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ZNR UUUUU ZZH
R 191623Z SEP 07 ZDK
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 6920
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY
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RUEHYD/AMEMBASSY YAOUNDE 0231
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RUEATRS/DEPT OF TREASURY WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK

UNCLAS SECTION 01 OF 04 KINSHASA 001127 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID ECON EINV ETRD SENV EAGR KGHG CG
SUBJECT: FOREST SECTOR REFORM IN THE DRC: STAKEHOLDER 
REACTIONS, PART II OF II 
 
REF: A. A. SECSTATE 56792 
     ¶B. B. SECSTATE 87904 
     ¶C. C. KINSHASA 1037 
 
KINSHASA 00001127  001.4 OF 004 
 
 
¶1. (SBU) Summary: The GDRC is reviewing 156 forestry titles 
for conversion into new titles as part of its forestry sector 
reform and economic development plan. The process is intended 
to regulate the forestry sector in a way which encourages 
sustainable resource management, improves forestry 
conservation efforts, and maximizes the sector's contribution 
to local and national economies. Despite significant 
technical and financial support from the donor community, the 
process remains limited in scope. Competing expectations of 
the private sector, civil society, GDRC, and international 
community may not all be met unless additional reform 
measures are taken by GDRC to support the forestry title 
conversion process.  End summary. 
 
---------- 
Background 
---------- 
 
¶2. (U) As part of the Congo River Basin, the DRC is home to 
the world's second largest rainforest. The least exploited 
rainforest in the region, it supports approximately 40 
million people throughout the country and 20 active 
commercial logging companies concentrated in the west. In 
2005, President Kabila issued a decree reinstating a 
moratorium on all logging concessions and requiring all 
existing forestry titles to be converted into new titles. The 
objective is to ensure that all operating concessions are 
legal and in compliance with the 2002 Forestry Code -- 
particularly those which may have been issued between 2002 
and 2005, in contravention of the 2002 moratorium on logging 
concessions, which was not published until 2004. (Note: 
Congolese legislation must be published in the official GDRC 
journal in order to be considered law. Whether or not the 
moratorium was in effect before its official publication in 
2004 is a source of contention between the GDRC and private 
concession holders.  End note.) Of the 156 titles up for 
conversion, 114 have had their applications reviewed by a 
technical working group (TWG) and await decision by an 
inter-ministerial commission (IMC) yet to be formed. (ref A) 
 
--------------------------------------------- --- 
Private Sector: Few Hopes for a Vibrant Industry 
--------------------------------------------- --- 
 
¶3. (SBU) According to Francoise Van de Ven, Secretary-General 
of the Federation des Industrialistes de Bois (FIB), a 
consortium of major logging companies in the DRC, forestry 
sector reform is long overdue. Jose Mingas and Sabbagh 
Youssef, co-owners of Trans-M and ITB, agree that reforms, 
such as simplifying the tax system and improving rail, road, 
and water transport, could support private sector development 
in the DRC's forestry industry and lead to a vibrant 
industry. Lacking these necessary changes, however, domestic 
industry leaders hold little hope that the forestry sector 
will be transformed into an "engine of the economy" even 
after the title conversion process is completed.  Rather, 
private sector reps such as Youssef and Mingas fear that this 
initiative might have the opposite effect and further weaken 
the industry, given that some companies now risk title 
cancellation and/or financial losses. 
 
¶4. (SBU) According to Van de Van and Youssef, small 
family-owned firms, which constitute the majority of logging 
companies in the DRC and were granted concessions after 2002, 
are assumed to be the most likely to face immediate closure. 
(Comment: It is unlikely that small firms would be willing or 
able to contest IMC decisions given their low profitability. 
In contrast, FIB, Trans-M, and ITB reps told us they would 
consider taking legal action against unfavorable decisions 
made by the IMC. End comment.) Interviews with public, 
private, and government reps, including the Ministry of 
Environment's legal expert, revealed that little attention 
has been given to the potential socio-economic impact these 
closures might have on local economies following the 
permanent cancellation of a title or prolonged legal battles 
over IMC decisions. 
 
 
KINSHASA 00001127  002.3 OF 004 
 
 
¶5. (SBU) Larger companies who oppose the conversion process 
generally fear financial losses may result. Many worry they 
won't be able to support increased production costs implied 
by sustainable forest management plans (SFMP), mandated by 
the Forestry Code, and required for conversion. (Note: 
According to USAID/Carpe, production costs for SFMPs are 
estimated between USD 2.50 and USD 5.00 per ha (USD 1.00 to 
USD 2.0 per acre) End note.)  Youssef expects that, under 
increased financial constraints, future expansion of his 
medium-sized company will not be possible.  He predicts that 
only a handful of companies will survive the conversion 
without suffering economic losses.  Van de Ven said she knows 
of at least 2 companies considering closure and several 
others looking to reduce their operations given their bleak 
expectations for the industry's future. 
 
¶6. (SBU) Private sector reps said the conversion process 
offers few benefits and only increased uncertainty for their 
operations. Van de Ven said that while the FIB has complied 
with GDRC conversion requirements and incorporated 
sustainable forestry management into its mission, the GDRC 
has not reciprocated with any efforts to support private 
sector development - whether through the improvement of 
road/rail/water transport, simplification of the tax system, 
or production incentives.  She reported that FIB companies 
alone have constructed: 101 schools; 34 health centers and 4 
hospitals; nearly 2 km of roads; and over 1,900 homes 
totaling USD 16.5 million.  This comes in addition to over 
USD 50 million FIB claims to have invested in constructing 
other structures for local communities.  Van de Ven expressed 
frustration when noting that, meanwhile, the GDRC is 
preparing to add five new taxes to the forestry industry in 
addition to the 171 which already exist.  ITB and Trans-M 
reps agreed with Van de Ven that the conversion process 
"serves them in no way" and is "only complicating things" in 
the sector.  Most private sector reps felt that by being 
required to make contributions to local development, while at 
the same time paying high taxes, they were being asked to 
take on the GDRC's role. 
 
---------------------------------- 
Civil Society:  Wishful Thinking ? 
---------------------------------- 
 
¶7. (U) Public interest in the DRC's forestry industry focuses 
on concerns for forestry conservation, indigenous rights to 
land resources, and socio-economic development of 
forest-dependent communities.  Of primary concern is the 
redistribution of 40 percent of tax revenues generated by the 
forestry industry to decentralized entities. Representing 
over 800 NGOs, the Congolese Coalition of National 
Environmental NGOs (CRON) has, with USAID/CARPE and the World 
Resources Institute's Global Forest Watch (WRI-GFW), assisted 
communities in selecting representatives to address these 
issues as members of the Technical Working Group (TWG) and 
the Inter-Ministerial Commission (IMC). 
 
¶8. (SBU) CRON's director, Flory Botamba, like World Wildlife 
Fund (WWF) and WRI-GFW officers, indicated that his 
organization received support from the GDRC and believes it 
to be sincere in its desire to work collaboratively with 
civil society.  He said that, with the exception of the FIB, 
CRON had received less cooperation from the private sector. 
While not singling out any particular company, CRON's 
director claimed that he was once physically threatened by a 
private sector representative. 
 
¶9. (SBU) Internal reports by local NGO's involved in the 
community assessment phases of the conversion process listed 
the following obstacles to their work: restricted access to 
concessions; difficulty traveling between concessions; 
language barriers; lack of familiarity by GDRC and community 
reps with conversion process and forestry code; 
intra/inter-communal disputes over shared concessions; 
insufficient funding for assessment work; interference of 
self-serving government deputies; and resistance of local 
communities to participation in the conversion process. 
According to the USAID/Carpe, it would be unrealistic to 
think that communities will be able to raise, address, and/or 
resolve all of their grievances with the commercial logging 
industry through this process. 
 
KINSHASA 00001127  003.3 OF 004 
 
 
 
----------------------------------- 
DRC Government: A Green Revolution? 
----------------------------------- 
 
¶10. (SBU) Stakeholders in both the public and private sectors 
seem to think that the GDRC is serious about forestry sector 
reform; however, many expressed frustration with the approach 
being taken by the administration. Industry experts believe 
that, in addition to the conversion process, the GDRC must 
adopt supportive legislation on decentralization and zoning 
in order to ensure that the goals of economic development and 
improved conservation are realized in the near future. 
 
¶11. (SBU) Successful decentralization is considered by many 
to be a necessary ingredient of a sustainable forestry 
industry in the DRC.  All interviewed fear that without 
legislation to support decentralization in place, revenue 
inflows from industry taxes will not reach local communities 
as intended.  Stakeholders also share a common concern that 
the lifting of the moratorium prior to the creation of proper 
zoning plans will be counter-productive to current 
conservation efforts. (Note: Forestry zoning is particularly 
important for regulating non-commercial uses of forests, such 
as subsistence agriculture, home construction, and firewood, 
which USAID/Carpe says have the greatest impact on 
bio-diversity and forest configurations. End note.) Although 
the 2005 Presidential Decree which established the moratorium 
requires a concession allocation plan for the first three 
post-moratorium years, the GDRC has done little to develop 
such a plan.  The lack of clarity regarding titles granted 
after the 2002 moratorium is an additional source of 
uncertainty and frustration for sector leaders. 
 
¶12. (SBU) In Equateur, one of the most heavily logged and 
poorest provinces in the DRC, the Provincial Coordinator for 
the Ministry of Environment, Mr. Baseka, agreed that the GRDC 
is sincere in its efforts to reform the forestry industry; 
however, he said that the sector was unlikely to become a 
primary source of development for the region -- a view shared 
by Equateur's Governor, Jose Makila, who openly expressed 
disapproval of promoting or expanding commercial forestry. 
(Note: According to Van de Ven, the Governor has refused 
numerous requests to meet with the FIB. End note.) Noting the 
large amount of food imported into the region, both officials 
advocated the development of agriculture for poverty 
alleviation in the province instead. 
 
--------------------------------------------- ------------- 
International Community: Large Investments, Few Guarantees 
--------------------------------------------- ------------- 
 
¶13. (SBU) The GDRC has been able to capitalize on 
international interest in forest conservation within recent 
years and hopes to do so even more in the future, 
particularly as it relates to climate change and carbon 
credits. According to Greenpeace, deforestation is 
responsible for up to 20 percent of carbon emissions 
worldwide. To date, conservation efforts in the DRC have been 
led by USAID/CARPE and the Congo Basin Forest Partnership, 
CBFP  (ref A).  According to CARPE administrators, 
USAID/CARPE alone has devoted over USD 60 million to forestry 
conservation and sector reform in the Congo River Basin. 
 
¶14. (SBU) The UK/DFID, EU, and Canada recently announced 
financial commitments of 50 million pounds sterling (USD 100 
million), 38 million euros (USD 51.6 million), and 24 million 
Canadian dollars (USD 22.7 million) respectively.  While 
exact allocations of these funds have not been determined, it 
is expected that the DRC will receive a significant 
percentage of these grants.  In late June, the German Embassy 
to the DRC also announced it would dedicate 283 million euros 
(USD 384.6 million) to environmental work in the DRC. (Note: 
Germany is a primary stake-holder in the DRC's logging 
industry via the Germany-owned Danzer Group and is next in 
line to assume leadership of the CBFP.  End note.)  In June, 
the World Bank also announced the creation of a USD 250 
million fund to combat deforestation worldwide, but 
especially in the DRC, Brazil, and Indonesia. The Bank has 
already made USD 3 million available to the DRC for 
post-title conversion work.  It also plans to prepare, by 
 
KINSHASA 00001127  004.2 OF 004 
 
 
2009, a grant through the International Development 
Association (IDA) of between USD 30 million and USD 50 
million to help the DRC planand manage its forests. The GDRC 
also hopes to benefit from the G8's Forest Carbon Initiative, 
which will grant developing countries carbon credits for 
prevented deforestation. 
 
¶15. (SBU) Those interviewed were particularly critical of the 
World Bank's role in this process and questioned its 
motivations and management of its funds. Neither private nor 
public sector representatives interviewed had a positive 
impression of the World Bank's role in this process. 
Recalling how grant conditionality had been used by the Bank 
in 2002 to push the GDRC to develop a Forestry Code and set a 
moratorium on logging concessions, private enterprises viewed 
the Bank as a "bully" or undue source of pressure in the 
sector.  Van de Ven was particularly critical of the amount 
of money and time spent on this initiative and the way the 
World Bank's resident forestry expert had "made a mess of the 
situation" through personal mismanagement of information. 
(Note: Public sector reps also questioned the Bank's 
motivation, claiming that its primary interest was commercial 
forest exploitation.  The Bank is criticized by the 
Greenpeace April 2007 report "Carving up the Congo" for 
failing to control the "illegal pillage" of the forest.  End 
note.) 
 
--------------------------------- 
Comment: Not Meeting Expectations 
--------------------------------- 
 
¶16. (SBU) There is broad consensus (within the DRC and 
internationally) that pursuing forestry sector reform is a 
positive and necessary step; however, there is disagreement 
as to whether the current concession conversion process is 
the best way of achieving the goals of private sector 
development, community-based resource management, and 
improved conservation. Unsupported by additional legislation 
on decentralization, privatization, and zoning, the 
conversion process is short-sighted and lacks elements 
necessary for the sector's long-term growth and 
sustainability.  Both private and public sector 
representatives seem to feel that incomplete reforms of this 
nature will only contribute to greater uncertainty in the 
industry. 
 
¶17. (SBU) Comment continued: Given the leadership role played 
by the USG through USAID/Carpe, the CBPP, and in the World 
Bank, the USG is well-placed to support and advocate the 
additional steps needed to promote sustainable forest sector 
reforms in the DRC post-forest title conversion process. 
Lifting of the moratorium on new forestry concessions is 
conditional upon implementation of a necessary, but not yet 
completed, zoning of the nation's forests into conservation, 
logging, and multiple use zones, to be followed by a 
transparent bidding process for new logging concessions.  A 
streamlined tax system for logging that transparently shares 
forestry tax revenues with local communities and the new 
decentralized government bodies is also a near-term priority. 
 Strengthening GDRC management and oversight of forestry 
activities, including awarding of concessions, monitoring of 
logging activities consistent with laws, and good 
environmental stewardship and revenue management, will boost 
investor confidence and create support for sustainable forest 
management.  Investment in physical infrastructure, such as 
roads, railways and ports, is a massive and long-term 
undertaking which will require the concerted effort of the 
GDRC and the international community, but it is critical to 
the success of the forestry industry and to the overall 
development of the economy. End comment. 
BROCK