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World Trade Organization |
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WT/TPR/G/169 23 August 2006 | |
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(06-3910) |
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Trade Policy Review Body |
Original: French |
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TRADE POLICY REVIEW Report by Republic of the Congo |
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Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statement by the Republic of the Congo is attached. |
Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on the Republic of the Congo.
CONTENTS
Page
I. introduction 5
II. SOME CURRENT ECONOMIC DATA 5
II.1 General 5
II.2 Activities in various sectors 7
(a) Agriculture and livestock 7
(b) Forestry 8
(c) Industry 8
(d) Mining and energy 9
(e) Services 9
(f) Social sector 10
III. REFORMS under way 10
IV. OUTLOOK 14
I. introduction
1. Since the late 1990s, the Government of the Republic of the Congo has been implementing an economic and social development policy based on market economies and promotion of the Congolese private sector.
2. This is a long process that focuses on phasing out the old macroeconomic management mechanisms inherited from many years of essentially State-controlled practices.
3. The main aim is to create a social and economic environment freed of the dead weight inimical to the creation of businesses in the Congo.
4. In view of the political system's involvement in the choice of the economic strategies to be adopted, the Government, in parallel, has introduced reforms that have led to the establishment of democratic institutions, deemed to be a guarantor of good governance.
5. To back up all these domestic actions, the Republic of the Congo is playing an active role in consolidating subregional integration through the adoption of measures on the free movement of persons and goods and, in the long term, the creation of common markets within the African Union, the Economic Community of Central African States (CEEAC) and the Central African Economic and Monetary Community (CEMAC).
6. All these efforts should contribute to:
- Building domestic production capacity;
- diversifying the Congolese economy;
- enhancing the competitiveness of businesses; and
- the inflow of foreign direct investment, etc.
7. As regards investment, the Congo has adopted a regulatory framework that is extremely favourable to foreign investors and protects their rights. It should be noted in this connection that the Congo is an important magnet for investment because of its immense and as yet untapped economic potential.
II. SOME CURRENT ECONOMIC DATA
II.1 General
8. The Republic of the Congo, a Central African State, straddles the equator and covers an area of 342,000 km2. It has a coastline of 170 km.
9. The territory of the Congo is bounded by Cameroon and the Central African Republic to the north; the River Congo to the east; the Democratic Republic of the Congo and Angola to the south; the Atlantic Ocean to the south-west and Gabon to the south.
10. The relief is fairly flat; the climate is hot and humid and average rainfall is 1,500 mm. Temperatures are of the order of 25o. The Congo has a highly diverse hydrographic network, comprising a number of rivers.
11. The Congo's population is currently estimated to be 3.7 million, most of whom live in the following cities: Brazzaville (the capital); Pointe-Noire; Dolisie; Nkayi; and Ouesso.
12. Per capita GDP is around US$1,300. Life expectancy is estimated to be 53 years, and the fertility rate is 6.07 births per woman.
13. As mentioned in the introduction, in addition to its oil reserves, the Republic of the Congo has abundant natural resources, including many species of timber, large expanses of arable land, an extensive hydrographic network, fisheries resources, and inestimable plant and animal resources.
14. Despite all these resources, the Government is still unable to create a viable economic base capable of boosting the development and well-being of the population.
15. The numerous efforts made by the Government since the Congo became independent have come up against many internal obstacles, mainly in the form of social conflict but also the negative international economic environment.
16. Today, the majority of Congolese citizens still live in extreme poverty. Drinking water, primary health care and basic services are desperately lacking in towns and rural areas. In some places, young people find it difficult to obtain access to education and unemployment is rising inexorably.
17. This dramatic situation has not, however, dampened the enthusiasm of the Congolese people, determined as they are to confront the challenges of developing their economy and achieving well-being for all.
18. For this purpose, the Congo is undertaking internal reforms in all sectors of the domestic economy so as to create a new catalyst for development.
19. Abroad, the Congo is reactivating and strengthening its cooperation with bilateral and multilateral partners.
20. The following should be mentioned in this connection:
- The reactivation or signature of trade agreements with partners in Africa, Europe, Asia and the Americas; and
- active Congolese participation in negotiations at the World Trade Organization and with the European Union in connection with implementation of the Cotonou Agreement.
21. The Congo is also one of the eligible countries under the African Growth and Opportunity Act (AGOA) and therefore regularly participates in the various ministerial conferences organized within this framework.
22. As far as regional integration is concerned, the Congo contributes to the formulation of policies to strengthen the economic integration of member countries of the African Union (AU), the CEEAC and the CEMAC.
23. The Congo is currently a member of the CEMAC Customs Union and the free-trade area of the CEEAC member States.
24. Lastly, since the late 1990s, the Congo has held substantive negotiations with the IMF and the World Bank with a view to obtaining the support it needs to revive its economy.
25. These negotiations concern a programme to reduce the public external debt, currently considered a real bottleneck because of its size.
26. All these actions will only be able to deliver their full potential if they receive vital support from the international community.
27. The following picture emerges from an observation of the various sectors of activity:
II.2 Activities in various sectors
(a) Agriculture and livestock
28. During the 1960s, 80 per cent of the population earned a living from agriculture, compared with 40 per cent today. Congolese agriculture employs some 300,000 people, 70 per cent of them are women. The sector produces a number of food crops for export, including coffee, cocoa and cane sugar exported to Europe under the Sugar Protocol (13,000 tonnes annually), with 7,280 tonnes going to the United States of America.
29. The agricultural sector's contribution to economic development has declined, from 27.1 per cent of GDP in 1960 to 6.7 per cent at present.
30. The agricultural sector is facing the following constraints:
- Degradation of the communications and energy infrastructures in rural areas;
- low level of investment;
- lack of organization among producers;
- absence of storage and processing structures; and
- competition from subsidized imports.
31. As far as the latter are concerned, the Congo has already suffered the effects of agricultural subsidies, notably the closure of poultry farms in 1975 and 1980 and, more recently, the abandonment of groundnut plantations and palm groves, which face strong competition from lower-cost vegetable oil imports.
32. In addition, the agro-industrial sector, previously dominated by five products, i.e. tobacco, oil palms, groundnuts, maize and sugar cane, now only produces a single product (sugar cane).
33. Congolese agriculture is today threatened by another problem, this time related to the impact of the European Union's new sugar regime.
34. The measures taken by the European Union to lower ACP sugar prices will undoubtedly harm the industries of developing country parties to the Sugar Protocol, such as the Congo.
35. Because of all these problems, the Congo's production of food crops falls far short of domestic demand, thus encouraging a high volume of imports.
36. It should be noted in this connection that the annual volume of Congolese food imports stands at CFAF 100 billion, out of a total of CFAF 600 billion for all imported goods.
(b) Forestry
37. The forestry sector was the engine of the national economy during the 1950s, 1960s and 1970s, accounting for 85 per cent of export earnings and over 10 per cent of the GDP.
38. This sector has now been largely overtaken by oil, which accounts for 47 per cent of GDP formation compared to 2 per cent for timber.
39. The Congo's forests comprise some 20 million hectares of natural forest (60 per cent of Congolese territory) and 90,000 hectares of plantations.
40. In the case of natural forest, 13 million hectares are exploitable and 7 million hectares are in flooded areas. Although some mountainous areas are showing signs of depletion, the natural forest can yield 2 million cubic metres of timber annually.
41. The most common species are: okoumé, limba, sapeli, moabi, bilinga, kambala, wengué, etc.
(c) Industry
42. In recent years, the industrial sector has seen its share of GDP decline, from 14.9 per cent in 1979 to 8 per cent at present.
43. The sector is composed of the following industries:
- Food industry: mainly producing cane sugar, beer and non-alcoholic beverages, bakery and dairy products, mineral water and wheat flour.
- Timber industry: composed of some sawmills and veneer plants.
- Building materials industry: the major enterprise is the Société nouvelle des ciments du Congo – SONOCC (Congolese New Cement Company).
- Chemical industry: with an oil refinery (Congolaise de Raffinage de Pétrole – CORAF (Congolese Oil Refining Company)), a plant manufacturing lubricants and industrial gas, small factories making paints, plastic foam and soap.
- Metal processing and engineering industries: comprising different types of plant producing, for example, corrugated sheets, nails and kitchen utensils, galvanized tubes and pipes.
- Other industries: the development of other industries, for example, cigarette manufacturing, faces a number of constraints such as the constricted domestic market, the high cost of production factors, the lack of urban and rural communications infrastructures, and the scarcity of electric power, etc.
(d) Mining and energy
44. The mining and energy sector is dominated by petroleum. The latter's share of the GDP was less than 2 per cent up to 1971, but since 1973, with the commissioning up of the first offshore well in 1972 and the oil price shock in 1973-1974, it has seen unprecedented growth.
45. Annual output of crude oil has risen from 2 million tonnes in 1974, 5.6 million tonnes in 1986, 10 million tonnes in 1996, to some 13 million tonnes at present.
46. Oil plays a vital role in the Congo's economy. This sector's earnings are crucially important as they account for 66 per cent of government revenue, over 47 per cent of the GDP and close to 90 per cent of export earnings.
(e) Services
47. Despite the boom in the petroleum sector, since the 1970s the services sector has become one of the most important in the Congo from the point of view of both its contribution to the GDP and the take-up of labour.
48. The services sector's share of GDP formation is undoubtedly smaller than in the 1970s (59 per cent), but still remains high (31 per cent) compared to the agricultural and industrial sectors.
49. The following are the various types of service supplied locally:
- Telecommunications: for over three decades the telecommunications sector was the monopoly of a State-owned enterprise, the Office National des Postes et Télécommunications – ONPT (National Posts and Telecommunications Office). The Congo has a very low density of fixed telephone lines, less than one line per 100 inhabitants.
- Since 1995, opening up to competition has led to the emergence of three new private mobile telephone operators, which serve large urban centres.
- Despite an increase in the number of subscribers between 1999 and 2000, the sector is still rundown and offers only limited and unbalanced coverage of national territory. Furthermore, the technical telecommunications equipment is antiquated and inadequate (particularly in rural areas).
- Transport: this comprises:
- Road transport, with some 17,289 km. of roads, of which 1,264 km., or 7.3 per cent, are paved.
- Rail transport, with the 512 km. Congo-Océan Railway (CFCO) and the old 285 km. line linking the Congo to Gabon.
- River transport along the River Congo.
- Maritime transport, which handles 85 per cent of the Congo's exports and imports out of the city of Pointe-Noire.
- Air transport, with two international airports (Brazzaville and Pointe-Noire) and 22 secondary airfields.
50. In general, the transport infrastructure is very rundown because of the destruction caused by the civil wars and lack of maintenance. This situation has jeopardized the Congo's previously recognized role as a country of transit.
- Tourism: the Government has promoted the establishment of hotels needed to receive business travellers to the detriment of leisure facilities for holidaymakers, even though there are important classified sites throughout the Congo, the most famous of which are the River Congo, the Nwabale-ndoki reserve, the Diosso Gorges, etc.
51. All categories combined, there are 452 hotels, some of which are State-owned and currently undergoing privatization.
- Electricity: the Congo has vast hydroelectric potential, estimated at over 2,500 Mw., but only the Moukoukoulou (74 Mw.) and Djoué (15 Mw.) hydroelectric facilities are in operation. There are also some small stations generating 100 to 1,000 KVA in the departmental capitals. Total installed capacity is 94 Mw. Given the scale of the needs, there is an undeniable shortage of electric power.
- Water resources: All urban communities have a drinking water supply network that is more or less operational. The total installed storage capacity is 26,050 m3 whereas production is only 6,067 m3.
- Of the estimated demand for 100 million m3 of water, only 36 million m3 is supplied to the population, corresponding to 36 per cent coverage. The Société Nationale de Distribution d'Eau – SNDE (National Water Supply Company), a State-owned enterprise, is the subject of a rehabilitation and privatization programme.
- Financial services: The breakdown of the State banking system in 1974 prompted the State to introduce reforms that have led to the creation of four privately owned banks.
52. As regards insurance, the unsatisfactory performance of the only State-owned company (Assurance et Réassurance du Congo (Congolese Insurance and Reinsurance)) has led the Government to liberalize the sector.
(f) Social sector
53. At the social level, the main feature is the deterioration in health and educational services, cultural and sports activities, as a result of the numerous conflicts in the Congo.
III. REFORMS under way
54. Confronted with this unsatisfactory situation, the Government has taken several steps to accelerate economic development and improve the population's well-being. These include the following:
- Rehabilitation and continued establishment of basic infrastructures;
- building up investment capacity in social sectors (health, education, social welfare);
- creating jobs for young people (by boosting agriculture and promoting investment in industry and services); and
- institutional and legal reforms.
55. The strategy adopted by the Government is set out in two programmes:
- The Programme intérimaire post-conflit – PIPC (Post-conflict interim programme) 2000-2002; and
- preparation of the Poverty Reduction Strategy Paper (PRSP).
56. Concerning these reforms, the Government is currently endeavouring to create an attractive economic environment, with focal points in the following sectors:
Trade
57. In this sector, the reforms relate to:
- Enactment of Law No. 19-2005 of 24 November 2005 regulating the exercise of the profession of trader in the Republic of the Congo.
- The main provisions of this Law include:
- Reaffirmation of the freedom accorded to any Congolese or foreign natural or legal person to engage in business;
- introduction of some restrictions, for example, concerning import and wholesale distribution activities, henceforward reserved to legal persons engaged in trade; and
- ban on import and export trade by transit companies.
58. The law on imports and exports has been revised to take account of WTO principles and Agreements, the economic reforms undertaken within the CEMAC, and recent domestic economic policy decisions.
59. The purpose is also to protect the domestic economy from certain external factors such as smuggling, counterfeiting and inflation.
60. The new law on imports, exports and re-exports in the Republic of the Congo provides for two (2) trade regimes:
- The import declaration regime, which establishes the principle of freedom to import goods and services without any quantitative restrictions; and
- the special import authorization regime, which, where applicable, concerns certain goods and services subject to temporary restrictions.
61. The import licensing regime provided for in earlier legislation has been abolished.
62. The other reforms relating to trade and business come under laws still being prepared, such as the laws regulating competition and consumer protection.
63. As to preshipment inspection, a contract for the verification of imports and exports was signed with the company COTECNA on 22 March 2006.
Negotiations on the WTO Agreements
64. The Congo takes an active part in the negotiations on the Doha Agenda and, within this framework, supports all measures directed towards objectives pursued by developing countries as a whole. These include the following:
- Elimination of the agricultural subsidies granted by developed countries;
- "measured" lowering of customs tariffs taking into account the interests of poor countries;
- free access to the markets of industrialized countries for developing countries' manufactures and/or agricultural products;
- enhanced technical assistance;
- access to essential medicines for those who most need them;
- enhanced special and differential treatment;
- promotion of aid for trade; and
- trade facilitation.
Negotiations on the ACP-EU Partnership Agreements
65. The Congo belongs to the Central African geographical formation that is to sign an EPA with the European Union.
66. This formation is composed of the six CEMAC States plus São Tome and Principe and the Democratic Republic of the Congo (DRC).
67. A road map for the negotiations has been signed jointly by the two parties and is being followed more or less normally.
68. A number of stages in the current negotiations have already been completed, for example:
- Several impact studies have been conducted;
- information and training seminars for negotiators have been held; and
- some measures to strengthen subregional integration and supply capacity have been defined.
69. As regards building supply capacity, some problems still have to be overcome in relation to the upgrading of the subregional economies.
Investment
70. The relevant law reaffirms the freedom to engage in business, guarantees the repatriation of profits made by foreign companies and prohibits any discriminatory practices that hamper free competition.
71. In addition, the process of privatizing State-owned enterprises and strengthening the institutional framework for business is going ahead steadily.
Agriculture and forestry
72. Because of its economic importance and considerable potential, agriculture is deemed a key sector for growth and poverty reduction.
73. The Government intends to develop the sector along three lines:
- Diversification and processing of domestic products;
- renewal of a special mechanism to finance rural activities; and
- promotion of income-generating non-agricultural activities, including handicrafts and eco-tourism.
74. The Government wishes to ensure sustainable management of forest ecosystems that contribute to development, together with conservation of biological diversity and the stability of the national environment as a whole.
75. This policy is set out in Law 16/2000 of 20 November 2000 containing the Republic of the Congo's Forest Code.
76. In addition, the Government has taken steps to enhance receipts from forestry operations by applying a felling tax, a tax on the export of forestry products, a surface area tax, a deforestation tax and an export surcharge.
77. A programme for the preparation of forestry management plans was introduced in 2000.
Petroleum
78. The reforms carried out in this sector concern the following, inter alia:
- Division of downstream petroleum activities into eight branches: refining, storage and transport, storage at sea, fuelling of aircraft, lubricants, gas, distribution, and imports;
- creation of the Société nationale des pétroles du Congo – SNPC (Congolese National Oil Company), responsible for marketing the Congolese State's share of crude oil under production-sharing agreements; and
- exclusion of CORAF from the privatization programme so that it can be restructured and reorganized beforehand.
Water and electricity
79. The Société Nationale d'Electricité - SNE (National Electricity Company) and the SNDE belong to the first group of companies to be privatized.
80. The tendering procedure initiated in July 2001 with a view to granting concessions for these companies was unsuccessful because of the amount of the investment required to upgrade their industrial infrastructures. Consequently, two essential measures were taken, namely:
- Preparation of the programme for the rehabilitation of the water and electricity infrastructures with the World Bank; and
- launching of the emergency programme for reorganizing the management of the SNE and the SNDE.
Transport
81. Reforms in this area concern:
- The CFCO, concerning which the tendering procedure for the grant of a concession was declared unsuccessful on 27 August 2004. The continuation of the process depends on the outcome of the option adopted by the Government, namely, to negotiate directly with the last two candidates that made bids;
- the river ports of the former Agence Transcongolaise de communication – ATC (Transcongolese Communications Agency), which are being appropriately restructured;
- the autonomous maritime port of Pointe-Noire, which has been the subject of a priority financing programme;
- the autonomous river port of Brazzaville, which is still seeking financing for its redevelopment programme; and
- river transport, for which the only bid, by the private company NBTL, is under consideration.
Posts and telecommunications
82. The telecommunications sector has been liberalized, but the Société des postes et d'épargne du Congo – SOPECO (Congolese Posts and Savings Company) is still a State-owned entity and will be restructured, with the help of the World Bank.
IV. OUTLOOK
83. An overall evaluation of economic activities shows that considerable efforts are still required in order to create the conditions needed for genuine development of the Congo's economy.
84. In order to do this, the Government is proposing in the short and medium terms to continue implementing the commitments contained in the domestic policy programme adopted five years ago. These include the following:
- Transforming economic insecurity and instability into steady economic growth by diversifying and modernizing the production base;
- supporting the creation and development of private enterprises;
- promoting the Congolese economy's integration into the subregional and international economic system;
- developing and modernizing the agricultural sector by building the necessary infrastructure;
- creating a genuine domestic industry based on the development of local resources;
- developing the Congo's tourism assets through eco-tourism in reserves and natural parks, cruise ship tourism on the River Congo and its tributaries, adventure tourism throughout the Congo and beach tourism on the Atlantic coast;
- creating free zones capable of attracting foreign investors;
- providing the country as a whole with viable infrastructures;
- in-depth reform of the State through good governance, restoration of the State's authority and transparency in the management of public affairs;
- introduction of administrative decentralization;
- continued reorganization and diversification of the financial system;
- developing trade and economic cooperation with other countries in the world; and
- pursuing negotiations on the WTO Agreements with the other members of the G90 in order to exert an influence on the final decisions concerning the conclusion of the Doha Agenda.
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