the meeting, the EITI National Committee
fulfilled two required steps towards EITI validation. First, the
Committee conditionally approved a report submitted by Price
Waterhouse Cooper's on "EITI in the DRC," which included
information on the amount of taxes extractive industries paid to
DRC government agencies and the amount of money the government
agencies actually recorded receiving from the extractive industries
in 2007. Second, the Committee selected the French Company CAC 75
to validate the Price Waterhouse Cooper's report. The objective of
the validation is to provide an independent evaluation of progress
the DRC has made in implementing EITI and also recommendations
about necessary measures which still need to be taken. Two steps
which the DRC still needs to take before a March 10 deadline is a)
to organize a workshop to present the Price Waterhouse Cooper's
report at the national and provincial levels and b) validate the
report. Whether the DRC meets the March 10 deadline remains to be
seen. End summary.



Report Conditionally Approved

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3. During the January 14 meeting, Executive Committee members
reviewed the first report published by the independent
Administrator/Conciliator Price Waterhouse Cooper's on December 22
on "EITI in the DRC," which covered twenty mining companies and
five petroleum companies. The report examined how transparency
works in DRC extractive industries by matching taxes that
extractive industries paid to government tax collecting agencies
and how much money the tax collecting agencies recorded in 2007.
DRC tax collecting agencies include OFIDA (Customs),DGRAD
(responsible for administrative taxes),DGI (responsible for
revenue, salary and property taxes),and OCC (the Import-Export
Authority). In the report, Price Waterhouse Cooper's recommended
that the DRC take the following actions: a) the extractive
industries should be required to adhere to the EITI process; b) the
DRC should define which revenues extractive industries should
declare in advance and explain which revenues to record; c) the DRC
should hold a workshop for all people involved in the EITI to
explain how to complete the declaration forms; d) the EITI
Technical Secretariat should sensitize extractive industries and
government agencies to stick to the timetable of implementing EITI
procedures and to provide all required documents related to revenue
declaration and e) the DRC should implement some payment procedures
for special payments of some revenues.




4. The report detected discrepancies between what the extractive
industries paid and what the tax collecting agencies declared. The
EITI Executive Committee approved the report on condition that

these discrepancies are addressed, some calculations re-adjusted
and some typographical errors corrected. Delegates from the OCC
requested that their figures not be published, since they were not
a "tax collection agency," but an "import-export authority."
However, the EITI Executive Committee decided to keep the OCC
figures in the report, provided that they label it as a "government
entity" and not a "tax collection agency." The next step in the
EITI process is that the DRC must organize a workshop to present
the report at the national and provincial levels.



Now Validation Work Begins

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5. As part of the EITI process, the Price Waterhouse Cooper's
report will now have to be validated. National EITI Coordinator
Christian Mambu announced that on December 23, a five-member ad-hoc
committee selected the French Company CAC 75 to validate the
report. He stated that the CAC 75's representative would arrive in
the DRC in mid-January and complete a validation report by February

15. The total cost of the validation would be USD 103,000. The
CAC representative requires a down-payment of 40 percent of the
total bill. The GDRC would pay 51 percent of this amount, while
multinational donors would cover the remaining 49 percent. In
order to raise funds, the EITI Executive Committee promised to send
a letter to the GDRC through the Minister of funds. The delegate
from the German government's development agency (GTZ) said that he
would call a meeting with donors to communicate their position.
The EITI Executive Committee requested that the World Bank shorten
its procedures for mobilizing funds, which normally take at least
15 days. (Note: On January 23, Mambu sent an invitation letter to
Hughes Renaux of CAC 75 to perform the validation. As of January
25, Renaux has still not arrived in the DRC. In addition, there is
no news as to whether the DRC has received funding to cover the USD
103,000 cost of the validation. End note.)




6. According to the Terms of Reference for the Validator, CAC 75
would submit a pilot report to the National EITI Coordinator and
the Validation Follow-Up Group on January 31. Final amendments to
the validation report would be shared with the International EITI
Secretariat. The final report would be submitted on February 28.
The Minister of Plan emphasized that the DRC should be ready with
its validation report no later than March 9. The deadline by which
the report needs to be validated is March 10.




7. (SBU) Comment: The DRC seems to be making steady progress
toward EITI validation. While he was in Kinshasa in early December
2009, Economic Governance Assessment Team member Nicholas Garrett
strongly encouraged USG political support of EITI in the DRC.
Whether the DRC fulfills all of its obligations for EITI validation
by the March 10 deadline will depend on financing, political will
of the GDRC and continued commitment by the international
community. End comment.



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