Documentof The World Bank FOR OFFICIAL USE ONLY ReportNo: 28048-ZR DEMOCRATICREPUBLICOF CONGO ECONOMIC AND SECTORWORK REFORMING PUBLIC ENTERPRISESTHROUGH IMPROVED GOVERNANCE March 10,2004 Private Sector Unit Africa Region This document has a restricted distribution and may be usedby recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. I CURRENCY EQUIVALENT (Exchangerate effective as of December 17,2003) Currency Unit - CongoleseFranc U S $ l - 415 CF GOVERNMENT FISCAL YEAR January 1- December 31 ABBREVIATIONS AND ACRONYMS ACP Agence Corigolaise de Presse AFRICA-RE Socittt Africaine de Rtassurance AFRICOM Socie'tt de Gestion et Financement des Entrprises AFRIDEX Socie'tt Africaine d'Explosifs AGRIFOR Socie'tt Agricole et Forestibre du Mayumbe ALT INVEST Alta Invest AMI-CONGO Agence Maritime Internationale du congo ANAPI Agence Nationalepour la promotion des investissements B.A.D Banque Africaine de De'veloppement B.D.E.G.L Banque de de'veloppementdes Etats de Grands Lacs B.T.M. Billition Tangwiza Mines BCA Banque de Cre'dit Agricole BCCE Banque Congolaise de Commerce Exte'rieur (in liquidation) BCDC Banque Commerciale du Congo BEID Bureau d'Etudes et d'lngtnieriepour le De'veloppement BIRD Banque Internationale pour la Reconstruction et le De'veloppement C.A.A Compagnie Agricole d'ilfrique C.E.E.C Centre d'Expertise, d'Evaluation et de Certification CACAOCO Cacaoyer de B d u CADECO Caisse Ge'ne'raled'Epargne du Congo CEPETEDE Centre de Perfectionnement aux Techniques de De'veloppement CFU Ste' de Chemin de Fer des Ue'lCs CHANIMETAL Chantier Naval et lndustrie de Construction CieP.Ht.LOM. Compagnie Pastorale du haut Lornami CILU Cimenterie de LUKALA CINAT Cimenterie Nationale CITYTRAIN City-Train CMDC Cie Maritime du Congo CNE Commission Nationale de l'Energie CODENORD Compagnie de De'veloppementdu Nord COHYDRO La Congolaise des hydrocarbures COMINGEM Combinat Industriel de Geniena CONGO ETAIN Socie'te'Congolaise d'Etain COPIREP Comite' depilotage de la re'forme des entreprises publiques COREBAC Comitt des Re'formes de Banque du Congo COTONCO Cotonni2re du Congo csco COTONNIERE Socie'te'Cotonnibre et Agricole du Kasai' et du Shas Caisse de Stabilisation Cotonriikre CSP Conseil Supe'rieur du Portefeuille CSL Complexe Sucrier de Lotokila DCF Democratic Congo Franc DRC Democratic Republicof Congo ENERGOCONGO Eritreprise d'lnstollntioris Etierge'tiqLies FOR OFFICIAL USE ONLY ENK-Mn Entreprise Miniere de Kiserige FEC FPderation des Entreprises dir Congo FIKIN Foire Internationale de Kinsliasa FINA Fina-Congo FONAMES Fonds National Medico-Sanitaire FPI Fonds des Proniotions de l'1ndiLstrie G.H.C. Grands HBtels du Congo GDP Gross Domestic Prodirct GECAMINES GCnCraledes Carritres et des Mines GOFFIN et CIE Coffin et Conipagnie GRELKA Sociktk des Grands Elevages de Katongola GULF OIL Gulf Oil Congo(CHEVR0N) ICCN Institiit Congolais de Conservation et de la Nature IJZBC Institiit dejardin Zoologiqiie & botanique du Congo IMNC Institiit des Miise'es Nationaiix dit Congo INERA Institiit Not. d'Etiides & Rech. Agro INFT lnst. Nor. Prep. Professionnelle INS Institiit National des Statistiqiies INSS Institut Nat. D e SCcuritC Sociale IPS-CONGO fndiistrie Promotion Service JAPECO Japan Petroleum Congo KARAVIA HGtel Karavia LAC Lignes Atrienries Congolaises MACAL Mariilfclctiire Congolaise des Allitmettes METELSAT Te'le'dktection par Satellite MIBA Socitte' Miniere de Bakrvanga MIDEMA Mirioterie de Maradi MOBIL MOBIL Oil Congo (Cobil) NBK Noiivelle Bariqiie de Kinshasa mco Norir:elles Entreprises Congolaises Nlle EXFORKA Noirvelle E.rploitatiori Forestikre du Kasai' OBMA occ Office des Biens Mal Acqitis Office Congolais de ContrGle OCPT Office Congolais des Postes et Te'l~cornnuinicatiotis. OFIDA Office des Dociaties et Accises OGEDEP Office de Gestiori des Dettes Piibliqries OGEFREM Ofice de Cestion de Fret Maritime OKIMO Office cles Mines d ' 0 r de Kilo-Moto ONATRA Office National de Transports ONC Office National dii Cafe ONDE Office Nationnl d'Elevage ONT Office iiariorial de Toiiristne OPEC Office cles Petites et Moyennes Entreprises OR Office des Roiites OVD Office des Voir'ies et Drainage PALMECO Paltiieroies de Cosiinia PE Public enterprise PERENCO Ste' de Recherche et d'E,~ploitnt"Pttroliere rlii Congo PHC Plniitations et Hiiilerie Lever dit Congo PSDC Private Sector Development and Comptetitivity R.S.G. Rdserves Strate'giqiies G&n&rales REGIDESO Regie de Disrribiition d'eaii RENAPI RPgie National rl'ilpprovisiontienre,lt et clrltnprit~ierie RENATELSAT Regie Nationale de Te'le'cornpar Satellite RTNC RoilicI Tc;IL;r.i.$io/I Notioti nI Cn~igolrci.ve Thisdocument has a restricted distribution andmay be used by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed (withoutWorld Bank authorization. - 2 RVA Rkgie des Voies Ae'riennes RVF Re'gie des Voies Fluviales RVM Re'gie des Voies Maritiines S.KWILU-NGONGO Conzpagrzie Siccribre de Kwilii-Ngongo S.M.D.G. Socie'td Minibre de Gorna SEP-CONGO Congo Service des Entreprises Pe'trolibres SGGI Socie'te' Gtne'ralede Gestion Immobilibre SHELLKINEREX Stt Shell Congo de Recherche et Exportation SHELL-RDC Congo Shell SIK Sociktt Iminobilibre Kirzoise SITAC Sociktt d'lnvestissenzent et de Transport du CONGO SNCC Socie'te'nationale de Chemin de Fer dn Congo SNEL Socitti Nationale d'Electricite' SOCIGAZ SOCIGAZ SOCIR Socie'tt Congolaise des Industries de Raflnage SODEFOR Socitte' de De'veloppement FGrestier SODIMICO Ste' de Dkveloppement Industriel. d Minier du Congo SOE State-ownedenterprise SOFIDE Sociktt Financibre de Dtveloppement SOLICO Socie'te'du Littoral Congolaise SOMICO Socie'tk Minikre du Congo SOMIKIVU Socittt M i d r e de Kivu SONAL Socie'tt Nationale de Loterie SONANGOL n.a. SONAS Ste' Nationale dlssurances SOSIDER Socittk d'Exploit. Sidtrurgique SOTEXKI Socie'te' Textile de Kisangani SOTRAC Socie'te'de Transport CONGO SUC. KILIBA Sucrerie de Kiliba SUCRAF S.A Sucrerie et RafJinerie dlfrique Centrale TOURHOTEL St6 de De'veloppement Touristique et HBtelier du Congo TRANSCOM La Congo-Marocaiiie de Transport UBC Union des Banques Congolaises ex.ZAIMAR Socie'tt Congolo-marocaine de Distribution Vice President: CallistoMadavo CountryDirector: EmmanuelMbi Sector Manager: DembaBa Task TeamLeader: IvanRossignol DEMOCRATICREPUBLICOF CONGO ECONOMICAND SECTORWORK IMPROVEDSERVICEDELIVERY THROUGHPE GOVERNANCEREFORM Table of contents Page EXECUTIVE SUMMARY ....................................................................................................... i A devastated country..................................................................................................................... i ...where lack of governance has resulted in the collapse of economic activity............................. i The political transition offers a window of opportunity.............................................................. ... ii ... which needs to be complemented by Public Enterprisereform.............................................. 111 Public enterprises dominate the Congolese economy .................................................................. ... 111 Enabling an environment for a successful PE reform.................................................................. v ...taking into account lessons learned.......................................................................................... v i Thus a different path and pace should be adopted..................................................................... vii ...inthe context of a strategy already in implementation........................................................... vii I. ECONOMICAND POLITICAL BACKGROUND........................................................... 1 Economic background...................................................................................................... 1 Political andeconomic transition...................................................................................... 3 A window of opportunity in a fragile context................................................................... 4 I1. PUBLIC ENTERPRISES INDRC..................................................................................... 6 Overview ........................................................................................................................... 6 Legal framework ............................................................................................................... 7 PESperformance............................................................................................................... 8 Contribution of PESto Public Finances.......................................................................... 13 I11. SELECTED SECTORAL REVIEWS .............................................................................. 15 Telecommunications....................................................................................................... 15 Cellular............................................................................................................................ 16 Transport sector .............................................................................................................. 18 Mining sector .................................................................................................................. 23 Legal framework ............................................................................................................. 23 Electricity ........................................................................................................................ 26 Water sector .................................................................................................................... 29 Statutorybodies .............................................................................................................. 30 Tariffs .............................................................................................................................. 30 Performance indicators ................................................................................................... 31 Financial sector ............................................................................................................... 33 I V.TAKING STOCK OF EXISTINGEXPERIENCE .......................................................... 35 Lessonslearnedin Post-conflict situations..................................................................... 35 Reintegrationand reconstructionactivities..................................................................... 36 Public enterprise reform..................................................................................................... 37 Private Sector Participation in Infrastructure . trends ................................................. recent 38 Achieving better governance .............................................................................................. 38 V. TORWARDS INCREASEDSERVICEDELIVERY THROUGHIMPROVED GOVERNANCE..................................................................................................................... 41 Assessingthe risks .......................................................................................................... 41 Building on successfulexperiences,the way forward.................................................... 42 Improving the business environment.............................................................................. 42 Financial sector reform................................................................................................... 44 Public enterprisereform sequencing............................................................................... 44 Listof tables Table 1. Internaldebt at June 30 1997 - Page 18 Table 2. - Economicand structural reforms implementedby the Government Page 20 Table 3. - Public enterprisesby sector Page 22 Table 4. - Selected activity indicators by sector Page 24 Table 5. -Total External On-lentDebt to PESon 31March2003 Page 26 Table 6. -DRC debt to privatesector firms identifiedby FEC - July 2003. Page 27 (Firms with individual debt over US$10 million) Table 7. - Special contributionsto the State Budget 2001-2003 Page 30 Table 8. - Telecommunications statistics Page 31 Table 8a. -Cellular phone operations Page 32 Table 9. - Government involvementin the transport sector Page 35 Table 10. - Performanceindicatorstransport sector Page 36 Table 11. -Transport Sector ReorganizationStrategy Page 37 Table 12.- DRC Mining Companiesand activities Page 39 Table 13. - Evolution of miningoutput 1986-2000 Page 40 Table 14-Estimateeffect on miningrevenuesof Gecaminesrestructuringprogram. Page 41 Table 15. - SNEL - Efficiency indicators Page42 Table 16.- SNEL - UnbundlingStrategy Page 44 Table 17.-REGIDESO - General PerformanceIndicators 1997- 2001 Page 47 Table I 8 - REGIDESO- DrinkingWater Service Level Page 47 Table 19.-REGIDESO-Water Distribution Indicators 1999-2001 Page 48 Table 20. -REGIDESO- Collectionperformance 1999-2001 Page 48 Exhibit 1.Power Highwaysfrom IngaSite Page 43 Exhibit 2. Managemendfinancing matrix inprivatization Page 54 Annex I-Detailedlist of Public Enterprises Annex I1- Detailedlist of Joint venture companies Annex I11- Summary of financial audits of 13 Key PES Annex I V - Diagnosticof 13 auditedPES. Annex V -Congo, Democratic Republicat a glance This report was prepared by a team led by Ivan Rossignol (AFTPS) assisted by Roger Christen, Public Enterprise Specialist, Eric Boucheny, Public Enterprise Specialist, ThCo Ejangue, Private Sector Development Consultant. Rebecca Kumuamba provided assistance for the missions in the field in June 2002 and April/July 2003 that led to the issuance of the first draft of this report. The report was prepared under the general supervision of Emmanuel Mbi, Country Director, Demba Ba, Sector Manager (AFTPS). Peer reviewers were David Donaldson (PSAPT), James Emery (IFC) and Lou Wells (Professor, Kennedy School, Harvard). The team acknowledges the input provided by Alex Nkusu from COPIREP and Onno Ruhl, Country Manager for DRC. The team extends its thanks to the many Congo public enterprises consulted for their insights on current developments and future opportunities for growth EXECUTIVE SUMMARY A devastatedcountry... 1. The Democratic Republic of Congo is a country richly endowed with natural resources, one of the three or four most prospective places in Africa for mineral development. The large agricultural potential i s still untapped and DRC also has 13% o f the world's hydroelectric potential. Yet DRC's indicators of economic and social development place the country as among the most deprived in the world. DRC is one o f the largest countries in Africa with a population of 55 to 60 million inhabitants. Average population growth i s 3% and 60% o f the population live in rural areas whereas the number of malnourished people in the country has more than doubled over the past 20 years. Per capita income has declined steadily from about US$ 380 in 1985 to US$ 87 in2000. DRC is now one of the poorest countries inthe world. 2. Government revenues have amounted to no more than about 5 percent of GDP during the past five years, one o f the lowest levels in Africa. External debt i s approximately US$12billion (before Enhanced HPC initiative) while internal debt i s estimated to peak at approximately US$ 3 billion. DRC has qualified for permanent debt relief under the enhanced HIPC initiative, up to 93 percent of this stock of debt that has been written off. ... wherelack ofgovernance hasremhedzh thecoZZapseof economicactivz2y 3. Duringthe 32-year MobutuSese Seko regime, the state gradually went from a provider of services to a vehicle that existed solely for the extraction of rents, rampant in corruption and mismanagement. This rent seeking approach has had devastating effects on the country's economy and citizens' quality o f life. Similarly, the impact on the business climate was severe: the myriad o f taxation and controls enacted with the view to maximize rents and supported by a highly corrupt judiciary has resulted in a dramatic flight of capital and one o f the lowest direct investment rates in any African economy. The financial sector has virtually collapsed. 4. Agriculture. Agriculture i s the country's most important sector in terms o f employment and share of national economic output with agriculture's share o f gross domestic product rising from 30 percent to nearly 60 percent at the end o f the decade 1990-1999while agricultural output has fallen by a third. 5. Infrastructure. Lack o f maintenance and damage from the conflict has led to the steady deterioration o f roads, bridges and other transport infrastructure. Markets are no longer connected and farmers can neither purchase agricultural inputs nor readily sell their products. Currently, over 40 percent o f 93 established water supply stations do not function and fewer than 50 percent o f urban dwellers have access to piped water and in some cities fewer than 10 percent of residents. Although DRC's total hydroelectric potential i s enormous, only about 6 percent o f the country's population has access to electric power, one o f the lowest rates o f coverage in the world. Telecom infrastructure throughout DRC i s in disarray, obsolete, old and badly maintained with less than half the service level o f other comparable African countries. 6. Private sector. The private sector private sector has been crowded out by the public enterprises taking over large swaths o f the economy. Public enterprises have developed outside 11 their core business in unrelated activities in addition to developing a large network of services including basic health centers but also large hospitals, schools, farming concerns, etc... These public enterprises are virtually all bankrupt with plethoric staff, inefficient and loss generating processes, which imposes a significant level of fiscal pressure on the state. ~hepo~~icnztransz~ionoffers n wzniztZow of opport~~nz;fy.. . 7. Following 20 years o f decline from a position of prestige among African nations, DRC, after years o f war and rebellion has signed peace treaties with its neighbors and rebels and has just appointed a transitional government for a two-year period, sharing power between all factions involved in the conflict. Democratic elections are scheduled at the end o f the transition period. 8. Over the past two years, governments have started implementing a far-reaching program aimed at liberalizing and stabilizing the economy and restoring the basis for economic growth. Actions included removing restrictions on foreign exchange. floating currency; managing expenditures on a cash basis, capping the wage bill and controlling non-salary expenditures, and broad money growth. Inflation has been brought under control and the customs and excise administration and tax and custom codes reformed or on rationalized. 9. In parallel to this effort, the Government implemented a number of structural reforms summarized below: Economicand structuralreformsimplementedby the Government Trade and prices Abolishment of controls on diamond trade; Liberalizationof all prices with the exception of utility and transport tariffs Financial sector Adoption of a new financial framework including: (a) a revised Charter of the Central Bank, and (b) new banking act, and Cooperative Banking law; Establishment of a steering committee (COREBAC) to implement the bank restructuring program Businessenvironment Adoption of new forestry and investment codes (the latter reflecting international best practices and aimed at facilitating the involvement of foreign companies); Adoption of a new mining code, labor code and revised telecommunication laws including the creation of a telecom regulatory agency; Creation of commercial courts, arbitration mechanism; Internal debt restructuring; Creation of ANAPI to promote investments and help reduce administrative barriers. Public enterprisereform Audit of the major public enterprises and replacement of their managers by interimadministrators; Adoption of a short-term reform action plan and creation by decree of a steering committee (COPIREP) to implement the reform and 'develop public/private partnerships. Coordination of the reform Creation of a steering committee, ECOFIN, including the most senior cabinet membersto coordinateeconomic and structural reforms. ... 111 ... whichneedstu be cumpZementedbvPidkcEiztey/i.se/-efuarm. 10. Despite the strong progress achieved so far, the road to recovery i s still long given how low was the starting point o f the recovery in 2002. There i s a need for continued focus on improving the general business environment. Lowering administrative barriers and improving efficiency of supply chains will help local and intemational private sector to invest or engage in import/export activities. It will also encourage local firms to start engaging in normal trading activities again. 11. Even if everything spelled out above i s done, this will not suffice to secure sustainable private sector led growth: DRC needs to promote very actively a model in which the private sector generates productive activities, and the state plays its role of regulator while making sure that basic utility services are rendered to the widest possible share o f the population. Therefore, far reaching public enterprise reforms are needed. Given the current state of the economy, the poverty levels and the challenges ahead, this i s a unique window of opportunity. Pubkcenterprikesdomhatethe Conguleseeconomy 12. The Government portfolio includes over 100 Public Enterprises mostly fully owned in most sectors of the economy. Most PEShave seen a drop in their production far in excess of 50% and for some of the largest ones, the decline has reached 80% and more. A number o f PEShave simply stopped activities in the mining, banlung and agriculture sectors. That i s also the case in industry. Publicenterprises by sector Agriculture 8 7 15 Mining 5 4 1 10 Energy 3 7 10 Industry 2 12 1 15 Transport 9 3 12 Communication 4 4 Financial services 8 2 2 12 Note:Joint Venture Companiesare groupedaccordingto LineMinistry as per interim government structure. 13. Overall employment, approximately 100,000 staff, or one tenth o f the total employment of the formal sector including the civil service, has not substantially declined despite some limited iv adjustments, contrary to the private sector. However hyperinflation has had the same effect in terms of salary costs and, as a result, average wages have dropped and stand at US$10 to US$50. 14. Audits' present a bleak picture of the financial health of PES.The 13 largest public enterprises that focus on commercial mandates, with net fixed assets estimated at U S $1.5 bn and representing 10% of PE employment, show losses of US$433 million on sales of US$268 million. Overall, quality o f management i s poor. Outputs and service levels have declined sharply and productivity in some cases i s 20 times lower that in similar industries in Africa. Weaknesses identified in PE management are institutional, abnormal business practices and weak personnel and fiscal management. Table 4. Selected activity indicators by sector - Traffic unit (millions) 15. While PE performance i s at one o f the lowest levels worldwide (see Chapter on Key Sectoral Reviews, and table 4), cash i s extracted from PESby the State as special contributions to the Budget or by payment of advances on dividends, a mechanism put into place in March 1998. The total PESare expected to contribute, some US$6.0 million4, Le. 6.6% o f the DRC revenue o f US$905 million through advances on dividends. 'An accurateassessment of PESfinancial performancescannot be done reliably for a number of reasons. First, numerous companies do not producefinancial statements or produce them so late, often many years after the cut-ofdate, that they are not relevant any more.. Second, the combination of hyperinflation and large variation in the currency exchange rates that have been accountedfor in very differentways and lack of assets reevaluationhave made the financial statements producedoften meaningless. Third, DRC does not have a standardcode of accounts. Output reacheda low of some 4 000 GWh during the war but has recoveredquickly with substitutionof domestic demand with exportsof energy. 'See previous note Amount to be compared to less than USS300nxllion 01 sales from Public enterprises V Salaries in Public enterprises The nominal annual salary of a general manager does not exceed US$70 compared to US$ 1,500 at the end of the 1980s. In spite of this large reduction in wages, in a number of cases, salaries and pensions have simply not been paid and large arrears have been accumulated, up to 44 months for LAC, up to 13 months for OCPT, up to 30 months for Gecamines to give a few examples. In addition, salaries are typically structured with minimal base taxable salary plus a strong mix o f non taxable fringe benefits to escape fiscal pressure. This situation has had a number o f adverse effects: a. First, since salaries are below the poverty line, staff at all levels, tend to find ways within the companies to increase their wages, This creates petty corruption which increases substantially delays and cost of doing business. b. Second, given the strength of the unions and the lack of financial means available for separation purposes, arrears are building-up and contributions to the pension system are not paid; Third, due to the dire situationof Institut Natonalde SCcuritC Sociale, staff coveredby the pension system does not exceed 70,000 or 0. 1 percent of the total populationand retirement benefits are so low, less than US$5 a month, that people over 60 years old that should have retired,remain on the pay roll of the companies, leadingto increasedcosts. I Enablzngan envirunmentfor asuccexsfuZPE reform.. . 16. Legal framework. The basic framework for public enterprises consists o f the following laws and regulations : (a) law 78-002portant dispositions ge'ne'rales applicables aux entreprises publiques, (b) ordonnance 86-202 portant statut des de'le'gue's ge'ne'raux des Entreprises Publiques and ordonnance 89-033 portant cre'ation du Conseil Supe'rieur du Portefeuille. This laws do not allow divestiture or simple management o f the Government's share in PES.They do not establish the basic commercial principles to address sustainability o f these enterprises. 17. Governance of the PE reform process. Several authorities are involved in PE supervision and restructuring: (i)the Head o f State nominating board and senior management, (ii) the Vice President in charge o f the economic and financial commission, (iii)the Ministry responsible for state portfolio (Ministre du Portefeuille), sector worlung groups defining the reform strategies in the mining, power, transport and finance sectors, (iv) the Conseil SupCrieur au Portefeuille and (v) the ComitC de Pilotage de la RCforme des Entreprises Publiques (COPIREP) all play a role' in the supervision and more recently in the reform o f the PES. The multiplicity o f players and overlapping roles dissipates authority over Public Enterprises. As a result, political pressures to keep the right to name senior management are regularly felt. It i s to be noted that the Minister o f Finance has no supervision means and the auditors appointed were in most case civil servants with limited auditing experience if any. Finally, overall quality of management i s quite poor as reflected by the recent legal audit of 57 PESconducted by the General Accounting Office (Cowdes Comptes). 18. To survive, PEShave accumulated large debt arrears towards the Government, foreign and local creditors and other PES. On 31 march 2003, arrears by public enterprises on on-lent loans and guaranties standout at US$861 million. Such arrears need to be managed through common measures taken both at the PE level and at the Government level. 'While CSP plays more of an advisory role, COPIREPi s in charge of the reform process, under a de facto supervision of the ECOFINand the Presidency. v i 19. Social services provided by PES.While the labor code calls for the provision of some basic health and education services, PES,to compensate for state deficiencies in that area, have developed a large network o f services including basic health centers but also large hospitals and schools. In the Katanga region, almost all facilities including large hospitals were built and managed by Gecamines. Petrocongo (Cohydro), Onatra and SNCC have also built a large network o f services. However, lack o f resources has also led to the deterioration o f services. hence contributing to the large decline o f social indicators in the country. While PESneed to be restructured to focus on their main mandates. the social responsibility o f these enterprises also needs to be re-thought. Any divestiture strategy will have to address the need to provide sustainable solutions for the provision of these services. 20. Sector strategies as defined by the Government. Building on the diagnosis elaborated by the Government, priority sectors for PE reform are all sectors associated with better connectivity and better access to major utilities. Power, water, telecommunications, and transport are essential. New local and foreign investments will be attracted to DRC only if investors are convinced o f achieving success in a difficult business environment. Partnerships with the local and international private sector are needed to satisfy much needed investments needs. These main sectors do not preclude the formulation o f faster strategies in certain sectors when feasible. 21. Overall, a massive restructuring program i s required to adapt bankrupt, plethoric, inefficient and loss generating public enterprises to new economic realities. Over a hundred enterprises need to be unbundled into essential public service enterprises or restructured around their core economic mandates, including through public-private partnerships. ...takzhgznfoaccountlessonslearned 22. Recent experience in Eastern Europe and mitigated success registered on outright privatization strategies in Africa show that such a process must be engaged with an objective that exceeds the simple goal o f changing the ownership of the PES. Indeed, reform should mostly be geared to improving service delivery: how can the public enterprises effectively comply with their commercial mandates and thus provide the necessary access to water, electricity, telecom, transportation, etc... to the population ? H o w can the economy grow based on a minimum infrastructure platform? In formulating the response to this question, the elaboration of a sectoral strategy consistent with the PEreform strategy i s key to its success. 23. Conversely, implementation o f a straight forward privatization program in all sectors at the same time and immediately, would generate highrisks since: Market response would be limited, if any, given the poor investment climate and perceived political risks ; Such a programmight lead to additional corruption; Failure to address social needs might lead to additional hardship and opposition, hence delaying the overall reform process; The political leaders would take high risks in trying to implement an outright privatization programin the coming two years and would not necessarily want to risk popular support in engaging in this duringthe transition period. 24. The Congolese context, with its history o f mismanagement o f the public enterprises, lack of adaptation of the regulatory framework but also widespread popular reticence to a diininishing vii role of the state (in spite o f a certain lack of trust in it) make these questions all the more valid. PE reform must be envisaged through a different angle: that of a better governance and better performance of the companies -regardless of the share ownership of the respective companies. 25. The social dimension o f the reform i s of critical importance and the following issues need to be addressed: (a) overstaffing: (b) wages salaries that are below the poverty line, (c) large number o f retirees that remain on the PE's pay-roll given the poor pension system, and (d) large network o f health and education facilities, that, although in a dire situation, need to be kept operating. Economic reinsertion pilot projects for livelihoods innovations and improvements within the retrenched mining workers will allow the establishment o f strategies that can be replicated and/or modified for other sectors. 26. Nevertheless, quick wins in the current Congolese context can be achieved. For instance airports and telecom, which traditionally attract private sector interest could be identified as entry ports. It i s also expected that in the mining sector, shoot to medium term quick wins will be found with Gecamines, as several marquee investors have already manifested strong interest (notably with Tenke and Kolwezi). Thusad&&-eiztpar/i andpaceshouldbeadopted.. 27. PE reform sequencing. A short term focus to improve the business climate in which both PESand private sector are operating i s necessary. Focusing on the following issues i s paramount to success: 0 Business framework consistently applied in order to repeal the ad hoc anti-business rules; 0 Addressing litigations from improving the judiciary to setting up arbitration courts; 0 Corporate taxation and collection to be rationalized and streamlined; 0 Increasing transparency rules in applying consistent accounting codes and audit requirements; 0 Political risks mitigation instruments through use o f MIGA and ATI. 28. PE reform geared towards achieving better corporate governance. Better governance will need to be addressed through (i)involvement o f local private sector supply chain stakeholders via direct shareholding in PESmade possible through debt equity swaps and/or (ii) the creation o f investment fund(s) managed by managers o f international caliber. Governance chains' provide benchmarks, that provides both information and accountability improvements. ...h theconte,rt of astrategy alreadyh zhzplementalion. 29. COPIREP i s coordinating Sectoral Groups, which role i s to elaborate PE reform strategies within the context o f new sectoral policies. These Groups are composed o f representatives o f the line ministries, o f decision makers o f the enterprises concerned, of trade unions and o f independent third parties. Their actions will lead to restructuring or divestiture strategies to be adopted by ECOFLNand then implemented by COPIREP. 'Privatizationand Corporate Governance - Principles, Evidence and Future Challenges - Alexander Dyck ... V l l l 30. The participatory process adopted by COPIREP will address all the risks listed above, while ensuring the relevance o f the reform strategy within each sector. Three months into implementation, all baseline information (mostly from audits) i s available, and several Sectoral Groups have been created. Work with certain key companies such as the main utilities has started, while COPIREP implements the Competitiveness and Private Sector Development Project, thus keeping control of the sequencing and pace of the process. I. ECONOMICANDPOLITICALBACKGROUND Economicbackground 1. The Democratic Republic o f Congo i s one o f the largest countries in Africa with a total area o f square km 2.3 million and a population o f 57 million inhabitants. Average population growth i s 3% and 60% of the population live in rural areas. It i s a country richly endowed with natural resources. 2. DRC i s one o f the three or four most prospective places in Africa for mineral development. The copper-cobalt deposits o f the Katanga copper belt are among the richest in the world. Known copper ore grades run two to eight times the grade of typical copper ore mined in North and South America, and the country has also. a promising geology for gold. The large agricultural potential i s still untapped and DRC concentrates also 13% of the world hydroelectric potential with total resources exceeding 100,000 megawatts. 3. Duringthe 32-year Mobutu Sese Seko regime, the state gradually went from a provider of services to a vehicle that existed solely for the extraction o f rents, rampant in corruption and mismanagement. The years of economic mismanagement and the recent conflict have had devastating effects on the country's economy and citizens' quality of life. While accurate data are lacking, it i s estimated that 200,000 people may have lost their lives in the recent conflict and, at least another 1.5 million may have died from the indirect effects of war, such as disease and malnutrition. 4. Virtually all the DRC's indicators o f economic and social development place the country as among the most deprived in the world. Gross domestic product has fallen from about US$lO billion in 1990 to approximately US$4.1 billion in 2002. Per capita income has declined steadily from about US$380 in 1985 to US$250 in 1990 and to US$87 in 2001. DRC is now one of the poorest countries in the world. The number of undernourished people in the country has more than doubled from 15 million to 32 million. Life expectancy stands at 45 years. One of every six children born never reaches his or her first birthday. In 1995 about 59 percent of eligible children were enrolled in primary school (62 percent o f eligible boys and 55 percent of eligible girls). This i s a sharp decline compared with 1978-79, when 72 percent o f eligible children were enrolled in primary school. 5. Macroeconomic indicators have steadily deteriorated in the DRC since the early 1990s. Government revenues have amounted to no more than about 5 percent o f GDP during the past five years, one of the lowest levels inAfrica. In2000 its fiscal deficit amounted to 10percent of GDP, including external arrears. Because o f the high fiscal deficit, the DRC experienced high inflation during the 1990s, as the government resorted to printing money to meet its expenses. Export earnings declined by about 70 percent during the 1990s. The current account deficit increased from about 7 percent o f GDP in 1996 to nearly 18 percent of GDP in 2000. The deficit has been financed mainly by the accumulation of arrears on external debt. External debt rose to 280 percent o f GDP (amounting to almost US$13 billion) at the end o f 2000, with arrears o f more than US$9 billion accounting for about 75 percent o f the total. The total external debt today, after the Club de Paris, i s about US$9.6 billion. 2 6. Internal debt i s estimated at US$ 3 billion made up o f debt at June 30 1997 for US$ 956 million (Table 1) and debt incurred since 1997 estimated to be in the order of some US$ 2 billion'. Table 1.- Internaldebt at June 30 1997 Short, medium and long-term loans, treasury 1 bonds and advances to the State 48.0 Social charges (salaries, medical and pharmaceuticals, travel expenses Public and civil works 360.3 281.7 Rent and other services 139.2 TOTAL 956.4 7. On-lent external debt to Public enterprises stands at US$ 860 million as at March 31 2003. (See Table 5.) 8. Agriculture. Although mining has generated most of the DRC's export earnings and government revenues, agriculture i s the country's most important sector in terms of employment and share of national economic output. Nearly two-thirds o f the Congolese rely on agriculture, animal herding and fishing for income and food, most usingtraditional methods to produce food that they consume themselves. Reflecting the general economic collapse, agriculture's share o f GDP has risen from 30 percent in 1990 to nearly 60 percent in 1999. While agriculture's share in national output has grown during the past decade, agricultural output has fallen sharply, from US$ 3.4 billion in 1990 to US$ 2.1billion in 2000. 9. Infrastructure. Lack o f maintenance and damage from the conflict has disrupted the supply chain and led to the steady deterioration o f roads, bridges and other transport infrastructure. Markets are no longer connected and farmers can neither purchase agricultural inputs nor readily sell their products. As a result agriculturists are increasingly cuItivating subsistence crops, and food in cities i s scare and expensive. It was estimated that the poor state of the 350-kilometer main road between the port of Matadi and Kinshasa city, before the recent rehabilitation of the road, added an average o f 40 percent to the price of goods in Kinshasa markets. 10. For lack o f funds the national water supply authority, RCgie de Distribution d'Eau (REGIDESO), has not been able to rehabilitate, repair or provide minimal maintenance o f its water works. Currently, over 40 percent o f 93 established water supply stations do not function. This situation has led to the sharp deterioration in the quality of services in the major urban centers, exposing residents to considerable risks of disease. Today fewer than 50 percent of urban dwellers have access to piped water, and in some cities fewer than 10 percent o f residents do. 'Currently being evaluated by independent consultants. 3 11. Although DRC concentrates some 13 percent of the world's total hydroelectric potential, only about 6 percent of the country's population has access to electric power (31 percent in Kinshasa), one of the lowest rates of coverage in the world. The electricity system has all but collapsed because the state power utility, SociktC Nationale d'ElectricitC (SNEL), has been unable to maintain electricity infrastructure, nor to replace worn and outdated equipment, in part due to tariffs kept at an artificially low level by DRC 12. Fixed telecom infrastructure o f the incumbent operator (OCPT) i s in disarray, obsolete, old and badly maintained with less than half the service level of other comparable African countries. Alternatively the cellular service and private-public participations in the sector without proper licensing nor proper regulatory framework has now led DRC to initiate an accelerated and structured reform program in telecom while neglecting Postal services. Telecom i s farthest ahead o f all reforms underway with a revised law and the creation o f the Regulatory authority for which investment i s presently financed entirely by DRC.. 13. The rent seeking approach o f Government and other public agencies has had a very adverse impact on the business climate. Multiple regulations regarding taxation and controls have been enacted with the view to maximize rents and were supported by a highly corrupt judiciary. These rules combined with an out-dated basic framework adopted prior to the independence of the country, have created a dire business climate that needed a complete overhaul. Political and economic transition 14. On the political front, on January 26, 2001, following the assassination of Laurent DCsirC Kabila, Joseph Kabila was sworn in as President on January 26, 2001. President Joseph Kabila's initial address to the country ufirmed his commitment to restore peace, improve living conditions inthe country and to liberalize the economy. 15. Actions to restore the peace process were launched quickly by authorizing the deployment o f United Nations operations and pulling back government troops from the frontlines. The inter-Congolese dialogue to discuss elections, a new constitution and reconciliation started in February 2002 and was successfully concluded in December 2002 this leading to a new transitional (2 years) government formed in July 2003. 16. The agreement reached between the government and the rebel faction. Key provisions o f the agreement include: (a) establishment o f governance bodies including an assembly, a senate and a senior army council, and (b) ministerial appointments representing all political groups. Joseph Kabila will remain President until elections. H e i s assisted by four Vice Presidents. 17. On the economicfront, since he came to power in 2001, President Kabila has appointed respected technocrats to key positions in the ministry o f finances, the central bank and other agencies and the government embarked on a far-reaching program aimed at stabilizing the economy and restoringthe basis for economic growth. 18. On the macro economic front, the first target was to break hyperinflation through tight monetary and budgetary policies. The Government removed restrictions on foreign exchange and floated the currency, the Congolese franc, on May 26, 2001. Expenditures were restrained by managing expenditures on a cash basis throughout the 2001 budget year, by capping the wage bill and controlling non-salary expenditures, and by reinstating expenditure controls in the 4 provinces. Broad money growth i s being controlled, and a new banking law as well as legislation reaffirming the independence o f the Central Bank has been approved by Parliament. As a result, inflation has fallen from an annualized rate exceeding 680 percent duringthe first five months o f 2001 preceding the adoption o f the IMF interim program to 8. 8 percent during the remainder of the year. Inflation in 2002 remained below 10%. 19. To increase fiscal revenues and reduce incentives to corruption, the Government has focused its efforts on a reform o f the customs and excise administration and on rationalizing the tax and customs codes and procedures. Among the measures adopted was the reduction o f the number o f taxes. There are over 1000 parafiscal taxes. In parallel to this effort, the Government implemented a number of structural reforms summarized below: Table 2. Economicand structural reforms implementedby the Government by mid-2003 - Trade and prices I Abolishment of controls on diamond trade; I Liberalization of all prices with the exception of utility and transport tariffs Financial sector 1 Adoption of a new financial framework including: (a) a revised Charter of the Central Bank, and (b) new banking act, and Cooperative Banking law; 1 Establishment of a steering committee (COREBAC) to implement the bank restructuring program Business environment 1 Adoption of new forestry and investment codes (the latter reflecting international best practices and aimed at facilitating the involvement of foreign companies); 1 Drafting of a new mining code, labor code and revised telecommunication laws including the creation o f a regulatory agency; 1 Creation of commercial courts, Arbitration mechanism; 1 Internal debt restructuring; m Creation of ANAPI to promote investments and reduce administrative barriers. Public enterprise reform 1 Audit of the major public enterprises and replacement of their managers by interim administrators; 1 Adoption of a short-term reform action plan and creation by decree of a steering committee (COPIREP) to implement the reform and develop publidprivate partnerships. Coordination of the reform 1 Creation of a steering committee, ECOFIN, including the most senior cabinet members to coordinate economic and structural reforms. A window of opportunity ina fragile context 20. Reforms and actions implemented by the Government, both on the economic and political front, in a short period of time, are quite impressive and reflect the commitment to improve living standards and restore economic growth. However, despite the strong progress achieved so far, the road to recovery i s still long as indicated by the slow responsiveness of the economy and the limited growth o f 4%. More reforms are needed to grow productive investment and generate employment. 5 21. In addition to the necessary rehabilitation of infrastructure and focus on vital service delivery, there is a need to continue focus on improving the general business environment. Changing the rules of the game. and lowering the entry cost lower will help local and international private sector to invest. It will also encourage local firms to start engaging in normal trading activities once again. The focus needs to be on the number o f administrative barriers to either invest, or engage in import/export activities. The focus also needs to be on the access to financial tools to invest or trade. 22. Nevertheless, improving the investment climate only will not suffice for private sector investments to grow: a Public Enterprise reform will be needed. The width o f the mandate of the PE has resulted in a slow crowding out of the private sector from all sectors of the economy. DRCneeds to revert to a model of private sector led growth, whereby the private sector embarks on productive activities, and the state plays its role of regulator. 23. Changing the rules o f the game will require the state and the private sector participants to embark in a philosophical revolution about their respective roles and their ways of doing business. This will take time. The Government will take political risks in embarking on this program, which ought to be balanced by the fact that poverty levels will only reduce if private sector led growth i s encouraged: this i s a unique window of opportunity. 6 11. PUBLIC ENTERPRISES INDRC Overview 24. Under the colonial regime, the public enterprise sector in DRC was mostly concentrated in the utility sector. The electricity companies, established on a regional basis, were privately owned as was the mining sector or the transport activities. Following independence, the Government started gradually to finance large infrastructure programs, such as, inter alia, the Inga dam. Later on, at the beginning o f the seventies, the state decided to proceed with the "zairization o f the economy" with the view to increase the role of nationals in the economy so as to wrest the economy from colonial hands. The combination o f the two factors led to the nationalization of privately owned companies such as Ge`ne`rale de Mines et de Carridres (GECAMZNES), the largest mining company, or the regional electricity companies that were merged to establish Socie`te`Nationale d'Electricite` (SNEL) and, the creation o f various other state owned companies that since, have continuously expanded their activities, most o f the time outside their mandate. 25. B y mid 2003, the Government portfolio included 58 fully owned SOEs (Annex I) and equity stakes in 63 others (Annex II), 59 o f which under Congolese law. Of the joint ventures, DRC held majority ownership in 5, 50% in 4, between 30% and 50% in 11 ("minorit6 de blocage") and of the remaining 43 joint ventures with less than 30% ownership, less than 10% in 9 (Annex 11). Table 3. below describes the distribution of the companies by sector. Table 3. Public enterprisesby sector - Medical 1 1 Research 3 3 Training 1 1 Services 6 5 11 RealEstate 1 1 TOTAL 58 51 5 I 114 interim government structure. 26. In a number of sectors, all companies are either 100% state-owned or joint ventures with a significant Government equity. The sectors in that situation include: (a) mining. (b) energy 7 (electricity. petroleum production and distribution), (c) water, and, (d) all major transport infrastructures (river and seaports, railways. shipyards, airports). In the financial sector although there are some fully private banks, they are only a minority. The above sectors are also some of the most critical for the economy and reflect the large role of PES:(a) historically, mining accounted for 25% of the country's gross domestic product, 25% o f total budgetary revenues and about three-quarters o f total export revenues, (b) transport companies, with a total staff of 35,000, are still some of the largest employment providers o f the country, while, (c) financial intermediation i s at the heart o f economic growth. Despite the overall employment decline over the recent years, with an estimated total staff of roughly 100,000. PESaccount for more than 10% of the overall employment in the formal sector. In other words, DRC economy i s in the hands of PES.PEShave over time expanded their activities outside the scope of their statutes to include other commercial activities in addition to health and education. The crowding out o f the private sector by the PEScombined with new roles in health and education normally reserved for the state has impacted the economy with a decline in GDP of more than 50 percent*. Legal framework 27. The basic framework for public enterprises i s constituted o f the following laws and regulations : (a) law 78-002 portant dispositions ge'ne'mles applicables nux entreprises publiques, (b) ordonnance 86-202 portant statiit des de'le'gue's ge'ne'rau des Entreprises Publiques and ordonnance 89-033portant cre'ation du Conseil Supe'rieurdu Portefeuille. 28. Thatframework includes the following dispositions: a. Public enterprises can be either industrial and commercial (EPIC), or o f an administrative nature (EPA) and have legal and financial autonomy; b. PESare administered by a board of directors of at most 11members; day to day decisions are made by a management committee comprising the general manager, two directors and a staff representative. Financial statements are to be reviewed by external auditors every year. The board members, general manager and auditors are appointed by the Head o f State. c. Each company i s subject to the supervision o f a line minister and all board and other significant management decisions are subject to Government approval; d. Several authorities are involved in PE management and restructuring: in addition to the Head o f State appointing board and senior management, Sector working groups and defining the reform strategies in the mining, power, transport and finance sectors, the Vice President in charge o f economic and financial commission, the Ministry responsible for state portfolio (Secrktaire du Portefeuille), Copirep. Pressures to attribute to the four Vice Presidents the right to name senior management were recently felt. e. Staff status i s governed by: (a) the labor code, (b) the sectoral agreements (conventions collectives), and, (c) by-laws of each PE. Generally, the specific agreements signed in each enterprise exceed the requirements of the labor code especially with respect to health and education services. f. The fiscal regime applicable i s also defined by the PE's charter; EPAs are .generally tax exempted while the taxation status o f EPIC vary widely. This inferrence is an assumption and not a directly measured correlation. 8 29. The Ministry responsible for the State Portfolio, with its special body. Conseil Superieur du Portefeuille (CSP) was established in 1989 to support the line Ministries in: g. Supervising PES; h. Preparing performance contract and assessing results; i. Undertakingallstudiestoimprovetheoverallperformanceofthestateportfolio; j. Taking stakes in new companies and divesting; 30. In addition, with respect to all issues not covered by the above framework or their charters, PESare in theory, subject to the company law, investments code, labor and fiscal code and other business regulations. However, there are no dispositions regarding bankruptcy and liquidation and while divestiture is included in the ordinance creating CSP, there are no guidelines on how it should be implemented. 31. Finally, joint ventures are subject to the general business regulations. However, the law imposes the designation o f the chairman o f the board by the Government in all joint ventures where state's equity exceeds 25%. Some 30 joint ventures are subject to that disposition. 32. Overall, this framework reflects the context o f the "zairization" of the economy during which it was adopted and the underlying principles o f a centralized and state dominated economy. Prior approval disposition included in law 78-002 are especially cumbersome but, since PE managers were political appointees, they don't appear to have been implemented or have been used to share the wealth. The Minister o f Finance has no supervision means and the auditors appointed were in most case civil servants with limited auditing experience if any. 33. CSP has only an advisory role and does not centralize PE's financial information. A very limited number o f performance contracts were signed in the early eighties but have been abandoned a long time ago and no Government agency has been able so far to impose financial transparency and discipline on PES.The multiplicity o f players including a new Executive Secretary o f the Portefeuille, CSP, and overlapping roles dissipates authority over Public Enterprises9. PESperformance 34. An accurate assessment of PESfinancial performances cannot be reliably conducted for a number o f reasons. First, numerous companies do not produce financial statements or produce them so late, often many years after the cut-of date, that they are not relevant any more. Second, the combination of hyperinflation and large variation in the currency exchange rates that have been accounted for in very different ways and lack of assets reevaluation have made the financial statements produced often meaningless. Third, DRC does not have a standard code of accounts. Finally, the lack o f qualification of the auditors appointed by the state to review the financial statements and their general lack o f opinions on the financial statements has not contributed to the reliability o f the latter. However available figures on output, employment, productivity, equipment and debt converge to draw a dismal picture o f PESperformance. 35. PESperformance mirrors the overall economic situation with a very large decline in outputs: ' I t is hoped that COPIREP will help solve this confusion, 9 Table 4. - Selected activity indicators by sector I Railways (SNCC) 1Traffic unit (millions) I 2000 I 350 1 82% I Telecommunications I Number of main lines 1 37,848 I 3000 91% (ONCPT) (1989) 1 (2000) I Port (ONATRA) ICargo handled in Matadi (millions II 1 6 0. 9 44% Tons) (1989) (2000) Mining (Gecamines) Copper (tons) 475,000 7,000 96% Cobalt (tons) 14,000 4,000 72% (I986) (2002) Electricity (SNEL) Net Energy generated (GWh) 5960 5780'' Some (1989) (2001) 33%" Water (Regideso) Cubic meter produced (millions) 213 188 14 8 (1997) 12000) 36. Over a ten year period, most PEShave seen a more than 50% drop in their production and for some o f the largest ones, the decline has reached 80% and more. A number o f them have simply stopped activities in the mining, banking and agriculture sectors. That i s also the case in the industry where production o f Sosider and Afridex i s non-existent. 37. Overall employment, 100,000 staff roughly, or one tenth of the total employment of the formal sector including the civil service, has not substantially declined despite some limited adjustments. In parallel employment in the the private sector has sharply contracted. As hyperinflation developped, average annual wages have dropped and stand in the US$ 10 to US$ 50 range. The nominal annual salary o f a general manager does not exced now US$70 compared to US$ 1,500 by the end of the eighties. In spite o f this large reduction in wages, in a number of cases, salaries and pensions have simply not been paid and large arrears have been accumulated, up to 44 months for LAC, up to 13 months for OCPT, up to 10 months for Gecamines to give only a few example. In addition, salaries are typically structured with minimal base taxable salary plus a strong mix of e untaxable fringe benefits to escape fiscal pressure. That situation has had a number of adverse effects: k. First, since salaries are below the poverty line, staff at all levels, tend to find ways within the companies to increase their wages. This creates petty corruption which increases substantially delays and cost of doing business. 1. Second, given the strength o f the unions and the lack of financial means available for separation purposes, arrears are building-up and contribution to the pension system are not paid; m. Third, due to the dire situation of Institut Natonal de SCcuritC Sociale, staff covered by the pension system does not exceed 70,000 or 0. 1percent o f the total population and retirement benefits are so low, less than US$ 5 a month, that people over 60 years old that should have retired, remain on the pay roll o f the companies, leading to increased costs. loOutput reached a low of some 4 000 GWh during the war but has recovered quickly with substitution of domestic demand with exports of energy. I1See previous note 10 38. Lack o f resources to renew and maintain investments has translated in a low level of equipment availability (see Table 4). That factor, combined with the nominal level of employment and the decline in output, has had a negative impact on productivity which, in the railways or telecommunication sector, i s twenty times lower than in similar industries in Africa. Quality o f services has dropped sharply and in turn has led to a drop in demand. In the railways sector, despite the bad shape o f the Matadi-Kinshasa road, the main acess for imports to the caiptal city, market share o f the cargo traffic is now 24% and still declining. 39. Tariffs, until very recently, because of the lack o f a formal regulatory environment were approved by the line ministries and adjustment mechanisms have varied widely. In the electricity and water sectors, they have remained unchanged and far below costs, thus adding to the financial difficulties o f the companies. In other sectors, tariffs established in foreign currencies are not affordable for the population and, in absolute terms are quite high and sometimes irrelevant. Average cost o f transit o f a twenty foot container in Matadi i s one of the highest in Africa. 40. T o compensate for lack o f revenues, companies have also expanded their activities in various areas without clear justification. Onatra (Ofice National des Transports) : while its initial mandate was limited to transport activities , the company is now involved in: (a) agriculture, (b) forestry, (c) printing, (d) production o f oxygen and acetylene and, (e) housing management. While overall figures are not available, a significant number o f PESappeared to have followed the same way, thus leading to additional difficulties to assess cost and revenues of the main services. 41. Overall quality of management i s quite poor as reflected by the recent legal audit o f 57 PESconducted by the General Accounting Office (Cow des Comptes). That audit reviewed only the legality o f management decisions with respect to salaries, procurement and internal procedures, and led to the dismissal of all general managers and board members and their replacement by transitional management committees in2002. 42. T o survive, PEShave accumulated large debt arrears towards the Government, foreign and local creditors and other PES. On 31 march 2003, arrears by public enterprises on on-lent loans and guaranties standout at US$861 million, as follows: Table 5. -TotalExternal On-lentDebtto PESon 31March 2003 (US$ millions) 11 B y July 2003, the F6dCration des Entreprise du Congo (FEC), consulting with its members, had identified a total State and Public enterprise debt of US$586 million with 84 o f its active members. The total amount of debt to FEC members could eventually exceed US$1 billion, the largest identified at present being: Table 6. -DRCdebt to private sector firms identifiedby FEC - July 2003. (Firmswith individual debt over US$lO million) I 386.69 Total of 84 firms 5 17.20 43. Finally, a most adverse effect has been the impact on social services provided by PES. While the labor code calls for the provision o f some basic health and education services, PES, under Government recommendation and to compensate for state deficiencies in that area, have developed a large network o f services including basic health centers but also large hospitals and schools. In the Katanga region, almost all facilities including large hospitals were built and managed by GecaminesI2. PetroCongo (Cohydro), Onatra and SNCC have also built a large network of services. However, lack of resources has also led to the deterioration o f services, hence contributing in the large decline o f social indicators in the country. Economic reinsertionin Congo Gecamines will retrench 10,500 workers in the last six months o f 2003 each eligible to receive a World Bank-financed severance package o f about $3,300 in average. A high number o f Gecamines employees indicated a willingness to start businesses or use their packages for existing businesses. All have 20 years or more employment with Gecamines and are mature people. Forty percent or more want to enlarge their agricultural activities, and have asked for helpconsulting, ideas, information, training and equipment to start or grow their businesses. Many have farms within 25 k m s o f urban areas and wish to engage in market-oriented production. The province has critical assets such as economic links o f the mining Copperbelt, a variety o f agricultural growing conditions, road and rail links both within the province, to other parts o f the country and to Zambia and other SADC countries to the South. Thus, it represents a region with a short term potential for livelihoods innovations and improvements within the retrenched mining workers allowing the establishment o f strategies that can be replicated and/or modified for other sectors. Such provision of services and institutional structure was inherited from colonial times. 12 To support the economic diversification in the southeastern Katanga region and the reinsertion of retrenched Gecamines workers, the CPSD will carry out two main activities: i)implement a small grants program; and ii) support economic diversification (agricultural activities) for the reinsertion of former Gecamines workers. The objective of the services i s the stimulation o f economic diversification and development in the southeastern Katanga region, through community-driven development approaches and reintegration of retrenched Gecamines workers in the local economy. The scope of work shall comprise three main activities : a) Distribution o f 50 high profile kit based on demonstrating businesses development utilizing appropriate technology and market opportunities within the regional markets accessible to Katanga farmers and agro-business processors. b) Management o f a matching grant and business support fund financed by the World Bank which would target 300 individual enterprises and 40 collective businesses over the two years in the three urban areas o f the Copperbelt and their surrounding rural periphery. c) Project management and grants management of other reinsertion activities at the request of the GDRC, World Bank and BCECO. 44. Governance: In 2001 the Office of the Presidency of DRC initiated special audits of Financial organization^'^ and Public Enterpri~es'~.In general, management of Financial Organizations and Public enterprises, except for rare exceptions, i s tainted with flagrant irregularities. The vast majority i s mismanaged. Weaknesses identified in PE management are institutional, abnormal business practices, weak personnel and fiscal management. (a) At the institutional level, in many cases, the absence o f a Supervisory body such as a Board of Directors or even non-existent statutes lends itself to intervention by Line Ministries. There are personal conflicts between members of existing Boards of Directors and Management teams, or between the Supervisory Ministry and the public enterprise. There i s an excessive and disproportionate allocation of remuneration and advantages to public appointees. The external auditing function i s generally not functioning. (b) The absence or disregard of usual management safeguards and procedures in the areas of revenue collection and o f incurring of expenses; incomplete accounting, bookkeeping and recording and absence o f supporting justifications; use of the national accounting code not compatible with modem business management needs; absence of budgetary philosophy and management practices; misappropriation o f major funds through unauthorized withdrawals; non-realization of objectives because o f misappropriation o f PES'resources; weak level of revenue collection; opaque management of certain bank accounts, of agencies or overseas representations not taken into account in the books o f the PE; absence of financial statements let alone audited ones; absent, incomplete, l3 RCgiesFinanciitres : Direction GCnCrale des Contributions(DGC); Direction GCnCraledes recettes administrative, judiciaires, domaniales et de Participations(DGRA) ;Office des Douanes et des Assises (OFIDA) l4 EntreprisesPubliques : GECAMINES ;SODIMICO ;OKIMO ;COHYDRO ;REGIDESO ;SNEL ; SOSIDER ;ONC ; SNCC ;CFU ;CMDC ;LAC ;RVA ;RVM ;RVF ;City-Train ;ACP ;RTNC ; SONAS ;FPI ;BCA ;OGEFREM ;OPEC ;OCC ;ONT ;Hotel Karavia ;RENAF'I ;OBMA ; METTELSAT ;FIKIN ;OR ;OVD ;FONAMES ;HGK ;INS ;INERA ;ICCN ;IJZBC ;INPP ; SOMICO ;SONAL ;UBC ;RENATELSAT ; FEPSE ;ONDE ;IMNC ;DCMP- LAPHAKI ;CSCO. 13 irregular inventories o f physical or patrimonial assets; absence of internal accounting and auditing procedures; disregard for procurement procedures carried out without any for o f supervision committee leading to contracts with non-existent enterprises, over billing or other misdeeds; large overdrafts with local Banks. (c) Weak personnel management as witnessed by the absence of employment and retirement policies and the disregard of personnel hiring, management and licensingprocedures; (d) Fiscal fraud and the absence of tax declarations or remit of taxes due the State, as well as o f those collected on the State's behalf. 45. An audit of 13 major PES conducted in 2003 on the previous three fiscal periods presented a bleak picture o f the financial health o f PE sector enterprises. With some 10% o f public sector employment or 10 000 employees in this subset o f the sector, (annual salaries o f U S $ 36 million) and net fixed assets estimated at US $ 1.5 bn, the consolidated picture shows losses of U S $ 433 million on sales o f U S $ 268 million; a negative return of 28 % on net fixed assets, a quick ratio of 0.3 and medium and long term debt representing half the value o f net fixed assets. Needless to say that the PE sector i s effectively bankrupt. Annex I11summarizes these audit findings Contributionof PESto PublicFinances 46. Cash i s extracted from PESby the State as special contributions to the Budget or by payment o f advances on dividends, a mechanism put into place in March 1998. 2215 public enterprises were identified to contribute to Budget financing for FY2003. This did not include Enterprises insufficiently healthy financially with too high levels of losses, those considered extensions o f public service or those situated in rebel areas. For 2003 a total o f US$4.85 million in advances from public enterprises to the state has been budgeted, which is seen as being a little amount. 47. PESare expected to contribute, some US$6.0 million is 6.6% of the DRC revenue of US$905 million through advances on dividends. Other special contributions to the State Budget for 2001 and 2002 were as targeted as follows although actual amounts were probably less: 48. O f all Joint Venture Enterprises, only seven are in a position to pay dividends: FINA- CONGO, SHELL DRC, SOCIR, CILU, MIDEMA, Sucrerie de KWILU-NGONGO, and B.C.D.C.For 2003 contributions fromdividends are projected to be US$1.2 million. I'EMK Mn. SNEL, REGIDESO,ONATRA, SNCC, CMDC, RVA, RVM, OGEFREM, RVF, FPI, INSS, SONAS, SONAL, CADECO, FIKIN,OBWlA, OCC, OCPT. ONT, INPP,RTNC. 14 Table 7. - Special contributions to the State Budget 2001-2003 (US$ million) Over the last two decades, with the crowding out of the private sector by public enterprises that expand outside their core activities, GDP has fallen" while fiscal revenue has dropped and corruption increased and service delivery by public enterprises i s limited. To achieve basic access to public services for DRC population overall quality of governance of the public enterprises will have to be improved significantly. ''The fall of GDP cannot be solely attributed to the role of PE and shrinking of the private sector. 15 111. SELECTED SECTORALREVIEWS Telecommunications 49. In a large country such as DRC where physical communications are difficult due to the poor condition of the land network and other means o f transport, a strong telecommunication system i s critical. However, similarly to other infrastructure, the basic network o f the incumbent operator i s in disarray. Other operators, deploying cable in Kinshasa and elsewhere are in much better shape. 50. 53. The legal framework for post and telecommunications in Congo i s defined by legislation enacted on October 16, 2002: Loi cadre no. 013/2002 sur les te'le'communications,Loi no. 012/2002 sur la poste ;and Loi no 014/2002 portant cre'ation de l'autorite' de re'gulation de la poste et des te'le'communications 51. The fixed network i s operated by the Office Congolais des Postes et Tkle'communications (OCPT) under a largely theoretical exclusivity regime. The technology i s obsolete; equipments are old and poorly maintained. As a result, out of the 10,000 main lines, only 3,000 to 4,000, for the largest part located in Kinshasa, are still operational and the situation i s rapidly deteriorating due to the financial losses occurred by OCPT. Such a low density, 0,03% has to be compared with the Sub-Samarian Africa average of 1.2%. 52. T o add to its poor technical performance, OCPT i s largely overstaffed and financially bankrupt; productivity i s especially low, revenues do not cover staff expenditure while total debt i s four times the amount of the assets. Bill collection is also weak, due in part to Government arrears that amount to US$ 16 millions. There i s no separate accounting for postal and telecommunication activities and telecommunication revenues subsidize postal activities. As a consequence, OCPT i s unable to pay the salaries regularly and wage arrears exceed 13 months. Table 8.-Telecommunications statistics Fixedlines Mobile users Number of lines (operational) 4,000 n. a. 10,000 680 000 Total staff 2,515 1,475 4,496 11 Average number of lines/staff 2 Total postal outlets 288 364 Salary arrears 15 53. Given that OCPT does not have the resources to finance the rehabilitation and expansion of its network, it has signed various joint-venture agreements with different partners to operate transit stations and expand the network. The latest one signed with an Asian ~ p e r a t o r 'calls for ~ the construction of 6 fiber-optic rings around the largest cities in the country. The 40% equity participation o f OCPT in that joint venture i s represented by the value o f the operating license "Thejoint venturecalledCongo-KoreaTelecomhasbroughttogether OCPT (40%) while the remaining 60% are owned by a consortium of Korean investors. 16 provided by the Government in 2002 and the transfer o f some buildings. So far, although OCPT has formal ownership in that joint-venture including a seat on the board, one o f the outstanding issues remaining to resolve i s the payment of the license by OCPT. The Korean partner has nevertheless committed significant investment to the sector. Congo-Korea TeIecom had some 2,500 clients early 2003, 80% of which are Internet subscribers and has started to roll-out ADSL service. 54. National long distance calls have to transit through the earth station network operated by Re'gie Nationale de Te'le'communications par Satellite (RENATELSAT). However, the main equipments have been out of service for 5 years and the traffic has now to transit through private operators' satellite stations. The only source o f income left to RENATELSAT i s the transmission o f television signals; however, since the national television company (RTNC) does not pay for these services, the Government has to provide a subsidy that i s nevertheless insufficient to pay for the satellite link rental and staff cost. RENATELSAT i s defucto bankrupt. Cellular 55. Given the deficiencies o f the public operator, during the early nineties, the Government started to award mobile licenses. Although such awards were not consistent with the law, by end 2000, at least 16 licenses had been granted and nine mobile companies had begun operating, mostly in Kinshasa with an estimated number o f 200,000 mobile users, a density o f 0.4%. It i s estimated that 90% of these mobile users are located in Kinshasa while the remaining 10% cent are equally shared between Lumumbashi and Mbuji Mayi. None of these licenses were awarded through a biddingprocess and technical requirements and standards were not harmonized. There are presently" two main active operators, Celtel DROC (65% share) and Vodacom Congo (30%) while there exists four other minor operators mainly in Kinshasa. The arrival o f Vodacom via the takeover o f a minor operator brought significant growth to the market doubling to over 500,000 mobile users in one year. As o f mid 2003, there are some 680,000 mobile users (almost all pre- pay customers), and 57 cities covered. 56. While the development o f these mobile operators has helped providing a minimumlevel of telecommunications services in the country, overall quality of services is not up-to the standard leInJune 2003. The trend showed morerapid growth of Vodacom. 17 o f other African countries. Although initial geographical coverage was limited, new areas have rapidly been opened following reunification of the country. Technical standards are not uniform and generate in some cases interconnection problems, and, the networks are frequently congested thus leading to low call success rates. Local telecommunications tariffs are still high, on average US$ 0.25 to 0.50 a minute, although they tend to diminish substantially due to the increased level of competition. Private participation in wireless phone booths has been very successful with Vodacom leading the promotion of privately-managed cellular phone booths while cellular phone prepaid card sales have also been popularized. Although difficult to quantify, these initiatives (some 6000 privately managed booths with Vodacom for instance, generating as many full-time to part-timejobs) have had marked influence on employment directly as well as indirectly. 57. Finally, due to the overall situation of the fixed and mobile networks, other services such as Internet are not widely available and their speed and reliability i s limited. However a nascent service industry specialized in intranet works i s making its appearance and a total o f 8 Internet Service Provider are currently operational. Internet subscribers are estimated to be around 6000. An additional constraint to the development of Internet access is the pricing regime for the use of wireless local loop frequencies. This regime puts the price tag for the use o f such frequencies at a prohibitive level, non consistent with today's use of this part of the frequency spectrum. The on- going revision o f the pricing regime should address this issue. 58. The Government, well aware o f the shortcomings in the post and telecommunications sector appointed an inter-ministerial task-force to make an overall assessment o f the sector and design a comprehensive reform action plan submitting it to public consultation before having it approved by the Government. 59. The new telecommunications legal framework adopted introduces the following major changes: n. The status granted to the reference operator (public operator) has been clarified along with that of other authorized (concessions) operators. 0. All networks opened to public require a license; p. Value added services are fully liberalized; q. Other telecommunication services such as independent networks are subject to an authorizationregime and; r. A regulatory agency has been created to expand and enforce the newly adopted framework. 60. Adoption o f this revised framework including the creation of a regulatory agency i s a major step forward and a pre-requisite to develop further the telecommunication sector. A number o f additional steps are being taken to make the reform successful. 61. First, the regulatory agency is becoming operational; Board members were named in August 2003 while core staff have been recruited from January 2003 on and have participated in study tours with a strong focus on training and understanding o f the relevant regulatory issues. The collection of operator fees should assure the financial independence o f the agency. DRC financed the office and equipment installations o f the regulatory agency testifying to its commitment to the sector reform. Given the lack o f knowledge regarding regulatory agencies in the legal environment in Congo and the difficulties to find trained regulators, additional staff training and capacity building will require strong financial support from donors. Another issue to be addressed i s the appeal process following decisions made by the agency in the context o f dispute resolution mechanism. Given the poor state of the judiciary in the country, during a 18 transition phase, putting in place arbitration mechanisms with the support o f specialized foreign agencies could be an appropriate solution. Part o f the capacity building will be financed by the recently approved Competitiveness and Private Sector Development (CPSD) Credit along with Technical Assistance to refine the regulatory framework. 62. Second, the regulatory framework for mobile operators is being enforced in order to improve service quality and expand coverage. The critical actions being implemented include: a. Completion o f an inventory of ail licenses awarded and the cancellation, in accordance with the signed agreements, o f all licenses that have not yet been used; b. Review of all the services and technical standards included in the licenses and their enforcement in order to gradually put all operators on a level playing field (this has been initiated); since requirements differ from one operator to the other, standard service obligations will have to be defined and agreed-upon through a negotiated process; and definition o f interconnection standards regulations will be needed. 63. Third, DRC is now studying the future of fixed networks in Congo. Given the large investments required and the financial constraints that all the major international telecommunications operators are facing and the high country risk, a bidding process aimed at selecting a strategic partner would have limited chances o f success. The rehabilitation o f the network might be implemented through the joint venture agreement signed by OCPT as long as that agreement, which does not call for any exclusivity, i s consistent with international standards with respect to investment costs, tariffs and does not require DRC financing. 64. Finally, as part o f this options study, it will be critical to find a solution to the future o f OCPT whether restructured or liquidated, as this will be critical to the success o f the overall reforms in order to create financially sustainable companies. To that end postal and telecommunications may have to be split into two separate autonomous entities. The adoption o f an appropriate sector policy in the postal sector in order to avoid the creation o f a loss making company will be a condition o f success. The restructuring or liquidation plan would have to be carefully designed with the view o f minimizing the social costs o f such a reform and related financing. Presently, financing o f the Telecom portion o f OCPT reform will be assured through the CPSD project. Transport sector 65. The DRC's economic and population centers are dispersed across a large geographical area that has led to the design o f a multi-modal transport network. The land transportation system comprises a network o f railways, roads, and inland rivers and lakes linked at strategic nodes. It includes: (i) a road network o f km 145,000 including a priority ring o f km 29,000, out of which 10percent only are paved, (ii) a railway network consisting o f about 5,000 kilometers o f tracks, part of which i s linked to the networks of neighboring Southern African countries, (iii)a river network comprising about 15,000 kilometers o f navigable waterways divided into three categories according to depth and the existence of river harbors, (iv) forty river ports, (v) three sea ports with a total capacity o f tons 2,5 millions, and, (vi) hundred airports opened to public traffic, out of which, four are international airports. 66. Given the size o f DRC, the transport sector i s critical for the wealth and the development of the country and it is no surprise that the Government is heavily involved in the sector through state owned enterprises. B y end 2000, 9 PESoperated in the sector; Table 9 below summarizes their activities: 19 Table 9. Government involvement inthe transport sector - Chemins de Fer (SNCC) cargo, urban and inter-urban); .. .. . . River and lake transport; Road transport. . Office National des Railways transport, Railways transport (Matadi-Kinshasa); Transports (ONATRA) River and lake transport: River and lake transport; Port management and handling Port management and handling (sea and river): Shipyards; Oxygen and acetylene production; Forestry and agriculture; Printing; 67. Contrary to other countries where major infrastructure such as ports, airports, airlines, shipyards, and railways tend now to be managed through public/private partnerships, private sector involvement in the transport sector in DRC i s virtually non-existent. The Government established in 1998 following the civil war has repealed the management contract o f SNCC. While the legal framework does not exclude such private involvement in infrastructure, the largest PE's have a defacto monopoly and the private sector i s limited to providing road, river and air transport services. However, given the financial difficulties encountered by all transport sector PES,they have progressively developed numerous new activities without clear justification as summarized in table 9 above. As a result, not only have these PESgrown significantly in size, but the addition of new activities without reliable accounting systems make it more difficult to assess real cost of services and has not led to increased efficiency or profitability. To the contrary, in some cases, these new activities have been cross-subsidized with the proceeds of regular services. 20 68. The state of transportation in the DRC mirrors that o f the country in general. The halt in the early 1990s of the programs financed by external donors and the lack o f national resources allocated to at least minimum maintenance o f the transport infrastructure has resulted into a collapse of the entire multimodal network and a rupture o f the logistical chain of transportation. Poor technical and financial performances o f the PES,as summarized below, have also aggravated that situation. Table 10. Performance indicators transport sector - 69. The economic decline o f the country has had a very adverse effect on the transport sector PE's since they have not adjusted their production capacity and means to the new level of activities. In turn, that lack o f responsiveness has led to a steep decline inperformances: a. All but one state owned enterprises have generated losses that, aggregated, amount to 23 percent of total revenues; b. Employment in numerous companies remains comparable to the pre-crisis situation, hence leading to very low nominal productivity. In the railways sub-sector, average production per employee i s twenty times lower than in Ivory Coast and Cameroon where railways operations have been concessionned. LAC, the previous flag carrier does not directly operate planes any more and its maintenance activities have been brought to a stop due to the explosion that occurred at the airport o f Kinshasa; nevertheless, pilots and other technical resources remain on the payroll o f the company although they are "rented" to local private airlines; c. Due to financial constraints, basic equipments have not been adequately maintained, thus leading to low level of availability comprised, on average, between 2 percent and 38 percent d. Nominal tariffs are generally very high in light o f services offered but also, in some cases, in absolute terms: (a) LAC applies the standard routing fees as defined by IATA but does not provide any routing services due to the lack of VHF equipment, (b) the average cost for the transit of a 20 feet container in the port of Matadi is US$ 21 US$500 compared to US$ 180 to 250 in West Africa and US$ 90 in Antwerp (Holland). 70. As for the telecommunication sector, the Government has appointed a task force, the Grocipe cl'Etucles des Transports (GET), to review the main issues in the sector and recommend an action plan. A seminar was organized in April 2002 and led to the following recommendations(these recommendations have not been endorsed by the Government yet): 71. The transport sector restructuring strategy formulated by GET i s to unbundle 21 transport sector companies to create 24 purely public enterprises, 30 public-private partnerships and three outright privatizations (Table 11). Table 11. -Transport Sector Reorganization Strategy Socie'te' Railways transportI Lake and river Railroad . River transport Nationale des (passenger and ports authority Handling . Gas plant Chemins de Fer cargo, urbanand I Shipyards .. (SNCC) .. inter-urban); Hospital, schools, River and lake hotels transport; Road transport. Office National Railways transport Regulatory Port Operation of port River and lake des Transports (Matadi-Kinshasa); Authority infrastructure transport (ONATRA) =. River and lake .. Navigation school (specific .. Coffee, forestry transport; terminals) operations Port management . Shipyards and handling (sea = Matadi-Kinshasa . and river); railroad Shipyards; Urbanrailroad Oxygen and Hospitals, schools acetylene .. Gas plant production; = . Forestry and agriculture; Printing; = Housing . management (3510 houses) Lignes Air transport . Traffic right Air transport Ae'riennes (marginally); management Handling Congolaises .. Handling; Hospital (LAC) * Traffic right .... Training center management . Hospital, Training center Conipagnie . Maritime transport = . Maritime . Maritime dii transport Congo (CMDC) City train Urban and inter- I. . Urban and inter- urbantransport urbantransport Rc'gie des I'oies 9 River hydrographicI Buoying Shipyard 22 Fliiviales (RVF) -Shipyard Re'gie des Voies Hydrographic Buoying Dredging; . Maritimes ... mapping: Dredging: Buoying; . 8 mapping of the Boat piloting .. Shipyard (RVM) .. Matadi and Boma port access ... Dredging; Buoying;; Boat piloting; Shipyard; . . Acetylene production Re'gie des Voies 1 Airport 1 National airports Intemational Ae'riennes (RVA) management: and air strips airport operations . . ... 1 Air transport control; Office de Protection and Assistanceto I Gestion du Fret representationof handlers Maritime ship owners; Hotel Mbingu . (OGEFREM) Other related advisory services; Centre de .. Management . Management formation des training training . agents voyers (CFAV) 0VD .. Planning and I . Anti erosion .. follow-up protection New construction Maintenance ..... . Anti erosion protection DVDA . Planning and Planning and New construction follow-up .. follow-up of road Maintenance . projects Office des routes Planningand Planningand Road ( O W follow-up follow-up of road maintenance fund National public projects New construction work laboratory National public 1 Maintenance New construction work laboratory Maintenance Mobile . Management . Maintenance training Crews DAC ... Airport and National airports airstrips 1 & 2 and air strips . Safety, navigation .. . Aerial navigation safety & security Meteorological Meteorological data collection data collection Hydrological data Hydrological data collection collection .. .. Te'le'de'tection par satellite (METTELSAT) .. Satellite Satellite . . teledetection teledetection Geophysics Geophysics Groupe Etude Transport Planning National Transport Transport (GET) . Transport Policy +Regulatory Board a Ministerial and Policy Tranmort TransDort Planning 23 Enterprise and studies Consulting Office BTC . Technical control Systematic control = . of public works of public works: road. rail, ports, airports and -. buildings BEAU Urban planning Urban planning OEBK . = Matadi bridge . Road toll and .. Matadi-Banana Matadi port railroad Kinshasa-Matadi- Bananarailroad CNPR = Transport safety . Transport safety . (Accident (Accident prevention, traffic prevention, traffic code, signaling, code, signaling, driving permits driving permits C.F.U. - Railroad = River ports Railroad . Riverports Authority Source : GET Mining sector 72. DRC is one of the most prospective countries in the world in terms of mineral potential. The country has a very large land area available for exploration. There has been a good amount o f regional geological work in the past, which indicates that the country i s one o f the three or four most prospective places in Africa for mineral development. The copper-cobalt deposits of the Katanga copper belt are among the richest in the world. Known copper ore grades run two to eight times the grade of typical copper ore mined in North and South America, and the country has also a promising geology for gold. 73. The Democratic Republic of Congo was previously an important world producer o f copper, cobalt, diamonds, gold and other base metals. Historically, mining accounted for 25% o f the country's gross domestic product, 25% o f total budgetary revenues and about three-quarters of total export revenues. It provided 7% o f employment. However, starting in 1985, the mining industry o f Congo entered a phase of steep decline that has led to the virtual collapse o f production for most mineral commodities. Legal framework 74. The legal set-up o f the sector, the Mining Code adopted by Law 81-013, o f April 1981 and revised in 1982, 1986 and 1987, i s very complex and difficult to administrate. It includes two totally different systems running in parallel: (i) the common law, applicable to individuals and small-scale mining; and (ii) investment agreements that regulate large mining investments in the country. Based on a very permissive code, the investment agreements negotiated over the years the recent years have provided for all kinds o f fiscal exemptions. Table 12 below describes the companies operating in D R C and their activities. 24 Table 12. - DRC Mining Companies and activities. (Gecamines) 1 Cobalt; 1 Zinc and cadmium; Socie'te'Minibre de Bakwanga 80% = Diamond (MIBA) Office des Mines d'Or de Kilo- 1 Gold Socie'te'Aurifbre du Kivu et du I Gold Maniema (Sakima) Kilo-Moto Mining (KIMIN) 1 Gold Societe'MiniBre du Kivu 1 Columbium, Tantalium Congo-Etain 100% 1 Tin EMK-MN 1 Manganese Table 13. Evolution of mining output 1986-2000 - 75. With the exception of MIBA, the production of which is now increasing thanks to large investments financed by the private partner, the mining industry i s in disarray as reflected by the huge decline in outputs. A number o f companies have simply ceased activities, while GECAMINES, that used to be the largest financial contributor to the economy, i s now technically and financially bankrupt. The situation o f the company can be summarized as follows: Old equipment and abyssal productivity; High production costs that translate into substantial operating losses; 24,000 employees that have not been paid for more than 8 months; and, Debt of about US$ 1. 4 billion dollars and arrears to most state-owned utilities. Moreover, the company i s tangled in a multitude ofjoint venture agreements, none of them operational. 76. The company's poor condition i s attributed to a combination o f 8 No clearly defined structure o f corporate Governance (no Board of Directors) and little autonomy with regard to the Government for basic commercial decisions. 25 Severe deterioration of operations: (i) cave-in of a big underground mine and flooding of open pit mines; (ii)aging, mostly cannibalized equipment; (iii)lack o f investment; (iv) lack o f spare parts; (v) fuel, lubricants, and sulfuric acid shortages; (vi) ore and finished product transportation problems; (vii) theft of finished products; (viii) debts owed to the state electricity company and state railway company; (ix) overstaffing, associated with . the inability to retain skilled labor; and (x) little commercial effort. Debt overburden and lack o f working capital 77. Given the potential o f the sector and the dramatic situation o f GECAMINES, the Government has already taken a number o f steps to address the sectoral issues starting with the regulatory framework: 78. First,the Ministry of Mines and Hydrocarbons (MMH)has prepareda new mining law to attract private investment needed to rehabilitate the sector. The new MiningCode will ensure full transparency in the access to mineral resources (e.g. allocation of permits), reduce Government discretion, promote the disclose information, and ensure a non-discretionarytreatment of all operators. It will introduce a standard, non-negotiable fiscal regime applicable to all investments that will ensure a fair distribution of revenues among Government, mining companies, and affected communities. The new Mining Code has been approved b y Cabinet (Ecofin) and submitted to the Parliament. However, following hot debates, a number of amendments have been introduced including the mandatory requirement for the state to hold at least a 5 percent equity stake in all companies and the right to appoint the chairman of the board. Such amendment will prove detrimental to the reform and will have to be addressed. 79. Second, the next step will be to freeze all pending deals until the new framework i s adopted. 80. Third, the Government is now designing a restructuring plan that would transform Gecamines into a holding, spin-off all activities and attract private capital for rehabilitation and expansion purposes. Given the role o f Gecamines in providing social services, a comprehensive social safety net will be put in place to alleviate poverty and promote alternative jobs in the affected areas. The main challenge i s to ensure that affected communities will effectively benefit from the rehabilitation of mining operations. Non-governmental groups and the private sector should be encouraged to provide social services, but these efforts should also be adequately coordinated to avoid large gaps in coverage, to ensure technical supervision, and to mount country-wide campaigns (e.g. for HIV/AIDS). 81. The expected medium-term (3 to 5 years) effects on revenues of that program are as follows: 26 Table 14-Estimateeffect onminingrevenuesof Gecamines restructuringprogram. Diamonds 100 Diamonds 400 1 Comer/Cobalt I 250 I Gold 40 Kisenge Manganese 8-0 Coltan 40 Tin 20 Other 1.ooo 70 I TOTAL I I Electricity 82. The Congo River basin represents an enormous potential for hydropower with some 100,000 MW of potential generation capacity. The Inga site on the lower Congo has installed capacity o f 1,775 MW on a potential o f some 44,000 MW. Total installed capacity for DRC i s 2,518 MW with private producers, mostly miningcompanies, generating in the order of some 100 MW. Development o f Inga i s a NEPADproject. 83. While no sectoral policy has clearly been formulated, DRC's main objective i s to render electricity accessible to all. Economic recovery and poverty alleviation in Congo requires full access to inexpensive electric power. The SociCtC Nationale d'ElectricitC (SNEL) has a defacto monopoly on generation, transmission and distribution o f electricity because of its national cover and sheer presence although texts dating from colonial times doe not disallow free access to the power sector. Although subject to a PE law under review, this i s in line with recent studies19 recommending free access to water and power infrastructure sectors for developingcountries. The organization o f transmission and the distribution o f the electric power are govemed by a decree o f June 2, 1928 and the royal decree o f October 9, 1956 fix the general regulations and the schedule of conditions of the concession of distribution . Tariffs are administered by the Commission Nationale de I'Energie (CNE). 84. In addition to a legal environment requiring modernization the current power infrastructure i s dilapidated and underutilized (47% availability o f generating equipment). SNEL suffers from weak financial performance with 30% recovery of invoices, which translate into difficulties in finding new financing. I'Inmost countries. a single firm has a legal monopoly on the supply of electricity in any given area. The study questions why no one else is allowed to supply such services. The study concludes that iIt would be better to allow anyone who wished to supply such services. Free entry in IiZfrastriictiire - Policy Research Workiiig Paper no. 2093 -Dai,icl Elirliarrlt arid Rebeccri Birrdon - March 1999. 27 Table 15. SNEL Efficiency indicators - - 85. Management feel total debt to SNEL could well be in excess o f US$1 billion2'. Debt by the State and Gecamines are presently in the order respectively o f US$300 and 220 million. Total outstanding external debt of SNE (Congo Brazzaville) i s in the order o f US$30 million. For the first six months o f 2003 total distribution revenue was US$4.5 million while exports generate some US$700 000 in monthly revenue. 86. The rehabilitation of installed capacity at Inga could double SNEL income. With power an expanding market in Africa the export of energy could be increased through interconnection of transmission networks : i)as far as Ivory Coast and Mali via Gabon, Cameroon, Nigeria and the West Africa grid (2100 km), ii)in the Middle East to Egypt via Central African Republic and Sudan (5300km), iii)South through Angola, Namibia to .* South Africa and Botswana (2955km), in addition to iv) 8' expanding demand in present interconnected countries (Zambia, Zimbabwe, South Africa). Major constraints include the lack o f financial resources, the absence o f a *' LIGfND P *'Thiscouldwell ; be exaggerated and certainly largely impossibl years of sales. w 28 real electricity market and the unstable sociopolitical environment. 87. The feasibility study of interconnecting with Egypt was completed in 1997, which would require construction o f Grand Inga (39000MW), the latter project being at the pre-feasibility level. The African Development Bank has recently reactivated its interest in financing the environmental impact study of the overall Inga site development and the interconnection to Egypt. D R C and Nigerian Electric Power Authority (NEPA) with three meetings on the subject in 2002 have recently created the Central African Power Pool (Pool EnergCtique de 1'Afrique Centrale) to be based shortly in Brazzaville and headed up by a senior ex-SNEL manager. SNEL, ENE (Angola), Nampower (Namibia), ESKOM (South Africa) and BPC (Botswana) have concluded bilateral and company agreements for the creation o f WESTCOR, a transmission company with the mission to build the southern interconnection through Angola and Namibia as well as Inga 3 (3500MW). 88. The Programme Multisectoriel d'Urgence pour la RChabilitation et la Reconstruction (PMURR)is financing US $802' million of rehabilitation and construction work aimed at repairs that will allow power to be distributed in Kinshasa and provincial capitals. The project includes rehabilitation o f hydro-generation and transmission capacity as well as MV and LV distribution. For thermal energy the project will rehabilitate generation capacity in cities outside the rebel areas in addition to Kisangani. Consultants have been hired and have initiated the work specification phase. PMURR also provides for a formal study o f institutional reform options and a tariff study. 89. A separate project, Projet d'Exportation vers 1'Afrique Australe, is in development by the Bank aimed at the export of energy to the South Africa Electricity Market. In the development stage the project o f US$180 million i s aimed at repair and maintenance o f infrastructure to allow export o f a firm 500MW o f power. The project involves rehabilitating the direct current transmission line between Inga and Kolwesi, improving the 200kV link to South Africa, the construction o f a second 220kV line from DRC to Zambia in addition to the rehabilitation o f the existing 220kV line to increase capacity from 350MW presently limited to 250MW, to 500MW. The project i s scheduled for Board approval in October 2003. 90. After mining, power represents the most attractive economic opportunity for DRC to attract foreign exchange at this time. 'IUSS72 million from the World Bank; US$S million from Belgium. 29 Table 16. -DRC's SNEL Unbundling Strategy as viewed by SNEL National Generation 11Provincial National Rural Interconnection Company & Distribution Electrification 4ctivities companies Transmission Companies Private Operators Service Seneration - Hydro - Large Yes Yes - Hydro - Micro Yes Yes Yes - Thermal Yes Yes - Renewables lYes Technical Technical - Extemal customers/2 Contracts management management 1/ International customers 2/ Customers in border towns in neighboring countries Water sector 91. The use of the water resources in Congo is central to the country's development supplying the Congolese population with potable water for pubic health, drainage works, hydroelectric and food production, irrigation of cultures, watering of cattle, rural hydraulics, and water as a mode of transport. 92. Two main organizations are in charge of developing water resources in DRC: - REGIDESO, public enterprise responsible for production, distribution and the commercialization of drinking water in existing cities and centers through an ordinance (1977) defining the schedule of conditions, payments (1991) and contracts of performance signed each year with the Conseil SupCrieur du Portefeuille. 30 - The Service National de I'Hydraulique Rurale responsible for populations living in rural areas that are supplied from small works and for drilling wells with installation o f manual pumps and the construction of gravity fed networks. It assists the communities in maintenance of the installed works. 93. A Code o f Water is in the course of validation. This code gives the prerogatives to the Department of the Environment to protect water resources and their quality. 94. REGIDESO operates some 93 water distribution and treatment centers throughout DRC. Because o f the war situation in DRC, the REGIDESO lost since 1998 the control o f 38 centers o f operation located in occupied zones. 95. The organization structure o f REGIDESO includes Headquarters, Commercial departments in North, South East and West Kinshasa, Provincial departments in Bandundu, Lower Congo, Equator, Occidental Kasai, Oriental Kasai, Orientale, Katanga, North and South Kivu and Maniema. REGIDESO employs 4.573 employees. 96. The DRC laid out since 1994 a Master plan o f development for the water and sanitation sector to 2015. The overall strategy o f the water and sanitation sector, over the period 1995-2015, gives priority to drinking water supply, through profitable projects and the optimization o f investments already installed. The objectives o f this plan are respectively to serve in the long term 97 % and 80 % of the drinking water of rural and urban populations and to set up adequate sanitation for respectively 40 % and 80 %. Statutory bodies 97. The REGIDESO i s placed under the supervision o f the Ministry for Energy for technical aspects o f its activities and o f the Ministkre du Portefeuille concerning the administrative and financial aspects. The deliberating bodies are composed o f a board of directors and a board of management whose members are all named by order in Council. There i s also the college o f the auditors named intheory, by order in Council. 98. The general delegate (general manager) can lodge a request for duly justified increase in tariffs with Ministries having Energy and the National Economy in their responsibilities, when the sale tariffs applied do not make it possible to generate a gross profit sufficient to cover operating costs and renewal of equipment. Tariffs 99. Tariffs are aimed at subsidizing social o f domestic consumption by other categories o f private subscribers (intermediary, commercial and industrial) instead o f the State, which i s confronted with other financial priorities. However, because o f the economic situation of the country strongly disturbed by the war and characterized by hyperinflation, the average tariffs really applied from 1999 to 2002 were: (a) 2001: in spite o f the standardization o f the rate o f exchange, the tariff schedule established by the REGIDESO and subjected to the approval o f the Minister for the Economy was not approved. The tariffs were consequently frozen. Thus the domestic category presented only 19 % of the cost recovery tariff while the other categories recorded a light improvement (ratio of 70 % of cost recovery tarifs). 31 (b) In 2002, tariffs revised in January were frozen until October. In November, tariffs were increased 10 %. Performance indicators Table 17. REGIDESO General PerformanceIndicators 1997-2001 - - Plant utilization (%) 70% 70% 63% 62% 66% Water sales (OOOm3) 127653 115893 103140 114819 126318 * Private 92 947 81 737 72 807 85 017 94 117 * State 34 706 34 156 30333 29802 32201 Network Efficiency (%) 60% 55% 55% 61% 64%, et service volume GIDESO Deliveries in l/d/p : liter per day per person Source :REGIDESO 32 Table 19. - REGIDESO-Water DistributionIndicators1999-2001 Lenght of connectors (m.) 4 837 331 4 857 712 4 882 725 Lenght of network (m.) 9 932 226 11054 913 11 164 603 Total (m.) 14 769 557 15 912 625 16 047 328 New meters (no.) Recycledmeters (no.) 1481 827 2 979 Table 20. - REGIDESO Collectionperformance1999-2001 - 100. Highlights of the performance indicators points out: (c) The service coverage recorded a continuous fall from 1999-2001 because of the absence of payments of State invoices which represent on the whole 36 % of the invoicing in the period; 33 (d) In 1999, the State profited from compensating 50 % of credits due before May 17. 1997.Arrears by the state in paying its consumption total some US$180 million. (e) On December 31. 1999, the unpaid bills o f the State represented 40,G months with other customers standing at 6 months o f invoicing. The average collection period for State increased to 52.6 months and finally in 64,6 months respectively in 2000 and 2001 because of the total absence of any payments duringthis period. This highlights the quasi-structural financial difficulties to which the FEGIDESO has been in prey for several years. The company currently suffers a financial imbalance, which brings it dangerously close to suspension of payments and stop of operations. However, a real awakening to the difficulties of the company in particular by the State, concerned with the improvement of the service level o f drinking water, a key criterion to social and economic development. Financialsector 101. Banks have faced an extremely difficult operating environment for the past decade, which has resulted in a dramatic decline in banking activity and widespread insolvency in the system. Confidence in the system i s low: many depositors have lost or been unable to access their deposits, whose value has been seriously eroded by hyperinflation. Bank deposits represent just 2 percent o f broad money (M2)and credit to the economy stands at less than 1percent o f GDP. The initial attempts by the government-supported by an IDFgrant and by Canadian assistance- to stabilize and reform the banking sector were disrupted by the return of hyperinflation. A recently completed audit o f four banks, financed by this assistance, found them to be undercapitalized, illiquid and insolvent, with over 60 percent o f their portfolios consisting of non- performing assets. Profitability i s low or negative. Prudential norms are not met. These banks are unable to perform the essential role expected o f them as regards (a) financial intermediation, (b) term transformation, (c) payment systems, and (d) imposition of financial discipline. The situation o f several of the remaining ten banks i s also worrisome (non respect o f prudential norms, organizational and managerial weakness, significant financial disequilibria and, in at least three cases, insolvency). One public sector bank, which had ceased operations from 1995-2000, has actually resumed operations despite being insolvent. 102. The Central Bank has not had independence until the law passed in April 2002. As a result, it has not been able to refuse instructions to execute payments that have not been approved by the Minster of Finance, making budget management and monetary control extremely difficult. 103. The legislative, regulatory and accounting framework i s weak and ill adapted to the requisites o f the development o f a sound financial sector. The fiscal regime i s inappropriate to financial intermediaries, and the dysfunctional legal system poses a serious financial and operational risk. Banlung supervision and licensing procedures have been inadequate. 2. The government created by decree a "Committee for Restructuring the Congolese Banking Sector (COREBAC) under the Central Bank. COREBAC i s responsible for bank restructuring. It has identified five private and three public sector banks as non-viable. The identified private sector banks are currently under liquidation. A further four financial institutions have submitted restructuring plans to COREBAC and are operating under a special restructuring regime. The new banlung law and law on credit unions (February 2002) strengthen the legal framework for financial institutions and provide greater independence to the supervisory authority. 104. The new Central Bank (BCC) charter, which assures the independence o f the Central Bank as regards the conduct of monetary and exchange policy, was signed into law in March 34 2002. A financial audit of central bank operationswas launched in mid-April 2002 and completed by end-September. A corrective action plan will then be prepared on the basis of this audit. 105. Looking forward, the recovery of the financial sector i s essential to private sector recovery and growth. The Government intended to place the three public sector banks identified as non-viable into liquidation, and to limit government shareholding in banks to under 20 percent. An overall financial sector strategy i s to be developed in 2003, that will encompass legal, regulatory, and accounting reforms, as well as a coherent strategy for other sub-sectors of the financial system, including credit unions, micro finance, insurance, and specialized financial institutions. As a next step in the bank-restructuring program, further audits are to be conducted to determine the current status of all remaining banks in the system. On the basis of these audits a list will be established by end September 2002 of banks to be liquidated, privatized or restructured. The corresponding action plans will be ready by end-December 2002. 35 IV. TAKING STOCK OF EXISTINGEXPERIENCE22 Lessonslearned inPost-conflict situations23 106. Much experience has been accumulated in coordinating and implementing reintegration, rehabilitation and construction activities in crises and post-conflict situations in various regions and countries throughout the world. While no two situations can be the same, experiences from many countries can provide a wealth of knowledge with valuable insights toward better future planning and management o f activities in the aftermath o f violent conflicts. Three key overriding lessons appear. 107. First, humanitarian assistance and development cooperation do not follow a consecutive linear progression but rather should be viewed in the totality o f a given situation. Peace, reintegration and development should all be considered as critical components and objectives o f post-conflict management, co-existing synergistically. 108. Second, conflicts are inherently contextual, shaped by the political, economic, geographic and socio-cultural conditions o f the region or country. While the lessons learned and experience gained elsewhere can certainly be utilized, post-conflict policies and programs should not be imported wholesale from another "similar" situation but rather, carefully designed and implemented, understanding the specific context and needs o f the direct beneficiary population. This requires local participation, ownership and capacity building to ensure program and project relevance and sustainability. 109. Third, successful economic growth will help create new opportunities and help the population turn the page from the trauma o f the conflict. It i s generally accepted that the main economic growth i s private sector led and takes place in parallel with reconstruction efforts. Several studies have been conducted to identify the priorities in the domain of private. In particular: 0 Effective private sector development can help contain conflict or avoid a return to war. 0 Effective private sector development can create space for broader economic reforms. unity. Private sector activity - which often cuts across ethnic and religious lines, in which rules-based competition i s the cornerstone -can provide a kind o f merit-focused model for social organization, especially in multi-ethnic societies.24 0 Effective private sector development work can help build a sense o f the lone term. War shortens the time horizons o f consumers, producers, traders and policy makers. Longer-term growth and investment depends on the nation's ability to create long-term thinkingin areas from governance to policy reform. 22The purpose of this chapter is not to provide an exhaustive list of PPPs options in a post conflict context 23Lessons learned in crises and post-conflict situations - The role of UNDP in reintegration and reconstruction programmes '`Why are there so many Civil Wars in Africa?, Elbadawi and Sambanis (12iOO). 36 0 Effective PSD work i s a part of the Bank's fundamental mandate. The World Bank has deep roots in the process of reconstruction. Reintegration and reconstruction activities 110. Economic growth and employment generation hold the key to successful and effective process o f reintegration. Where ex-combatants, refugees and IDPs form a large portion of the population, it i s better to target activities on the entire community as it makes program implementation easier and avoids opposition alienation from community members who otherwise would not be targeted. 111. Targeting reintegration activities, whether on specific groups or on specified communities, can only be a limited strategy for reintegration. This approach has to be complemented by more general efforts to stimulate long-term growth and employment in the entire region or country. 112. In the immediate aftermath of a conflict, it might be advisable to focus on short-term Quick Impat Projects to engage demobilized soldiers, refugees and IDPs in employment and income generating activities even when such projects may not be sustainable in the long run. The contribution of such projects to the peace-building and reconciliation efforts can be invaluable. Reconstruction o f basic infrastructure such as roads, hospitals, schools and water supply systems can employ large numbers o f people and provide immediate benefit to the population. 113. However, at the same time special attention should be given to developing long-term programs that directly address the underlying causes o f instability. Often regions o f conflict lack skilled human resources and the financial wherewithal critical to program sustainability. Training of locals, accessible credit schemes and national ownership can go a long way in building local and national capacities to sustain a growing number of programs. 114. Time i s o f the essence in delivering humanitarian and development programs to those affected by conflicts. Governments, donors and implementing agencies have to act quickly to prevent further escalation o f war to provide relief to the victims. Delays cannot only exacerbate the situation on site but lead to negative perceptions of international assistance. 115. Continual and thorough assessment of needs at the local, regional and national levels, and on-going program evaluation and monitoring are equally important in achieving program success. 116. Programs and projects should leave room for contingencies. Crises and post-conflicts situations are not always predictable and programs need to be vigilant and adaptive to the change environment. Otherwise they might be rendered irrelevant or lack support from other organizations and local communities. Abrupt changes in the environment can lead to implementation delays and major changes in program costs. It i s in this context that the public enterprise reform in D R C must be envisaged. 37 Publicenterprise reform 117. Public enterprise reform options can range from management contracts to outright divestiture. With public or private sectors assuming the various elements of the framework (asset ownership, O&M responsibility, capital investment and commercial risk). The Exhibit below presents the responsibility matrix along two axes, a management and financial dimension. Exhibit2. Managemenufinancing matrix inprivatization - 118. While reviewing all these options provide the necessary background the envisage the PE reform in DRC, recent experience in Eastem Europe and mitigated success registered on outright privatization strategies in Africa show that such a process must be engaged with an objective that may differ from the simple objective of changing the ownership of the PE. Indeed, reform i s mostly lead to ensure service delivery: how can the public enterprises effectively comply with their commercial mandates and thus provide the necessary access to water, electricity, telecom, transportation, etc... to the population ? H o w can the economy grow based on less than the minimuminfrastructure platform? 119. The Congolese context, with its history of mismanagement of the public enterprises, lack o f adaptation of the regulatory framework but also generally accepted popular resistance to a diminishingrole o f the state (in spite of a certain lack of trust in it) make these questions all the more valid. PE reform must be envisaged through a different angle: that o f a better governance and better performance of the companies - regardless o f the share ownership o f the respective companies. 38 Private Sector Participation in Infrastructure - recent trends2' 120. Power and Water Sector reform issues are very similar in many respects. In fact in many countries power and water service i s run by the same utility. The key issues facing both these sectors are coverage, investment, efficiency and collections. Two key recent conferences on the water sector confirmed that many governments across Africa have recognized the necessity of structural reform to improve water and sanitation services to which we can safely add power service and to extend coverage in fast-growing urban settlements. As noted at the Kampala Conference26 more than thirty African countries are either engaged in, or planning reform to increase autonomy and ensure financial viability. 121. The Kampala Conference and the Dakar Workshop27helped to develop a shared vision of the conditions for sustainable and socially responsive PSP-WSS services in Africa; access to best practice and guiding principles emerging from the experience o f African countries, practical guidance to planning, implementing and sustaining PSP-based reforms; and coordinated action by donors. Achieving better governance 122. In the early 90's privatization28was judged necessary, and not simply to improve the performance of public enterprises-though the evidence was striking that it can and does improve performance. Privatization's essential contributions were to "lock inthe gains" achieved earlier in reforming public ownership or in preparing a firm for sale, to distance the firm from the political process, and to inoculate it against the recurrence o f the common and deadly ailment o f public enterprises: interference by owners. 123. Although neoclassical economic theory suggested that the relationship between ownership and performance was tenuous, it was considered that private ownership produced superior efficiency outcomes because of five factors: 0 Private ownership had established a market for managers, leading to higher- quality management. 0 Capital markets subjected privately owned firms to greater scrutiny and discipline than they do public enterprises. Because o f explicit or implicit guarantees from the state, public enterprises could borrow capital at less-than- market interest rates, and they often enjoyed outright subsidies and other concessions from the state (meaning that they didn't pay their taxes, their utility bills, their accounts payable to other public enterprises, customs duties, or the like). 0 Private firms were subject to exit much more often than public enterprises. Private firms were more subject to bankruptcy, liquidation, hostile takeover, and closure than public corporations. When exit i s a real possibility, there i s a greater likelihood that owners and managers will take active, efficiency enhancing measures to avoid it. 25Finding220 -World Bank -Africa - Private sector and Infrastructure Private SectorParticipation-based Roadmapfor Reforms inWater and Sanitation- Paul Kriss - December 2002 26February2001 27February2002 IsJohn Nellis, 1994 39 0 Politicians interfered less in the affairs o f private than public firms. Political interference is a major cause of efficiency-reducing conditions in public enterprises; it manifests itself in overstaffing, under-capitalization, inappropriate plant location, wrong use of inputs, and many other costly acts. 0 Private firms were supervised by self-interested board members and shareholders, rather than by disinterested bureaucrats, and are thus more likely than public firms to use capital efficiently and to maintain it. 124. Transfers from the public to the private sector are now considered to have failed to stop the "grabbing hands" of state, but also allowed profits to be diverted to the grabbing hands o f insiders in privatized firms. Recent revelations in Czechoslovalua, Russia and Chile present challenges for state-run enterprises that are about to be privatized. Evidently the transfer of title alone does not ensure improved resource allocation. Policymakers need to consider more than issues of competition and regulation: adopting a corporate governance perspective will lead to more effective privatizations with fewer problems, particularly in the long run.The steps required to encourage the private sector to invest are relatively simple, find a way to tie the grabbing hands of public and private parties by providing information and accountability to investors. But putting such ideas into practice is difficult, given the variety o f institution s that affect information and accountability. 125. Governance chains29 are a new concept that can constrains grabbing hands and provide bench marks, based on their use in established firms, that measure the likely effectiveness of different governance chains. There are two types o f chains: a private governance chain in which there are few institutions and each provides both information and accountability and a formal governance chain, in which the specialization o f information and accountability increases the length of the chain and the demand for institutional depth. Where information flows to outsiders are timely, accurate, and credible, diversions by insiders are more difficult to hide, and resources are more likely to be matched with promising investment projects and managers. Effective institutions o f governance make insiders accountable. Accountability mechanisms are enhanced when investors have clearly defined powers in advance, the ability to coordinate their actions and low-cost mechanisms for resolving disputes with insiders. 126. The least formal of governance institutions known as private governance chains have only a few links that monitor and enforce economic activities. The relationship between insiders in the firm and specific external organization such as business associations or banks, generates bothinformation and accountability. The strength of these governance chains rests largely on the motivations and ability of insiders in their firm and those in charge o f these external organizations. 127. The most formal solutions contain more links in their governance chains. Separate entities specialize in providing information, others offer accountability, and still others provide a combination of these tasks. The three principal links are institutions that hold political actors accountable; internal institutions, such as boards o f directors, that provide both information and accountability; and legal institutions, such as corporate bankruptcy and disclosure laws, which ensure that information and powers of accountability are held not only by the board but also by outside financiers more generally. Privatization and Corporate Governance -Principles, Evidence and Future Challenges - Alexander Dyck 40 128. Complementing these institutions are additional external organizations. Policy advisers also need to consider financial intermediaries that pool the capital o f inventors and provide monitoring; information intermediaries, such as auditing firms, credit- and bond-rating agencies, and brokerage firms, that provide independent assessments and ratings; and regulatory organizations that provide incentives for financial and information intermediaries to disseminate socially beneficial information and provide accountability. Private and formal governance chains can be combined. 129. Governance approaches and privatization outcomes in transition countries provides a rich data source to help refine the understanding of the components o f effective governance. The difference between corporate structures of established firms and those introduced at the time of privatization i s that structures devised by political actors for newly privatized firms have not yet been tested. T o a large extent, countries that held to international benchmarks on govemance and introduced concentrated ownership structures to counterbalance their weak legal environments have done better than average. Those countries that implicitly relied initially on formal governance chains have done worse, sometimes spectacularly so. Privatized firms that relied on formal approaches to provide governance recorded the weakest returns, whereas those that relied on private solutions based on ownership concentration and links between insiders and private ordering agents have had much stronger retums. Outsiders are more effective than insiders in improving performance. 130. The experience o f the transition economies reveals the importance of all of the links in formal governance chains. Some links can be transformed through dedicated effort. But what apparently cannot be done i s to improve all o f the links simultaneously. The experience o f the transition economies suggests that it takes a long time to develop effective formal governance chains. Private governance chains in the same environment, though they have their flaws, have resulted in better performance. 41 V. TORWARDS INCREASEDSERVICE DELIVERY THROUGH IMPROVED GOVERNANCE Assessingthe risks 131. The challenges of creating attractive private sector investments-and of simultaneously ensuring that the private sector itself contributes to good economic management and generates wealth and jobs for the Congolese-in an evolving political situation such as the DRC's must not be underestimated. Given the pivotal role of PESin the economy, inaction would only lead to additional decline and increased poverty. 132. The state i s still perceived as a wealth provider in influential circles and efforts to reduce the role o f PESwill generate strong opposition from various stakeholders as reflected by the difficulties to revise the miningcode a. First, despite the dismissal of previous PE's managers involved in rent seeking and assets stripping,vested interests remain strong and newly interim managers appointed might not remain without reaction iftheir powers are threatened; b. Second, unions have been associated for a long time to PESmanagement and might not easily undestand the proposed reforms; c. Third, despite the commitment towards reform of the new president, cabinet members might have different approaches including for some o f them, the desire to rebuild and rehabilitate SOEs as before. 133. Another source o f risk i s the delays incurred in the decision process that may derive from the appointment of a large national union Government. While, on one hand such a Government i s critical to build a large political consensus and to strengthen the credibility o f the state, on the other hand, during such transition times, the decision making process i s often based on unanimity that makes the process longer and, as a result difficult decisions tend to be postponed. A related risk is linked to the fact that the requiredreform process is quite broad and will call for a careful sequencing o f actions in numerous areas such as business regulations, judiciary, sectoral and social policies. Mistakes in the above sequencing might derail or delay the expected benefits. 134. Economic growth and employment generation hold the key to successful and effective process of reintegration in post-conflict situations. Targeting reintegration activities, whether on specific groups or on specified communities, can only be a limited strategy for reintegration. This approach has to be complemented by more general efforts to stimulate long-term growth and employment in the entire region or country. transform its centrally-planned economy to a market economy through a Mass Privatization Program including 16 000 medium and large enterprises. MPP was based on 135. However, the private sector may fail to vouchers distributed to all Russian citizens. For a number of reasons, including the economic illiteracy of the respond to opportunities created through the population, malpractice, fraud, a large number of parastatal reforms because they view the political investment funds and companiesturned out to be financial risk as too high. The success of the PE reform will pyramids. The major criticism of the MPP was that its incentive structure left the majority of shares, some 6 5 8 therefore depend on the Government's ability to on average in the hands of employees,creatingsubstantial provide the necessary upside to potential investors governance problems. or managers while lifting (financially or otherwise) Lessonslearned: Take advantage of a window of opportunity to enact the risks associated with the investment. It i s major wide rangingreforms. admitted that the private sector i s less and less Shaky legislative foundation can make results vulnerable willing to participate in outright privatization effort to revisionist onslaught. Project design should be fairly flexible and include post privatization support and includo fairly intense supervision. 42 given the risks associated. Examples in the telecom and utility sectors are numerous. Sophisticated financial structures, including guarantees have eventually not provided the investors with the necessary safeguards to convince their Board of Directors to invest in certain countries. One could assume that DRC would fall under this category. 136. Finally, keeping the reform momentum will call for achieving visible results quickly, even ifof limited size. To that end establishing small scale pilot public/private partnerships rapidly that will make a difference and addressing the social issues will be o f a critical importance. The ability to rapidly give confidence to investors in order to attract in the shortest time frame possible those sums necessary to rehabilitate the key public enterprises in mining, transport and power can only be achieved through improved private chain governance which could be achieved in D R C by involving local private operators inthe governance o f PES.Internal debt arrears payment may allow to increase investment liquidities necessary to ensure broad participation o f the Congolese in the PE reform, and to have the Congolese private sector participate in the PE better governance3'. Buildingon successful experiences, the way forward 137. DRC PE sector is, by a number o f aspects, closer to the former transition economies than to other African public sectors and the reform process should build on the lessons drawn in that region. Despite some signs o f revival such as the currently implemented investment program by a mobile operator, the Government i s well aware that the large investments required to rebuild the country won't materialize until the country risk i s significantly reduced and to that end, it has developed an ambitious strategy that calls for a two pronged approach: d. First, priority would be given to improve the business climate by up-grading part of the basic regulatory framework and addressing some o f the critical constraints identified by private operators; framework for public enterprises will be Broad distribution of shares through vouchers may have modemized in order to improve the Out- motivated the new owners to strip assets from privatized dated 1978 law and to establish the legal firms in addition to looting (borrowing heavily with no basis for public/private partnerships while a intent to repay and usingthe loans for private purposes). Lessons learned: in-depthassessmentof the pE sector Financial incentives and regulation are as important as . ownership structure in the design of privatization. Improving the business environment. 138. As indicated above, the existing business framework is a combination of colonial rules and rent-seeking regulations adopted during the Mobutu regime. The company law dates from 1887 and does not provide a sound protection for modem trade and business practices while 30One could imagine that internal debt arrears paymentsmay lead to debt-equity swaps strategies allowing Congoleseprivate entrepreneursto invest in reformed PES,and to populatetheir respective Board of Directors with competent management. 43 bankruptcy dispositions are ill defined. As a result, court decisions are often made in a legal vacuum, adding to the mistrust in the judiciary. The various regulations enacted by the previous regime have not only created multiple bureaucratic controls, but also added to the business uncertainties since no inventory o f such decisions has been made and published. Despite a significant effort by the Government to streamline taxations, the number of taxes remains high and some are illdesigned such as the 15% taxation on companies equity increases in a country starving for new investments. As a result, focus in the short-term will be as follows: f. Business framework: anew company law will have to be adopted as a first step to modernize the overall commercial code. In order to avoid "reinventing the wheel", the new law will have to be built on generally accepted principle and practices already adopted in Africa through regional agreements. At the same time, an inventory o f regulations designed by the previous regime will have to be conducted in order to repeal the "ad-hoc anti-business'' rules. Since a new investment code has already been adopted the other priorities will include: (a) the labor code and the mining code and, (b) a public procurement code that will increase transparency and security for public contractors. g. Addressing litigations will be a critical issue given the lack of trainedjudges and the mistrust in the judiciary. A first step has been implemented by the Government by creating commercial courts composed of judges issued from private sector organization, the General Accounting Office and the Ministry o f Finance. However, making these courts operational will take some time and other short-term stop-gap measures will have to be adopted such as supporting the development o f arbitration mechanisms and o f an arbitration court. Such mechanisms could be implemented during an initial period of time with the support o f foreign renowned arbitrators. h. With regards to taxation and collection, as part of the overall support provided by the IMF, an in-depth assessment o f the taxation system would be conducted with the objective o f repealing non-economic taxes and streamlining the tax code. Non-efficient taxes, such as those having limited impact on revenues and highmanagement costs will also be abolished as part of that process. i. Years o f lack of financial discipline and Government finances mismanagement have led to the accumulation o f a large domestic debt o f US$956 million by end 1997 with some US$ 2 billion since. Despite the audit completed at that time no actions have been taken so far and, if domestic investment i s to resume, that issue has to be addressed. To that end, the Government i s committed to: (a) up-date the dept assessment to end 2001, consultants have been hired to do this and, (b) in coordination with the IMF, adopt an action plan to gradually reimburse creditors. j. With the view to increase transparency and address governance issues, an ethic code regarding control and inspection agencies will be enacted and enforced. One o f the main objectives will be to reduce the number of controls and related governance issues. k. In order to provide political risks safe,guards,DRC intends to become member o f MIGA and of the African Trade Insurance Agency. 44 1. Good ,qovernnnce in Public Enterprises will need to be addressed through (i) involvement of local private sector supply chain stakeholders via direct shareholding in PESmade possible through debt equity swaps and/or (ii)the creation of International Investment Fund(s) managed by managers of intemational caliber with full powers guaranteed by the State and where DRC shares in PEScould be warehoused and into which major donors and creditors and local and intemational private sector partners could participate. Financial sector reform 139. While, full implementation o f all these actions will take time, especially the overhaul o f the business code and the strengthening o f the judiciary, adoption o f a new company law and of arbitration mechanisms, or, stream-lining taxations while providing additional security to investors through the recently adopted investment code and joining MIGA, can be achieved in the medium term. Such reforms will have a positive impact on local and foreign investments in the short-term although they will only fully bear fruits in the medium-term if at the same time, financial sector issues are addressed in parallel. 140. The access to the financial sector will however condition the speed at which the investment level will grow. In that sense, PE reform will not yield the expected results without necessary reform o f the financial sector and re-engagement o f the commercial bank in normal lending activities. Public enterprise reform sequencing 141. In parallel to improving the business environment, the public enterprise reform should start with however, a more flexible time span. Indeed lessons from transition economies and also from successful experiences in Africa show that market based adjustments take time and require a conducive environment together with a clear strategy and consensus. Implementation o f a straight forward privatization programin all sectors at the same time would generate highrisks since: m. Market response would be limited, if any; n. Such a program might leadto additional corruption; 0. Failure to address social requirements might lead to additional hardship and opposition, hence delaying the overall reformprocess; p. Such a program needs a wide range o f support, cooperation and coordination between labor, government, management and the private sector. 142. The proposed reform agenda i s aimed at addressing the above risks while mitigating the costs related to a slower approach. It i s built around the following pillars: (a) putting in place the required legal and institutional framework, (b) building a consensus while conducting an in-depth assessment o f the PE sector, (c) putting in place the required safety net, (d) looking for w i d w i n situations and, (e) reducing the possible budgetary costs of a slower approach. 143. The existing legal framework: (a) i s outdated with respect to public enterprise supervision and management, and (b) does not address divestiture and liquidations issues. In addition the institutional set-up i s weak and performance o f CSP are not adapted to the implementation o f the broad reform required. The first step o f the reform should be to put in place a strong steering committee that will be in charge of the overall PE reform. To that end, the Government has already adopted a decree creating a Coinit6 de Pilotage de la Rkfornie des Eiztreprises Publiqiics 45 (COPIREP) and had selected its three executives; under the supervision of the Conseil SupCrieur du Portefeuille in the Ministkre du Protefeuille, this unit will supervise the overall reformprocess. The next step will be to: (a) up-date the PE regulatory framework and, (b) to adopt a transparent set-up with respect to: (i) divestiture, (ii)liquidation and, (c) publidprivate partnerships such as BOT, FIRC and other similar mechanisms. 144. Information on PESare still fragmented and although the broad picture is clear. in-depth assessments o f the largest PESare still lacking missing in order to build a very detailed strategy. At the same time, consensus on PE reform i s still weak. In order to address both issues, the Govemment has decided to establish working groups including line-ministries, PE's, Union and user representatives; their mandate will be to: (a) conduct the required assessments with outside technical assistance, (b) and to make recommendations that will be publicly discussed in open seminars prior to their adoption by the Govemment. All these working groups will be coordinated by COPIREP. Such working groups have already been established in the transport, Electricity and Telecommunications sectors and, recommendations made so far have not only proved to be up-to- the point but have also contributed in building the required consensus. 145. The social dimension of the reform i s of critical importance and the following issues need to be addressed: (a) overstaffing, (b) wages salaries that are below the poverty line, (c) large number o f retirees that remain on the PE's pay-roll given the poor pension system, and (d) large network o f health and education facilities, that, although in a dire situation, need to be kept operating. A specialized working group i s being established to make recommendations in that area and such recommendations will be a key point of the reform program in order to avoid additional hardship. 146. Economic reinsertion pilot projects for livelihoods innovations and improvements within the retrenched mining workers will allow the establishment o f strategies that can be replicated and/or modified for other sectors. Stimulation of economic diversification and development through community-driven development approaches and reintegration o f retrenched workers and military in the local economy will need to be expanded nationally. 147. Privatization as a reform measure in post-conflict situations i s often a cause for increasing poverty rather than alleviating it. Layoffs lead to retrenchment, and financing retrenchment i s only a palliative measure at best. While restructuring PESwill eventually lead to higher service levels, investment, rehabilitation and reconstruction jobs, more meaningful work, regular salaries and social benefits and better quality o f service will take time. Ironically, financing retrenchment in Congo, with the vast majority of PESunable to pay salaries for many months now, will create temporary relief from poverty and suffering. DRC and donors will need to find solutions to the absence o f an existing social net if reforms are to succeed. 148. Identifying w i d w i n situations will be an essential part o f the reform design if it i s to succeed. Priority sectors have already been identified based on the expected short-term impact and include: (a) mining, (b) telecommunication and (c) transport. In addition, establishing small size publidprivate partnerships in the health and education sector and in PESnon core activities will also have an immediate impact. Finally, with respect to some PE's ancillary activities, swaps will be envisaged that will transfer their ownership to interested staff groups through salary arrears compensation. Such swaps might not only lead to better use o f assets but also to success stories. 46 Bibliography Free entry in Infrastructure - Policy Research Working Paper no. 2093 - David Ehrhardt and Rebecca Burdon - March 1999 Stratigie de re-dynamisation des enterprises du portefeuille et restructuration de la dette exte'rieure de la Re'publiqueDe'mocratique du Congo: Proposition de cre'ation d'un Fonds Intemational d'hestissements et de Reconstruction au Congo :FIRC - Venant Patrice Kinzonzi et PaulFrix - OECD-OCDE- 7 avril2003 Etats Ge'niraux du Portefeuille -Minist&-edu Portefeuille -2000 Dette inte'rieure FEC -July 2003 Democratic Republic of the Congo -Emergency Multisector Rehabilitation and Reconstruction Project (EMRRP)-June 20, 2002. Ownership Structure and the Temptation to Loot -Evidencefrom privatizedfirms in the Czech Republic. Policy Research Working Paper - Cull, Matesova and Shirley - March 2001 Implementation Completion Report - Privatization Implementation Assistance Project - Russian Federation -December 29, 2000 Lessons leamed in crises and post-conflict situations - The role of UNDP in reintegration and reconstruction programmes -Rafeeudin Ahmed, Manfred Kulessa and Khalid Malik Privatization and Corporate Gowemance :Principles, Evidence and Future Challenges, Alexander Dyck, The WorldBank Research Observer vol. 16 no. 1pp 59-84 47 Contacts Sango Nabina - Administrateur dClCguC GenCraAdjoint - REGIDESO (243) 88 01 341 mabinasango@yahoo.com Prof. Lubunga Pene Shako - Administrateur DelCguC GCnCral- REGJDESO (243) 88 45 128 1ubungapsahoo.fr Michel B. Losembe - Citigroup Country Officer, Managing Director - Citigroup intematioanal - (243) 88 41 184michel.losembe@citicorp.com Albert Yuma Mulimbi- Administrateur DClCguC GCnCral - Utexafrica (243) 88 45 494 avuma@utex.cd Professeur Modeste Mutombo Koyamadosa - Ministre des Finances, anciennement Ministhre des Poste et de TClCcommunications (243) 88 02 786 mutonbokyamakosa@vahoo.fr Joseph Mukania Kabwe - Conseiller Principal - Collhge Economique et Financier (243) 88 02 857jmukabwe@vahoo.fr Placide Mbuyu Banze Directeur GCnCral a.i. - Bureau Central de Coordination BECECO (243) 88 07 810 bceco@micronet.cd FirminKoto Ey'Olanga Conseiller - Collkge Economique et Financier (243) 99 13 441 firkoto evo@vahoo.fr Oscar Gema di Mageko - Administrateur Directeur GCnCral - Office De Gestion De L a Dette Publique (OGEDEP) (243) 081 51 28 047 J.P. Lebebele Momboyo Kukuta - Directeur GCnCral Groupe EtudesTransport (GET) (243) 997 1392iplibebele@vahoo.fr Bruno Kapandji Kalala G. SecrCtaire permanent - Pool EnergCtique de 1'Afrique Centrale (PEAC) (243) 00 12497 bkapandi@hotmaiI.com Antoine Ndombo Masimo - Chef de Division Adjoint de la Dette RCtrocCdCeOGEDEP (243) 894 2492 antoinendombo@hotmail.com LebugheMonsevile - Service Dette Interne OGEDEP (243) 27 849 Vika di Panzu - Conseiller en relations intemationales (projet WESCOR) SNEL (243) 98 13 32 21 vikadipanzu@vahoo.fr 48 M.Mugiele Nana- Directeur Strategies et Programmes - Conseil superieur du Portefeuille (243) 99 57 127 Prof. Laurent Kitoko - Directeur du Departement de Recherche et DCveloppement SNEL (243) 81 700 54 93 profkitoko@hotmail.com Ngandu Kayembe - Ministkre Des Mines et Hydrocarbures (243) 98 22 26 04/88 02 960 nganduki@Yahoo.Fr Ilunga Bunda - Conseiller Financier et Administratif - Ministkre des Mines Bemard Mulumba - Ministkre de 1'Cnergie (243) 88 02 430/89 43 990 Ndangi Ndangani - Ministkre de l'knergie (243) 88 02 431/99 310 60 ndangi-Fr@Yahoo.Com Denis Tshilombo - Assistant Au Collkge Ecofin, PrCsidencede L a Rep. (243) 99 17 286/81 50 10 668 dtshilombo@Yahoo.Fr Alex N'kusu PrCsidence de la RCpublique (243) 99 82 843 alexnkusu@Hotmail.Com Charles Panda K. Expert Conseil supkrieur du Portefeuille (243) 880394419907820 Shako A Lusaka Dir./Jur. - Conseil supCrieur du Portefeuille. (243) 9921254 Nana Mungiele Directeur Des StratCgies et Programmes - Conseil supCrieur du Portefeuille (243) 99 57 127 Mungiele@Yahoo.Fr Luhahi Niama Conseil supCrieur du Portefeuille Desire Luhahi@Yahoo.Fr NkuluKilumba ADG SNCC /Lbb Sncc.01@Ic.Lubum.Id Nyalosaso Likoko Directeur SNCC Kin Snccl2 @Yahoo.Fr Telo Lozi Motondo Directeur SNCC (243) 98401597 49 Nkulu Kilumba ADG SNCC (243) 97 03 22 78 KasongaMbeiu Ministkre DuPian (243) 081 50 57 409 Essimbo N.Manu Conseiller Ministkre Des Finances (243) 081 50 47 240 LubaIu I s i SNEL (243) 98 21 48 48/ 99 28 111 Aimex I Puge 1 of 2 Annex I- Detailed list of Public Enterprises 36 Institut Nat. De SCcuritCSociale INSS 781186 KINSHASA 37 Office des Douaneset Acciises OFIDA 791114 KINSHASA 38 Fonds des Promotionsde 1'Industrie FPI KINSHASA Anne.r I Page 2 of 2 40 Office des Petites et Moyennes Entrep. OPEC 781221 41 Office des Biens Mal Acquis OBMA KINSHASA 42 Office Congolais de ContrBle occ c 781219 KINSHASA 43 Office national de Tourisme ONT 861210 KINSHASA 44 RCgie National d'Approvi.et d'lmpr. RENAPI 851314 KINSHASA HOTE : TRADE 46 IFoire Internationale de Kinshasa FIKIN 781218 I LUBUMBASHI 47 Agence Nationale pour la promotiondes Invertissements ANAPI PUBLIC WORKS 48 /Officedes Routes OR 781223 49 loffice des Voiries et Drainage OVD MEDICAL 50 IFonds National MCdicao-Sanitaire I FONAMES I 861056 KINSHASA RESEARCH 51 IInstitutNational des Statisticlues INS 781397 KINSHASA 52 IInstitutNat. d'Etudes & Rech.Agro INERA 78/211 I YANGAMBI 53 (TClCdCtectionpar SatClite 1METELSAT I KINSHASA CONSERVATION 54 IInstitut Congolais Conserv,nature ICCN 781190 KINSHASA 55 IInst.De iardin Zoo. & botan. Congo I IJZBC 781215 KINSHASA 56 IInst.des MusCes Nationaux du Congo IMNC KINSHASA TRAINING 57 IInst.Nat. PrCn.Professionnelle INPP 781189 KINSHASA I F u 5. u w w zi42 a! -1 0 d Y LfY wz iz8 W a! 25> - 3 mQ : p pi Eo 4 2 7 c - 3 5 P 4 E 330 ?. DNO Congo, Dem. Rep. at a glance (v24Kl2 Lo, 1- 52.4 874 2.511 107 470 00 6.7 317 1.089 3.0 2.5 1.9 2 0 2.8 2.3 30 32 31 48 47 58 12r 91 76 34 45 55 76 37 37 37 -- 48 78 98 50 85 103 32 72 88 r m 1911 2ooo 2001 125 9.1 6.7 5.0 I 10.5 5.6 19.8 14.1 20.4 19.9 17.8 7.5 1.8 14.9 5.7 -7.1 16.9 -3.8 1.o -11.4 -29 -25 0.6 0.0 2 7 40.6 119.3 1920 2582 21.9 9.5 73.7 73.3 153.4 1.117.0 r e n a 19114 zmo 2001 m-05 0.7 4.3 4.0 4.5 4 2 -25 -72 4.5 -7.1 0.5 7.7 1.7 -3.7 -34.6 Isel 199( aDQ0 2001 82.5 ty.9 78.9 10.0 13.3 6 2 17.1 24.1 18.7 16.7 I -OM -GDP I Annex V Congo,Dem. Rep. mal 1WI zoo0 554.0 33.2 2.202.3 630.1 I 4.5 -5.3 -3.6 4.8 0.5 -GDP- -CA I961 loB( Ppg 1001 1.849 692 940 444 489 590 207 206 297 97 129 669 702 49 43 19C.l 19W moo 1001 1 . m 1.841 983 1,015 2148 2.086 w5 953 376 -a4 58 62 a46 -756 388 416 244 57 138 pe 476 -1.037 -1m -128 243 994 107 137 236 43 87 -11 -101 .48E-ll 5.ME-8 50.0 312.0 1- 1991 zopo ZOOI 5.092 1 0 , w 12862 12.880 80 87 76 76 ai78 176 1.183 1,188 1,151I B! 1 . m 401 177 758 14 20 m0 0 1 11 0 0 199 258 220 276 0 0 TI -13 0 0 74 83 0 0 27 78 0 50 17 114 0 0 7 17 0 0 I O 97 0 0 8 14 0 0 2 82 0 0