Congo, Democratic Republic of the (DROC) - Foreign investment

Beginning in 1966, when the Mobutu government began to assert control over the economy, foreign firms with assets and operations predominantly based in the former Zaire were ordered to incorporate under national law and to transfer their headquarters to the country. For a time, a liberal investment code enacted in 1969 encouraged private investments. In 1973, however, Asians and Europeans were barred from any commercial activity in five of the country's eight regions. Shortly thereafter, a deliberate policy of Zairization of the retail sector was introduced. Under these measures, expatriates were barred from a wide range of business activities, mostly in the retail and service sectors. Foreigners affected by this policy were compelled to sell their interests to Zairian nationals, many of whom turned out to be officials of the national party. Many of the new owners had little or no business experience, and quite a few of them simply liquidated the stock and never repaid the low-interest loans extended by the government for acquisition of the businesses. More frequently, Zairization involved some form of mixed ownership, with the government usually the major shareholder but with management remaining in largely foreign hands.

Generally poor results brought new changes. The Congo's investment code of 1979, updated with World Bank advice in 1986, provides packages of tax breaks and duty exemptions for three categories of investment: "General System" ($200,000 to $10 million), "Contractual System" (above $10 million with extra incentives negotiated on a case-by-case basis), and "Special Regimes," (meeting various priorities at different times). The country's complex and arbitrary judicial system made implementation of this legal framework problematical at best.

The ending of the Mobutu regime in May 1997 has solved no problems as corruption and decay has been replaced by successive wars in the renamed Democratic Republic of the Congo (DRC). In 2001, timber investments by firms from Zimbabwe (about $300 million), Germany, Malaysia, and China were reported but for the most part looting of the country's wealth of natural resources—diamonds, gold, timber and tantalite deposits (used in mobile phones), particularly—by rival military groups had taken the place of investment. As of mid-2003 an estimated 3 million had been killed. In June 2002, a three-year standby agreement was concluded with the IMF, but stabilization and welfare spending targets were missed because of the need for increased military spending. The country stands in need of timely and sufficient foreign assistance, but the DRC was ranked third from the bottom of 140 countries on UNCTAD's Inward FDI Potential Index for 1998–2000 with a score of 8.5 out of a possible 100.

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