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P R 011455Z APR 09
FM AMEMBASSY BRAZZAVILLE
TO SECSTATE WASHDC PRIORITY 1333
INFO AMEMBASSY BRAZZAVILLE

UNCLAS BRAZZAVILLE 000097 
 
 
DEPT FOR AF/C LKORTE 
DEPT FOR EB/IFD/OIA 
DEPT PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: OPIC USTR EINV EFIN ETRD ELAB PGOV KTDB CF
SUBJECT: CONGO/BRAZZAVILLE INVESTMENT CLIMATE REPORT 2009 
 
1.REPUBLIC OF THE CONGO - INVESTMENT CLIMATE REPORT - 2009 
 
OVERVIEW: 
 
Located in Central Africa and straddling the equator, the 
Republic of the Congo (ROC) covers an area of 142,000 square 
miles, slightly larger than the State of New Mexico.  Its 
population is estimated at between 3.5 million to 4 million 
inhabitants, with a population density of 8.7 people per square 
kilometer.  The country is bordered by Cameroon and the Central 
African Republic to the north, Angola (the Cabinda enclave) to 
the south, the Democratic Republic of Congo to the east and the 
Republic of Gabon and Atlantic Ocean to the west.  Republic of 
the Congo has three climatic zones: equatorial in the north, 
sub-equatorial in the center and humid tropical in the south. 
 
The country is governed in accordance with the "Constitution of 
January 20, 2002" which calls for a bicameral legislature, 
composed of the Senate and National Assembly; a Judicial Branch, 
represented by the Supreme Court, Court of Accounts and 
Budgetary Discipline, Court of Appeals, and the Constitutional 
Court; and, an Office of the Prime Minister with the 
responsibility to coordinate government activities. 
 
A civil war from 1997-1999, followed by sporadic fighting that 
ended with peace agreements in 2003, destroyed much of the 
country's infrastructure. The government designed and 
implemented an "Interim Post Conflict Program: 2000-2002" 
after an in-depth analysis of the country's economic situation, 
which had deteriorated considerably during the conflict period. 
The program's central objectives were to restore the optimum 
conditions necessary for economic and social revitalization, and 
to rehabilitate all sectors of the economy.  It has been 
financed primarily by the country's own natural resources, 
mainly its oil revenues. The oil sector has been the major 
catalyst for growth for the past three decades, contributing 80 
percent of the country's gross domestic product. 
 
Presidential elections are set for July 5, 2009. President Denis 
Sassou Nguesso, who has ruled intermittently for thirty years, 
is expected to announce his candidacy shortly. 
 
-- Openness to Foreign Investment 
 
During the 1970s and 1980s, the Congolese economy had been 
dominated in large measure by state-owned companies.  However, 
the promulgation of Law 24/94 on August 10, 1994, which 
introduced a framework for privatization, and its addendum, Law 
10/95 introduced on April 17, 1995, which identified specific 
sectors to be privatized, ushered in a new economic era, 
receptive to national, private and foreign investments. 
 
The framework of the laws defines the privatization process 
accordingly: 
 
-  a transfer of property from the government to the private 
sector; 
 
-  a call for private sector capital or expertise managed 
through concessions or contract to conduct a public sector 
activity. 
 
Public companies have been divided into two categories of 
privatization:  (a) the first consists of six major public 
companies supporting the oil, transport, telecommunication, 
water and electricity sectors; and, (b) the second includes all 
other agricultural and industrial companies in the farming, 
forestry, hotel, banking, transport and transit sectors. 
 
The privatization program has suffered delays in its 
implementation due to disruptions in the domestic economy in the 
aftermath of the 1997-2003 war. 
 
As a member of Central African Economic and Monetary Community 
(CEMAC), and by default also affiliated with OHADA (African 
Business Law Harmonization Organization), the Republic of the 
Congo provides more liberal terms and investment guarantees to 
foreign investors than non-members.  Foreign companies based in 
the Republic of the Congo enjoy the same rights and privileges 
as Congolese companies under existing business laws and statues. 
However, Article 11 of Law #19-2005 on November 24, 2005, 
prohibits foreign ownership in the retail and bakery trades and 
urban and long-haul transport sectors, limiting ownership to 
Congolese nationals only.  The ownership law had not fully taken 
effect by close of 2007, however; all existing businesses will 
be grandfathered in and not subject to the ownership rules. 
 
In addition, the Investment Charter, established by Law 6-2003 
on January 18, 2003, offers a range of advantages to foreign 
investors such no discrimination or disqualification on types of 
investment, and equal justice under Congolese law. 
 
Recent indicators show an increase of business exchanges between 
the Republic of the Congo and People's Republic of China.  An 
increasing number of large public works projects, including 
roads, dams, railroads and general construction, are being 
awarded to Chinese companies.  Many other Asian companies are 
investing in the forestry sector. 
 
The judicial system upholds the sanctity of contracts; parties 
 
-- Conversion and Transfer Policies 
 
The Republic of the Congo is a member of the French Franc Zone 
(Communaute Financiere Africaine - CFA), a member of the Central 
African Monetary Union (UMAC) and the Bank of the Central 
African States (Banque des Etats de l'Afrique Centrale - BEAC). 
BEAC serves as the Central Bank for Cameroon, Central African 
Republic, Chad, Republic of the Congo, Equatorial Guinea and 
Gabon. 
 
The common currency used in Republic of the Congo and other 
African nations of the French Franc zone, including UMAC 
members, is the CFA Franc (CFA F).  The CFA F is linked to the 
Euro and considered as an intervention monetary unit at a fixed 
exchange rate of 0.001524 Euro/CFA franc.  This agreement 
guarantees the availability of foreign exchange and the 
unlimited convertibility of the CFA franc.  It also provides for 
considerable monetary stability to the Republic of the Congo and 
other countries of the region. 
 
Funds are freely transferred within the French franc zone and 
there are no restrictions on importing foreign capital into the 
ROC. 
 
-- Expropriation and Compensation 
 
During the 1970s and 1980s, the political landscape of the ROC 
was marred by turbulent policies and Marxist-Leninist ideology 
which led to nationalization of private companies and the 
departure of many foreign investors. However in 1992, the ROC 
completed a transition to multi-party democracy, and its former 
economic and political views moderated considerably following 
the collapse of the Soviet Union. 
 
The current government is eager to attract investors and to 
achieve privatization of most state-owned companies. 
 
There is no evidence that foreign investors are discriminated 
against in any fashion or have been subjected to expropriation 
of assets.  Foreign and national firms established in Republic 
of the Congo operate on an equal basis. 
 
-- Dispute Settlement 
 
The majority of foreign and U.S. private companies based in the 
Republic of the Congo are invested in the oil and timber 
sectors.  Relations between the government and oil companies are 
regulated on the basis of Production Sharing Agreements (PSAs). 
Although there have been some reports of constraints on recovery 
of  VAT reimbursements or customs fees, very few private 
investment disputes involving foreign businesses have been 
lodged in recent past years.  Most cases stem from companies 
purchasing Congolese debt in secondary markets.  For example, in 
2005, there was a dispute between the Republic of the Congo and 
a US investor who purchased Congolese debt in a secondary 
market.  The investor, who claimed that the Republic of the 
Congo defaulted on the debt, won a judgment in US courts in 
April 2005. 
 
The Republic of the Congo is a member of the World Trade 
Organization (WTO) and is party to other international treaties 
governing trade and commerce.  Binding international arbitration 
of investment disputes is accepted. 
 
Public Law 6-2003, which established the country's Investment 
Charter, states that investment disputes will be subject to 
settlement under Congolese law.  However, independent settlement 
or conciliation procedures can be adopted by the parties. These 
procedures are governed by or arbitrated under: 
 
- the convention regulating the Community Justice Court; 
 
- the treaty of October 17, 1993, implementing the African 
Business Law Harmonization Organization (OHADA); 
 
- The International Center for the Settlement of Investment 
Disputes (ICSID). 
 
-- Performance Requirements and Incentives 
 
Presidential decree No: 2004-30 of February 18, 2004, defines 
the requirements for foreign and national companies to benefit 
 
from incentives offered by the Congolese Investment Charter. 
Four types of incentives are considered: 
 
(a) Incentives to export. 
 
(b) Incentives to reinvest the company's profit in the Country. 
 
(c) Incentives for business implementation in remote areas or 
areas which are difficult to access. 
 
(d) Incentives for social and cultural investment. 
 
In the oil and forestry sectors, companies are required to 
respect the environment, particularly regarding water pollution 
safeguards and forest regeneration.  All forestry companies, 
both foreign- and locally owned, are also required to process 85 
percent of their timber in the country and to sell it abroad as 
furniture or otherwise transformed wood.  Companies are allowed 
to sell just 15 percent of their wood production as natural 
timber. 
 
There are no known performance enforcement procedures for 
foreign companies.  There are no known restrictions on U.S. or 
other foreign firms from participating in Congo-government 
financed or subsidized research and development programs. 
 
-- Right to Private Ownership and Establishment 
 
The law stipulates that each individual, without distinction of 
nationality, residing in the territory of the Republic of the 
Congo, has the right to establish a business in agriculture, 
mining, industry, forestry, handicrafts, commerce or services in 
accordance with existing policies.  Local and foreign investors 
have the right to own and establish lawful business enterprises 
and all forms of remunerative activity. 
 
The Republic of the Congo guarantees the legal right and freedom 
of private business to: 
 
- import or export raw materials or products, equipment and 
materials necessary for economic activity; 
 
- define their own production, commercial and hiring policies 
and, 
 
- select suppliers and customers and set prices. 
 
Given these guarantees, the Republic of the Congo should be one 
of the more progressive and open economies in the Central 
African region to encourage and promote foreign private business 
development.  At present, oil, timber and some commerce are 
either operated or controlled by foreign investors. 
 
-- Protection of Property Rights 
 
As a member of the Central African Economic and Monetary 
Community (CEMAC), Congo is automatically a member of the 
African Intellectual Property Organization (AIPO). AIPO is 
charged with issuing a single copyright system which is 
enforceable in all CEMAC member states.  As a member of the 
World Trade Organization (WTO), Congo is conforming its 
legislation to trade-related aspects  governing intellectual 
property. 
 
The Ministry of Commerce and other interested departments work 
together to address issues related to counterfeit products and 
other items entering the country illegally. Containers of 
contraband items, such as medical supplies and food products, 
are frequently seized and destroyed by local authorities. 
 
-- Transparency of the Regulatory System 
 
Transparency in the government's economic management system is 
an ongoing concern.  The Public Finance Law of 2000 governs 
transparency and public management. 
 
Recognizing that sustained progress in good governance is a key 
condition to the country's development, the government continues 
to implement a "Transparency and Good Governance Project."  The 
principal objectives of the project, originally funded by the 
World Bank in 2002 at USD $7.5 million, included transparency in 
the budget process; management of natural resources; capacity 
building in the government and civil society; support for 
re-establishment of basic public services, particularly health 
and education; and combating the spread of HIV/AIDS. 
 
There is still need for improvement in the areas of transparency 
and economic management, a key area of concern with the IMF and 
the World Bank in the ongoing discussions regarding debt relief 
for Congo under the Higher Indebted Poor Countries (HIPC) 
initiative. IMF and other international organizations remain 
critical of the government's inability to explain budgetary and 
oil revenue spending. 
 
In the near term, the oil sector will likely remain the key 
contributor of revenue to the state treasury. Therefore, the 
focus on full mobilization of oil revenue is essential if the 
government hopes to strengthen its fiscal situation and to 
implement poverty reduction programs which will benefit the 
population. 
 
-- Efficient Capital Markets and Portfolio Investment 
 
The Republic of the Congo does not have a stock exchange. 
Monetary and credit policies are conducted by the BEAC in the 
regional context of CEMAC. The main objective is to ensure the 
stability of the common regional currency. 
 
The privatization of Congo's main commercial banks has been 
completed; however their financial health remains fragile.  The 
Congo's economy is predominantly cash-based and commercial banks 
service only a small segment of the market. 
 
The weak banking sector impedes the flow of credit to small 
businesses, and appears to be a major constraint to the 
country's economic growth and development. 
 
-- Political Violence 
 
The young Congolese democracy, established during a National 
Conference in 1991, experienced severe trials in the early 1990s 
and eventually led to civil war which destroyed major portions 
of the city's infrastructure in Brazzaville in 1997-1999. 
 
A tense period of unrest ensued as militias loyal to the former 
President Pascal Lissouba, the former Prime Minister Bernard 
Kolelas, and President Sassou-Nguesso vied for control of the 
country.  Peace accords were signed in 2003 and stability has 
returned, although some areas of the country remain volatile. 
 
By late 2007, Sassou-Nguesso had offered a general amnesty to 
his former adversaries and adopted a political platform focused 
the nation's attention on peace and reconciliation, political 
unity, and economic and social development.  Kolelas has 
returned to the country but Lissouba has not.  The next 
presidential elections will be held in July, 2009. 
 
-- Corruption 
 
Corruption remains a major constraint to the Congo's economic 
development. The Anti-Corruption Ministry, established in 1999, 
did not have its mandate renewed in 2004, after a government 
reshuffle.  To date, no corruption case has been brought before 
the current oversight body, the Court of Accounts and Budgetary 
Discipline. 
 
Congo's formal economy is based primarily on the petroleum 
sector.  Oil revenues represent more than 70 percent of the 
country's total export revenue.  However, oil sector revenue 
management is still somewhat opaque and is thus widely believed 
to be subject to corruption. 
 
In November 2007, the London Club forgave 77 percent of the 
country's debts, or about USD $643.3 million.  Also in November 
2007, the country was readmitted to the Kimberley Process, 
allowing diamond exports to resume.  The Republic of the Congo 
had been suspended from the Kimberley Process in 2004 after 
audits showed its exports were vastly greater than diamond 
production capacity.  Current diamond capacity is estimated at 
5,000 carats with a potential for 50,000 to 70,000 carats. 
 
The Republic of the Congo continues to be subject of several 
lawsuits by companies or firms who purchase debt on the 
secondary markets.  In November 2005, the High Court of Great 
Britain ruled in favor of a creditor which had seized assets 
belonging to the international trading company Glencore.  The 
judgment revealed egregious conflict of interest issues 
involving the director of SNPC, the State Oil Company, and 
senior Republic of Congo officials.  These individuals were 
charged with selling the state's oil through an elaborate web of 
offshore trading companies. In 2007, SNPC won an appeal of a 
similar creditor's lawsuit, when the U.S. Second Court of 
Appeals ruled on procedural grounds that the Foreign Sovereign 
Immunity Act applied to SNPC, thus 
limiting a claim filed by Kensington International Limited; the 
case remains active in other U.S. and European courts. 
 
The Republic of the Congo, granted Heavily Indebted Poor 
Countries (HIPC) status in 2006, is currently engaged in 
negotiations on repayment agreements to its international 
creditors, and debts owed to the members of the Paris Club, who 
also have forgiven the lion's share of the country's debt. 
However, HIPC completion point has not yet been reached. 
 
Corruption has not been specifically identified by U.S. 
companies as an obstacle to investment in the Republic of the 
Congo. 
 
There is no known enforcement of criminal laws against paying 
bribes, but the practice is believed to be widespread; no 
company is known to deduct corrupt payments from its taxes 
because bribes are not considered official or legal. 
 
-- Bilateral Investment Agreements 
 
On February 12, 1990, the Republic of the Congo signed a 
Bilateral Investment Treaty with the United States.  The treaty 
entered into force on August 13, 1994.  Bilateral investment 
agreements with France and China have been in place for many 
years, as well as fiscal agreements with other CEMAC countries. 
 
Commercial and bilateral agreements to safeguard investments 
have been signed with several African nations, including South 
Africa in 2005 and Namibia in 2007. 
 
-- OPIC and Other Investment Insurance Programs 
 
The overseas Private Investment Corporation (OPIC) is active in 
the Republic of Congo with a political risk insurance program 
covering MINOCO (Minoterie du Congo SA), a flour mill company 
owned and operated by the Seaboard Corporation.  The Republic of 
Congo is also a member of the Multilateral Investment Guarantee 
Agency (MIGA). 
 
--  Labor 
 
The state civil service bureaucracy is the country's largest 
employers, with an estimated 62,000 employees.  The World Bank 
and other international lending institutions have pressed for 
reform in public sector hiring practices.  Unemployment among 
Congo's youth is approximately 40 percent, as workers seeking to 
leave behind the rural agricultural economy find limited 
opportunities in urban centers, state-owned enterprises and 
public service. 
 
Except for members of the police, gendarmerie and armed forces, 
the Congolese Constitution provides workers with the right to 
form unions and to strike, subject to conditions established by 
law.  The Labor Code allows for collective bargaining; however, 
it is not widespread due to the social and economic disruption 
and extreme hardship that occurred during much of the 1990s.  A 
2001 labor agreement, "Social Truce," renewed in 2005, was 
opposed by some labor organizations, mainly the teachers' union, 
which called a strike to obtain back-payment of salaries from 
the Government. 
 
The Labor Code states that a standard work period should not 
exceed 40 hours per week. 
 
--  Foreign Trade Zones/Free Trade Zones 
 
As a member of the Central African Customs Union (UDEAC), the 
Republic of the Congo belongs to a free trade zone which 
includes Cameroon, Central African Republic, Chad, Equatorial 
Guinea and Gabon.  Within this zone, imports are subject to very 
low or no customs duties.  The CEMAC zone is also considered as 
a preferential trade area, for Congo and other member countries. 
 
There are no foreign trade zones or free ports established in 
the country, however, this issue is currently under 
consideration by the Ministry of Commerce. 
 
--  Foreign Direct Investment Statistics 
 
The Congo's economy relies primarily on exploitation of natural 
resources rather than industrial production, and foreign direct 
investment is concentrated in the oil and forestry sectors.  The 
government has increased its investment promotion activity in 
the communication and banking sectors, and investments in both 
sectors have been rising. 
 
The total Republic of the Congo trade with the U.S. was US 
$698,078,976 in 2008. Total U.S. exports were $63,670,461 while 
imports were valued at $634,408,515.  The 2008 trade balance 
with the U.S. was negative $570,738,054. 
 
According to recently released figures by the International 
Monetary Fund (IMF), the Nominal GDP was CFCA 4,800 billion = US 
$10 billion in 2008. The IMF also reported that GDP per capita 
was US$2,400 in 2008. 
 
Real GDP grew at an estimated rate of 2.8 percent in 2008, 3.7 
percent in 2007, 6.1 percent in 2006 and 7.8 percent in 2005. 
 
There were no figures available for 2008 U.S. FDI stock flow in 
Republic of the Congo or Republic of the Congo FDI stock flow in 
the U.S. 
 
Following are major companies registered as foreign businesses 
by the Congolese Chamber of Commerce. 
 
Agriculture and Industry 
 
A)      Oil Sector: 
-       Chevron Overseas 
-       CMS Nomeco Congo 
-       Congorep 
-       Eni Congo 
-       Total 
-       Zetah Congo 
-       Puma International 
-       X-Oil 
-       Total Congo 
-       Murphy Oil 
 
B)      Forestry sector: 
-       CIB 
-       Cristal 
-       IFO 
-       Likouala Timber 
-       Thanry Congo 
-       Congo Timber 
-       FORALAC 
-       MAN FAI TAI 
-       TRABEC 
 
C)      Banking sector: 
-       Credit Lyonnais 
-       Banque Congolaise Internationale 
-       ECOBank 
-       La Congolaise de Banques 
-       BGFIBANK 
 
D)      Communication sector: 
-       AFRIPA Telecom Congo 
-       Zain (formerly Celtel Congo) 
-       Ets. Temi 
-       MTN 
-       Warid Telecommunication 
 
 
EASTHAM