0104 \ AE13 [ Vol. 1 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION THE CONGO'S ECONOMY: EVOLUTION AND PROSPECTS N DEMOCRATIC REPUBLIC OF THE CONGO z DJ j (in three volumes) C ° Z m VOLUME I > -11 --I w 0~ MAIN REPORT i > 0< D m m N" I December 8, 1970 Caatern Africa Department CURRENCY EQUIVALENTS AND UNITS From November 6, 1961 to November 9, 1963 Unit - Congolese franc (CF) US$ 1 CF 64, From 'November 9, 1963 to June 23, 1967 Unit - Congolese franc (CF) US$ 1 CF 180 (selling rate) US$ 1 CF 150 (buying rate) After June 23, 1967 Unit - Zaire (Z) equals 1,000 CF US$ 1 = zo.5 INTERNATIONAL BANK FfOR RECONSTRUCTION AND DEVELOPM>1ENT FILE C opyESTRICTED R71-62 FROM: The Secretary March 29, 1971 DEMOCRATIC REPUBLIC OF THE CONGO There is attached for information a copy of a report entitled "The Congo's Economy: Evolution and Prospects - Democratic Republic of the Congo" (AE-13a), in three volumes, dated December 8, 1970, as follows: Volume I - Main Report Volume II - Agriculture Volume III - Thansport This report has been made available to the Congo Consultative Group (CON(K) 71-1). Distribution: Executive Directors and Alternates -*President *P:csident's Council *Executive Vice President, IFC Vice President, IFC Department Heads, Bank and IFC *Without attachment Foreword This report was prepared for a first meeting of the Consultative Group on the Democratic Republic of the Congo. It therefore gives some basic background information on the country as well as an account of recent economic trends and of development prospects. It was written following an economic mission in May-June 1970, consisting of Messrs. A. Van Nimmen and M. Hyde (FAO), but draws heavily upon the Bank's economic report dated November 1968. TABLE OF CONTENTS Page No. BASIC DATA SUMMARY AND CONCLUSIONS i :1 INTRODUCTION: THE COUNTRY, ITS POPULATION, POLITICAL AND ECONOMIC STRUCTURE 1 Geography 1 Natural Potential 1 Political Situation 2 Population Growth and Distribution 3 Structure of the Economy 4 II POST-INDEPENDENCE POLITICAL AND ECONOMIC DEVELOPMENT 9 Circumstances Attending Independence 9 Years of Strife 9 Progressive Pacification 10 Tiie Monetary and Fiscal Reform 11 III ECONOMIC DEVELOPMENTS SINCE JUNE 1968 16 Economic Growth 16 Sectoral Developments 17 Public Finance 30 Private Investment and Investment Climate 40 Prices, Wages and Employment 42 Foreign Trade and Balance of Payments 46 Foreign Aid 48 Foreign Debt 53 I:V DEVELOPMENT PROSPECTS 55 Economic Growth 55 Private Investment 59 Economic Planning 61 Investment Priorities 62 Public Finance and Public Investment Resources 68 Foreign Aid 71 Foreign Indebtedness and Creditworthiness 72 STATISTICAL APPENDIX MAP BASIC DATA Area and population Area 905,000 square miles Population 17.7 million Rate of increase 2.3 percent per annum Gross Domestic Product 1959 1964 1966 1968 1969 (in millions of zaires) (1966 prices) 285.1 267.5 304.1 324.6 347.6 (current prices) 66.1 225.0 304.1 720.4 882.5 GDP per head, 1969 $100 approximately 1966 1967 1968 1969 1970 (in millions of zaires) Government finance Total receipts 61.8 95.1 185.6 268.1 315 Ordinary expenditure 60.7 87.5 164.0 201.2 262 Deficit (-) or surplus 1.1 7.6 21.6. 66.9 53 Capital expenditure 5.7 13.8 25.5 56.0 65 Over-all deficit (-) or surplus -4.6 -6.2 -3.9 10.9 -12 Money and Credit (end of period) Foreign assets (net) 10.2 60.9 84.9 112.6 Domestic credit 90.3 96.5 108.0 110.5 Claims on Government (net) 77.6 79.6 87.3 82.7 Claims on private sector 12.7 16.8 20.7 27.8 Money supply 73.4 110.8 135.1 151.7 1966 1967 1968 1969 (in m=lEons ofTU.. dollars) Trade and payments Exports of Goods 482.9 470.5 584.9 681.4 Imports of Goods and Services (net) 465.9 427.6 507.1 587.3 Net Goods and Services 17.0 42.9 77.8 94.1 Investment Income, Net:Outflow (-) -8.o -2.1 -10.8 -14.5 CURRENT SURPLUS (+) OR DEFICIT (-) 9.0 40.8 67.0 79.6 - 2 - External Debt (December 31, 1,969): (In millions of' U.S. dollars) Total debt outstanding - excluding undisbursed 262. " - including undisbursed 326.1 Estimated Debt Service Ratio (1960): -i. v< SUIMMARY AND CONCLUSIONS 1. The Democratic Republic of the Congo is a vast country, covering some 2,345,000 square kilometers in the heart of the African continent, lying astride the Equator. By African standards the country is richly endowed with still largely unexploited natural resources. There is a wide range of climates which provide the conditions for a variety of agricultural crops, and the soil is rich in known mineral resources, especially copper, cobalt and diamonds. Furthermore, dense tropical forests in the Kongo- Central and Equateur provinces contain abundant timber, mainly of the limba variety. Finally, the country has large untapped hydro-electric power resources. 2. In spite of this great potential, the Congo is still a relatively poor country, with a per capita GNP of around $90. The country has a total population of 18 million, but because of the vastness of the territory, population density is only seven inhabitants per square kilometer, which is relatively low, even by African standards. This population includes a great many tribal groups, which have sometimes been split rather arbitrarily by colonial boundaries and often lacked a sense of cohesion and unity. The size of the country also entails considerable transportation difficulties. Economically and demographically the Congo has three centers: Kinshasa, the capital, in the west, Lubumbashi and its neighboring mining centers in the southeast, and Kisangani, at one time an important city in the north- eastern part of the Congo. Transportation between those points is either by river or by a combination of rail, road and river, requiring sometimes several transshipments. Total distance between Lubumbashi and Kinshasa, for example, is over 2,000 km. 3. The country became independent from Belgium in 1960, under very difficult circumstances. Mutinies and rebellions, which followed almost immediately ujon independence, threatened to balkanize the country, and resulted in a mass exodus of BJelgian civil servants, as well a6 of a great deal of the foreign civilian population. From nearly 13,000 in 1960 the number of Belgian technicians in the administration dropped to less than 100 right after independence. The country fell into near chaos. A number of people suddenly had to be promoted to jobs for which they were ill- prepared. Agricultural production reverted largely to subsistence; com- mercialized output dropped sharply and in 1966 was still only at 60 per- cent of the level attained in 1959. Only mining and manufacturing with- stood the shock of independence. The service industries, of course, expanded, primarily as a result of increased government activities. 4. Stability and order were not re-established until President Mobutu came to power in November 1965. Since then the President has in- creasingly imposed his authority. The number of provinces was gradually reduced from 21 to 8 and central control over provincial governors con- siderably tightened. Instead of being elected, the provincial governors were appointed by the President and commonly posted to regions not their own. A new constitution in 1967 established a presidential regime and gave the President the power to name and revoke most high Government - ii - officials. A single political party, the Mouvement Populaire de la Revolu- tion (MPR), now operates throughout the country. Parliamentary elections were held for the first time in November 1970 and a Parliament established in December of the same year. 5. Simultaneously with his efforts to consolidate the country polit- ically, President Mobutu took drastic measures to improve the overall-eco- nomic situation. In June 1967 the currency was devalued and a stabiliza- tion program introduced under IMF auspices. This program was an immediate success. It gave the Congolese currency a more realistic value, improved incentives to export, greatly raised Government revenue through increased export taxation and paved the way for a gradual dismantling of exchange controls. By the end of 1967 the Congo had healed its gravest wounds from the post-independence years of strife and was ready to start on its re- covery. 6. This recovery is now fully under way, and in the last two and a half years economic growth has increased to a rate exceeding 7 percent (in constant prices) per annum. Developments in this period have, however, been widely divergent. The mining sector continued to expand and produc- tion of copper alone reached 362,000 tons in 1969. Industrial production, which had declined in 1968 as a result of reduced purchasing power and increased foreign competition following the monetary reform, has picked up considerably in 1969. In the field of agriculture, however, the record has been somewhat disappointing in 1969. Due to both favorable climatic con- ditions and the restoration of security in the interior, agricultural output had increased by more than 15 percent in 1968, but in 1969 the output fell back by more than 5 percent, particularly with respect to coffee, tea and foodcrops. First estimates of the 1970 production indicate that in this year the output-level attained in 1968 may again have been reached. 7. This rapid economic growth combined with high copper prices and improvements in tax collection led to a considerable increase in Govern- ment revenue. In 1968, revenue nearly doubled from $190 million to $372 million, and in 1969 rose by another 45 percent to $536 million. Revenue for 1970 has reached $630 million or more than one third of GNP in the same year. This rapid increase in revenue has permitted the generation of important public savings and the financing of public investment up to an amount of approximately 4 percent of GNP in 1968 and 7 percent of GNP in 1969. 8. In spite of this considerable increase in public savings in the last two years, the public finance situation gives rise to some concern and should be carefully watched in the next five years. Although Congo- lese copper production provides about 50 percent of Government revenue and is expected to increase considerably in the next few years, this in- crease in production will not compensate the effect of an expected de- cline in copper prices on the future evolution of domestic public re- sources. The Government has given Gecomines a tax exemption to the end of 1974 on all mineral output exceeding the 1969 level, and the additional out- put from a Japanese mining venture expected to begin production in 1973 will - iii - not Rtart supporting taxes until 1978. Up to 1975 Government revenue from copper production will thus be levied on the same production as in 1969. The Bank economic mission has estimated that, at a copper price of US 50 cents/lb, Government revenue from Gecomines would fall to a level of $180 million a year, as compared to a revenue of $264 million in 1969, when average copper prices stood at US 67 cents/lb. Alternatively, if prices were to decrease further to US 40 cents/lb or return to US 60 cents/ lb the revenue would be $150 million and $250 million respectively. Under certain assumptions on the rate of increase of Government revenue from other sources, total revenue in 1974 could lie anywhere between $600 mil- lion and $700 million. From this analysis it appears that, given a con- tinuous increase in current expenditures, public savings in 1974 could be reduced to $6 million if (copper prices were 40 cents) or reach $106 million (if copper prices were 60 cents). In neither case would public savings be as high as in 1969. 9. In view of this situation it is particularly important that the expansion of current expenditures be curtailed and that a careful screen- ing be made of the projects to be financed with the available domestic public resources. A great deal of progress has already been made in this respect since 1968. The formulation of the Government current budget has become more orderly and budgetary control more strict, while a team of experts which has been seconded to the Government, partly with World Bank financing, has improved the procedures for drawing the investment budget. Among other things, an explicit distinction has been introduced between disbursements on ongoing projects and on new commitments, enabling the authorities to see more clearly than before that a large share of avail- able investment resources is already earmarked for ongoing projects. Efforts should now be undertaken to improve the preparation of projects, possibly through strengthening the staff in technical ministries, and to provide for a more rigorous screening of the projects presented for fi- nancing. 10. For the first time since its independence, the Congo has reached a stage where it can start thinking seriously about the direction which it wants to give to its future economic development. There is no present inclination to engage in comprehensive economic planning, but in the choice of the 1970 investment budget as well as in the composition of the programs submitted for financing to the major foreign aid donors, some fundamental options can already be detected. From these documents it appears that Government authorities continue to attach high priority to the rehabilitation of the transport infrastructure, but that more emphasis will be placed than in the past on the development of mining and industry. Compared to transportation, industry and mining, agriculture appeared to have been given relatively low priority. That may be understandable in view of the serious administrative and policy problems encountered in agri- cultural development, but it is nevertheless true that the future economic development of the country will largely depend on increased productivity in this sector, which provides a living to 70 percent of the population. It will thuis be important tha. w~,7r.S be found to channel part of the public financial resources derived fram *02e exploitation of the country's mineral wealth into a program for the modernization of the agricultural base in - iv - order to improve the standard of living of the rural population. Its real income is still below the level attained on the eve of the monetary reform and, presumably, still considerably below pre-independence levels. Ili- creased agricultural production will also be necessary to prevent food shortages in the urban centers. 11. Fortunately, the expressed reduction in domestic resources avail- able for public investment comes at a time when the efforts undertaken by the Government to attract foreign private capital are expected to start bearing fruit. Two important steps have been taken to that effect: (1) the promulgation in June 1969 of a new Investment Code, providing for con- siderable tax advantages as well as for the transferability of profits and capital; (2) the settlement in September of the same year of the outstand- ing dispute with the Union Miniere concerning the take-over of the latter's assets in the country. Both these measures, combined with the restoration of security and order, have led to a keen interest on the part of foreign investors. A considerable number of investment proposals have already been accepted by the commission in charge of the application of the Invest- ment Code; others are under active consideration. Most of these projects are in the industrial sector and deal with the production of consumer goods and building materials; some of them involve the inflow of new capital from abroad, a development which had still been conspicuously lacking in the last three years. Furthermore, a small number of important foreign investments, including additional mining in Katanga and an aluminium smelter near the ocean, are being discussed with the Government. On the whole, it leaves no doubt that private investment in the next five years will be consider- able, and may well more than compensate for the shortfall in public in- vestment below its 1969 level. 12. In the first years after independence, the Congo received substan- tial amounts of public foreign aid, at a gross level of about $80 million a year. In the last three years, however, total foreign aid flows have been gradually declining to a gross level of about $60 million in 1969. Further- more, only a relatively small part of this foreign aid flow is available for direct investment. In 1969, for example. more than half of the aid disbursements were for the payment of technical assistance, another third was given in the form of commodity aid, while about one fifth, or $12 mil- lion only, was for project aid. 13. Even if foreign aid disbursements were to rise from their present level of $60 million a year to $95 million in 1974, considerable amounts of this aid will still have to be used for the defrayment of technical assistance expenditures. However, due to the shift in US aid from com- modity to project aid and in view of increased disbursements from the World Bank Group, the share of foreign resources made available for direct pro- ject financing will probably go up. From approximately $12 million, or one fifth of aid disbursements in 1969, it could well rise to $55 million, or 60 percent of the aid disbursed in 1974. Assuming, furthermore that suppliers' credits to the public sector would increase from $16 million in 1969 to $26 million in 1974, total public investment financed with foreign resources in the latter year would amount to $81 million. This large in- crease in foreign resources for public investment could partly compensate for the expected fall in domestic resources available for investment, but only under the assumption of a copper price approaching US 60 cents/lb would total public investment in 1974 exceed the level reached in 1969. For a copper price level of US 50 cents/lb or below, the increase in foreign resources would not be sufficient to compensate the fall in domestic re- sources, and total public investment would still remain below its 1969 level. 14. Because the bulk of post-independence aid to the Congo has been given in the form of grants, the country's external debt burden is very small. At the end of 1969 total public debt outstanding (including un- disbursed) amounted to $328 million. Service payments on this debt in 1970 have been estimated at $23.6 million or about 3 percent of the pro- Jected export of goods and services in the same year. Debt service pro- jections indicate that, depending on the future evolution of copper prices, the debt service ratio up to 1985 would lie between 5.5 and 4.5 percent. On these grounds the Congo appears creditworthy for the additional lending on conventional terms which has been assumed in this report. 15. Because the Congolese Government has decided not to engage in any comprehensive planning at this stage of its development, no official projections are available on the future evolution of the economy. How- ever, the Bank economic mission has estimated that, if internal security continues to prevail and if the Government can prevent undue deficit fi- nancing from endangering the balance of payments situation, the consider- able foreign public and private investment flows expected to be forth- coming in the next five years will give rise to a sustained high rate of growth. This rate of growth would, of course, also partly depend on the volume of domestic public investment resources and consequently on the future evolution of copper prices, and could range anywhere between 6 and 7 percent a year (in constant prices). It would in any case imply that the Congo would be able to terminate its present phase of recovery and enter into a phase of full-scale economic development. THE CONGO'S ECONOMY: EVOLUTION AND PROSPECTS I. INTRODUCTION: THE COUNTRY, ITS POPULATION, POLITICAL AND ECONOMIC STRUCTURE Geography 1. The Democratic Republic of the Congo is a vast country of some 2,345,000 square kilometers, equal in area to the United States east of the Mississippi and to Western Europe inclusive of Scandinavia but exclusive of Spain. It is the largest country in sub-Saharan Africa (excluding the Sudan). In terms of its population - probably around 18 million - it ranks fouLrth in sub-Saharan Africa. 2. The Congo is a country of great diversity. A wide variation of climate, topography and soils permits the growing of a wide range of crops from arabica coffee, tea and pyrethrum at high altitudes to oil palm, ro- busta coffee and rubber at lower altitudes. Much of the central part of the country - the Congo Basin - is covered by dense tropical forests, but there are also broad savannas and high mountains. In the east, bor- dering Lake Albert, Lake Edward and Lake Kivu there are mountain ranges with lofty peaks; and in the southern part of the Kasai and South Katanga the country rises to a high plateau ranging roughly from 3,000 to 5,000 feet. Natural Potential 3. The natural potential of the country is great by African standards. Apart from the broad range of crops it can support, the Congo possesses ex- tensive forestry resources, and its lakes and rivers are generally rich in fish. Its minieral wealth has made it one of the leading mining countries in Africa. In South Katanga there are important deposits of copper, zinc, lead, cobalt, cadmium and manganese. The Kasai has a significant output of diamonds, primarily of an industrial quality; and in the east there are scattered deposits of gold, tin - and tungsten-bearing ores. Unexploited deposits of iron ore also exist. Furthermore, the country has vast re- serves of hydro-electric potential which for the identified sites alone exceed 100,000 MW. 4. WhiLe the size of the country provides a great diversity of re- sources, it is also a handicap. For the most part the population is scat- tered rather thinly over a large area and consists of nulmerous tribes which are difficult to weld into a single political unit. Over such a vast country it is also difficult to create and maintain a network of transport and communications that permits effective administration and economic unification. Transport tends to be time-consuming and costly. Products and supplies from and to the interior must often be transported successively by road, river and rail before reaching their destination. The Congo and Kasai rivers together with their tributaries provide nearly 15,000 kilometers of navigable waterways covering most of the country, but they do not ex !nd to the mineral rich region of Katanga or the productive agricultural areas of the far eastern part of the country; and the Congo river is unnavigable downstream fronm Kinshasa, so that all products be- tween Kinshasa and the port of Matadi must be carried by rail 1/ or by road. North and South Katanga are linked withl the network of navigable waterways by the CFL 2/ and BCK 3/ railways, but copper from Katanga must go successively by rail and river and rail again to be exported via Matadi while it can be exported entirely by rail via Lobito in Portuguese Angola or via Beira in Portuguese Mozambique. In the northi the 839 kilonmeters Vicicongo rail network extends the "reach" of river transport toward the east, but even so parts of the east can import or export more conveniently via Uganda and the East African port of Mombasa, or farther south, via Lake Tanganyika and the East African railway thirough the Tanzanian port of Dar es Salaam. Political situation 5. The country's current constitution reflects a determination to unify and strengthen the country administratively and politically. It was promulgated in June 1967 after repeated post-independence efforts to decentralize control to autonomous provincial governments which at one time numbered as many as twenty-one. Under the new constitution powers are centralized in the hands of a President who appoints a Cabinet re- sponsible to himself alone. The provinces, now reduced to eight 4/, apart from the capital city of Kinshasa, have become administrative units whiere governors hold office by Presidential appointment. To emphasize the admin- istrative function of the gubernatorial posts a conscious effort is being made by the President to send governors to provinces different from their region of origin. The President's powers are furthermore enhanced by provisions that make him head of the army and police and give hiim the right to appoint and dismiss all officers and high government officials. He is to be elected by universal suffrage for a term of seven years. The first elections following the adoption of the new constitution were held in November 1970. 1/ The 365 kilometers long Chemin de Fer Matadi-Kinshasa (CFMK). 2/ Chemins de Fer des Grands Lacs with 1,085 kilometers of track wlhich link the region it serves with Lake Tanganyika and the BCK. 3/ Chemin de Fer du Bas-Congo au Katanga, the largest railway with a total length of 2,556 kilometers. 4/ The provinces with their capitals shown in parentheses, are: Kongo Central (Matadi), Bandundu (Bandundu), Equateur (Mbandaka), Province Orientale (Kisangani), Kivu (Bukavu), Katanga (Lubumbashi), Kasai Oriental (Mbuji-Mayi), and Kasai Occidenltal (Luluabourg). - 3 - 6. The legislative powers are vested in a unicameral National As- sembly which will be elected in December 1970 and whose powers are mean- whi:Le exercised by the President. The constitution limits the number of poliLtical parties to two, although only one party has actually been form- ed. This party, the Mouvement Populaire de la Revolution (MPR), wants to detribalize congolese politics and to give the country a sense of unity. 7. The Congo maintains close political and economic relations with western countries but trade relations with the Eastern European countries have become stronger in the last two years. An effort has also been made towards closer relations with the two former Belgian trust territories, Rwanda and Burundi, but with deficient transport connections between the three countries and a desire on the part of Rwanda and Burundi to develop closer ties with East Africa, cooperation has so far been limited to a few economic sectors, including the production of electric power. Ties with the People's Republic of the Congo have been strained in the last few years, but althouglh the country's ideological outlook remains quite different from that of the leadership in Brazzaville, an official reconciliation between President Mobutu and President Ngouabi took place in June 1970 under the auspices of the members of the Central African Customs and Economic Union (UDEAC) 1/. Po2ulation Growth and Distributiou 8. It has already been noted that the Congo is rather sparsely in- liabited by about 18 million people. This estimate is based on the assump- tion that the population, which a 1956/57 demographic inquiry put at 13 million in 1956, has continued to grow at the annual rate of 2.3 percent revealed by this inquiry 2!. The current estimate indicates an average pop- ulation density of only 7.1 per square kilometer. There are, however, areas of substantially higher density, including parts of the Kongo Cen- tral (the region between Kinshasa and the sea), the mountainous region of the east, the province of Kasai Oriental whichi has witnessed a substantial inf'lux of Baluba refugees since independence, and tihe mining region of South Katanga. Probably about 69 percent of the population lives in communities of less than 2,000 and are classified as rural and primarily devoted to agriculture. Another 15 percent live also in such small communities but derive their 'Livelihood primarily from nonagricultural pursuits. The balance, or 16 percent may be considered urban. There are some migratory labor movements, especially from Rwanda to the mining areas of Katanga, but: compared to Congo's total labor force these movements are relatively small. 1/ This customs union includes apart from Congo (People's Republic of), Cameroon, the Central African Republic, Chad and Gabon. It partly overlaps with the economic union (UEAC) which has existed since January 1969 between Congo (Democratic Republic of) and Chad. The Central African Republic, originally also member of UEAC, withdrew from the latter union before it actually went into effect. 2/ A recent administrative census, issued by ministerial decree No. 1236 dated July 31, 1970, estimates the present population at 21.6 million. 9. As in many other African countries, urban population in the Congo increases much faster than the population of the country as a whole. A recent census taken in Kinshasa shows that the rate of growthi of the population in the capital is around 10 percent per year. The age compo- sition of the city is very young, with more than 50 percent of the popu- lation being less than 15 years old. This will pose severe educational and employment problems and will require considerable investments for the city's growth. The other major urban centers, with their estimated popu- lation given between parentheses, are: Luluabourg (429,000), Lubumbashi (318,000), Mbuji-Mayi (256,000), Kisangani (230,000), Likasi (146,000), Bukavu (135,000), Kikwit (112,000) and Matadi (.110,000). It should be emphasized, however, that recent demographic data are not very reliable. 10. The Congolese Government does not at this stage have a well-de- fined population policy. In view of the vastness of the country and its great economic potential the Government does not give high prior-itty to the encouragement of population control. However, it leaves no doubt that the high, possibly rising, rate of population growth absorbs a large part of the country's savings and hence severely constraints its future economic growth. Structure of the Economy 11. The structure of the economy is revealed by estimates of gross domestic product for 1959 and 1969 which should however, be regarded as only rough approximations (See Table 1). The internal disturbances in the country since independence, led, of course, to certain shifts in production which have made the structure of the economy in 1969 somewhat different from that of 1959. The most significant of these are the in- crease in the relative importance of mining and commerce, and the decline of commercialized agriculture. However, some of these changes are likely to prove temporary as the economy recovers and development resumes. 12. The characteristic features of the economy may be summed up as follows: (a) The degree of monetization is substantial. The subsistence sector accounts for only 10 percent of GDP at factor cost, and, of course, for even a smaller proportion of CDP at market prices. The degree of monetization was high in 1969 as well as 1959, for although in the agricultural sector the proportion of marketed agricultural output to total produc- tion fell from 64 percent to 56 percent as many peasants reverted to subsistence production in the turbulent post-war years, other monetized sectors of the economy such as manu- facturing and services gained in importance. (b) Output is fairly well diversified. Reflecting the diversity of the country's resources, agriculture, livestock and fish- eries accounted respectively for only about a third and a fifth of GDP at factor cost in both 1959 and 1969. In the -5- Table 1 VOLUME AND COQPSITION OF GDP Year 1959 Year 1969 Percentage of Percentage of Index Total I II III Index Total I II III I PRIMARY SECTOR Agriculture, Livestock, Fishing commercialized 100 20 50 74 10 35 non-commercialized 100 11 28 97 9 28 Total 100 31 78 83 19 63 Mining 100 9 22 104 11 37 Total of I 100 40 100 88 30 100 II SECONDARY SECTOR Metallurgical Industries 100 11 50 128 18 68 Other Industries 100 6 28 126 5 17 Energy 100 1 7 159 1 4 Building & Construction 100 3 15 85 3 11 Total of II 100 21 100 120 27 100 III TERTIARY SECTOR Transport & Telecommu- nications 100 7 19 82 6 14 Services 100 9 23 124 11 26 Commerce 100 8 21 165 12 28 Government 100 15 37 164 14 32 Total of III 100 39 100 136 43 100 Total GDP at factor cost 100 100 116 100 a/ This table is derived from Tables 2.1 and2.3,Statistical Annex. It should be noted that the GDP figures for 1969 understate the actual contribution of mining owing to the heavy increase in taxation of metals that has taken place since independence. Source: National Bank of the Congo. - 6 - agricultural sector itself a rather wide range of products is produced for the market including, apart from foodstuffs, principally palm oil, coffee (robusta and arabica), rubber, timber, tea and cotton. Combined mining and metallurgical industries are of great importance, contributing 20 percent and 29 percent of GDP in 1959 and 1969 respectively. The manufacturing industry produces a wide variety of consuimer goods, construction materials, chemicals, fabricated metal products, plywood and veneer, etc. With the increased for- -eign competition following the liberalization of the economv in 1967, the share of manufacturing in GDP has fallen from 6 percent in 1959 to 5 percent in 1969. However, its con- tribution is somewhat underestimated in that part of the processing of agricultural products is included in the agri- cultural sector. (c) A large;part of production is normally exported. In 1959 exports of goods and non-factor services represented 47 percent of GDP at market prices. Owing primarily to the decline in agricultural output and exports, this proportion has dropped to some 34 percent in 1969. However, thete has been a.marked shift in the composition of exports between 1959 and 1969, with the share of agricultural and forestry products falling from 35 percent to 14 percent. The do-llar value of mining exports actually more than doubled owing to the sharp rise in copper prices since 1959. (d) The foreign sector plays a significant role in the economy. -Foreign enterprises have been of crucial importance to:the economy. The five commercial banks operating in the country are foreign owned although the Government has a minority interest in four of them. In the mining industry and to a small extent in some other sectors the Government long ago acquired a minority interest in many concerns as the price of concessions, and this interest, transferred after independence to the new Government, has been greatly rein- forced, principally as the result of the take-over of the extensive properties of the Union Miniere in Katanga at the end of 1966; but also as a result of the recent acquisition by the Congolese Government of 50 percent in the share cap- ital of Miba, the diamond concern in Kasai, and in the cap- ital of Congo-Etain, a company owning a tin mine and smelter in the Manono region. IHowever, in the mining industry much foreign management has remained. Even in agriculture, for- eign commercial enterprise, both corporate and individual, has been extremely important. In 1958, European enterprise accounted for about two-thirds of the commercial output of agriculture, livestock, forestry and fisheries. Although the colonial administration made a considerable effort in the 'fifties to promote the growing of cash crops by Congolese -7- peasants, the share of European enterprise in the areas planted to such perennial crops as rubber, oil palm, coffee, tea and table bananas ranged from 65 to 94 percent in 1958. Half of the cattle in the country were also owned by large European concerns. While many individual Europeans (princi- pally Belgians) abandoned their holdings in the troubled post- independence years, Congolese peasant production of cash crops also fell off sharply, so that the share of the foreign sect- or in output probably did not change significantly. The num- ber of wage and salary workers employed in medium and large agricultural, forestry and fishing enterprises (almost all foreign) was still about 125,000 in 1965 as compared with 180,000 in 1958. Manufacturing has been almost entirely in foreign hands. In fact, foreign enterprises, located pri- marily in Kinshasa and other urban centers whlich have gener- ally escaped civil strife, have expanded since independence. Despite the vicissitudes experienced in the early 'sixties and the interruptions and difficulties in production, foreign corporate enterprise has been remarkably persistent in main- taining its investments and adding to them out of reinvested profits. During the early years of weak and often ineffective public administration the private sector has also had to give considerable support to the Government at central, provincial and local levels in contracting to provide services, transport, road maintenance, etc. (e) Gross investment has remained high. According to rough esti- mates, which are derived from data on the value of imports and output of equipment and of construction, the proportion of investment to GDP has remained constant at about 14 per- cent in 1959, 1964 and 1966. In 1968 it rose to over 19 per- cent of GDP (see Table 2.4, Statistical Annex). However, the comparison with 1959 is rather deceptive, since that year apparently witnessed a sharp drop in investment from the much higher figures in the three preceding years which averaged close to a quarter of GDP. Moreover, much of the gross in- vestment in early independence has been offset by destruction of capital equipment during civil disorders and by lack of maintenance which have undoubtedly resulted in considerable wastage of existing investment, particularly in the transport and communications infrastructure of the country. In spite of a recent revival in private investment there is still sub- stantial visual evidence of deterioration and of arrearages in investment. Public investment, which was negligible in the first post-independence era, has picked up considerably in the last two years and has risen to about 30 percent of gross fixed capital formation in 1969. So far the bulk of private and corporate investment has come from retained earn- ings and depreciation rcserves. - 8 - (f) Although approximately recovered to its pre-independence level, per capita income is still low. In spite of the fact that production expanded rapidly after World War II, the large resources of the country were far from being fully developed. By the advent of independence per capita GDP had probably reached the equivalent of $100. While by 1966 per capita GDP had fallen by 14 percent, it is likely that, in view of the rapid recovery in 1968 and 1969, per capita GDP is again at the pre-independence level. This comparison, however, somewhat overestimates the recovery, in the sense that the 1969 GDP estimate contains a larger component of "services" whose real contribution to the economy is doubtful. The share of the tertiary or service sector in CDDP at factor cost rose from 39 percent in 1959 to 43 percent in 1969. The real stan- dard of living is better reflected by the volume of goods produced (i.e. by the primary and secondary sectors of the economy); and this in 1969 was approximately equal to the level in 1959, reflecting a decline of nearly 20 percent in output per capita. Recent national account statistics and Bank mission estimates indicate that net factor income pay- ments abroad in 1969 may have amounted to some $155 million; in such case GNP per capita was probable in the order of 90 dollars. -9- II. POST-INDEPENDENCE POLITICAL AND ECONOMIC DEVELOPMENT Circumstances Attending Independence 13. Tle Congo achievecl independence on June 30, 1960 under very un- favorable circumstances. Whlile considerable progress had been made in primary education, there were less than 20 Congolese university graduates and only a few hundred secondary school graduates on the advent of inde- pendence. The sudden withdrawal of most Belgian civil servants immediately after independence and the subsequent exodus.of virtually all the remain- der following the outbreak of civil strife almost paralyzed the Government. Congolese clerks and noncommissioned officers had to take over the respon- sibilities for which they were ill-prepared. In time increasing numbers of foreign personnel were reintroduced, at first under UN auspices and later under bilateral technical assistance programs, but it proved diffi- cult to recruit higlhly qualified personnel under the conditions prevailing in the Congo and to put them in positions where they could assume direct operational responsibilities. 14. The task of the new inexperienced government and administration was complicated by the size-of the. country and the lack of cohesion and uniity among the many ethnic groups constituting its population. Although a decentralization of government appeared theoretically desirable after independence, it was exceedingly difficult to effect a transition from the highly centralized regime which had previously obtained. Control had been centralized not only in Leopoldville, but even in Belgium where a substan- tial part of corporate and customs revenue had been collected and part of the administration and records had been located. 15. Finally, the country became independent when the economy was experiencing a recession and rising government expenditures combined with declining receipts had opened up an over-all budget deficit amounting to 8.4 billion and 8.2 billion francs in 1958 and 1959 respectively. Years of Strife 16. Under these circumstances it was not surprising that the country fell prey to years of turmoil characterized by internal strife, ineffective administration, declining production, deteriorating public finances and attendant inflation. 17. Soon after independence civil strife broke out and by the end of 1960 separatism had manifested itself in Orientale Province, South Kasai and Katanga. United Nations intervention restored some semblance of order and unity and in 1962 put an end to the secession of Katanga which had meanwhile been proclaimed. However, in 1963, as a concession to tribalism and pressures for local autonomy, the Government increased the number of provinces to twenty-one, each endowed with its own government and elected parliament. Meanwhile production had fallen off markedly and the govern- ment deficit had risen from 8.2 billion francs in 1960 to 17.6 billion in 1963 when receipts covered only 43 percent of expenditures. - 10 - 18. Toward the end of 1963 the political and economic situation began to improve. A government budget was drawn up for the first time since 1960. To compensate for the intervening inflation and restore ex- port incentives the Congolese franc, whiichi had initially been valued at fifty to the US dollar, was devalued in November 1963 with the establish- ment of a buying rate of 150, and a selling rate of 180, to the US dollar. The resulting exchange profits accounted for over one-third of government revenue in 1964; and in that year total receipts tripled to 39.4 billion francs as compared to 13.3 billion in 1963. The deficit was reduced from 17.6 billion in 1963 to 2.2 billion in 1964. 19. However, the improvement was short-lived. Extensive rebellions erupted once more, affecting by the second half of 1964 the productive agricultural regions of the east and northeast as well as a portion of the west. Katanga, however, was spared this time and continued to produce and export its ores and metals. The area around the country's capital and that between the capital and the sea also remained quiet. Total output dropped in 1965 to what in retrospect proved to be its lowest point. Under the impact of rising military expenditures and thie failure to control provinc- ial and other expenditures, government outlays soared from 41.7 billion francs in 1964 to 65.0 billion in 1965. The deficit, almost entirely fi- nanced by inflationary central bank credit, reached 20.9 billion in that year. Progressive Pacification 20. By the end of 1965 and early 1966 the rebellions were being pro- gressively liquidated. In November 1965 General Joseph-Desire Mobutu took over the Presidency and has since provided an element of continuity and stability which had previously been lacking. His government reduced the number of provinces from 21 to 8 and reduced their governors to the status of civil servants. The process of pacification has been interrupted only twice: in mid-1966 by a brief uprising of Katangese gendarmes in Kisangani, the capital of Orientale Province; and early in the second half of 1967 by a more serious mercenary-led rebellion which started in Kisangani and spread to Bukavu, the capital of Kivu. However, by comparison with the earlier rebellions these uprisings were limited in scope and quickly suppressed. Since then, internal security has been fully restored. 21. With the progressive pacification of the country, production began to revive in 1966. Substantial increases in taxation in that year, together with a considerable rise in the price of copper exports raised domestic government revenues from 44.1 billion francs in 1965 to 61.8 bil- lion (61.8 million zaires) in 1966. Since there was only a modest increase in expenditures, the over-all government domestic deficit fell from 20.9 to 5.4 billion francs. 22. By mid-1967 conditions in the Congo were mixed. On the one hand, the Government appeared to have firmer control over the country than at any time since independence and this was contributing to a slow revival of confidence. On the other hand, the financial situation and its repercus- sions on the economy were increasingly disquieting. Inflationary pressures were strong. During the first half of 1967 government expenditures had risen to an annual level of around 85 billion francs despite substantial arrearages in payments of salaries and for suppliers and services; and at this level, which was 25 percent higher than that of the preceding year, the Government was running an annual deficit of some 20 billion francs. Under the impact of this deficit together with a significant increase in bank credit to the private sector, money supply had risen 15 percent during the first half of 1967 to an amount which by the end of June of that year was almost twice as great as at the end of 1963. At the same time retail prices in Kinshasa public markets and in stores were respectively almost seven and six times as high as in 1960. Inflation was undermining incent- ives to produce and export; and government efforts to contain the pressure on the balance of payments and on prices had led to price controls, strin- gent import licensing and foreign exchange restrictions, which not only operated rather arbitrarily but were conducive to considerable evasion, clandestine exports, and illegal capital transfers through over-invoicing of imports and under-invoicing of exports. Public administration was still weak; and parts of the country's transport and communications infrastructure had fallen into a state of disrepair. The Monetary and Fiscal Reform 23. To cope with some of these problems the Government, after con- sultation with the International Monetary Fund, announced on June 23, 1967 far-reaching monetary and fiscal measures. These included: (a) Devaluation of the Congolese franc from the dual rate of 150 and 180 to the U.S. dollar to 500 to the U.S. dollar and the simultaneous introduction of a new monetary unit, the zaire, equivalent to 1,000 old francs and two U.S. dollars and con- sisting of 100 makuta, each worth 2 U.S. cents or 1 Belgian franc. _/ (b) The limitation of resulting price increases in the domestic market by restricting the rise in wages and salaries to 40 percent and by requiring justification and government approval of increases in the prices of domestically consumed goods and services. (c) Liberalization of foreign trade by abolishing quantitative restrictions on imports and retaining import licensing only for the purpose of recording obligations for import payments and preventing the use of import payments as means for illicit transfer of invisibles. In addition, travel allowances, pay- 1/ On September 2, 1970 an initial par value for the zaire was established by agreement between the Government of the Democratic Republic of the Congo and the IMF. - 12 - ments for services and remittances of expatriates' salaries were liberalized and a promise was made to introduce progres- sive relaxation of the prohibitions against transfer of invest- ment income abroad. (d) Imposition of a ceiling on commercial bank credit to prevent speculative accumulations of stocks and excessive increases in imports. (e) Substantial increases in taxation resulting partly from an in- crease in the tax base on which existing rates of taxation would be levied (e.g. taxes on foreign trade and turnover) and partly from the raising of tax rates on imports and exports, the application of the turnover tax to exports, and a subse- quent revision of direct taxation. (f) Steps to set aside 10 percent of increased government revenue for financing development expenditures, eventuating in the adoption, for the year 1968, of the first development budget. (g) Provision by the IMF of a standby credit of $27 million to provide additional support for the new Congolese currency unit, subject to the maintenance of ceilings on bank credit to both the public and private sector. 24. The basic objectives of these reforms were (a) to provide incen- tives for production and export (b) to improve the balance of international payments (c) to liberalize the economy and make it less dependent on con- trols which are difficult to administer and open to abuse, and (d) to bal- ance the government budget without resort to central bank financing and to provide some budget resources for rehabilitation and development. 25. By the middle of 1968, aided by the favorable climate of internal security and rising copper prices, the major short-term aims of the mone- tary reform were achieved and the operation could be called a success. (a) The effect on incentives 26. Devaluation was intended, above all, to stimulate agricultural production for export by raising the prices in local currency of exports. Prices of products grown for the domestic market were also expected to rise, partly as the result of government action raising the minimum prices which farmers were supposed to receive. In addition the monetary and fis- cal reform was designed to improve the supply of goods to the rural sector, particularly in the interior, as the result of the liberalization of imports and of the limitations on wage increases which had the effect of curtailing consumption in the urban centers that had previously tended to absorb near- ly the entire restricted supply of consumer goods. - 13 - 27. Signs of revival of agricultural production were evident by early 1968. It is difficult, however, to determine the relative importance of various factors contributing to this increase. The incentives provided by devaluation were less than would have been possible since minimum farm prices had been increased in a smaller proportion than the exchange rate adjustment. Nevertheless, some net incentive remained for producers, par- ticularly for agricultural enterprises which have considerable outlays on wages and therefore benefited from the limitation on wage increases. In addition, the reduction of purchasing power in the cities apparently forced manufacturers and traders to cultivate markets in the interior, thus im- proving to some extent the supply of consumer goods in many areas. By and large, however, it is probable that the improvement of security in the in- terior, particularly in the productive agricultural regions of the north- east and east, made the most important contribution to the revival of pro- duction. This enabled traders to move back into areas they previously abandoned and encouraged farmers who had long been deprived of access to markets and consumer goods to resume production. (b) The effect on thie balance of payments 28. During the first half year following devaluation - i.e. in the second half of 1967 - the balance of international payments undoubtedly improved. Imports fell from about US$ 160 million in the first half of 1967 to $100 million in the second half; and export proceeds increased substantially from $180 million to $280 million. Net foreign exchange assets of thie Central Bank and the banking system rose from about $46 million at the end of June 1967 to $122 million at the end of the year. In June 1968 they exceeded $1]55 million, equivalent to six months' imports (based on 1968 imports). 29. While the devaluation was undoubtedly necessary in the long run for an increase in exports, it is doubtful that it played a significant role in the improvement in exports which took place in the second half of 1967. Almost the entire rise in exports receipts was due to copper which recovered from an interruption of shipments early in 1967 and profited from the substantially higher prices that prevailed in the world market during the second half of the year. 1/ Agricultural exports increased only slightly; and it was indeed not to be expected that any favorable effects 1/ The average price of copper as communicated by the Societe Generale des Minerais, the sales agent for Congolese copper, dropped from BG 57,579 per ton (52 US cents/lb.) in the first quarter of 1967 (during which shipments of Congolese copper were partly interrupted) to BF 48,888 (44 cents/lb.) in the second quarter and rose to BF 50,297 (45 cents/lb.) and BF 60,117 (54 cents/lb.) in the third and fourth quarters of 1967. In the first quarter of 1968 the price soared to BF 70,260 (63 cents/lb.), in the second quarter it fell back to BF 55,294 (50 cents/lb.). - 14 - of the monetary reform on such exports would become evident within the first six months after devaluation. The deflation of urban purchasing power and the curbs on commercial credit on the other hand, undoubtedly did contribute to the decline of imports. 30. Furthermore, the monetary reform considerably diminished incen- tives for clandestine exports and other illegal exchange transactions. During the last half year before devaluation the so-called "parallel" or black market rate of foreign exchange rose to over three times the offic- ial buying rate. During the first half of 1968 the disparity between the official and black market rates was only 19-20 percent. However, the post-devaluation increases in export taxation as well as the attempts to keep some producer prices in the domestic market below those prevailing abroad continued to encourage smuggling to some extent, while continued restrictions on capital transfers still provided black-market demand for foreign exchange. (c) Liberalization of the economy 31. The automatic licensing of imports and the promised liberaliza- tion of transfers of profits undoubtedly had salutary effects on the over- all economic climate. Foreign competition was restored and the confidence of the foreign private sector was gradually being rebuilt. In January and March 1968 the requirement for National Bank validation of import licenses was dropped for imports by government and parastatal institutions and for imports of some priority goods, like spare parts, seeds, fertilizers and mineral and chemical products. On the other hand, the Government's desire to limit price increases and the need to prevent excessive use of bank cred- it also produced some new and tightening of old controls. To slow the in- crease in the cost of living, price controls over consumer goods were ex- tended and manufacturers' profit margins and wholesale margins, which had previously been excessive, were regulated by law. Pursuant to understand- ings with the IMF, commercial bank credit to the private sector, which amounted to Z 17.6 million at the end of June, was subject to an overall ceiling of Z 20 million. 32. These price and credit controls were instrumental in keeping down the rate of increase in the cost of living following devaluation. At the time of the monetary reform it was anticipated that retail prices would approximately double; by June 1968 retail prices in Kinshasa markets were actually 87 percent higher than in June 1967. Despite the fact-that im- ports more than tripled in cost after devaluation and that prices of do- mestically produced goods rose sharply, the volume of bank credit to the private sector was kept below the ceiling, reaching by the end of 1967 a level of Z 16.8 million, an amount smaller than in June 1967. By mid-1968 the amount of credit had risen to Z 20.5 million. - 15 - (d) Impact on public finances 33. The monetary and fiscal reform brought about a significant and immediate improvement in public finances. Despite the virtual disappearance (except for a small carryover from the first half of 1967) of income from the dual exchange rate, government revenues rose from Z 28 million in the first half of 1967 to Z 67 million in the second half. At this level they corresponded closely to the expectation that annual receipts in the im- mediate post-devaluatiorn period would be Z 132 million. While the revenue from import taxes fell slightly below expectations owing to the decline in imports, that from export duties and turnover taxes exceeded the estimates in view of the higher prices realized on copper exports. In the second half of 1967 Government public finances were in equilibrium for the first time since independence. 34. However, the first half of 1968 witnessed a renewed deterioration in Government finances. Despite a continued increase in revenues, Govern- ment expenditures exceeded receipts and led to a deficit of around Z 5 mil- lion. Aware of the seriousness of the situation, the President issued a directive in May 1968 to set a ceiling to permissible expenditure, and in accordance with these instructions, a Treasury Plan was drawn up for the second half of 1968. Furthermore, a corps of "Inspecteurs des Finances", chosen from among a group of young university graduates, was set up in the Ministry of Finance, to control more systematically the financial commit- ments made by the technical ministries and the provinces. The evolution of public finance, the weakest point in the realization of the monetary and fiscal reform, thus received full attention from the Government author- ities. - 16 - III. ECONOMIC DEVELOPMENTS SINCE JUNE 1968 A. Economic Growth 35. Whereas GDP in constant prices had slightly declined between 1966 and 1967, it increased by more than 7 percent in both 1968 and 1969. Tlhis- expansion affected all sectors of the economy, but was particularly concen- trated in agriculture and Government services in 1968, in mining and metal- lurgy in 1969. The manufacturing sector, whiich had suffered from increased foreign competition and reduced purchasing power in 1968, picked up again in 1969 and reached its highest level ever. Measured in current prices these rates of expansion were, of course, much larger due to domestic and foreign price increases, and reached 56 and 22 percent in 1968 and 1969 respectively. Preliminary estimates for 1970 prepared by the National Bank show that the rate of growth may be in the order of 6 percent, mainly due to a rapid expansion of the building sector. These estimates also expect that agricultural output will recover from its stagnation in 1969 and will increase by more than 10 percent. 36. From existing data on national accounts it appears that the ad- ditional resources resulting from economic growth in 1969 have permitted a larger share of GDP to be channeled into investment than had been the case in the previous year. Table 2: ESTIMATED USE OF RESOURCES (in millions of zaires) 1968 1969 Values % of GDP Values % of GDP GDP at Market prices 720 882 Resource gap -49 6.8% -47 5.3% Total resources 671 835 Uses: Consumption 531 73.8% 617 70.0% Gross fixed capital formation 140 19.4% 218 24.7% 37. These data indicate that the share of consumption in GDP has fallen from 73.8 in 1968 to 70.0 percent in 1969, while the share of invest- ment has risen from 19.4 to 24.7 percent. The excess of exports of goods and non-factor services over imports continues to represent a resource - 17 - surplus of approximately Z47 million, or 5.3 percent of GDP. Domestic savings increased in the same period from Z189 million to Z265 million, or from 26 to 30 percent of GDP. 38. Factor income payments abroad, which in the Congo represent bet- weerL 8 and 9 percent of GDP may have risen from Z55 million in 1968 to about Z77 million in 1969, at a rate exceeding the rate of growth of GDP. Consequently gross national product in 1969 is estimated at Z805 million, compared to Z665 million in 1968. The national savings effort has slightly improved in the same period, rising from 19 to 21 percent of GNP, implying a marginal savings ratio of over 30 percent. B. Sectoral Developments (i) Agriculture 39. The revival of agricultural production which started in 1967 continued in 1968. The three major export crops, palm products, coffee and rubber were the main contributors to this revival. Table 3: AGRICULTURAL PRODUCTION (in thousand tons) 1966 1967 1968 1969 Export crops Palm oil 147 179 209 196 Palm kernel oil 34 44 58 45 Robusta coffee 29 35 43 39 Arabica coffee 7 4 6 7 Rubber 30 32 41 37 Cotton (fiber) 7 8 12 19 Foodstuffs /a Maize 13 12 13 8 Manioc 10 11 10 11 Rice 1 5 12 15 /a Deliveries at Kinshasa. Source: Agricultural Volume Table 6 in text and Table 1 in Appendix III. - 18 - The production of palm oil and palm kernel oil increased by 17 and 32 per- cent respectively, while the output of coffee (robusta and arabica) and rubber rose by over 25 percent. There was an increase of nearly 50 percent in the production of cotton (fiber), which did not significantly affect the country's export earnings, but permitted a substantial reduction in imports needed for local textile mills. At the end of 1968, however, the country could resume its export of cotton. 40. Statistics on the production of marketed foodcrops are still de- ficient, but based on the deliveries of foodstuffs from the interior to Kinshasa it can be inferred that the productioni of foodstuffs, mainly of rice, increased considerably in 1968. This assumption is confirmed by the drop in food imports registered in the same year. Whereas in 1967 the Congo had to import 23,000 tons of rice and 69,000 tons of maize, these tonnages fell to 18,000 and 58,000 respectively in 1968. 41. The record for 1969 is somewhat more ambiguous. Nevertheless it appears that the rapid expansion of agricultural output has come to a halt and that, for several products (among which rubber and palm oil), there might have been a slight drop in production. Only for cotton did the ex- pansion continue, and production which stood at 12 thousand tons in 1968 rose to 19 thousand tons in 1969. Partial estimates of foodstuffs arrivals in Kinshasa indicate that marketed output of maize has fallen, while rice production seems to have increased in 1969. 42. On the whole it can be surmised that the spontaneous revival of agricultural production under the impact of restored security and tie re- newed availability of consumer goods in the interior has produced its main effects. Some small further increases may be expected, but a con- tinuous growth of agricultural output will only be possible in the future if development projects are prepared, and adequate inputs and extension service provided to increase productivity in the sector. The design and implementation of such projects will require the Congolese authorities to put greater emphasis on investment in agriculture, as well as the formula- tion and carrying out of some administrative reforms in the agriculture sector. These points will be discussed in more detail in Chapter IV, Sec- tion D of this report. (ii) Mining 43. Mining and metallurgy are of vital importance to the Congolese economy both with regard to employment (some 57,000 wage earners are em- ployed in the sector) as for the generation of government revenue (50 per- cent of total) and foreign exchange earnings (85 percent of total). Mining production is generally located in the eastern and southern parts of the country, a long way from the sea, with main concentration in the Katanga copperbelt. The principal products are copper, cobalt, diamonds and cas- siterite (tin ore). - 19 - 44. At present the only copper-producing company is Gecomines 1/, the state-owned successor company to the Belgian Union Miniere du Haut Katanga. In February 1967, a few months after the take-over by the Congolese Govern- ment: of thie Union Miniere assets in the Congo, the new company signed a long-term convention with the Societe Generale des Minerais (SGM), a Belg- ian subsidiary of the Union Miniere, which provides management services to the Gecomines. SGM recruits the European personnel, studies the long-term development plans of Gecomines and acts as sales agent for the company. ln September 1969 the convention was prolonged for twenty-five years and settlement was reached on a compensation for the take-over of the Union Miniere assets (see para. 107). 45. The Congo is the fifth largest copper producer in the world 2/ and the third largest producer in the developing world. In 1968 Gecomines output increased by only 2 percent, from 320,000 to 326,000 tons, but in 1969, primarily thanks to the entry into production of a new concentrator at KCamoto, copper output rose by nearly 12 percent to 362,000 tons. Nearly half of this production is exported as wire bars, another 20 percent as electrolytic cathodes and the remainder as blister copper and concentrates. 46. Tle most valuable by-product of copper is cobalt, of which the Congo, witlh its more than 10,000 tons, is the largest producer in the world. An associated product is zinc. The latter is exported as concentrate, as roasted zinc or as refined product. Total metal content of the Congolese production amounts to 100,000 tons. Other by-products are of lesser im- portance. 47. The third largest item in the Congo's mineral exports are diamonds. Tihe main company now engaged in diamond mining is MIBA (Societe Miniere de Bakwanga). This company, whose concession is located in the Kasai Oriental province, has been 50 percent government-owned since May 1969. Its peak output was 18 million carats in 1961, but owing primarily to the competition of illegal producers, output declined steadily to 11.6 million carats in 1969). The Congolese Government has entrusted the sale of Miba's entire output to the British Congo Diamond Distributors (Britmond) in which the de beers group has an interest. In 1969 the foreign exchange proceeds of diamond sales were about $30 million. 48. A problem which has plagued the country, ever since before in- dependence, is the smuggling of diamonds, primarily from the Kasai Occident- al province, through Brazzaville or Bujumbura. To reduce these illegal ex- ports the Congolese Government asked Britmond in November 1968 to set up a purchasing office in Tshikapa, and reduced the export tax on this production 1/ In March 1970 the name of the company was changed from Generale Congolaise des Minerais (Gecomin) to Generale Congolaise des Mines (Gecomines). 2/ After the United States, Chile, Zambia and Canada. - 20 - to 2.5 percent, as compared to 25 percent for the Miba production. As a result of these measures the smuggled production has been estimated to fall from 6.9 million carats in 1968 to 2.4 million carats in 1969. A decision to close the Tshikapa office would again increase clandestine exports. 49. In the eastern part of the Congo a number of companies have long been engaged in mining cassiterite (tin ore), found in association with minor minerals of tantalum, niobium and tungsten, and also of gold. Pro-- duction and export of tin suffered from the rebellions of 1964 and 1965, but has stabilized since 1967 at a level of about 6,500 tons metal content. Symetain in Kivu province and Congo-Etain in north Katanga are the princi- pal miners of cassiterite. Congo Etain is the only company converting cas- iterite into tin, but its installation is working below full capacity. 50. Manganese is another mineral which in the past lhas made a modest contribution to the Congo's exports - $6.8 million in 1959 and $3.1 million in 1969. In 1967, the mines and installations, located in Katanga (Kisenge) not far from the Angolan border, suffered from an interruption of output and occupation by Congolese troops in the aftermath of a mercenary-led in- cursion from Angola. However, shiipments from large accumulated stocks ap- parently continued. Exports of ore, all via the Angolan port of Lobito, totalled 280 thousand tons with a manganese content of about 50 percent. A sharp decline in ore prices (from 80 US cents per long ton unit in 1966 to 57 US cents in the first half of 1970) is reported to have made the con- centration of ores of 32-35 percent manganese unprofitable; and reserves of richer ores with a manganese content of 48-50 percent are sufficient for a limited time only. In view of the company's difficulties the Govern- ment decided in December 1969 to lower the export duty on manganese from 25 to 5 percent. 51. There is as yet no petroleum exploitation in the Congo. Since 1959 some exploratory work has been done in the Bas-Congo by Socorep wlhich includes among its shareholders a number of other oil companies and off- shore by Solico-Congulf. According to recent information the latter com- pany has found favorable indications. (iii) Industry 52. The bulk of the Congo's industrial sector still rests with the metallurgical industries, and because of relative price changes their im- portance in the total value added by the sector has in fact increased from 64 percent in 1959 to 80 percent in 1969. Price changes apart, the Congo is endowed with an important and diversified manufacturing base which has continued to expand almost continuously since independence. In 1967 and 1968 the sector's production declined somewhat as a result of decreased purchasing power and more active foreign competition following the monetary reform. This decline particularly affected food industries as well as the producers of goods which are particularly exposed to international competi- tion, such as leatherware and clothing. - 21 - Table 4: MANUFACTURING INDUSTRY (value added in millions of zaires - 1966 prices) 1966 1967 1968 I METALLURGICAL INDUSTRIES 32.7 33.0 34.0 II OTHER INDUSTRIES 18.4 18.0 16.7 a. Final consumer goods 11.2 10.9 10.3 of which: foods and beverages (4.8) (3.9) (3.9) clothing (1.1) (1.1) (0.9) leather and shoes (1.3) (1.2) (1.1) tobacco (0.9) (0.9) (0.9) b. Intermediate goods 7.2 7.1 6.4 of whiich: textile (2.8) (2.8) (2.4) non-metallic minerals (1.5) (1.7) (1.5) mechanical industries (0.9) (0.8) (0.7) chemicals (0.9) (1.0) (0.9) Source: Appenclix Table 2.2 53. Food, beverages and tobacco constitute the most important branch of thie manufacturing industry, accounting for about a third of total value addetd. The production of sugar, vegetable oils and fats, beer and soft drinks. and the manufacture of cigarettes are of the greatest significance in this branch. The oldest of the two existing sugar mills is located at Moerbeke in the Bas Congo (Compagnie Sucriere du Congo). Its production has continued to expand and now reaches 35,000 tons per year. A further expansion program to 50,000 tons a year is under execution. The other sugar mill, the Sucrerie et Raffinerie Centrafique (Sucraf) located in Kivu province, is operating below capacity because cane production in the Ruzizi Valley is still disrupted, partly owing to the flight of the population from this area during the rebellions of 1964 and 1965. Its production in 1969 amounted to 7,000 tons, but plans to re-equip the factory are underway. Plans for a meat and vegetable canning plant have been carried out, al- though still on a very limited scale. The brewing industry, which includes no less than 13 breweries, expects to raise its output, which in 1968 al- reacly amounted to 2.2 million hectoliters. Flour milling capacity has hithierto been restricted to Katanga, but in February 1969 the decision was taken to set up in Matadi an important flour mill (MINACO) with a capacity - 22 - of 100,000 tons a year. The Continental Grain Company participates in the financing of this project. Capacity for processing certain plantation crops such as tea and coffee is expected to be in part rehabilitated and in part expanded. 54. The textile industry is the second largest branch of manufactur- ing, contributing over 20 percent of total value added in the sector. Ihis industry which is equipped with about 120,000 spindles and 2,200 looms, has a total capacity of about 100 million m2. This capacity will be increased by approximately 20 million m2 in 1971 when the new factory for "wax-prints" will enter production. This unit, financed jointly by the Congolese Govern- ment and by the British Calico Printers Association, will have the exclusive right of wax-fabric production for a period of fifteen years. There are quite a large number of enterprises engaged in knitting, the production of blankets, the manufacture of clothing, and the making of bags and other packaging materials. Some projects for the extension of production capacity are presently being undertaken. 55. The shoe and leather industry is now virtually able to satisfy the local demand. Bata, the largest producer, has a total capacity of 7.6 million shoes a year and has plans to modernize its equipment and enlarge its capacity. 56. The chemical industry produces sulphuric acid and explosives for the mining and metallurgical industry, as well as soaps and toilet articles, paints and varnishes, and moulded and extruded articles of plastic. In April 1968 a refinery located near Moanda on the coast and capable of re- fining 650,000 tons of crude oil began production. The refinery (SOCIR) is a joint venture in which equal shares are held by the Congolese Govern- ment on the one hand, and three companies of the Italian ENI group on the other hand. 57. The metal fabricating industry turns out a wide range of products. It includes the construction of barges and small ships, ship repair, the manufacture of containers, galvanized sh_.eting, hoes, machetes, cutlery, metal structures, wire and cable, bicycles and light motorcycles and scooters. 58. The principal products of the non-metallic minerals industry are cement, cement products, tiles and bottles. Apart from the import of some iiighly specialized varieties of cement, Congo satisfies the needs of its own market, and exports small quantities to neighboring countries. Total production amounted to 294,000 tons in 1968 but, as a result of intense construction activity, was expected to reach 350,000 tons in 1969. The Societe de Ciments du Congo (CICO), largest producer in the country, is raising its capacity from 280 to 560 thousand tons, among other reasons, to meet the future demand for cement in connection with the Inga dam construc- tion and the urbanization plans for Kinshasa. The second largest producer, -Cimenkat, produces mainly for Gecomines and for exports to Zambia. Its present capacity of 180,000 tons is being increased to 300,000 tons per year. - 23 - 59. On the whole thus it can be said that the industrial sector has overcome the difficulties resulting from the liberalization of the economy in June 1967. The slackening of demand which followed immediately upon the monetary reform, particularly in the field of final consumer goods, seems to be over and the industries connected with building and construc- tion activities are in fact often working at full capacity. In several instances expansion plans are underway; in other cases the industrial sect- or is modernizing its equipment and increasing its productivity. The Gov- ernment has received many requests for additional protection, but only very rarely, as in the case of textiles and petroleum, have import duties been increased in the last two years. (iv) Power 60. Nearly all of the electricity in the Congo is supplied by hydro- stations. At the end of 1969 the 31 existing hydro-stations had an in- stalled capacity of 675 MW as compared with an aggregate thermal (mostly diesel) capacity of about 80 MW of which most was used only as standby and the remainder to supply electricity to many towns not connected to hydro plants. From 1960 to 1966 production rose from 2.4 billion kwh to 2.8 billion kwh, by only 2.2 percent a year. In the same period, however, due to a decrease in electricity exports, domestic electricity consumption rose from 1.9 to 2.5 billion kwh, or at a yearly rate of 4.7 percent. Since then, as a result of the almost complete disappearance of exports to Zambia, electricity production has dropped to 2.5 billion kwh in 1967 and risen again to 2.7 billion kwh in 1968. Domestic consumption, on the other hand, following the stagnation in the mining sector in 1967, remained stable in the latter year and increased by 4.8 percent in 1968. 61. The country's main consumption centers are Katanga (80 percent of total) and Kinshasa (10 percent). Consumption in the capital has grown from 221 million kwh in 1966 to 282 million kwh in 1969, at a yearly rate of about 8.5 percent. The revival of industrial activity in the city is underscored by the fact that high tension consumption, which stagnated in 1968, rose by over 9 percent in 1969. Table 5: ELECTRICITY CONSUMPTION (in million kwh) 1966 1967 1968 1969 Katanga 1,913 1,880 1,953 2,091 Kinshasa (city) 221 236 249 282 of which: high tension (141) (149) (152) (166) low tension (80) (87) (97) (116) Source: Ministry of Energy - 24 - 62. The present capability of the generating stations serving Kinshasa is 78.25 MW; this includes the Zongo (62 MW) and Sanga (1() MW) oydro-sta- tions, as well as the recently installed therri.l units at Limete (6.25 MW). During the low-water season total firm generating capacity, however, falls to 61.25 MW as compared to a demand of 59 MW (August 1970). In February 1970, however, peak demand in Kinshasa was already as high as 64 MW. At present rates of expansion peak demand may well reach 86-88 MW by 1973, and consequently two more thermal units representing 6.25 MW will be installed in the near future. 63. To meet the future needs of Kinshasa and the region between Kin- shasa and Matadi, the Government has started to develop the Inga site on the Congo River. The possibility of this hydro-power development has been the object of study since before independence. A consortium of Italian firms - SICAI - made the final studies and engineering plans. Tihere is a consensus that the Inga project is capable of delivering an enormous amount of cheap power. The project calls for the diversion of part of the Congo River into a parallel valley where the water level will be 60 meters hligher than the Congo River at the point, 6 km below the intake, where the valley will be sealed off by a barrage. Along this valley no less than five power stations are projected, of which the last four will all be subterranean. The first power station will contain six 50 MW units of which three will be installed in the first stage. Eachi of the four subsequent stations would have a capacity of 800 MW. 64. Cost of the first stage of the project (including three 50 MWI units) has been estimated at $65.6 million, of which $47.6 million for the civil works and equipment and $18 million for the transmission lines. On April 25, 1968 the Congolese Government concluded with an ltalian consort- ium called Italinga a contract for the civil works and equipment. This contract is to be financed for $27.6 million out of thie Government's budget and for $20 million by a suppliers' credit carrying 6 percent interest and repayable over a period of eight years following commissioning of the gen- erating units. In July 1969, the European Development Fund has agreed to finance the transmission lines with the proceeds of a $9 million grant and a $9 million soft loan (pret a conditions speciales) repayable in 28 years. The loan has a grace period of 10 years and bears an interest rate of 2 percent. Execution of the project is on schedule and the station is ex- pected to start production, with one unit installed, at the end of 1972. 65. Up to now the main producers of electricity have been the Forces hydroelectriques du Bas-Congo et de l'Est, a company with majority Govern- ment participation, Colectric, a private company which owns the Sanga in- stallations near Kinshasa, Regideso, a parastatal organization operating in small areas and Gecomines, the copper producer. Apart from these four larger producers, a number of private, industrial and agricultural compa- nies produce electric power for their own needs. In May 1970 the Congolese Government decided to set up the Societe Nationale d'Electricite, a public company which will be the owner and manager of the Inga hydro-station. The company will be supervised by the Ministry of Energy and may acquire the ownership of other power-stations. - 25 - (v) Transport 66. The evolution of the Congolese economy is fairly well reflected in the export traffic handled by the Port of Matadi. Table 6: MARITIME EXPORTS VIA MATADI (in thousand tons) 1959 1967 1968 1969 Copper 99.7 167.6 171.8 189.6 Palm and palm kernel oil 224.6 139.0 166.0 140.3 Rubber 38.9 29.0 41.4 37.9 Coffee 44.8 29.7 40.3 38.1 Palm kernel cake 73.4 39.1 41.1 46.3 Other 311.4 78.8 86.5 82.3 Total 792.8 483.2 547.1 534.5 These figures show that between 1967 and 1968 exports via Matadi increased from 483,000 to 547,000 tons, i.e. by 13 percent. In 1969, on the other hand, exports fell back by 2 percent to 534,000 tons. The drop in the latter year was, however, entirely due to a decrease in agricultural pro- ducts, since copper exports rose by 18,000 tons. Excluding copper the ex- ports fell from 375,000 to 345,000 tons, a drop of 8 percent; particularly affected were palm oil and rubber exports. In the agricultural volume of this report it is argued that no entirely satisfactory explanation for this decline 1ias been found as yet. Although unfavorable climatic conditions are undoubtedly partly responsible, it seems that difficulties encountered in the evacuation of the 1968 crop might have adversely affected the agri- cultural production in the following year. Whether this be so or not, there are sufficient other indications which show that deficiencies in the trans- port network, high transport costs and high profit margins on the part of intermediaries continue to hamper the continued development of the agricul- tural sector. 67. With respect to rivers and waterways the problems are both tech- nical and managerial. On the one hand, the floating equipment is worn-out and needs replacement, dredging is insufficient and river markings need improvement. On the other hand the main organizations in charge of river transport (Otraco and the Service des Voies Navigables) are overstaffed, while there are few qualified personnel. Heavy losses are incurred on Otraco's river transport operations. - 26 - 68. The importance of this sector in the Congo's further development has continuously been recognized by a number of foreign aid agencies. Since 1967 FED has been financing a trainiing prograni for medium and hiigh-level Otraco personnel, while foreign experts are provided by both Belgium and France. USAID has made two loans to Otraco, of $3 million and $10 million respectively, for the purchase of equipment. Finally, a team of consultants financed by UNDP under a project with the World Bank as Executing Agency is studying a reorganization of river transport management and identifying an emergency investment program to ensure adequate traffic facilities in the next few years. 69. By comparison with other modes of transport, the railways pose no serious immediate problem. The vital railway line between Kinshiasa and Matadi (CFMK), which is operated by OTRACO, appears to be capable of coping with the increase in traffic. Table 7: CFMK TRAFFIC (in thousand tons) 1959 1967 1968- 1969 Matadi-Kinshasa 609 426 480 502 Kinshasa-Matadi 814 459 514 508 Local traffic 734 437 437 460 Total 2,157 1,322 1,431 1,470 As shown in the table above traffic handled between Matadi and Kinshasa in- creased by 8 percent in 1968 and by 3 percent in 1969. In the latter year, due to the decline in agricultural output and exports, the increase in traf- fic resulted exclusively from higher imports and increased local movements; the export traffic declined. 70. The BCK/KDL railway, which handles the minerals traffic and the provisioning of South Katanga, is the only railway handling more long dis- tance traffic today than before independence. This is due to the fact that the production of minerals and metals already exceeds pre-independence lev- els, that a larger amount of transit is being handled for Zambian account, and that imports into Katanga have increased. Passenger traffic in 1969 increased by 28 percent from 1.6 to 2.0 million passengers, while freight traffic rose by 8 percent from 4.5 to 4.8 million tons. Local traffic increased more than long-distance hauls which seems to indicate a revival of internal movements of agricultural products. The railway is under for- eign management and is well run. New rolling stock has recently been put into service and mid-May 1970 the electrification of a first 96 km-stretch (Luena-Dianda) was accomplished. - 27 - 71. The CFL, which, together with water transport links, connects the BCK/KDL railway with Albertville on Lake Tanganyika and with Kisangani to the north, is in poor condition. Traffic flows on this railway are still considerably below pre-independence levels, but are expected to pick up in the coming years, partly as a result of the expected evacuation of Sodimico copper production via Dar-es-Salaam. In mid-1970 a $17 million contract was signed with a British firm for the provision of locomotives, rehabilita- tion of the permanent way material and technical assistance. 72. The Vicicongo railway, which serves the northern and northeastern part of the country as a prolongation of the navigable waterways of the Congo River and its tributaries, suffered very much from the rebellions and was entirely closed for some .time. With the return of peaceful con- ditions during the last four years traffic is now growing rapidly. Tonnage handled increased from 57,000 tons in 1968 to 77,000 tons in 1969. Pas- senger traffic, as everywhere else in the Congo, considerably exceeds pre- independence levels. In 1969 the Congolese Government decided to go ahead with the extension of the existing railroad from Aketi to Bumba, a port on the Congo River some 185 km southwest of Aketi. The cost of this extension has been estimated at $14 million and construction should be terminated in early 1972. The project is entirely financed by the Congolese Government. 73. Roads, which in the Congo serve mainly as feeder axes to the rail- road and river networks, are still poorly maintained and in many cases prob- ably continue to deteriorate. Funds for road maintenance are provided from the central Government budget ($4 million in the 1970 budget) and to a smal- ler extent from US counterpart funds. Under the latter system maintenance is entrusted to privately-owned plantations, enterprises or missions, which have a specific interest in certain road sections. Starting in 1970, how- ever, USAID's contribution to this road conventions program was reduced to 25 percent of total cost; and in any case the system is insufficient, since it leaves out certain important roads, maintenance of which cannot be en- trusted to one particular enterprise. Apart from these minor road repairs, some major road reconstruction has been undertaken with Government funds under contract with private firms, as well as from financing by FED. (vi) Education and training 74. It is fortunate that great progress has been made by the Congo since independence in the realm of education. In the colonial period em- phasis was almost exclusively placed on primary education. In 1959/60 primary school enrollment was about 1,640,000 or over 70 percent of the estimated number of children in the 6-11 age bracket. However, the 38,000 pupils in secondary schools represented only 2-3 percent of the children of secondary school age. While university enrollment had increased sharply in the years immediately preceding independence, it totaled only 763 in 1959/ 60 and there had as yet been only a few graduates. - 28 - 75. The impressive increase which has taken place in the last two years, at least in quantitative terms, is strikingly expressed by the fig- ures on enrollment given below: (For details see Table 8.2 Statistical Appendix). Table 8: ENROLLMENT IN EDUCATIONAL INSTITUrIONS 1959/60 1966/67 1968/69 Primary 1,644,044 2,193,200 2,455,840 Post-Primary 22,505 7,070 10,000 Secondary 37,836 140,620 194,777 Higher 763 4,651 8,401 of which: University (763) (2,925) (5,483) Other ( - ) (1,726) (2,918) While primary school enrollment has increased by 12 percent in the period 1966/67-1968/69, enrollment in post-primary and secondary education has risen by 43 and 39 percent respectively. Expansion is most impressive for higher education where enrollment has gone up by over 80 percent. 76. Enrollment now by far exceeds the 1959 level for all levels of education, except in the post-primary schools which for the most part pro- vide low-level vocational training and teacher-apprentice training. This drop was dl.e, above all, to the greatly expanded opportunities for secondary- school education and was compensated, in terms of vocational training, by an increase in enrollment in secondary technical and professional schools from 6,763 in 1959/60 to 13,207 in 1966/67. In 1969, expenditures on educa- tion amounted to Z45 million or 22 perceat of total current expenditures. 77. The quality of education is still deficient in many respects. A large number of schools lack textbooks and teaching materials. In the pri- mary schools 70 percent of the teachers in 1966/67 were not fully qualified professionally. The drop-out rate and the "non-pass" rate are still extreme- ly high in such schools. In the secondary schools the number of nonquali- fied teachers was only about 25 percent in 1966/67, but this was because almost 46 percent of the teachers were still foreign. 78. A considerable effort is, therefore, being made to train more teachers. Those for primary schools are being trained in normal schools at the secondary level where enrollment, after having declined from 13,517 in 1959/60 to a low of 5,686 in 1962/63, increased to 14,718 in 1966/67. In this same year there were eight "middle" normal schools with an enrollment of 620 for the training of lower secondary school teachers, and a National - 29 - Pedagogical Institute at Kinshasa which trains teachers for higher second- ary education and had an enrollment of 392. With the planned increase in the number of such institutions and in the enrollment at existing ones, it should be possible to raise significantly the proportion of Congolese tea- chers. However, given the prospective further rise in enrollments at secon- dary and higher institutions of education, it is likely to be a long time before the country can support a considerable absolute reduction in the number of foreign teachers. In higher education there were in 1967 only 26 Congolese teachers as compared with 266 foreigners. In secondary schools the number of teachers required is expected to rise from 5,726 in 1966/67 to 8,413 in 1972/73, so that a substantial expansion of teacher training will be needed simply to fill these additional posts. 79. The type of education also needs to be changed. There is too much emphasis on academic education and the liberal arts. In 1966/67 only 13,207 pupils or 9.4 percent of the total in secondary schools were pursu- ing technical and professional training designed to fit them for careers in mechanics, electricity, construction, agriculture, commerce and similar trades and professions. In the past, the universities have not attracted sufficient students in agriculture, the sciences and engineering. Thus of 640 people graduated from the universities of Lovanium and Lubumbashi from 1958 to 1968, only about 50 received degrees or diplomas in agriculture, and about 20 in engineering. Recently the Government has sought to direct more students into these fields, and the fact that 36 percent of the total student body in institutions of higher learning during 1966/67 were major- ing in science, mathematics and technical subjects indicates that a shift has taken place. However, two professions still characterized by a severe shortage of qualified personnel - namely, agriculture and medicine - had attracted only 3.5 percent and 9.3 percent respectively of the total number of students. 80. The Congo now has three universities, including (with 1969 en- rolLment figures shown in parentheses) the Catholic University of Lovanium at Kinshasa (2,988), the oldest institution; the State University of the Congo at Lubumbashi (2,250); and the Free University of the Congo in Kis- angani (603), which is the newest and has yet no graduates. The total number of graduates from the first two universities in 1968 was only 168, reflecting in part considerable wastage but mainly the fact that the very sharp rise in the number of students has taken place only during the last three or four years. 81. An encouraging aspect of higher education has been the establish- ment of an increasing number of specialized institutions. Apart from teach- er-training institutions, the more important of these are (with 1969 en- rollment given in parentheses) the National School of Administration (550) which hopes gradually to increase its enrollment to 1,000 and by 1967 had contributed 239 graduates to various branches of the central, provincial and municipal civil service as well as the army; the National Institute of Building and Public Works (194); the National Institute of Mines (120); the National School of Posts ahd Telecommunications (66); and the Higher Institute of Commerce (58). In addition there are hligher institutions for the training of architects, surveyors and hospital assistants. - 30 - C. Public Finance 82. Both as a result of high copper prices and better methods of budget control, the overall budgetary situation of the Congo has consid- erably improved since the first half of 1968. Whereas a deficit of about Z5 million had been registered during the first six months of 1968, the year as a whole closed with a deficit of Z3.96 million before debt amorti- zation (or Z7.8 million including debt amortization). In 1969, on thie other hand, the Congolese budget closed witlh a surplus of Zl0.9 million (or Z5 million after debt amortization). Consequently, domestic borrow- ing from the National Bank was reduced by Z5.68 million. 83. Not only has the overall budgetary situation improved in tllis period, but current savings and public investment have risen considerably. Current savings which totaled Z7.6 million in 1967 went up to Z21.6 mil- lion in 1968 and more than tripled to Z66.9 million in 1969. In the same period central Government investment financed thirough domestic resources increased from Z13.9 million to Z25.5 million and Z56.0 million respec- tively. (i) Revenue 84. This improvement in the country's situation has taken place in a climate of rapidly increasing revenues. Between 1967 and 1968 Gov- ernment domestic revenue nearly doubled from Z95 million to Z186 mil- lion, while in 1969 it rose again by 45 percent to Z268 million. Revised estimates for 1970 put total Government revenue at Z291 million (as com- pared to a conservative original budget estimate of Z215 million), but early returns of the first six months of the year indicated that revenue will exceed Z300 million and might easily reach Z315 million. If the latter estimate were to materialize, Government revenue would have in- creased by another 17 percent in 1970. Table 9: CENTRAL GOVERNMENT REVFNUE (in millions of zaires) Revised Actuals Estimates 1967 1968 1969 1970 Income tax 8.5 27.1 69.8 55.4 of which: corporation tax (3.8) (17.5) (43.2) (32.1) wages and salaries (4.0) (7.9) (20.7) (17.0) Taxes on international trade 78.5 124.1 166.5 192.6 of which: import duties (13.3) (30.4) (39.8) (40.0) export duties (39.1) (65.6) (93.0) (117.7) export turnover tax (15.2) (20.6) (24.1) (26.6) Internal turnover tax 6.8 10.6 17.1 18.0 Other Total 95.1 185.6 268.1 291.2 Source: Appendix table 5.1 - 31 - 85. As can be seen from the table above, the largest relative in- crease between 1967 and 1969 has been in the field of direct tax revenue, particularly from the corporation tax. Main impulse for this growth in direct taxation was the tax law introduced in January 1968. The purpose of this new legislation, which was prepared by a specially established Commission de Reforme Fiscale, was to simplify the methods of levying direct taxes and to remedy certain inconsistencies which had crept into the system primarily as the result of a continuous inflation. Principal features of the reform were the introduction of a uniform tax on company profits (set at 45 percent instead of the previously existing progressive schedule ranging from 14 to 40 percent), the possibility of revaluing company assets according to a schedule of ratios outlined in the law, and the taxation of revaluation profits at 5 percent. Income brackets for the determination of personal income taxes (taxe professionnelle sur les remunerations) were readjusted upwards to reflect the new wage levels and wages for expatriate personnel were subjected to an additional 5 per- cent tax to be paid by the employer 1/. Apart from these modifications in the prevailing legislation, the acceleration of the overall economy, of course, also contributed to the sizable increase in direct tax revenue. 86. The second largest relative increase, and the largest in ab- solute size, is the increase in revenue from foreign trade taxation, which rose from Z78 million in 1967 to Z166 million in 1969. At the time of the monetary reform, exports duties had generally been doubled on the ground of greater profitability of export trade and export indus- try. The export tax on coffee, which had already been raised from 17 percent to 30 percent in May 1966, was put at 40 percent, as was the tax on diamonds (Lubilash). In general, the earlier policy to tax the export of raw materials more heavily than the export of semi-finished products was maintained. 1/ In February 1969 direct taxation was again slightly modified. Among other changes, the company profit tax was reduced from 45 to 40 per- cent, and additional prepayment measures were introduced to accelerate the collection of taxes. - 32 - Table 10: EVOLUTION OF MAJOR EXPORT TAXES (in percentages) 1960 1967 1967 1968 1969 before after (Jan.6) (Oct. 22) reform reform Copper (wire bar) 15 30 40 40 40+surtax/ Cassiterite 7 9 18 20 20 Manganese n.a. 13 26 25 5/2 Zinc n.a. 8 16 15 15 Coffee (Robusta) n.a. 5 10 10 3 (Arabica) n.a 7 10 10 3 Tea n.a. 6 12 12 exempt Palm oil 7 7 14 15 2/3 Groundnuts (shelled) n.a. 12 24 25 exempt Groundnut oil 1 1 14 2 2 Cotton (lint) 5 15 6 5 5 Cotton fabric 0 n.a. n.a. 5 5 Rubber 12 12 24 10 5 Wood: logs 10 12 24 20 6 sawn timber 7 10 20 15 5 plywood 3 3 6 5 2 /1 starting May 15, 1969 /2 starting December 5, 1969 /3 starting October 31, 1968 87. On January 6, 1968, a new tariff schedule of export taxes was published. This schedule basically left the post-devaluation rates un- changed, but sharply reduced the export tax on groundnut oil, for example. - 33 - 88. Under the impact of these tax increases, but mainly as a re- sult of export growth and prevailing high copper prices, revenue from export taxes first rose in the second half of 1967, then continued to expand in 1968. In early 1969 a surtax on copper, levied on a progres- sive basis whenever the copper export price exceeds a certain minimum 1/, was introduced. Revenue of this surtax in 1969 amounted to Z13.1 mil- lion. In the course of the same year export taxes on a number of agri- culture products including coffee, tea, rubber, palm oil 2/ and wood were reduced to stimulate agricultural production. These reductions only mar- ginaLly affected export tax receipts and total revenue from export taxa- tion rose by more than 40 percent, to Z93 million. 89. At the time of the monetary reform the turnover tax was ex- tended to export transactions. 3/ This provided an additional source of tax revenue, which has in the meantime grown to Z24 million in 1969. The combined revenue from export duties and export turnover tax totaled Z117 million (US$234 million) in 1969, which in the same year amounted to an effective taxation of exports of 35 percent (as compared to 30 percent in 1968 and 23 percent in 1967). Average taxation of mineral exports was 38 percent, whereas it was only 16 percent for agricultural products. 90. Simultaneously with the monetary reform, import taxes on non- essential consumer goods as well as on goods competing with local pro- duction had been raised by 15 percent on the average. Taxes on the im- port of a few luxury goods had been raised even more. Some days after the reform, the new tariffs were split up in two elements: (1) a customs element which is subject to discussion and negotiation in the framework of international agreements, and (2) a fiscal element which is primarily considered as a source of government revenue and, hence, as not-negotiable. On January 6, 1968, finally, together with the new schedule of export tariffs, a new complete schedule of import tariffs was published; this latter schedule did not differ fundamentally from the tariffs prepared after the reform, althouglh in a few cases - as for wines and domestic electrical appliances - the rates were raised further, while in some other cases - as for clothing and lint cotton - the rates were slightly reduced. A comparison of a sample of import tariffs established in 1968 with thlose existing in 1960 shows that the tariffs which were relatively low in 1960 hiave by and large remained unchanged, while the tariffs which were relatively high have been made even higher. To the extent that the low tariffs applied to raw materials and the high tariffs to the processed 1/ The minimum level at which the surtax is being levied is a valeur de base, or taxable basis, of Z34 per 100 kg wire bar (which cor- responds to an f.o.b. Antwerp price of approximately US 45 cents/lb.) 2/ Palm oil export taxes had already been brought down at the end of 1968. 3/ Originally this tax was uniform at 7.5 percent; but in December 1969 it was reduced to 7 percent for copper, cobalt, diamonds, uranium and zinc, and to 6.75 percent for all other exports. - 34 - form of these same raw materials, the incentive for industrialization.has been boosted;,to the extent that the.low.tariffs,apply to investment,goods and agricultural inputs, the relative price of these. goods vis-a-vis con,- sumption goods has been favorably affected. 91. Since January 1968 no protective measures have, been. in.troduce,d, except for petroleum and.in the field of textiles.and, clthing,. whe,re..a, minimum specific duty was established to protect domestic prod,ucers,,(se,e, Table 11). On the other hand, Government.authorities have,frequently refused to;grant additional protection to local producers in cases where such additional.protection did not appear warranted. On the .w,hole nominal protection against imp.orts does not appear unduly high. In 19.69 average taxation of imports amounted to 26 percent. - 35 - Table 11: SAMPLE OF IMPORT TAXES (in percentages, unless otherwise marked) 1960 1968 -(Jan6) I. Luxury goods Cars: less than 1,750 Z 25 50 more than 1,750 Z 25 100 Domestic electrical appliances 20 60 Cameras 30 50 Radios 20 50 Motor boats 30 50 Wines - 15 0and more: 5 liters or more 25F 42 small bottles 34F 56 II. Goods competing with domestic production Sugar 35 35 Cocoa 20 50 Biscuits 30 50 Groimdnut oil 60 60 Soap 35 50 Synthetic textile 20 50 Clothing 20 - 30 40 - 50 (different Shoes 20 40 specific duties) Cement (Portland) 10 50 Bottles 12 35 Sulfuric acid 20 10 Dry batteries 10 20 Cigarettes and cigars 80 100 Cotton fabrics 20 - 25 40 - 50 (8.5K-9.OK/m ) Leaether 25 50 III. Intermediate and investment goods Trucks 15 15 Wagons 15 15 Barges 5 20 Tractors 5 5 Fertilizers 5 5 Pumps 10 10 Industrial machinery 10 10 Cot-ton (lint) 5 5 Tobacco 50 50 Hides 5 10 Dyet stuffs 10 15 Caustic soda 20 10 Soda ash 15 20 1/ Figures between parentheses indicate minimum specific duties introduced in April 1969. - 36 - 92. Total fiscal pressure has been traditionally relatively high in the Congo and had already reached 21 percent of monetized GDP at the eve of independence. In the last few years this total tax revenue ratio has gone up from 22 in 1966 to 28 in 1968 and 33 in 1969. Table 12: TAX REVENUE RATIO 1966 1968 1969 Monetized GDP (million Z) 275 656 814 Tax revenue (million Z) 55 171 268 Ratio 20% 26% 33% Value added by Gecomines (million Z) 159 205 Tax revenue from Gecomines (million Z) 96 132 Ratio 60% 64% Value added by other sectors (million Z) 297 609 Tax revenue from other sectors (million Z) 75 136 Ratio 15% 22% Source: National Bank of the Congo. 93. Even if we exclude from this ratio the part related to Gecomines, which has by itself a tax revenue ratio of over 60 percent, the tax share levied on the other sectors of the economy still is relatively high and has increased from 15 percent in 1968 to 22 percent in 1969. The fact is that, in spite of a rapidly increasing mining output, increased copper prices and the introduction of a surtax in 1969, the tax contribution by Gecomines in total tax revenue has slightly gone down in the last few years. Wlereas this contribution stood at 84 percent in 1966, it fell to 56 in 1968 and 49 percent in 1969 1/. The main reason for this appears to be improved tax collection in other sectors of the economy. 1/ This decline also appears, although somewhat less pronounced, if the Gecomines tax contribution is measured as a percentage of total Gov- ernment receipts including non-tax revenue. - 37 - (ii) Current Expendi tures 94. As mentioned earlier, since the emergency measures taken in May 1968 methods of budgetary control and discipline have considerably improved, both with respect to the methods of assessing and collecting taxes, as with regard to the control of expenditures. Progress in the latter field has been mainly accomplished through: (1) the use of fi- nancial controllers in the technical ministries, (2) the elaboration of detailed provincial budgets to be examined and approved by the Central Government, (3) the introduction of mechanized accounting, and (4) the consistent forrnulation of a conservative provisional budget. Original budget figures on Government receipts and expenditures are usually on the low side, based on a conservative estimate of copper prices (US50 cents/lb); in the course of the year, when it appears that higher copper prices will lead to higher revenues, additional expenditures are gradually authorized by the Ministry of Finance. This method permits the Ministry of Finance to exercise a discriminatory control over the additional au- thorizations, and at the same time to limit total expenditures in case a higher copper price does not materialize. In 1969, for example original budget receipts were set at Z185 million, while total actual revenues at the end of the year amounted to Z268 million. This led to total expendi- tures, including debt amortization, totaling Z263 million, of which an estimated Z201 million were current and Z62 million capital expenditures. 95. In both 1967 and 1969 the expansion of current expenditures remained below the rate of increase in receipts and, consequently, cur- rent savings are estimated to have been boosted from Z8 million in 1967 to Z22 million in 1968 and Z67 million in 1969. The distinction between ordinarv and investment expenditures is, however, not a straightforward matter: the budget classification is not always drawn according to eco- nomic criteria, and furthermore an important part of Government expendi- tures are taken at the initiative of the Presidency. The exact nature of these expenditures is not always known and, consequently, the estimate on investment expenditures has to be made by the National Bank on rather arbitrary grounds. 96. According to the National Bank estimates, current expenditures increased from Z164 million in 1968 to Z201 million in 1969, an increase of 23 percent. Although a detailed breakdown of these expenditures is not available it seems that a definite shift has taken place in the major elements causing the expansion in 1969 as compared to the expansion in the two previous years. Whereas, according to the national accounts, Government wages and salaries had risen by Z31 million between 1966 and 1968 (from Z50 million to Z81 million), their share in total current expenditures had fallen from over 70 to approximately 50 percent, be- cause of a more rapid expansion in expenditures on goods and services. In 1969, on tihe other hand, it seems that the increase in the overall wage-bill was the main factor behind the expansion of Government expendi- tures. According to the same national account estimates Government wages and salaries increased by Z31 million between 1968 and 1969, while total - 38 - current expenditures rose by Z35 million, or only Z4 million more. These figures indicate that the share of wages and salaries in current expe,ndi- tures would again have increased from 50 to 56 percent. The main reason for this important increase is the introduction in January 1969 of a new salary scale for civil servants (see para 113). 97. The main items in the Government's ordinary expenditures..f,r. 1969 are education (Z45-million) and defense (Z23 million), but the lat- ter part is probably underestimated due to the probable inclusion of military expenditures in the large item of unallocated expenditures (Z43 million). Interest charges on public debt in the same year amounted to Z6 million. (iii) Capital Expenditures 98. In spite of the uncertainties surrounding the composition of public expenditure, two important facts stand out fairly clearly: (a.) current savings have increased considerably in 1968 and 1969 and (b), public investment financed with domestic resources has also expanded considerably, although it has not always been channeled in the areas of greatest priority. Table 13: PUBLIC SAVINGS AND INVESTMENT (in millions of zaires) 1967 1968 1969 19.704- Current revenue 95 186 268 315 Current expenditures 87 164 201 262 Current savings 8 22 67 53 Investment expenditures 14 26 56 65 /l provisional. Source: Appendix table 5.3 99. As shown in the table above public savings tripled in both 1968 and 1969, but provisional data for 1970 show a decline of over 20 percent. Public savings had increased from 12 of Government revenue in 1968 to 25 percent in 1969. Parallel to this rise in savings, pub- lic investment expenditures (excluding debt amortization) increased from Z26 million in 1968 to Z56 million in 1969, and are expegted to reach Z65 million in 1970. This means that in 1969 public investment of domestic resources represented nearly 7 percent of monetized GI)P. - 39 - 100. The exact breakdown of the investment expenditures is not known, but National Bank estimates show that the largest share of public investment is taken up by public works, energy and defense. In 1969, for example, the major public investment projects absorbing domestic resources were the reconstruction of the Orientale province, the Bukavu airport, the Aketi-Bumba railroad, the civil works of the Inga dam, the Regideso electricity program, and the Congolese participation in a French-sponsored horticultural project near Kinshasa (Ndjili). Table 14: ESTIMATED DISTRIBUTION OF INVESTMENT EXPENDITURES (in percentages) 1968 1969 1970/1 General Services 22.0 18.6 32.2 of which: defense (16.4) (9.2) (19.0) Economic Sectors 63.5 63.4 54.2 of which: transport & communications (3.0) (13.7) (14.4) public works (14.3) (19.8) (6.4) energy (17.1) (14.5) (15.3) agriculture/3 (6.9) (6.6) (4.2) Social Services 14.5 4.2 13.6 of which: education (10.8) (1.9) (5.4) health (1.4) (1.6) (5.0) Unclassified - 13.8k /1 estimated expenditures /2 mostly for general services /3 mission estimate Source: National Bank of the Congo. On the whole, it appears that in 1969 and 1970 the share of investment in transport and communications has gone up as compared to 1968, whereas the share of education has gone down. The share of agriculture, however, remains very low, at less than 7 percent. Furthermore, some of the ex- penditures classified as public investment contain elements of public consumption. - 40 - 101. Apart from the public investment financed from domestic re- sources, there is some public investment which is financed through for- eign grants or loans. This investment, which amounted to Z3 million in 1966, rose to Z16 million in 1968 and Z17 million in 1969. itowever, due to the increased public savings effort, the share of foreign fi- nancing in total public investment has fallen from 38 percent in 1968 to 23 percent in 1969. 102. Considerable progress has also been made in the last two years in the formulation of the investment budget and in outlining development programs for foreign aid agencies. In 1968 the Govern- ment became aware that its development budget was a hastily improvised document which contained a miscellany of items, some reflecting payments falling due on contracts already concluded, others envisaging the carry- ing out of fairly concrete plans, and still others relating to plans which had not yet been translated into concrete projects and unlikely to be realized. Investment decisions were often taken by the technical min- istries, without due regard to their financial cost or economic returns. To check this the authorities decided to set up an interministerial com- mittee (Comite Interministeriel Economique et Financier - CIMEF), com- posed of the principal ministers and with a permanent secretariat in the Office of the Presidency. This commission, which has been meeting regularly, reviews the yearly investment budget and approves all major investment projects. At the request of the Congolese Government the World Bank, together with the French aid agency, have helped finance an international team of experts seconded to the Office of the Presi- dency. This team has helped the Government with the elaboration of the 1970 investment budget, in which for the first time a clear dis- tinction has been drawn between disbursements on ongoing and on new projects. 1/ The team has also contributed to the setting up of a new administrative system, inviting the technical ministries to submit development projects to be considered for inclusion in the budget. Furthermore, the Government has submitted to the European Development Fund (FED) a document outlining the projects proposed for possible fi- nancing under the third Fund. This document represents a further attempt at rationalizing the development effort. No doubt, the Government budget still contains a number of items which will not directly contribute to economic development, and the preparation of programs submitted to for- eign aid agencies can still be improved, but serious progress has been made in that respect since 1968. D. Private Investment and Investment Climate 103. Relatively little is known about the actual size of private investment in the last three years. The national accounts estimates 1/ Of the Z51.5 million disbursements included in the 1970 investment budget, Z29 million are for ongoing projects. - 41 - prepared by the National Bank relate to the overall figures of invest- ment and are based on the data concerning the import and local produc- tion of investment goods. Private investment is the residual item after substraction of public investment. 104. In spite of this imprecision as to the total amount of private investment two points stand out fairly clearly: (1) whatever private investment has taken place in the last two years has been financed through reinvested profits rather than through new capital flows from abroad (net private capital transactions as measured by the balance of payments only amounted to $7 million in 1967 and $5 million in 1969); and (2) private iniestment has increased considerably in the same period; whereas it amounted to Z32 million in 1966 it may have risen to as much as Z98 mil- lion in 1968 and Z145 million in 1969. Most of this investment was pre- sumably in the field of housing and industry, but there are signs of renewed investment activity in agricultural plantations and equipment as well. Table 15: TOTAL INVESTMENT (in millions of zaires) 1966 1968 1969 Public Investment 9 42 73 of which: domestic resources (6) (26) (56) foreign resources (3) (16) (17) Private Investment 32 98 145 Total Investment 41 140 218 105. Although foreign capital flows from abroad have so far been limited, a number of foreign investment decisions have been taken in the last three years. Among them is a $75 million project to mine and concentrate copper ore from the Musoshi deposit, financed jointly by a subsidiary of the Japanese Nippon Mining Company and the Congolese Gov- ernment. American investment projects include an Intercontinental Hotel in Kinshasa, a Union Carbide niobium mining operation in Kivu, a Conti- nental Grain Company flour mill in the port of Matadi, and a possible copper mining project at Tenke. 106. Two important events occurred in 1969 which contributed to the restoration of confidence on the part of foreign investors. The first was the promuLgation on June 26, 1969 of a new Investment Code. This code regulates the fiscal incentives and foreign exchange transfer guar- antees which can be granted to domestic and foreign investors. The docu- ment foresees two types of preferential treatment: one - the regime general - is granted to any investment deemed to stimulate the economic ancl social development of the country: the other - the regime conven- tionnel - is reserved to investments which are of major importance to - 42 - the country's development and, moreover, of exceptionally large size or characterized by a long gestation period. The general purpose of the preferences given under both regimes is to reduce the cost of the investment through exemption from incorporation fees and import duties on equipment goods, and to increase profitability through temporary exemption from the corporation income tax, the tax on the earnings of expatriate employees and the real estate tax. The advantages granted under the general regime are for a specified length of time (usually five years), but this period can be extended if the investment has been accepted under the convention system. In the latter case, fiscal stabil- ity may also be guaranteed for a specified length of time. Furthermore the code guarantees to foreign investors the transferability of profits as well as of capital in case of liquidation. The application of the investment code is administered by an Investment Commission which com- prises representatives of the main economic ministries. In case of dis- sent among the members of the commission, and in all cases dealing with an application under the convention system, the final decision is taken by the council of ministers. 107. The second event which contributed to a restoration of business confidence is the settlement in September 1969 of the outstanding dispute between the Union Miniere and the Congolese Government in connection with the loss of the former's assets in the Congo. This issue had been clouding the investment horizon since the beginning of 1967. It was solved by an extension for 25 years of the technical corporation agreement between the Societe Generale des Minerais and Gecomines. According to the pro- visions of this new agreement SGM will receive 6 percent of the value of Gecomines' production during the first fifteen years of the agree- ment; this amount includes both a compensation element for the assets and a management fee. For the remaining years the payment will be re- duced to 1 percent and will cover the management fee only. 108. As a result of the increased business confidence an important number of foreign trade missions have visited the Congo in the last two years. These missions, among others, f,om Belgium, the United Kingdom, the U.S., France, Canada and Germany, will probably lead to new private investment in various sectors of the economy (see paras. 156-162). E. Prices, Wages and Employment 109. One of the objectives of the monetary reform was the stabiliza- tion of domestic prices. In this, as in most other respects, the operation has been a success. Whereas it had been expected that internal prices would double in the wake of the devaluation, retail prices in Kinshasa markets in June 1968 were in fact 87 percent above the level attained in June 1967. - 43 - Table 16: RETAIL PRICE INDICES June 1967 = 100 1967 1968 1969 1970 December June December June December June Kinshasa (markets) 155 187 185 198 208 210 Kinshasa (stores) 153 177 182 190 194 204 Lubumbashi (low-income) 143 184 186 192 194 n.a. Lubumbashi (high-income) 137 163 173 177 182 n.a. Source: Appendix tables 7.1 and 7.2. In the same month retail prices in Kinshasa stores were 77 percent above their June 1967 level. In the second half of 1968 the price level remained virtually unchanged (market prices in fact declined somewhat), and it ap- peared that the price increase immediately following the devaluation had come to an end. 110. Starting in March 1969, however, a new series of price increases set in, which continued through August of the same year.. In this six months' period the retail prices in Kinshasa markets rose by nearly 10 per- cent, and prices in stores by 5 percent. Among the reasons for this in- crease are the introduction of a higher salary scale for civil servants in January 1969, the rise in the price of imports and a scarcity of local foodstuffs (mainly rice, beans and potatoes) in the Kinshasa area. Since then prices have again stabilized. During the first half of 1970 the retail price in Kinshasa markets has gone up by only 1 percent. 111. Evolution of the price level in Lubumbashi was similar to the evolution in Kinshasa, with the post-devaluation adjustment having shown most of its effect by mid-1968. In the course of 1969, however, prices did not rise as much as in Kinshasa, mainly due to a steady supply of foodstuffs (maize) from Zambia. 112. By April 1968 wages and salaries, both in the public and private sector, were approximately 40 percent above their pre-devaluation level. In thie private sector, minimum wage rates had been adjusted twice, in October 1967 and in April 1968, for a combined total of about 44 percent. In the public sector, two increases had also been granted: one at the time of the monetary reform, when housing allowances for civil servants were reintroduced, and one in October 1967, when salaries were increased by 10 percent and yearly automatic adjustments of 3 percent were introduced. The combined impact of these two adjustments varied between salary scales, but ranged between 30 and 50 percent. - 44 - 113. Since then there has been one major adjustment of wages in the civil service, in January 1969. This adjustment, which had been long expected, considerably widened the spread of the wage scale in the public sector and entailed increases ranging from 25 to over 200 percent. In the private sector, minimum wages were raised by another 10 percent in July 1969, and, effective January 1970, actual wages were again increased by 20 percent. The Government is confident that the latter increase will be compensated by a reduction in the rates and scope of the turnover tax, and will not lead to additional price increases. 114. Following these successive salary adjustments real wages for qualified labor in the private sector and for most categories of civil servants now exceed their June 1967 level, as indicated in the following table: Table 17: EVOLUTION OF REAL WAGES (June 1967 = 100) 1967 1968 1969 1970 December June December June December March Private sector unqualified labor 80.4 76.6 77.6 72.6 76.0 92.0 qualified labor 96.3 92.0 93.2 87.1 91.0 110.2 Public sector commis auxiliaire 78.3 65.1 65.9 109.3 103.8 107.9 commis 89.3 74.2 75.2 87.5 83.0 86.3 chef de bureau 87.6 72.8 73.7 123.8 117.4 122.0 secretaire general 86.2 71.6 72.6 194.4 184.4 191.8 115. Employment statistics in the country are very scanty, but from partial estimates on employment by large enterprises it appears that the economic growth in 1967 and 1968 has been accompanied by a rise of 8 and 2 percent respectively in the number of African salaried workers (see Appendix Table 8.1). However, due to a decrease in the number of non- salaried workers and expatriates personnel in 1968, total employment in the latter year has hardly gone up. It is interesting to note that the level of employment in all categories is still considerably below the pre- independence level, but that the short-fall is largest for the same non- salaried workers and expatriates. Employment of salaried African workers is now at about 90 percent of its level in 1960. 116. Although the urban unemployment problem in the Congo has not reached the dimensions which it has attained in other African countries, the distribution of the unemployed among different age groups shows that the problem, in Kinshasa at least, will become more acute in the years ahead. From a comparison between the population census taken in Kinshasa in 1967 - 45 - Table 18 :BALANCE OF PAD.iSTS (in millions of US dol-^.rs) 1966 1967 1968 19691= A. Goods and services 9.0 40.8 67.0 79.6 Trade balance 179.5 208.6 272.9 289.5 Exports f.o.b. 482.9 470.5 584.9 31.4 Imports f.o.b. -303.4 -261.9 -312.0 _,,9 Services (net) -170.5 -_167.8 -205.9 -209.9 Freight and insurance -55.1 -39.6 -50.1 -64.9 Other transportation -11.7 -6.4 -3.9 1.1 Travel -6.4 -13.2 -16.0 -7.2 Investment income -8.o -2.1 -10.8 -14.5 Government n.i.e. .62.9 -67.5 -86.5 -84.5 Other -26.4 -39.0 -38.6 -39.9 B. Unrequited transfers (net) - -26.4 -26.0 -35.9 Private -50.3 -63.5 -65.3 -75.1 Central Government 50.3 37.1 39.3 39.2 Total A + B 9.0 14.4 4l..0 43.7 C. Capital (net) 24.1 26.6 10.6 10.3 Private -2.7 6.7 -6.o 5,1 Central Government 26.8 19.9 16.6 5.2 D. Net errors and omissions -6.8 9.9 -3.0 1.4 Total. A through D 26.3 50.9 48.6 55.4 E. Monetary movements (net) -26.3 -50.9 -48.6 55.4 Central bank 0.4 -47.0 -70.2 -60.0 Commercial banks -26.7 -3.9 21.6 4.6 Source: National Bank of the Congo. I/ Preliminary - 46 - and employment statistics for the same year, it appears that male unemploy- ment (excluding the student population and the retired) must have amounted to some 29,000, or 13 percent of the adult male population. Distribution of the unemployed was, however, highly uneven and heavily concentrated among the younger elements of the population; in fact it reached 27 percent in the 20-24 age group, and 13 percent in the 25-29 age group, as compared to approximately 8 percent among the elements of 30 and over. F. Foreign Trade and Balance of Payments 117. The Congo's export earnings are determined to a large extent by the exports of minerals, mainly copper, which accounted respectively for 86 and 66 percent of total exports in 1969. Due to the combined effect of an increase in copper production (14 percent between 1967 and 1969) and a sustained rise in the price, total revenue from copper exports has grown from $259 million in 1967 to $443 million in 1969, an increase of over 70 percent. Table 19: COPPER PRICES /1 (US cents/lb) 1966 1967 1968 1969 1970 Jan. June Sept. 55 49 54 67 72 65 56 /1 Quotation of Congolese copper in Antwerp market. Other mineral exports increased in the same period from $93 million to $136 million, i.e. by 46 percent. Non-mineral exports have remained stable at $94 million, and this in spite of the fact that the total value of the country's five main agricultural export products - coffee, rubber, palm oil, palm kernel oil and timber - has risen in the same period from $73 million to $83 million. Mainly responsible for the stagnation in non- mineral exports was the drastic decline in the export of bananas and fibers (urena, punga). 118. Apart from recorded exports, there exists a stream of smuggled exports, including mineral and agricultural products. In terms of value by far the largest item consists of diamond smuggling, but as mentioned earlier this trade has sharply declined in the last two years. The other items which are exported illegaly include tin, gold, coffee, palm oil and tea. Altogether the value of clandestine exports has been estimated at $24 million in 1967 and $8 million in 1969. 119. The Congo's imports are classified according to the sources of finance; these include the National Bank's foreign exchange, foreign aid, suppliers' credit and the parallel market. Following the reduction in US commodity aid, the import of goods financed through foreign aid has fallen from $36 million in 1967 to $16 million in 1969. Suppliers' credit imports, on the other hand, have continued their earlier expansion and more than doubled from $15 million in 1967 to $31 million in 1969. - 47 - Table 20: IMPORTS OF GOODS (in millions of US dollars) Source of financing 1966 1967 1968 1969 National BanLc foreign exchange 236 196 251 329 Foreign aid 43 36 23 16 Suippliers' credit 4 15 16 31 Parallel market 11 9 11 16 Other /1 9 6 11 - Total 303 262 312 392 /1 grants in goods and private direct investment. 120. Whereas total exports (including clandestine trade) increased by 45 percent between 1967 and 1969 (from $470 million to $681 million), total imports in the same period went up by 49 percent, from $262 million in 1967 to $392 million in 1969. In spite of this more rapid increase in imports than in exports, the absolute trade surplus in the same period rose from $208 million to $289 million. 121. No major change has occurred in the last two years in the direct- ion of the Congo's foreign trade. The main trading partner remains Belgium (and Luxemburg) with 51 and 24 percent of exports and imports respectively. Among the countries whose trade with the Congo has expanded more than pro- portionately are the Netherlands and Japan. In 1967 the Congo exported $9.7 million worth of goods to the Netherlands and imported $8.3 million; in 1968 the trade balance turned negative, with exports amounting to $14.4 million and imports worth $17.8 million. Preliminary results for the first half of the 1969 show that these trade flows have continued to increase, with exports (on an annual basis) rising to $23.4 million and imports to $34.2 million. Trade relations with Japan have expanded even more, with exports rising from $8.1 million in 1967 to $12.8 million in 1968 and im- ports rising from $5.8 million to $22.0 million. This increasing trend continued in 1969. 122. Despite its increasing deficit on account of service payments, Congo's net balance on goods and services has continued to improve in the last two years; from $41 million in 1967 it rose to $80 million in 1969. The remaining elements of the balance of payments consist primarily of transfers of private savings abroad and of capital flows in the form of suppliers' credits and foreign aid. Because of a considerably increase in private transfer payments and a concomitant fall in foreign aid disburse- ments, the balance on these remaining elements has considerably deteriorated; - 48 - from being positive to the extent of $10.1 million in 1967 it has turned negative for a total amount of $24.2 million in 1969. In spite of this deterioration, the net gain of the balance on goods and services has been more than substantial enough to compensate the loss on the remaining ele- ments, and Congo's balance of payments has consistently been positive ever since 1967 at a level varying between $50-55 million. At the end of 1969 the country 's net foreign exchange reserves stood at $225 million, equivalent to seven months' imports. In the first half of 1970, the Congo's foreign reserves continued to increase, and by the end of June they reached $248 million, including $15.6 million in SDR's. 1/ G. Foreign Aid 123. In the first years after independence, the Congo received sub- stantial amounts of foreign aid, at a gross level of about $80 million a year. In the last three years, however, total foreign aid flows have been gradually declining to a gross level of about $60 million in 1969. This decline has taken place in spite of increased disbursements on the part of the European Development Fund (FED) and France, and is caused by the sharp decline in US foreign aid. In 1968, when total foreign aid disburse- ments amounted to $60 million, more than half of the disbursements was for the defrayment of technical assistance expenditures and sclholarships, and another 34 percent was in the form of commodity aid. Only $7.7 million or 13 percent was for project aid. Table 21: FOREIGN AID DISBURSEMENTS /L (in millions of US dollars) 1966 1967 1968 1969 Commodity aid 46.7 28.1 20.7 Technical assistance 29.0 30.8 28.4 31.8 Scholarship and training 3.3 3.3 2.9 Project aid 8.5 10.7 7.7 11.0 Total 87.5 72.9 59.7 61.5 of which: grants (63.2) (46.2) (44.8) loans (24.3) (26.7) (14.9) /1 These foreign aid disbursements figures do not exactly taley with balance of payments shown on public transfers and official long-term loans. 1/ The Congo's initial allocation of SDR's on January 1, 1970 amounted to $15.1 million. In view of its favorable balance of payments situation the country has been designated to provide foreign currency for SDR's in an amount of $0.5 million. - 49 - Although total payments for technical assistance have remained more or less stable in the last years at a level of $30 million, the number of experts financed with this aid has sharply declined from 2,811 in 1966 to 1,990 in 1968.. To complement these foreign experts, the Congolese Government hires a number of expatriates (mainly teachers) at its own expenses; their number has gone up from 1,373 in 1967 to 2,000 in 1969. 124. As shown in the table above, the proportion of grants in the Congo's total foreign aid receipts has remained fairly stable at around 75 percent between 1966 and 1968. Altlhough the share of grants in the US aid package has fallen sharply (from 50 to 28 percent), the overall blend of the Congo's foreign aid has remained unaffected, because the aid from other sources, which was entirely on a grant basis, has been maintained at the same level. 125. Up to 1967 the United States was the largest provider of aid; starting in 1968, however, the continued decline of its assistance has brought it into second position after Belgium. The United States has consistently provided well over 90 percent of the import aid. This has taken the form of general commodity aid, consisting mainly of trucks, tires and tubes, and industrial machinery, spares and raw materials for purchase by the private sector against local currency, and has also consisted of PL 480 supplies, principally wheat, wheat flour, cotton and tobacco. In view of the country's successful liberalization program and improved balance of payments situation, US aid on account of these two programs has been drastically curtailed. General commodity assistance, which since 1966 has been given mainly in the form of dollar loans, has fallen from $22.1 million in 1966 to $6.1 million in 1969. PL 480 supplies were largely put on a dollar loan basis in 1967 and have been falling off from $20.7 million in 1966 to $4.8 million in 1969. The local currency counterpart of the commodities supplied under these programs has been used for various purposes agreed with the Congolese Government. Recent projects financed with thiese counterparts are the continuation of the road repair conventions, construction of two bridges on the road from Kinshasa to Kenge, paving of the Matadi-Boma road, and repair of the Bunia airport. 126. Because of insufficient project preparation, the US aid mission ihas not yet been able to complete the shift from balance of payments support to development projects. Among project preparation recently undertaken by the United States are the feasibility studies for two road stretches linking Kikwit with Mbuji-Mayi via Luluabourg, an educational survey and a transport sector survey for the northeastern part of the country. These studies may eventually lead to the financing of project executions. Furthermore, USAID may be associated indirectly in the financing of projects prepared by the World Bank Group in the field of road and river transport. - 50 - 127. Because Belgian aid disbursements have remained more or less cconstant in the last four years - a period during which American aid sharply declined -, Belgium has now become the largest aid provider to the Congo. In 1969 its aid amounted to $22.5 million, or 36 percent of the total. 1/ Almost all of this aid was for the provision of technical assistance, scholarships and training. 128. Up to 1966 the total number of Belgian technical assistants provided to the Congo was in the neighborhood of 2,000 (excluding some 300 teachers at the schools for children of Belgian residents), but in 1968, following the upheavals in Bukavu the number fell to 1,333. Since then there have been some small increases, although the total remains below 1,400. Around 65 percent of these technical assistants are active in the field of education (including 7 percent at university level), followed by 10 percent in public health services. 129. Apart from personnel assistance, the Belgian Government con- tinues to give a number of scholarships and training grants, but the number of new scholarships granted, and hence the number of Congolese students studying in Belgium, has declined significantly. From 1,084 in 1965-66 the number of Congolese scholarship holders has dropped to 426 in 1969-70. More than half of the total number of Congolese scholarship-holders in Belgium are enrolled at universities, with another 35 percent taking higher non-university courses. 130. Belgian project assistance properly speaking is limited to approximately $1.6 million per year. It consists mainly of Government subsidies to private or semi-public institutions which have been active in the Congo for several years in the field of medicine or rural development (e.g. Fonds Medical Tropical, Association Internationale de D4veloppement Rural, INEAC, etc...) In early 1970 the Belgian Government also decided, in agreement with the Congolese Government and FED, that a number of the feasibility and preinvestment studies required to implement FED's five year lending program will be financed by the Belgian aid agency. 131. Second in importance with respect to technical assistance personnel is France, which, especially since 1965 has considerably increased its assistance to the Congo, and is now providing some 300 expatriate personnel. Half of these are in education. French aid has also undertaken a number of studies in the field of urbanization, demography, mining and lake fishing, and participates with the World Bank in the financing of a group of experts advising the Government on its investment priorities. 132. Apart from the previous sources of bilateral aid, the Congo also receives technical assistance from Canada, Denmark, Italy, Switzer- land, China and Israel. Scholarships were provided by various other 1/ These foreign aid disbursements exclude Belgium's contribution to the amortization of the pre-independence colonial debt as well as pension payments related to the colonial period. - 51 - countries. Furthermore, 5 loans for a total amount of 11.0 million have been granted by the German Kreditanstalt fur Wiederaufbau. Two of these loans were for the purchase of vehicle spare parts, a third for the reconstruction of two bridges, and a fourth, signed in March 1967, provided for the purchase of four Diesel locomotives. A fifth loan, amounting to $3.8 million, was granted for the purchase of railway equipment, to be used by the CFL railroad. 133. The principal source of project financing has been the FED of the European Economic Community. As of the end of 1969 total commitments under the two funds amounted to $90 million equivalent. Of the latter amount, $18.8 were committed under the first fund (1958-1963) and $71.2 million under the second fund (1964-1969). Table 22: FED COMMITMENTS (in millions of dollars) First Fund Second Fund Road and bridges 10.7 9.2 Other infrastructure 2.5 Transport 0.1 5.7 Energy - 18.0 Agriculture 1.8 19.0 Education - 18.5 Other 3.7 o0.8 18.8 71.2 From the table above it appears that the sectoral distribution of FED's intervention has changed considerably over the years. Emphasis under the second fund has been put much more on agriculture and education than had been the case before. The present agricultural program of the FED in the Congo is concentrated in four areas and aims at rehabilitating the production of five industrial crops: Gandajika (cotton), Katanga (tobacco), Kivu (tea) and Ubangui (oil palm and cocoa). In the field of education, FED's contribution under the second fund consist mainly in the construction of a social sciences faculty building at Lovanium University, the construction and equipment of three teacher training schools, and the provision of training programs to higher-level personnel in OTRACO. Furthermore, FED ccntinues to finance a road program, which under the second fund allocation covers mainly the construction of the Mbuji-Mayi - Mwene Ditu road. Finally, as mentioned above, FED has agreed to provide $18 million for the financing of the transmission lines of the Inga power project. -- 52 - 134. Of FED's total commitment of $')O million, $29 million had been disbursed at the end of March 1970, leaving some $61 million on undisbursed commitments in the pipeline. Most of tl-hese undisbursed amounts related to the second fund, altlhough there remains a balance of $4 million on the commitmeLts of tl-he first funid. 135. The United Nations assistance to the Congo can be broken down in two parts: the conventional and the non-conventional program. The conventional program of the IJN consists primlarily of the organization's activity through the United Nations Development Programme. Financial resources made available thlrough these channels amount to approximately $2.5 million a year. In 1969, however, disbursements on these accounts have been much more substantial and were probably in the order of $4.3 million. So far, the Governiing Council of the UNDP has approved 13 proj- ects for a total valute of $16.4 million. The earliest of these projects all dealt with education and training; among them, the National Institute of Building and Public Works in Kinshasa trains Congolese students in elementary engineering, with an emphasis on public works and maintenance. In January 1969, the Governing Council adopted two projects in the field of river and road transport, for whiclh tlhe World liank is Executing Agency. FAO, on the other hand, is Executing Agency for two other projects aiming at rehabilitating the agronontic centre in Yangambi and at the promotion of agricultural prodluction in the Ruzizi plain. 136. Non-conventional UNM aid has been channeled through a series of funds to which contribtutions were made by, among others, the United States, Great Britain, Canada and Sweden. The nature of this special aid has varied considerably over time and rangedl from outright import support (with the counterpart funds being used to finance local cost of UN operations in the Congo) to individual contributions earmarked for specific purposes. At present th:[s non-conventional activity has been seriously curtailed and is limited to the Funds-in-Trust program, a fund which provides financial resoturces for the recruitment of expatriate personnel In the Congo. ITI 1.967 some 300 experts were active in the Congo under this program, buti their nu-,'oer was gradually reduced and has fallen to 80 in 1970. 137. Following its 1968 economic mission to the Congo, the World Bank Group resumed its lending, giving priority to the agricultural and transportation sectors. Accordingly, the Bank Group made a $6 million IDA credit in June 1969 for a highway technical assistance and maintenance project. This project finances tlhree regional highway teams which are assisting the Government to carry out a program of road maintenance and rehabilitation. The program also provides for the purchase of an emergency supp].y of maintenance equipment and for the execution of a number of rehabilitation worlks by subcontract. In addition, the Bank is Executing Agency for two UNDP projects; one consists of a group of consultants to advise the Government on highway administration and to prepare highway rehabilitation programs, while - 53 - the second covers a review by consultants of the internal organization, staffing and administrative procedure of two agencies which operate the main river transport services (OTRACO and the Service des Voies Navigables). These two teams will also draw up investment plans for the transport sector. With regard to the agricultural sector the Bank Group has sent out a number of IBRD/FAO Cooperative Program missions to prepare possible projects in the field of cotton development, rubber, livestock and fishing. 1383. The Bank Group has also assisted the Government with the establishment of a development finance company. The company, SOCOFIDE, was set up in January 1970 to provide medium and long-term credit to private industry, primarily in the field of manufacturing and processing. The World Bank Group has lent its financial support through an IFC equity participation of $750,000 and an IDA credit of $5 million. 139. Finally, the Bank Group has given a technical assistance grant which, together with French financial aid and a Congolese contribution, has permitted the recruitment of an international team of experts advising the Government in public investment matters. This team has taken up duty in Kinshasa in Septem)er 1969 and is working with the Office of the Presidency. H. Foreign Debt 140. In March 1965 an agreement was reached between Belgium and the Democratic Republic of the Congo regarding the service of the Congo's public debt existing at the time of independence. In broad lines this agreement contained the following provisions: (i) The public debt expressed in Congolese francs was entirely taken over by the Democratic Republic of the Congo; (ii) The public debt in foreign currencies and guaranteed by Belgium would be serviced by the latter country; (iii) The public debt in foreign currencies not guaranteed by Belgium was consolidated in a 40-year bond issue, carrying a 3-1/2 percent interest rate and serviced by the Fonds Belgo-Congolais d'Amortissement et de Gestion de la Dette Publique. The yearly contribution of the Congo to the service of this new debt was set at Z3 million per year ($6 million). Belgium's yearly contribution amounts to $4.2 million. - 54 - 141. At the end of 1966 total disbursed public debt outstanding, including the Government-guaranteed debt of public and semi-public enterprises, amounted to $185.3 million. Nearly three fourth of this total ($135 million) consisted of the debt outstanding (excluding interest) with the Fonds Belgo-Congolais. Another 12.5 percent (23.3 million) consisted of debt outstanding with the US Government, while World Bank loans outstanding amounted to 6 percent ($11.4 million). 1/ The rest of the debt ($15.7 million) consisted of other official loans and suppliers' credits. Since then the total disbursed outstanding has risen to $282 million in December 1969, mainly due to a sharp rise in the use of suppliers' credits and continued borrowing from the United States Government. Principal sources of suppliers' credit were Italy and Japan. (see Appendix Table 4.2). Including the undisbursed portion of the debt raises the total from $282 million to $328 million at the end of December 1969. The largest amount of undisbursed loans ($40 million) is from USAID. 142. Service payments in 1970 on the foreign public debt outstanding as of December 31, 1969 have been estimated at $23.6 million, or about 3 percent of the projected export of goods and services in the same year. Future service payments on this debt are relatively evenly spread over time; the yearly payments average $23 million up to 1974 and then gradually level off to $13 million in 1984. (see Appendix Table 4.3). 1/ These are the pre-independence World Bank loans disbursed after independence. - 55 - IV. DEVELOPMEIENT PROSPECTS A., Economic Growth 143. The Congo's experience of ten years of independence has been turbulent, making it difficult to visualize the country's evolution in the next more "normal" five years and beyond with any degree of prevision. Moreover, very little is known about past basic relationships. The col- lection of up-to-date macro-economic data only started about two years ago. Detailed national account figures for four years are available, but, in most cases, value-added figures are mere extrapolations of the pre-independence 1959 data on the basis of changes in production. Investment data are estimated on the assumption that investment can be measured by adding to the import value of equipment goods the local production of equipment goods as well as the value of building con- struction. Furthermore, because part of the recent recovery, especially in the agricultural sector, has resulted from a spontaneous response to restored order and security in the interior, the relationship between recent investment levels and recent economic growth may not be indicative for the capital output relationship which will hold in l:he future. Finally, for reasons explained below, there is no basic document outlining the Government's development strategy or targets. For all these reaons the following discussion of the country's future development will perforce be impressionistic. 144. The main sector about which it is possible to give a meaningful forecast is the copper industry. Indeed, management of Gecomines has drawn up an investment program which should permit the company to increase its production from 362,000 tons in 1969 to 450,000 tons in 1974 and 560,000 tons in 1978. The first tranche of this investment program has been officially approved and, as discussed below, has led to the granting of temporary tax exemptions on the production exceeding 360,000 tons; the second tranche of this program still needs approval. The stated purpose of this expansion program is to enable the company to recover the place whLch it occupied in world copper production before independence. The company's share, which amounted to 8 percent in the 1950-1960 period, had fallen to 7 percent in 1966, following a low level of investments and the ensuing relative stagnation after independence. Gecomines foresees that world consumption will increase by 4.2 percent in the coming years and that, by expanding its production at a rate of 5 per- cent, the company will recover the lost ground. When adding to the Gecomines production the predicted output from the Sodimico mine and from a possible project in the Tenke/Fungurume area, the Congo's prob- able copper output in the next nine years looks as follows: - 56 - Table 23 : FORECASTED COPPER OUTPUT (in thousand tons) Tenke/ Gecomines Sodimico Fungurume Total 1970 370 - - 370 1971 375 - - 375 1972 400 - - 400 1973 425 55 - 480 1974 450 60 - 510 1975 475 125 100 700 1976 500 125 100 725 1977 525 125 100 750 1978 560 125 100, 785 Under these (relatively conservative) assumptions the Congo's total copper output would amount to 785,000 tons in 1978, a yearly increase of about 9 percent. Up to 1974, when the Sodimico project will not yet have entered in its second phase and the Tenke/Fungurume project will not yet have started producing, the yearly rate of expansion would be 7 percent. 145. Output of cobalt will, according to Gecomines plans, rise from 10,600 tons in 1969 to 14,400 tons in 1974, an annual rate of growth of slightly over 6 percent. Expansion of other minerals will probably be somewhat less. 146. In the field of agriculture it may be assumed that subsistence output, which accounted for 44 percent of the total contribution of agriculture to GDP in 1969, will rise proportionate to the increase in the rural population. In the absence of recent demographic data, this may be put, on the basis of older indications, at around 2 percent per year. 147. Within agriculture, the livestock sector is likely to make but slow progress. Cattle herds have been greatly reduced since independ- ence, and their reconstitution will take considerable time. The severe shortage of veterinary staff is also a serious handicap. An annual increase of a little over 2 percent in the immediate future may therefore be all that is obtainable. - 57 - 148. Among plantation crops oil palm has always been by far the most important. The production of palm oil in 1969 has been estimated at about 200,000 tons as compared with 244,000 tons in 1959; and the output of palm kernel oil and cake was at about the same level in relation to 1959. Although there was a substantial "immature" acreage on the advent of independence, there is little prospect of exceeding pre-independence output, partly because some existing plantations have long been neglected, but, above all, because the supply of palm fruit from wild palms is unlikely to increase significantly in view of the fact that young Congolese who used to gather this fruit now show little interest in this arduous and not very remunerative task. Altogether the output of palm products, which has already recovered substantially since 1965, may rise perhaps another 20 percent in the next five years to a level approaching the 1959 level. Most progress will be made through rehabilitation of the existing plantations rather than through extension of the cultivated acreages. 149. The prospects for coffee (robusta and arabica), the second most important plantation crop, appear somewhat more promising. Con- siderable rehabilitation of plantings seems to be taking place. Although the year 1968/69 was not particularly favorable, partly for climatic reasons, it should be possible to reach an output level of 60,000 tons by 1974 of which about 10,000 tons may be arabica. This would slightly exceed the total achieved in 1959 and would make possible exports of around 55,000 tons (as compared with 47,200 tons in 1968), which would be within the export quota to which the Congo would be entitled under the existing international coffee agreement. 150. Rubber production in 1969 was around 90 percent of that in 1959. Pre-independence output will probably be exceeded by 1974, considering the fact that in 1959 about one-third of the area planted to rubber still had not matured. Sugar output is likely to rise by at least 20,000 tons, taking into account the contemplated expansion of the Moerbeke plantation and mill and a modest recovery by the Ruzizi Valley plantation. The production of tea, of which there was a large immature acreage in 1959 and of which more has since been planted, may increase to about 8,000 tons by 1974, a level almost double that of 4,200 tons achieved in 1959. Cocoa output is already at pre-independence levels, and there seems to be little possibility that a further increase of more than 10 percent can be achieved without new plantings. 151. For the peasant sector the most important crops marketed in the past have been cotton, rice and maize. The output of cotton, which was 63,000 tons in terms of lint in 1959, fell off to almost nothing but is now showing a strong revival. Production in 1969 was around 20,000 tons. Pre-independence output which was strongly oriented toward exports may never be reattained, but by 1974, it should be possible to achieve a production of 30,000 tons of lint which would not only cover all domestic consumption but leave some margin for export. The recovery of food production for the market may be rather rapid. Data on the output of foodstuffs are notoriously deficient, but there - 58 - are indications that the production of rice particularly is increasing markedly. An expansion of about 40 percent in marketings of foodstuffs should be possible. 152. Finally, a few comments should be made about the prospects of forestry and fisheries. In the long run there is a large potential for further development of timber extraction and allied industries. In the period immediately ahead, however, an increase of production seem's unlikely owing to the progressive exhaustion of the timber resources of the Mayumbe region in Kongo Central. The tapping of the large forestry reserves along the Congo River and its tributaries, which has already started in Equateur Province will inevitably take considerable additional investment. With respect to fisheries, a very rough estimation indicates that the total catch of lake, river and marine fish in 1969 was only about 110,000 tons as compared with nearly 140,000 tons in 1958. Provided that commercial firms engaged in fishing get some financing and modest efforts are made to assist individual and cooperative Congolese enterprises, output should increase by at least one-third over the next five-year period. 153. Using 1969 estimates of GDP as a base, the indications of possible output by 1974 given above would point to an annual growth of total agricultural production (including forestry and fisheries) of about 4 percent. However, production for the market would increase at a rate of nearly 6 percent. 154. Industrial development in the next five years will in all like- lihood be important. The Congo already has a relatively well-developed industrial base which will continue to expand with the rise of population and of living standards, particularly in the urban areas. A number of new industries and assembly plants will be set up and, as outlined above, cheap power supply of the Inga dam together with a climate favorable to foreign private enterprise, will attract some basic industries in the Bas Congo area. In a first phase these industries will produce for the local market only but, especially if contacts with the UDEAC countries improve, exports to neighboring African countries should ultimately be possible. Although the rate of growth of 10 percent registered in 1969 following the recovery from increased foreign competition after the monetary reform, will probably fall off in 1970, industry can be expected to expand at a rate of 8 percent in the next five-year period. 155. Altogether it can be expected that, if the service sectors expand at a rate of 6 percent, total GDP in the next five years could also grow at a rate of approximately 6 percent. This rate of growth, which would entail a yearly increase in per capita income of about 3.5 percent, of course depends on the maintenance of security and stability in the country. It furthermore assumes that the renewed climate of international confidence and stimulation of private foreign investment will be forthcoming. If actual events were to invalidate these assump- tions, then economic development would be considerably slower. - 59 - B. Private Investment 156. As mentioned earlier several factors have favorably influenced the climate for private investment: internal security and order have been maintained, financial and economic stability have been restored through a sound credit policy and favorable public finances, and inter- national confidence has been built up through the consolidation of the balance of payments position and the strengthening of the country's currency. Furthermore a series of positive steps have been taken by the Government specifically intended to foster private foreign investment; these steps include the settlement in late 1969 of the pending dispute between UMHK and the Congolese Government and the promulgation in the same year of the Investment Code. This improved climate will undoubtedly increase the amount of private investment in the country in the next five years and may, for the first time since independence lead to a significant net inflow of foreign private capital. By April 1970 some 24 investment projects for a total cost of Z26 million had been accepted by the Investment Commission to benefit from the advantages included in the new code. Another series of proposals for a total value of Z56 million were under active consideration. Most of these projects are in the industrial sector and deal with the production of consumer goods and building materials. Some of them involve the inflow of new capital from abroad, others will be financed out of reinvested profits and possibly with financial support from the newly established development bank. 157. The Societe' Congolaise de Financement du Developpement (SOCOFIDE) was established in January 1970 under the sponsorship of the Government, the National Bank of the Congo, commercial banks in Kinshasa and three local associations of businessmen. Its initial capital of Z 100,000 was subsequently raised to Z 2 million, of which half has been paid in. Present shareholders are the Congolese Government (12.5 percent), the National Bank of the Congo (12.5 percent), private national investors (30 percent), foreign investors, including US, Italian, German, French, Belgian and Japanese banks (26.25 percent) and IFC (18.75 percent). Additional financial resources have been provided through an interest- free Government advance of Z 1 million and an IDA credit of Z 2.5 million ($5 million). During the first two years of operation two more Government loans, for a total value of Z 2 million, will be made for a period of 40 years at an interest rate of 1 percent. Total resources presently lined up thus amount to Z 7.5 million ($15 million). 158. SOCOFIDE has been established to provide medium- and long- term finance for private enterprises in all productive sectors of the economy, in particular manufacturing and processing industries, but also commercially oriented agriculture, forestry, fishing, transport and tourism. As of August 1970, three dossiers had been accepted by the Bank's Executive Committee for a total amount exceeding Z 800,000; two more dossiers were under active consideration, while a number of other investment projects had been submitted to the Bank. This insti- tution will undoubtedly play an important role in stimulating private - 60 - investment and in promoting local enterprise. However, the size of SOCOFIDE's investments is restricted by statutory regulations which limit its financial intervention in a single enterprise to 20 percent of its paid-up share capital, the unimpaired reserves and the quasi- capital. Large private investments will therefore have to be financed from other sources. 159. Among the large private investment projects presently under consideration are two copper mining projects in Katanga, an aluminium smelter and several consumer goods industries. The first copper mining project is in fact a possible extension of the already ongoing investment program by the Societe de Developpement Industriel et Minier du Congo (SODIMICO). This company, which is jointly owned by Codemico (85 percent), a subsidiary of the Nippon Mining Company, and the Congolese Government (15 percent), is presently engaged in a $75 million project to mine and concentrate copper ore from the Musoshi deposit soutlh of Lubumbashi, close to the Zambian border. The project is financed for $11 million from equity capital and for $64 million through loan financing provided by the Japanese Export-Import bank and the Japan Overseas Cooperation Fund. It is expected that the Sodimico production will reach some 55,000 tons of copper a year, starting in late 1972. More recently the company has located some other rich deposits (8.4 percent copper content) near Tshinsenda. It has been announced that additional investment may be undertaken to exploit the deposits and also to install copper refining facilities to handle the ore. If the decision to go ahead with this investment is taken Sodimico might produce an additional 75,000 tons starting in 1975-1976. A second important investment in Katanga (Tenke) for copper exploitation is being considered by an international consortium. This project, if implemented, might raise the Congo's copper output by another 100,000 tons from 1975- 1976 onward. 160. Contacts have recently been taken up between the Congolese Government and an American firm for the implementation of an aluminium smelting project near Moanda on the Congo river estuary. The project, which would use electric power from the Inga dam, provides for the initial production of 70,000 tons of aluminium, to be extended in later stages. Alumina would be imported from abroad. Total project cost has been estimated at $100 million and, if an investment decision is taken soon, production could start in late 1973. 161. Among the more important industrial projects are a tire factory and a new cement plant. A large American rubber producer has decided to become the promoter of a tire factory to be built in Kinshasa witlh an initial capacity of 184,000 tires a year. A contract has been signed between the Congolese Government and a German firm for the construction of a cement plant, witlh a capacity of 1,000 tons a day. This project would be 80 percent foreign-financed. 162. These are but some of the examples of private foreign invest- ment which may be forthcoming in the next five years. From recent - 61 - visits made by President Mobutu abroad and from the numerous foreign trade missions which have visited the Congo in recent years it appears, indeed, that foreign investors are becoming increasingly aware of the great economic potential of the Congo and, given the present climate of stability and security, are seriously considering investing in the country. This renewed interest and regained confidence are, however, of recent origin and any serious deterioration in the economic situation could affect the expected flow of foreign capital. To a large extent this recent international confidence is based on the strength of the Congo's balance of payments and on the stability of its currency. Since both these elements are closely interrelated and largely dependent on the country's budgetary policy, it is extremely important that in the next five years when, as discussed below, fiscal revenue will expand much less fast than in the preceding three years (and in fact may sta- bilize or even decline), the Government pursue a policy of austerity in the expansion of its current expenditures, and make a judicious alloca- tion of its public investment resources. C. Economic Planning 163. Up to now the Congolese Government has rightly eschewed the setting up of a Planning Commission responsible for the formulation of a development plan. Government authorities in charge of economic and financial policy have repeatedly asserted that, in the present state of development, it suffices to outline the overall economic priorities and that any effort to produce a complete development plan would only immobilize the already too scarce resources in qualified personnel. This point of view is readily understandable, especially in view of the fact that, in the last three years the choice of alternative paths of development was relatively limited and some urgent priorities fair- ly obvious. The infrastructure and the productive apparatus had suf- fered considerably in the disturbances of the pre-independence period, so that the most urgent task, once stability and security were restored, consisted in the rehabilitation of the means of production. The dif- ficulty thus lay not so much with the formulation of fundamental policy orientations, but with the preparation of sound development projects and with the economic and financial appraisal of alternative proposals. 164. The danger of such an approach to development is that invest- ment decisions may be taken by the technical ministries in an uncoordi- nated fashion and without regard for the economic justification of individual projects. To avoid this the Congolese authorities have in the last two years taken a number of steps to rationalize public invest- ment decisions. First of all, an Interministerial Economic and Financial Commission (CIMEF) has been established, composed of the principal ministers, with a view of approving all public investment propositions. The permanent secretariat of this commission, which meets once a week, is provided by the Office of the Presidency. Secondly, the Government has devised procedures for the preparation of a yearly development budget. Starting with the 1970 budget, the technical ministries were asked to submit investment proposals to be considered for inclusion in - 62 - the budget. A selection was made among these proposals on the basis of their respective merits and in accordance with the expected availability of financial resources. Owing partly to the lack of project preparation in directly productive sectors of the economy, the final selection of projects included in the 1970 budget contains a number of investments economic priority of which is rather doubtful. Agriculture is typically underrepresented with only Z2.2 million, or less than 5 percent of the total; this is even less than the Z2.6 million which were included in the 1969 budget. None of the new projects included in the 1970 budget are in the agricultural sector. 165. In the field of private investment considerable steps have been taken to restore confidence in the economy and to provide sufficient additional incentives to attract foreign private capital. For these measures to bear fruit it will suffice to maintain the climate of confi- dence and, consequently, to assure overall equilibrium in public finances and safeguard the balance of payments. In the field of public investment, however, additional measures will be required to improve the allocation of domestic resources. The dearth of prepared projects has been detri- mental in the last three years when, as a result of the monetary reform and the prevailing high copper prices, ample financial resources were available for development. The fact that few projects had been prepared has meant that the revenue from high copper prices has often been channeled into recurrent expenditures and insufficiently prepared invest- ment proposals. The preparation of projects (especially in the field of agriculture) becomes more imperative now that, as shown below, domestic public investment resources may stagnate or even decline. Now that the spontaneous revival of the economy following the restoration of law and order has probably produced most of its effects, resources will have to be directed toward more productive investment to keep the rate of growth of the economy at its present high level. It is also import- ant that more attention be given to the development of regions outside Kongo Central and Katanga, as well as to the gradual improvement of living standards in rural areas. 166. In this latter respect, the Government has decided to under- take a comprehensive study on the development potential of the north- eastern region of the country in order to stimulate the emergence of a third growth center - after Kinshasa and Lubumbashi - in Kisangani. The study will consist of a complete survey of all economic sectors, including agriculture, industry and infrastructure and will in effect be the first attempt at comprehensive planning in the Congo. D. Investment Priorities 167. Because at this stage the Congo does not have a detailed devel- opment plan, no official estimates exist on foreign and domestic capital requirements in the next five years. And because in many instances meaningful cost estimates are not yet available for projects which might be undertaken, it is not possible to estimate aggregate investment needs. Therefore the following paragraphs are necessarily limited to - 63 - a description of investment priorities, without an assessment of total capital requirements. This part of the report is followed by an evaluation of the public financial resources, both domestic and foreign, which are likely to be forthcoming in the next five years, but no attempt can be made to match public capital needs with capital availabili- ties. 168. There have been no basic changes in public investment priorities in the last two years: high priority should still be given to transportation, agriculture, and technical and vocational schooling. With respect to transport, as noted earlier the infrastructure base existing at the eve of independence was relatively dense and efficient. After independence, however, this base deteriorated due to disruptions from rebellions, lack of maintenance and deficiencies in management. In the next five years a major effort will have to be undertaken for the rehabilitation of the transport network and for the more efficient handling of road maintenance and river transport. The studies carried out with UNDP/IDA financing in both these areas may, if implemented, lead to concrete results. 169. Finance for the road rehabilitation program should be forth- coming from four main sources: the World Bank Group, the FED, USAID, and the Congolese Government. In general these programs are all aimed at rehabilitation, although in a few cases they may involve the paving of new stretches. The program of the World Bank Group includes the organization of maintenance teams, as well as the purchase of equipment and ferries; it is concentrated in Kongo Central, in the Province Orientale and in the two Kasai provinces. FED on the other hand, may undertake the construction of the Kenge-Kikwit road, the completion of the Bukavu-Kisangani axis and the study of the Bukavu-Rwindi link. USAID has studied the feasibility of improving the road from Kikwit to Mbuji-Mayi, and the Congolese Government itself should continue, with its own resources, the financing of the road maintenance program under the road conventions. Since, in the Congo, roads often link up with the river network, equal weight should be (and has been) given to the efficiency of the river transport. The UNDP financed consultants who have been studying the river transport problems in the country have formulated a series of recommendations on the reorganization of the Service des Voies Navigables and Otraco. Once these recommendations have been accepted by the Government, additional finance may be forth- coming from the World Bank Group for the reconditioning of the floating material, repair and improvement of port facilities, and technical assistance including the necessary training of Congolese counterparts. On the whole these programs show that a considerable effort will be made in the next five years to remove transport bottlenecks and lower transport costs through higher productivity, better management and improved maintenance. 170. For some time the possibility has been envisaged of linking Port-Franqui to Kinshasa by rail to avoid transshipments and to provide a continuous rail-link from Katanga to Matadi, the Congo's main port. - 64 - Three routes for this railway link have been suggested: a "northern" one, roughly paralleling the Kasai river; a "southern" route; and a "middle" route which would ostensibly tap a region of considerable agricultural potential. The BCK surveyed the northern and middle routes - the first in considerable detail - and a Japanese mission made a preliminary study of all three possibilities. The BCK considered the northern route preferable owing to its much lower cost, but the Japanese mission favored the middle route owing to the agricultural potential of the region it would traverse. More recently an international consortium consisting of Lonrho, Nissho-Iwai and Cominiere has studied the feasibility of a number of variants around the middle route. 171. The Congolese Government has recently asked the World Bank Group to undertake a study of the econiomic costs and benefits of various alternative routes (including rail, inland waterways, road and combinations thereof) linking the Katanga region to Kinshasa and the sea. The study will determine the investment required for each major alternative (over and above the minimum investment necessary to assure the short-run reorganization and rehabilitation of Otraco) to handle the forecasted traffic flows in the next 20 years. The study should start in early 1971. 172. Whereas investments in transport during the next five years will be considerable, investment in the agricultural sector will be relatively small unless the Government attaches higher priority to the sector than has been the case so far. Unless efforts are made to prepare and execute a larger number of development schemes, and to improve the existing extension services, agricultural development will lag behind the rest of the economy. This would affect the living standard and purchasing power of nearly 70 percent of the country's population and might result in a shortage of foodstuffs in urban areas. 173. Since 1968 the World Bank Group has sent a number of FAO/IBRD Cooperative Program missions to the country to identify and prepare a series of agricultural projects. These missions have studied develop- ment projects in the field of cotton, rubber, livestock and fishing. Some of these projects seem economically promising, but all of them require, in one form or another, cooperation of the private sector for the management of the project, the transformation of the crop or the marketing of the final product. The Government is willing to cooperate with the private sector in those areas, and now steps must be taken to get the projects underway. More financial and human resources must be channelled into agricultural development in spite of the difficulties which surround development in this sector. 174. One crop which will require special attention in the next five years is cotton (see Agricultural Volume, paras 91-98). Cotton continues to be produced in outlying areas, without adequate extension services, and throughput in the ginneries has declined from 179,000 tons in 1959 to 55,000 tons in 1969; consequently crop yields and ginning productivity are low and Congolese cotton has great difficulty competing - 65 - on the world market. This situation would improve with a development scheme aiming at raising yields and total output, but given prevailing world market prices it would be better to concentrate such an expansion program in areas which, either because of their ecology or because of their vicinity to existing ginning mills and means of transportation, offer the greatest comparative advantage. At the same time the terms of the contract which determines the financial fees of the privately- owned ginning mills may need revision; part of their fee is calculated on a cost-plus basis and eliminates incentive for increased productivity. 175. The major agricultural development schemes in the next five years will probably be financed by the European Common Market. FED will continue disbursements for its ongoing projects in the Kasai Oriental (cotton), Katanga (tobacco), Kivu (tea) and Ubangui (palm oil and cacao), and is considering a number of agricultural plants in the same areas. Other small production schemes will continue to be financed by China, Belgium and France. 176. In addition to the setting up of agricultural development schemes, it will be necessary to improve traditional agriculture carried out outside specific projects, since this occupies the bulk of the rural population. One means of stimulating production by traditional farmers would be to increase competition among small-scale Congolese traders and raise their capacity to handle inceased quantities of agricultural products. Another would be to provide better extension service and to distribute improved seeds. Although dealing with a peasant population which is probably larger than in 1959, the Ministry of Agriculture has only 32 qualified agronomists as compared to 224 before independence. Lower echelon field staff are also fewer than in 1959. What seems necessary at this stage is a revision of the curricula in existing agricultural schools - putting more emphasis on practical work - and possibly on increased enrollment at the A3 level (moniteur agricole). Furthermore, there is a need to revive the regional INEAC stations. These stations could play a significant role in the carrying out of applied research and could also contribute to the production of improved seeds and planting material of which there is presently such an acute need. One of the INEAC stations could also host a small unit to collect data on farm incomes in order to ascertain with more precision the income changes that may be expected from development projects or improved production methods. Data on farm incomes are now entirely lacking. It would appear that such a program to revamp the regional INEAC stations on an operationally-oriented basis would offer many opportunities for bilateral aid assistance. UNDP/FAO are already engaged in such an action at the Yangambi-station, and Belgium has accepted the responsibility for providing management personnel for the Institute as a whole, but inside this framework there is still ample room for regional initiatives. 177. It is important at this stage for the Congo to take a new look at its agricultural development. So far, agricultural development policy has been largely geared to a rehabilitation of the production - 66 - structures existing in 1959. This approach has been useful in the first years of recovery when the priorities obviously lay with the rehabilita- tion of plantations which had been abandoned or neglected during the period of internal disturbances. Now ten years after independence, internal conditions and world-markets have greatly changed. It is now quite possible that the country is no longer competitive in a number of products which it could produce economically before independence, or that the growing of certain crops should be concentrated in certain areas rather than in others. Furthermore, the Congo has been isolated for some time from agricultural improvements developed in other areas of the world, and this in a period when its own agricultural research had come to a halt. Finally, it is quite likely that the Congo could economically produce in the seventies a number of crops which it did not produce (or export) before independence. For all these reasons it would be useful if a general survey of the country's present agricultural potential could be undertaken. 178. The Congo was launched on its independence handicapped by a severe dearth of trained manpower. Much thus depends on its ability to create an increasing reservoir of qualified Congolese personnel to man the public services and to staff private and mixed enterprises. Although the need for foreign technical and managerial assistance will remain great for some time, future progress can be assured only if Congolese. can be enabled to play an increasing role in the conduct of both public and private business. "Congolization" with properly trained and educated personnel is therefore a prominent goal of govern- ment policy. Although the growing supply of trained manpower (paras 74- 81) will gradually make it possible to carry out a Congolization program, the Government will have to stress vocational and technical education, as well as teacher training. Among vocational education agriculture takes a particular place: if agricultural progress is going to be made more extension workers at various educational levels will be needed, both in and outside the larger development schemes. In the general branches of education, on the other hand, emphasis should be placed on productivity and curriculum adjustment rather than on expansion. 179. Formal training and education will not, of course, be sufficient. Experience and in-service training will be necessary before the :graduates of educational institutions can discharge the responsibilities of middle- and high level posts. In any event, however, the prospects that foreign technical assistance and managerial personnel can be given competent counter- parts for on-the-job training should be much better in the years immediately ahead. It is likely that the general administrative services of the Govern- ment will be the first to profit from the growing reservoir of trained Congolese manpower. On the other hand, the technical services and the government organizations managing commercial undertakings will probably be the last to get qualified Congolese staff at top or near top levels both because existing training institutions are not yet producing enough people and because the operational and managerial skills required for many posts - 67 - can only be acquired after long experience. Acute shortages will continue for some time in the operation and management of transport, communications and civil aviation services and in the direction of public works programs and agricultural schemes. 180. Among the public industrial projects actively pursued by the Con- golese Government are a number of basic industries around the Inga dam. The same consortium of Italian firms (SICAI or Societe Italo-Congolaise de De'veloppement Industriel) which developed the plans for the Inga scheme has been making a series of detailed studies of these industrial possibilities, while the Institut de Recherches Economiques et Sociales (IRES) of Lovanium University has assisted in analyzing the market potential for various pro- ducts. The most advanced among the projects studied is the proposal for the construction of a steel mill at Maluku. The project would consist of the construction of a smelting unit with an initial capacity of 100,000 tons and rolling mills for the transformation of 180,000 tons of imported steel. The idea of using local iron ore (from Luebo or Mont Tina) or importing the ore from neighboring countries has been abandoned for this first phase, and metal scrap will be used instead as raw material. Estimated project cost is $88 million, of which $9.6 million is in local currency. The project would be financed largely through suppliers' credit; it would be managed by a management company in which the Congolese Government would participate for 50 percent, with the remaining half being held by a German-Italian con- sortium together with an Italian steel company (FINSIDER). The latter firm would also provide technical assistance for the training of Congolese counter- part personnel. Payment of the suppliers' credit installments would be guar- anteed by the Government. Implementation of the project, which is scheduled to start production in 1973, would also require a number of infrastructure investments, including the construction of a road from Nsele to Maluku and the extension of the electricity distribution net to the site of the mill. These expenditures have been estimated at Z2 million. 181. Two other projects studied by SICAI in the framework of the Inga complex are a nitrogen fertilizer plant and a caustic soda and PVC (poly- vinyl chloride) plant. In view of the fact that the Congo's present con- sumption of nitrogenous fertilizer is negligible and was only 3,000-4,000 tons before independence, it is unlikely that a fertilizer plant would be justified in the near future. The second project foresees a yearly produc- tion of 12,000 tons of caustic soda for use in vegetable oil and soap making and 13,000 tons of PVC for the plastics extrusion and moulding industry. Project cost has been estimated at Z10 million, but no promoter has been found as yet. 182. Although the temptations for rapid industrialization are large, it is important that projects for basic industries such as those mentioned above be undertaken only if market studies indicate a demand sufficient for an economic size plant. Otherwise, especially in cases where foreign risk- capital involved is very limited and suppliers' credits carry Government guarantee, the possibility always exists that an unforeseen financial burden may fall upon the development budget or that excessive protection may drive up domestic prices at the expense of the consumer and, perhaps, of export potential. - 68 - 183. Not much is known about the public investment which will be under- taken outside the investment budget, by public and semi-public enterprises. According to national accounts estimates this investment amounted to $24 million in 1969. In the next five years a large share of this extra-budget- ary public investment will be represented by the Gecomines expansion pro- gram. This program envisages an expansion of the present copper producing capacity of 375,000 tons to 450,000 tons in 1974; at the same time the pro- duction of cobalt would be raised from 11,000 tons to 14,600 tons. The cost of this program, which would involve an extension of the Kamoto under- ground mine as well as an expansion of the electrolytic refinery installa- tions at Luilu, has been estimated at around $80 million. Given the tempo- rary fiscal exemption which has been granted by the Government to Gecomines it should be possible for thie company to finance the program out of its reinvested profits. If copper prices were to fall below 50 US cents/lb, Gecomines might also obtain medium-term suppliers' credit from Belgian and American sources. To bring the share of Gecomines in world copper produc- tion back to its level of 1960 (8 percent), the company intends to extend its capacity at a yearly rate of 5 percent and to reach a capacity of 560,000 tons in 1978. No details have been worked out yet on this furtlher expansion phase, but it will undoubtedly entail the construction of a copper refinery at Kamoto and require additional electric capacity. 184. With respect to electric power the two most important growth centers in the next five years will be the Bas-Congo (Kinshasa) area and the Katanga province. In view of the plan for a steel mill at Maluku and an aluminium smelter at Moanda, requiring an installed electricity capacity of perhaps 50 MW and 300 MW respectively, the Government has now decided on the installation of the three additional units whicih would complete the first phase of the Inga dam and bring its capacity to 300 MW. In Ka- tanga province, forecasts on future mining production and electricity con- sumption are such that, starting in 1972, electric power will have to be purchased from Zambia. A possible additional source of local electric power would be the construction of a hydro-station (240 MW) at the Busanga site. Alternatively,, it has been suggested that a transmission line from Inga to Katanga be constructed and consequently that the Inga dam be ex- panded beyond its first phase (300 MW). However, in view of the present high cost of such a transmission line and the uncertainties surrounding long-distance transmission, it might be more economical to build the Busanga dam first, irrespective of the possible future need for a transmis- sion line. F. Public Finance and Public Investment Resources 185. Analysis of public finances in the last three years shows that the main reasons for the rapid increase in Government revenue were the June 1967 monetary reform, the introduction in January 1968 of a new direct tax legislation, a rapid recovery of economic activity, the continued rise in copper prices and improvements in the efficiency of tax collection. None of these factors is likely to have a measurable impact on the evolution - 69 - of budget revenue in the next five years. The initial rapid recovery fol- lowing the restoration of internal stability and security is largely expend- ed. The Congo's economy has now been stabilized, fiscal revenue is already high as a percentage of CDP, and further significant improvements in tax collection are improbable. Most of any future increases in Government revenues will thus have to come from the normal expansion of economic activ- ity. In fact, any decline in the copper price below its exceptionally high level of 1969 and early 1970 is likely to lead to a decrease in revenue from copper; and in view of the introduction in early 1969 of a progressive surtax on copper such a decrease will be more than proportional. For 1970, for example, it has been calculated that with an average copper price of US cents 72/lb., export tax revenue from copper would amount to Z 103.7 raillion; if the average copper price were to fall to US cents 68/lb. or US cents 50/lb. this revenue would drop to Z 94 million and Z 52.5 million respectively. A sharp fall in copper prices would also affect the profita- bility of copper mining and reduce the income tax revenue from Gecomines, estimated at Z 14 million in 1970. 186. If the average copper price (at current price levels) in the 1972-76 period declined to 50 US cents/lb., total Government revenue on the existing Gecomines production 1/ would be in the neighborhood of Z 90 mil- lion, as compared to an actual revenue in 1969 amounting to Z 132 million. If the copper price were only 40 US cents/lb. this revenue would be only Z 75 million, while under the more favorable assumption of an average price of 60 US cents the revenue would be on the order of Z 125 million. In all three hypotheses there would be less revenue than was collected in 1969; depending on the price assumption used, this shortfall would range between Z 7 million and Z 57 million a year. Under the most plausible assumption of a copper price of 50 US cents the shortfall would be Z 42 million. 187. Theoretically the decline in revenue from existing production from Gecomines could be compensated by an increase in copper production (either from Gecomines or from other producers) or through an expansion in the other sectors of the economy. It is expected that Congolese copper produc- tion in 1974 will be around 500,000 tons (see para 144), of which 450,000 tons will be from Gecomines and 50,000 tons from Sodimico. However, since Gecomines' expansion program will be financed partly from a temporary tax exemption on production exceeding 360,000 tons, while the Sodimico estab- lishment convention includes fiscal exemptions, no significant additional tax revenue should be expected from copper output before 1975. This means that any decline in revenue from Gecomines would have to be compensated through increased revenues from other mineral products or other economic sectors. Thus, to keep Government fiscal revenue in 1974 at the level expected of 1970, namely Z 315 million, revenue from these other activities would have to increase from Z 136 million in 1969 to Z 225 million in 1974, an annual increase of 10.5 percent. If the Congolese economy (excluding 1/ Direct and indirect taxes levied on Gecomines production, including both copper and other minerals. - 70 - mining) were to expand at a rate of 6 percent a year in the 1970-1974 period and assuming a yearly overall price increase of 2.5 percent it might be possible, although difficult, to reach this level of receipts in 1974 1/. Other revenue would have to increase by less than 10.5 per- cent to maintain revenue at its 1970 level if the copper price were to remain above 50 US cents/lb., or alternatively total Government revenue could con- tinue to expand and exceed its 1970 level. However, even under the favor- able hypothesis of an average copper price of 60 US cents and assuming, as above, a growth rate of 10.5 percent for other Government revenue, total revenue would amount to Z 350 million or only 11 percent above the level in 1970. On the other hand, the situation would be more critical if the average copper price were to fall below 50 US cents; in such case other Government revenue would have to grow faster than 10.5 percent a year in order to maintain the 1970 level of total revenue. 188. With these revenue prospects, it appears that public financial resources available for investment will probably not increase in the next five years. The National Bank has estimated that, on the basis of a total revenue amounting to Z 315 million in 1970, the Government has spent Z 262 million on current expenditures, thus generating public savings amounting to Z 53 million. Under the rather stringent assumption that current expenditures could be maintained at a level of Z 260 million in 1971 and would expand at an annual rate of 4.5 percent in the following three years, total current outlays would total Z 297 million in 1974. This means that even in the most favora- ble hypothesis analyzed above (an average copper price of 60 US cents combined with a yearly growth of 10.5 percent in other revenue) domestic resources available for public investment in 1974 would amount to Z 53 million, or ex- actly the same amount as in 1970. If the copper price were to fall to 50 US cents/lb, public savings would, under the same assumptions, drop to Z 18 million. 189. Clearly, the above outlook for future public savings is based on a series of assumptions which could be easily invalidated. The purpose of the exercise, however, is not to provide an accurate forecast of public savings over the next five years, but to indicate the sensitivity of these savings to changes in the future copper price, and at the same time to indi- cate that it is unlikely that average yearly savings will exceed Z 20 mil- lion. They would be even less if copper prices were to fall considerably below 50 US cents/lb or if, for example, through wage increases in the pub- lic sector, current expenditures were to exceed Z 260 million in 1971 or ex- pand by more than 4.5 percent a year thereafter. 190. Furthermore a large part of future resources available for public investment have already been committed. In the 1970 investment budget Z 29 million were earmarked for disbursements on ongoing projects, leaving Z 22 million for new purposes. To these should be added Z 17 million on 1/ The Congo' a tax system is too recent to permit any quantitative eval- uation of its elasticity, but given the high fiscal burden already existing in the country it is unrealistic to assume that tax revenue for the sectors other than mining would grow faster than their value added. - 71 - undisbursed commitments resulting from new projects included in the 1970 investment budget, adding up to a total of approximately Z 45 million. Admittedly, the disbursements on these commitments will be spread over time, but in any case they will considerably reduce the amount of financial resources available for new investment projects in 1971 and 1972. This makes the judicious allocation of the resources among new projects all the more necessary. F. Foreign Aid 191. because, as explained above, domestic public resources available for investment will probably stagnate or even decrease in the next five years, and because foreign investment resources will simultaneously in- crease, the share of the latter in total public investment will probably rise again. 192. Given the existing foreign aid pipeline and in the light of ex- pected future commitments, total public foreign aid flows, which amounted to $61.5 million in 1969 and which are estimated at $68.5 million in 1970, can reasonably be expected to be on the order of $95 million in 1974, with some $55 million coming from bilateral sources and $40 million from multi- lateral agencies. The four principal sources of foreign aid would be Bel- gium, the World Bank Group, the United States and the Common Market. Grant aid may be about $56 million, or nearly 60 percent of the total. 193. A large part of these foreign aid disbursements will, of course, consist of payments for technical assistance. However, due to the expected shift in US aid from commodity to project aid and in view of increased dis- bursements from the World Bank Group, the share of foreign resources made available for direct project financing will also go up. From approximately $18 million, or 30 percent of aid disbursements, in 1969 it could well rise to $55 million, or nearly 60 percent of aid disbursed, in 1974. 1L94. Assuming, furthermore, that suppliers' credits to the public sector would increase from $16 million in 1969 to $26 million in 1974, the total public investment picture in the latter year would be as follows: - 72 - Table 24: PROJECTED PUBLIC INVESTMENT RESOURCES /1 (in millions of zaires) 1969 1974 Budget resources Low hypothesis /2 56 3 Medium hypothesis /2 56 18 High hypothesis /2 56 53 Foreign resources 17 40.5 of which: public grants (8) (10) public loans (1) (17.5) suppliers' credits (8) (13) Total Low hypothesis 73 43.5 Medium hypothesis 73 58.5 High hypothesis 73 93.5 /1 Excluding self-financing by semi-public institutions. /2 The three hypotheses correspond to copper prices of 40, 50 and 60 US cents/lb respectively. It thus appears that, even under the high assumption regarding future copper prices, the share of public investment financed through foreign resources will be much larger in 1974 (43 percent) than it was in 1969 (23 percent). The table, furthermore, underlines the difficulty which the Congo would encounter to match foreign assistance with local resources, if the copper price were to fall to 40 cents/lb. It also re-emphasizes the need for considerable foreign aid resources in the next five years. G. Foreign Indebtedness and Creditworthiness 195. The Congo's external public debt is still small and the debt serv- ice ratio in 1970 amounted to only about 3 percent of projected export earn- ings from goods and services. Due to the expected rapid increase in copper production, the Congo's export earnings can be expected to rise significantly in the next five years. Depending on the future evolution of copper prices, total exports of goods and services could amount to between $800 and $1,000 million in 1974, as compared to $711 million in 1969 (see Table 3.4). Under these three assumptions the annual growth rate of foreign exchange earnings would be between 2.5 percent and 7 percent. Export earnings are thus very sensitive to variations in the copper price, but because debt service is at present so low the effect of these different assumptions on the debt service ratio is limited. Depending on the copper price, the debt service ratio in 1974 on public debt outstanding at December 31, 1969, ranges between 2.2 - 73 - and 2.8 percent. Assuming that the external public debt would increase ac- cording to the pattern get out above in the foreign aid section, the debt service ratio in 1974 would range between 4.6 and 5.8 percent. 196. From this it appears that the Congo could service the additional amount of conventional debt foreseen in this report. Even under the most pessimistic assumptions regarding future copper prices, the country's debt service ratio will remain reasonably low. The important question is thus not so much the level of additional conventional debt the Congo should take on, but rather for what purposes it should be used. Assuming that the foreign aid agencies concentrate their immediate efforts on the re- habilitation aspects of economic development, there would be room left for the Congolese authorities to contract additional suppliers' credits for the execution of selected projects in, for example, industry and power. However, caution should be exercised over the financial terms of these credits (particularly with respect to the grace period) and the Government will have to be watchful that these projects, which normally lie outside the development budget, will not affect the available budget resources as would be the case if the projects selected for suppliers' credit fi- nancing were to prove less financially self-supporting or more costly in infrastructural outlays than originally foreseen. This is particularly important because, as is shown in the public finance analysis, less do- mestic public resources will probably be available for investment than indicated by the evolution of public savings in the last two years. S TA T I S T I C A L A P P EN D I X List of Tables Production Table 1.1 Mineral production Table 1.2 Industrial production Table 1.3 Electricity production and consumption National Accounts Table 2.1 Estimated gross domestic product (in thousands of zafres - 1966 prices) Table 2.2 Detailed breakdown of gross domestic product (in millions of zalres - 1966 prices) Table 2.3 Estimated gross domestic product (in thousands of zafres - current prices) Table 2.4 Estimated balance of resources (in millions of zaTres - current prices) Balance of Payments Table 3.1 Balance of payments Table 3.2 Exports receipts Table 3.3 Direction of trade Table 3.4 Export projections Foreign Aid and Externial Debt Table 4.1 Estimated foreign aid disbursements Table 4.2 External public debt outstanding as of December 31, 1969 Table 4.3 Estimated future service payments on external public debt outstanding including undisbursed as of December, 1969 Public Finance Table 5.1 Central Government Revenue Table 5.2 Central Government Expenditures Table 5.3 Central Government Consolidated Financial Statement Monetary Statistics Table 6.1 National Bank Table 6.2 Deposit money banks Table 6.3 Monetary survey 2- Prices Table 7.1 Retail price indices (Kinshasa stores) Table 7.2 Retail price indices (Kinshasa markets) Table 7.3 Sectoral evolution of retail prices (Kinshasa markets) Employment and Education Table 8.1 Employment in large enterprises Table 8.2 Evolution of the number of pupils enrolled in various types of educational institutions, 1959-6o to 1968-69 Table 1 .1 : MJN1IAL PRC]DUCTION 1959 1962' 1964 1966 1967 1968 1969 Prodcucts Units Copper 2/ m.t. 282,320 296,986 276,583 316,870 320,521 326,038 364,000 Zinc 2/ m.t. 67,200 95,184 104,665 114,850 121,547 119,297 97,000 Cobalt m. .t. 8,431 9,683 7,739 11,297 9,718 10,399 10,600 Tin 2/ m.t. 9,341 6,985 5,190 7,152 6,583 6,264 6,653 Mwang;mese ore m.t. 365,000 321,000 290,000 248,936 271,636 321,841 311,429 Coal m.t. 266,830 81,379 106,015 99,150 132,680 70,921 83,783 Wolfranite m.t. 551 360 216 227 135 174 214 Colcnbo-Tantalite m.t. 256 147 47 96 146 113 8l CadiLum m.t. 475 307 469 421 283 320 29U Silver m.t. 148 50 46 58 57 67 63 Gold kilos 10,823 6,363 5,869 4,971 4,758 5,341 5,464i Diamonds (industrial) thousand carats 14,196 14,656 14,752 12,418 13,154 11,353 11,621 Diamonds (jewels) thousand carats 660 - 3 11 1 551 2,246 2/ Metal cuntent Source: Ministry of Mines Table 1 2 : INDUSTRIAL PRODUCTICt1 Units ?958 1962 1964 1966 1967 1968 FOOD INDUSTRY Maize flour m.t. n.a. 52,062 45,700 77,262 66,886 73,631 Whoat flour _.t. n.a. 47,025 40,879 55,448 53,134 n.a. Sugar m.t. 20,777 41,000 28,178 32,716 34,598 39,153 Animal feed mn.t. n.a. 13,172 12,725 16,570 12,928 13,301 BEVERAGES AND TOBACCO Beer '000 hl 1,186 2,105 1,877 2,240 2,231 2,233 Cigarettes millions 4,244 2,523 2,056 3,191 3,113 2,997 TEXTILE AND CLOTHrNG Cotton fabrics '000 m 52,980 1/ 54,148 66, 048 73,708 95,960 122,761 Knitted goods 1000 pces 13,500 1 7,226 7,562 9,355 9,236 3,896 Shoes '000 pces 2,744 3,966 3,764 5,491 4,214 4,401 Blankets '000 pees 1,9761/ 1,626 1,738 2,082 2,007 1,610 Veneer M 34,519 58,448 51,555 49,000 33,249 30,181 Plywood _3 8,778 6,798 8,484 9,600 5,923 5,929 CHEMICAL INDUSTRY Sulphuric Acid 'OOOm.t. 126 103 107 124 162 127 Explosives m.t. 2,690 2,634 3,246 3,447 3,434 3,061 Paints and varnish m.t. 4,020 1,751 2,256 2,828 2,556 3,379 NCN-METALLIC MDNERAL PRODUCTS Bottles '000 pces 23,250 21,680 19,490 20,668 25,838 17,829 Cement m.t. 393,200 197,288 225,257 284,857 290,685 294,748 Concrete and products n.t. n.a. 40,505 60,773 67,602 69,o43 68,866 METAL PRMDUCTS Cap-corks '000 pces n.a. 181,008 116,827 349,542 463,603 340,986 Hoes '000 pces - - 3 291 251 324 ---Refrigerators pc08 n.a -- 200 3,530 4,311 1,716-- t,ooo--- Metal ftrniture '000 poes n.a. 41,678 28,917 67,851 77,345 53,207 Bicycles poes n.a. 52,842 31,331 44,696 28,885 n.a. ELECTRICAL EQUIPMENT Transistor radios pcos n.a. 17,580 14,453 38,149 39,196 n.a. 2/ 1957 Source: Direction de la Statistique at de8 Etudes Eccnomiques. Table 1.3: ELECTRICITY PRODUCTICN AND CCNSUMPTICN in million KwH 1964 1965 1966 1967 1968 PRODUCTICN Eydro-electric 2,336 2,573 2,789 2,452 2,607 Thermal 45 45 53 54 57 Total: 2,381 2,618 2,842 2,506 2,664 of which: Katanga n.a. n.a. (2,344) (1,988) (2,111) Kinshasa and Kongo Central n.a. n.a. (327) (346) (382) CCNSUMPTICN 2,167 2,343 2,513 2,494 2,610 of which: mining and metallurgy (1,631) (1,743) (1,839) (1,831) n.a. KIPORTS 11 .214 275 338 26 74 & Eports to Zambia stopped in 1967; remaining exports are mostly to Burnmdi Sources: Ministry of Ehergy National Bank of the Congo. Table 2.1 : ESTIMATED aROSS DQ(ETIC PRODUCT (in thouaanduof zaXres - 1966 prices) 1959 1964 1966 1967 1968 1969 I PRMIARI SECTOR 97,300 76,830 77,720 80,706 86,291 85,857 Agriculture, Livestock, Fishing 75,300 57,400 56,325 59,228 64,791 62,895 of which: comnercialized (44,100) (28,400) (27,125) (29,628) (34,791) (32,495) son-commercialized (31,200) (29,000) (29,200) (29,600) (30,000) (30,4oo) Mining 22,000 19,430 21,395 21,478 21,500 22,962 n SECODARr SECTOR 57,190 51,080 59,908 59,394 61,6L 7 68,677 Metallurgical Industries 29,260 28,000 32,705 32,967 34,000 37,366 Other Industries 14,600 16,120 18,413 17,962 16,747 18,422 Enorgy 2,150 1,930 2,290 2,015 2,980 3,409 Bulding and Construction 11,180 5,030 6,500 6,450 7,900 9,480 III TERTIARW SECTCR 119,100 120,370 138,000 136,240 152,020 162,468 Tranuport and Telecommunications 26,000 15,420 16,340 17,300 19,670 21,244 Servioes 28,750 28,250 30,500 28,500 31,770 35,581 Coimeroe 27,350 34,700 41,000 38,500 41,500 45,027 Ooiverzm'nt 37,000 42,000 50,160 51,940 59,080 60,616 Gross Dometic Product (at factor prioes) 273,590 250,280 275,628 276,240 299,938 317,002 L2direot Taxes (not of subsidioe) 11,00 19,250 24,480 30,603 Gross Domestic Product tal; market pricee) 285,090 267,530 304,108 301,135 324,618 347,605 ....... Umu* *u.u... m....... =.......,. . Sourest National Bank of ti. Cango. Table 2.2: DErAILED BREAIO)l OF GROSS DOMESTIC PRODUCT (in millions of zaIres - 1966 prices) 1966 1967 1968 I PRIMARY SECTOR 77.7 80.7 86.3 A.Comnercialized agriculture 23.1 25.2 30.0 a. Foodstuffs 8.5 9.3 10.7 b. Export crops 10.0 11.3 13.9 of which: palm oil (3.3) (4.6) (5.6) ooffee (3.5) (3.7) (4.7) rubber (1.7) (1.8) (2.3) c. Domstic industrial crops 4.6 4.6 5.4 of which: palm oil (1.6) (1.7) (1.8) wood (1.0) (o-8) (1.1) cotton (0-9) (1.0) (1.4) B.Non-comercialized agriculture 29.2 29.6 30.0 C.Livestock and Fishing 4.0 4.4 4.8 D.Mining 21.4 21.5 21.5 II SECQIDARY SECTOR 59.9 59.4 61.6 A.lletallurgical Industries 32.7 33.0 34.0 of which: copper (27.8) (28.5) (29.3) cobalt (2.9) (2.1) (2.7) B.Other Industries 18.4 78.0 16.7 a. Final Consumer Goods 11.2 10.9 10.3 of which: foods and beverages (4.8) (3.9) (3.9) clothing (1.1) (1.1) (0.9) leather and shoes (1.3) (1.2) (1.1) tobacco (0.9) (0.9) (0.9) b. Intemediate Goods 7.2 7.1 6.4 of which: textile (2.8) (2.8) (2.4) non-metalic minerals (1.5) (1-7) (1.5) mechanical industries (0.9) (0.8) (0.7) chemicals (0.9) (1.0) (0.9) C.Exeru 2.3 2.0 3.0 D.Building and Construction 6.5 6.4 7.9 nI TERTIARY SECTOR 138.0 136.2 152.0 A.Transport and Telecomnmications 16.3 17.3 19.6 B.Servtoes 30.5 28.5 31.8 C.Cmerce 41.0 38.5 41.5 D. Govenment 50.2 51.9 59.1 IT DIDIRECT TAXES (net of subsidies) 28.5 24.8 24.7 GRCBS DQCTIC PRODUCT 304.1 301.1 324.6 .........a ...=.... .... *.. ..... (at market prices) Source: National Bank of the Congo. Table 2.3 : ESTIMATED GROSS DC4ESTIC PRODUCT (in thouasnds of zaIres - current prices) 1959 1964 1966 1968 1969 I PRDIARY SECTOR 25,200 66,830 77,720 223,506 243,065 Agriculture, Livestock, Fishing 19,760 52'830 56,325 150,206 153,330 of which: commercialized (12,760)' (27,430) (27,125) (86,206) (85,330) non-conmercialized (7,000) (25,400) (29,200) (64,000) (68,ooo) Mining 5,440 14,000 21,395 73,300 89,735 II SECCNDARY SECTOR 13,320 38,310 59,908 169,172 216,400 Metallurgical Industries 6,640 19,200 32,705 112,990 148,265 Other Industries 3,735 13,860 18,413 32,114 37,090 Energy 945 1,380 2,290 7,068 8,095 Building and Construction 2,000 3,870 6,500 17,000 22,950 III TEETIA SECTOR 24,180 101,855 138,000 274,550 351,145 Transport and Teleconunications 4,630 12,095 16,340 40,100 48,710 Services 5,690 23,900 30,500 70,800 90,135 Commerce 5,000 28,800 41,000 82,300 100,000 Government 8,860 37,060 50,160 81,350 112,300 Gross Domestic Product (at factor prices) 62,700 206,995 275,628 667,228 810,61o Inctrect Taxes (net of subsidies) 3,410 18,050 28,480 53,162 71,850 Gross Domestic Product (at market prices) 66,110 225,045 304,108 720,390 882,460 Soutrce: Rational Bank of the Congo. Table 2.4 ESTIMATED BALANCE OF RESOURCES (in millions of zaires - current prices) 1959 -1964 1966 1968 GDP at market prices 66.1 225.0 304.1 720.4 Imports of goods and non-factor services 26.0 62.3 68.8 252.7 Exports of goods and non-factor services -30.9 -61.7 -73.8 -302.0 Total available resources 61.2 225.6 299.1 671.1 Consumption 51.9 194.8 257.6 531.3 Gross domestic fixed capital formation 9.3 30.8 41.5 139.8 Total use of resources 61.2 225.6 299.1 671.1 Domestic resource surplus (-) or deficit -4.9 0.6 -5.0 -49.3 Gross domestic savings 14.2 30.2 46.5 189.1 Gross domestic investment as a percent of GDP 14.0% 13.7% 13.7% 19.4% Gross domestic savings as a percent of GDP 21.4% 13.4% 15.3% 26.2% Resource surplus or deficit as a percent of GDP 7.4% C.3% 1.6% 6.8% Sources: Banque Centrale du Congo belge et du Ruancla- Urundi; Ninistere de l'Ekonomie Nationale et de l;Industrie; National Bank of the Congo. Table 3.1: BALANCE OF PAMENITS (in mill.ions of US dollars) 1966 1967 1968 1969- Credit Debt_ Credit Debit Credit Debit Creditr Di t i. loods and services 501.8 492.8 489.8 449.0 608.7 541.7 720.8 6hl.2 1. MerchandIse f.o.b. 477.1 303.4 465.0 261.9 579.0 312.0 673.0 391.9 2. Canmonetary gold 5.8 -- 5.5 -- 5.9 -- 8.4 - 3. Freight and insurance 4.2 59.3 5.8 45.4 6.7 56.8 1.5 66.4 4. Other'transportation o.6 12.3 1.3 7.7 3.5 7.4 11.0 9.9 5. 1'ravel 0.9 7.3 0.7 13.9 0.5 16.5 0.3 7.5 6. Invesbment income 6.9 14.9 3.2 5.3 2.2 13.0 9.9 2k.h 7. Government n.i.e. 5.5 68.4 6.6 74.1 6.7 93.2 4.3 88.6 8. Other services 0.8 27.2 1.7 40.7 4.2 42.8 12.4 52.3 Dlet goodand services 9.0 40.8 67.0 79.6 Trade bance 2) 17T73 207c 277" 2M7. Net Bervices (3 thru 8) 170.5 167.8 205.9 209.9 B. Unrequited transfers L9. 59.2 51.5 77.9 52.9 78.9 63.3 99.2 9. Private 6.9 57.2 7.3 70.8 8.8 74.1 21.8 96.9 10. Central Governmernt 52.3 2.0 44.2 7.1 44.1 4.8 41.5 2.3 Net total (1 thru 9) 41.3 22.7 1.7 -- 4.5 Not total (1 thru 10) 9.0 14.4 41.0 43.7 C. Private capital 10.6 13.3 19.2 12.5 14-4 20.4 39.5 34.4 11. Direct investmen2, 8.5 -- 8.2 -- 6.3 __ 9.9 5.1 12. Other long-term 2.1 13.3 ll.o 12.5 8.1 20.4 29.6 29.3 D. Official capital 37.9 11.1 38.4 18.5 26.7 10.1 19.2 14.0 13. Long-term loans 37.9 9.2 38.4 11.0 26.7 9.9 19.2 14.0 14. Other long-term capital __ 1.9 -- 7.5 -- 0.2 __ _ B. Net, errors and omissions 6.8 9.9 3.0 1.4 F. Monetary movements 26.3 50.9 48.6 55.4 Central bank (net) 0.4 47.0 70.2 60.0 Assets (0.9) C--) (--) (47.0) C--) (70.2) (--) (60.4) Liabilities (__ 0(o5) (__) () ) 0-o4) Commercial banks (net) 26.7 3.9 21.7 4.6 Assets (a) (26.7) (--) (3-5) (20.7) (--) (4.7) ( - ) Liabilities '--) (--) C--) (0.4) (0.9) (__) C__) (0.1) Source: National Bank of the Congo. Preliminary / Including suppliers-' credits Table 3.2: EXPORTS RECEIPTS (in millions of US dollars) 1964 1965 1966 1967 1968 1969 2/ Mining products 264.00 265.o 375.0 352.0 469.o 579.0 of which: Copper 151.0 171.4 266.9 259.2 348.4 442.9 Cobalt 18.9 18.2 29.7 21.2 34.4 41.3 Diamonds (Lubilash) 28.7 23.3 25.6 22.5 27.2 30.0 Tin and tin ore 14.8 18.3 26.4 20.5 19.0 21.0 Zinc 18.0 20.4 14.2 15.1 14.4 20.9 Gold 7.0 1.3 3.2 2.4 6.4 6.4 Manganese 2.8 4.1 4.1 4.1 3.6 3.1 Agricultural products 103.0 73.0 72.0 94.0 101.0 94.0 of which: Coffee 27.6 17.2 25.8 25.3 31.2 28.4 Palm oil 24.5 15.3 17.3 22.2 23.7 22.4 Palm kernel oil 10.7 8.6 8.6 8.1 18.7 10.8 Rubber 14.9 9.1 12.5 12.0 14.8 16.3 Timber 7.2 6.o 6.4 5.1 5.8 5.3 Cocoa 2.5 1.1 1.2 2.5 3.4 3.9 Cotton 1.6 - - - - 3.6 Total 367.0 338.0 447.70 446.0 570.0 673.0 Sources: National Bank of the Congo. 2/ Preliminary Table 3.3: DIRECTICN OF TRADE (in percentages of total value) 1964 1965 1966 1967 1968 Expc.rts Belgiwn-Luxambourg 45 48 54 48 51 Other EEC countries 27 28 27 32 30 Italy (9) (11) (9) (12) (11) France (8) (8) (10) (11) (9) Germany(Federal Republic) (8) (7) (6) (7) (7) Netherlands (2) (2) (2) (2) (3) United States U1 10 9 8 7 United Kingdom 8 8 5 6 7 Others 9 6 5 6 5 Total 107 I:- =0 100 io- Imports Belgium-Luxembourg 26 26 26 23 24 Other EEC countries 22 23 26 31 33 Germany (Federal Republic) (10) (8) (9) (9) (10) France (6) (7) (7) (10) (10) I-baly (3) (5) (6) (9) (7) Netherlands (3) (3) (4) (3) (6) United States 30 29 24 22 17 United Kingdom 6 4 6 9 7 Japan 2 2 3 2 7 Others 14 16 15 13 12 Total 105 I55 T I0 1000 Source: International Monetary Fund and International Bank for Reconstruction and Development, Direction of Trade. Table 3.4: EXPORT PROJECTICNS (in million dollars) 1970 1971 1972 1973 1974 Goods low hypothesis 506 319 340 408 433 medium hypothesis 506 457 440 504 535 high hypothesis 506 469 500 600 637 Cobalt 43 45 47 49 51 Diamonds 30 31 32 33 Tin & tin ore 22 23 24 25 26 Zinc 22 24 26 28 30 Other minerals 24 26 28 30 32 Coffee 32 35 38 41 44 Palm oil 24 26 28 30 32 Palm kernel oil 12 13 14 15 16 Rubber 17 17 18 18 18 Cotton 5 6 6 8 11 Other 19 19 20 21 22 Total goods low bypothesis 756 584 621 706 749 medium hypothesis 756 722 721 802 851 high hypothesis 756 734 781 898 953 Services 41 43 46 49 52 Total exDorts low hypothesis 797 627 667 755 801 medium hypothesis 797 765 767 851 903 high hypothesis 797 777 827 947 1,005 Table 4.1 : ESTIMATED FOREIGN AID DISBURSEMENTS (in millions of US dollars) 1964 1965 1966 1967 1968 1969 BILATERAL AID Vnited States 38.2 44.3 43.9 27.1 19.5 13.8 Supporting assistance 22.5 18.8 22.1 11.3 6.4 6.1 of which: grant (22.5) (17.3) (1.6) (0.2) (0.1) loan - (1.5) (20.5) (11.1) (6.3) PL 480 13.6 24.1 20.7 15.4 12.8 4.8 of which: grant (2.4) (3.1) (1.9) (1.5) (4.3) loan C11.2) (21.0) (18.8) (13.9) (8.5) Project aid 2.1 1.4 1.1 o.4 0.3 2.9 Belgium 19.0 20.9 24.4 23.6 20.6 22.5 France 2.0 4.0 3.9 4.5 5.3 5.2 Germany 2.8 1.3 2.8 2.1 0.3 0.6 Otber bilateral aid 2.8 1.1 1.8 3.1 3.3 3.0 TOTAL BILATERAL AID. 64.8 71.6 76.8 60.4 49.1 45.1 NULTILATERAL AID United Nations 12.7 10.9 8.7 8.7 7.1 7.4 European Economic Community 3.1 2.8 2.0 3.8 3.5 9.0 First Fund (3.1) (2.7) (1.6) (2.0) (1.6) (2.1) Second FUnd _ (0.1) (0.4) (1.8) (1.9) (6.9) World Bank Group - 12.5 - - TCTAL HMLTILATERAL AIl 15.8 26.2 10.7 12.5 lo.6 16.4 nfln a*snn ===n s=n a== TOTAL AID 80.6 97.8 87.5 72.9 59.7 61.5 Sources: National Bank of the Congo, FED and staff estimates. Table 4.2 : EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECE4BER 31, 1969 1/ Debt Repayable in Foreign Currency (In thousands of U. S. dollars) Debt Outstanding December 31 1(e6 Source Disbursed Including only undisbursed TOTAL EXTERNAL PUBLIC DEBT 281,968 328,076 Privately-held debt 68,051 68,05 Publicly-issued bonds 4 462 4,462 Suppliers 6 6 France 1,037 1,037 Germany (Fed. Rep. of) 540 540 Israel 928 928 Italy 49,521 49,521 Japan 10,637 10,637 United States 925 925 Loans from international organizations 6,301 12,301 IBRD 6,301 ,301 IDA - 6,ooo Loans from governments 79,738 119,846 Germany (Fed. Rep. of) 5,572 5,572 United States 74,166 114,274 Fonds Belgo-Congolais 2/ 127,878 127,878 j Debt with an original or extended maturity of over one year. g Debt of the former colony of the Belgian Congo. Source: IERD Table 4.3 ESTIMATED FUTURE SERVICE PAYMENTS CN EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1969 Debt Repayable in Foreign Currency (In thousands of U. S. Dollars) Payments during Period Debt Outstanding Including Amortization Interest Total Undisbursed 1/ 1970 320,155 15,434 8,217 23,651 15'71 304,721 15,253 8,373 23,626 1972 289,467 14,918 8,170 23,087 1973 274,550 14,854 7,941 22,795 1974 259,696 14,790 7,470 22,259 1975 244,906 12,335 7,044 19,379 15976 232,571 11,104 6,748 17,852 15977 221,468 10,800 6,496 17,29i 1978 210,668 10,791 6,256 17,047 1979 199,877 10,225 6,002 16,227 1980 189,652 9,273 5,783 15,o5. 1981 180,379 7,234 5,573 12,80i 1982 173,145 7,409 5,356 12,76'; 1983 165,737 7,590 5,134 12,72iJ 1984 158,147 7,787 4,897 12,683 1/ At beginning of period Source: IBRD TLable 5.1: CENTRAL GOVERNMENT REVENUE Tin millions of zalres) Revised Actuals Estimate 1966 1967 1968 1969 1970 Income Tax 8.30 8.49 27.06 69.78 55.43 Corporations (6.20) (3.78) (17.53) (43.16) (32.11) Wages and salaries (1.17) (3.96) ( 7.87) (20.71) (17.00) Other (0.93) (0.75) (1.66) (5-91) (6.32) 'Property Tax 0.80 0.12 0.15 3.84 3.68 Internal Turnover Tax 2.94 6.83 10.59 17.12 18.03 Excise Taxes 6.40 6.73 7.88 9.90 10.55 Taxes on international trade 34-58 78.50 124.06 166.53 192.64 Import duties (7.28) (13.26) (30.43) (39.80) (40.00) Export duties (9.82) (39.09) (65.56) (93.04) (117.67) Export turnover tax ( -- ) (15.16) (20.64) (24.07) (26.60) Exchange tax (14.22) (7.38) ( -- ) ( -- ) ( __ ) Other (3.26) (3.61) (7.43) (9.62) (8.37) Other Taxes 2.02 0.11 0.83 1.18 o.69 Total Tax Revenue 55.04 100.78 170.57 268.35 281.02 Other revenue 1.32 3.55 9.57 4.60 10.16 Adjustments 1 5.49 -9.22 5.42 - 4.84 - Total Revenue 61.85 95.11 185.56 268.11 291.18 a===== ==== =…======= Sources: Ministry of Finance, National Bank of the Congo. / These adjustments result from receipts not yet classified by revenue category or not yet transferred to the central accounts of the Treasury. Table 5.2 : CENTRAL GOVERNMENT EXPENDITURES (in millions of zalres) Ravised Actuals Estimate .1967 1968 1969 1970 I CURRENT EXPENDITURES 87.49 163.99 201.20 207.00 General Services 40.24 75.76 85.01 of which: Defense (13.45) (21.92) (23.16) Social Services 15.64 29.41 57.26 of which: Education (13.12) (25.76) (44.81) Health (1.21) (1.46) (7.91) Economic Services 5.93 7.87 9.63 of which: Agriculture (0.84) (0.55) (1-79) Interest on Public Debt 2.96 7.66 6.32 Unclassified expenditure 22.72 43.29 42.98 II CAPITAL EXPENDITURES 13.86 25.53 55.99 64.00 Investment budget 4.55 16.81 29.05 Durable goods 6.74 5.30 3.36 Priority expenditure 2.57 3.42 23.58 III PUELIC DEBT AMORTIZATICN 2.70 3.89 5.93 9.00 TOTAL 104.05 193.41 263.12 280.00 Sources: Ministry of Finance, National Bank of the Congo. Table 5.3 : CENTRAL GOVERNMIENT CCNSCLMAED FINANCIAL STATEMENT (in millions of za-res) Revised Actuals Estimate 1966 1967 1968 1969 1970 Revenue 69.65 109.18 204.45 294.55 318.00 Domestic origin (61.85) (95.11)(185.56)(268.11) (290.00) Foreign origin (7.80) (14.07) (18.89) (26.44) (28.00) Current expenditures 70.95 100.00 181.09 220.35 226.00 Domestic resources (60.73) (87.48)(163.98)(201.20) (207.00) 'oreign resources (10.22) (12.52) (17.11) (19.15) (19.00) Current surplus -1.30 9.18 23.36 74.20 92.00 tkmestic resources (1.12) (7.63) (21.58) (66.91) (83.00) Foreign resources (-2.42) (1.55) (1.78) (7.29) (9.00) Capital expenditures 8.95 22.77 4184 73.30 85.00 Domestic resources (5.68) (13-86) (25-54) (55-99) (64.00) Foreign resources (3.27) (8.91) (16.30) (17.31) (21.00) Over-all surplus or deficit -10.25 -13.59 -18.,48 0.90 7.00 Domestic resources (-4.56) (-6.23) (-3.96) (10.92) (19.00) Foreign resources (-5.69) (-7.36) (-14.52)elO.02) (-12.00) Firnancing 10.25 13.59 18.48 -0.90 -7.00 Gross borrowing (12.18) (19.80) (21.54) (5.57) Domestic (7.64) (8.88) (7.54)(-4.99) National Bank (5.67) (7.60) (3-75)(-5.68) Commermial banks ( .. ) (-0.11) (3.87)(-0.14) Post Office (.0.20) (0.26) (-0.04) (0.83) Other (2.17) (1.13) (-0.05) ( .. ) Foreign (4.54) (10.92) 13.96 (10.56) Long-term loans (3.68) (7.68) (8.02) (6.58) Suppliers' credits (0.86) (3.24) (5.94) (3.98) Debt amortization (-) (-0.89) (-2.70) (-3.89)(-5.93) Net borrowing 11.29 17.10 17.65 -0.36 -7.00 Other 11 -1.04 -3.51 0.83 -0.54 Sources: Ministry of Finance, National Bank of the Congo. 1/ Consists largely of changes in Congolese counterparts to foreign aid programs. Table 6.1 : NATICNAL BANK (in millions of zaires) 1963 1964 1966 1967 1968 1969 Foreign assets 5.31 6.oo 3.08 33.79 68.90 99.21 C:Laims on Government 36.13 39.81 68.66 80.97 89.79 112.53 Assets - Liabilities -41.44 45.81 71.74 114.76 158.69 211.74 Rieserve money 28.04 34-35 50.87 63.04 94.20 107.21 Time and Foreign Currency Deposits - - 0.20 0.33 11.30 13.19 Bankers' Restricted Deposits 4.30 5.18 5.19 15.78 18.17 16.17 Prepayments for Exchange - - 1.29 2.22 1.36 1.30 Foreign Liabilities 0.60 0.51 0.58 0.62 0.83 1.18 Government Deposits 0.86 1.53 5.46 15.87 20.87 49.09 Counterpart -Funds 3.34 4.47 5.99 8.23 7.40 7.96 Other items (net) 4.30 -0.23 2.16 8.67 4.56 15.64 Source: International Financial Statistics Table 6.2 : DEPOSIT MCNEY BANKS (in millions of zaires) 1963 1964 1966 1967 1968 1969 Reserves 6.39 7.50 14.19 12.67 35.77 40.69 Restricted Deposits 3.98 4.75 5.19 16.02 18.17 16.18 Foreign assets 6.16 6.16 7.97 28.30 17.92 15.59 Claims on Govenment 11.34 11.61 13.41 13.30 17.17 17.03 Claims on Private Sector 6.12 9.53 12.32 16.39 20.21 27.79 AesetS - Liabilities 33.99 39.55 53.08 86.68 109.24 117.28 Demand Deposits 19.55 24.74 35.80 58.66 75.32 81.06 Time and Foreign Currency Deposits 0.65 0.98 3.96 3.94 4.30 6.26 Import Prepayments 6.65 5.54 6.12 15.14 18.62 16.62 Foreign Liabilities 3.68 2.57 0.24 0.61 1.08 1.03 Counterpart Fbnds -0.09 0.34 1.95 0.09 0.71 2.80 Capital Accounts 1.18 1.61 3.75 3.85 4.54 8.28 Other Items (net) 2.37 3.77 1.26 4.39 4.67 1_23 Source: International Financial Statistics Table 6.3 : McNErARY SURVEY (in mil1ons of zaires) 1963 1964 1966 1967 1968 1969 Foreign asaets (net) 7.18 9.07 10.23 60.86 84.91 112.59 Dobmstic credits 54.53 59.95 90.32 96.48 107.96 110.48 Claims on Government (net) (48.04) (50.70) (77.56) (79.62) (87.27) (82.63) Claims on private sector (6.31) (9-07) (12.69) (16.79) (20.64) (27.79) Assets - Liabilities 61.71 69.02 100.55 157.34 192.87 223.07 Money 43.88 52.35 73.40 110.81 135.07 151.70 Quasi-money o.65 0.98 4.15 4.26 15.60 19.45 Import prepayments 6.65 5.54 7.41 17.36 19.98 17.92 Counterpart funds 3.25 4.81 7.94 8.32 8.11 10.76 Other items (net) 7.28 5.34 7.65 16.59 14.11 23.24 Source: International Financial Statistics. Table 7.1 RETAIL PRICE INDICES (KINSHASA STORES) Base: June 1960 = 100 General Food Other Index 1961 June 129.8 124.2 127.5 December 152.1 145.1 149.1 1962 June 168.6 142.3 157.5 December 189.5 166.6 179.8 1963 June 211.4 184.8 200.2 Decemnber 300.7 206.6 261.1 1964 June 466.5 262.9 380.8 December 454.o 270.8 376.9 1965 June 515.4 298.1 424.o December 498.8 323.9 425.2 1966 June 629.2 386.3 527.0 December 532.9 397.4 475.9 1967 June 696.1 429.9 584.1 December 1,110.9 622.9 892.0 1968 June 1,209.0 813.4 1,031.5 December 1,230.7 852.0 1,o60.8 1969 June 1,282.5 893.7 1,10o8.1 December 1,283.4 945.7 1,131.9 1970 June 1,324.3 1,034.6 1,194.4 Source,: Institut de Recherches Economiques et Sociales, Lovanium Table 7.2 RETAIL PRICE INDICES (KINSHASA MARKETS) Base: June 1960 = 100 Food Clothing Other General Index 1960 June 100.0 100.0 100.0 100.0 December 113.2 109.7 111.2 112.5 1961 June 125.9 112.5 141.1 126.8 December 145.2 186.6 163.1 151.b 1962 Jmue 188.1 258.4 190.9 194.7 December 261.4 339.9 285.2 273.6 1963 June 344.1 392.7 303.6 342.9 December 384.2 577.5 309.4 392.7 1964 June 521.8 607.7 454.8 521.6 De'embpr 443.8 501.0 440.9 450.7 1965 June 466.1 513.2 435.7 466.5 December 490.1 544.8 445.7 488.5 1966 June 597.3 600.9 485.4 573.9 Desanber 665.1 597.0 488.o 616.1 1967 June 751.5 631.5 562.9 691.2 Decaember 1,174.7 - 891.6 933.3 1,074.1 1968 June 1,406.8 1,133.7 1,094.0 1,293.4 Decenber 1,369.6 1,169.8 1,o86.2 1,276.3 1969 June 1,486.2 1,211.4 1,137.6 1,365.3 Decerber 1,587.6 1,235.0 1,168.5 1,437.2 1970 June 1,612.0 1,215.9 1,197.3 1,454.3 Source: Ins,td.itut 9 Recherches Economiques et Sociales, Lovanium. Table 7.3: SECTORAL EVLvUTIr OF RZrAnL PRICES (KINSHASA MARKETS) Baes: June 1960 - loo Imported "Mixed" Products L o c a 1 P r o d u c t s Products Agricultural Products Hanufacturers Other Total Clothing Other Total 1960 Juni 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 December 109.7 114.8 109.7 104.5 106.6 113.2 111.4 124.8 1961 June 114.7 120.2 112.5 -- 149.3 132.7 127.6 126.6 153.6 December 124.0 140.4 186.6 165.2 173.8 146.5 153.7 206.1 1962 June 167.7 188.6 258.4 185.6 213.0 196.1 1994. 226.2 December 311.6 249.1 301.8 212.3 245.9 235.9 244.5 383.8 1963 June 410.4 338.9 339.3 250.3 284.1 324.6 313.8 383.6 December 470.6 367.3 516.3 271.0 364.8 359.9 364.6 1i1.8 1964 June 547.0 481.3 578.8 445.1 502.5 440.7 479.2 755.8 December 419.7 434.7 493.9 412.4 448.1 413.5 434.7 635.1 1965 June 440.2 434.5 512.8 423.7 462.7 443.6 447.5 658.6 December 487.2 429.8 529.4 447.7 483.5 482.2 464.3 656.6 1966 June 543.4 542.0 579.5 510.1 540.9 580.5 547.9 839.4 December 500.6 708.2 589.0 506.8 543.2 645.8 612.0 979.7 1967 June 572.3 755.9 611.1 623.0 615.9 665.6 665.4 1,360.2 December 977.7 1,288.2 844.7 969.0 905.6 1,017.1 1,034.1 1,496.o 1968 June 1,149.8 1,442.7 1,106.3 1,219.1 1,160.8 1,283.7 1,266.7 1,651.8 December 1,109.6 1,377.7 1,147.1 1,191.4 1,166.6 1,271.1 1,249.0 1,750.2 1969 June 1,143.1 1,575.6 1,182.2 1,226.2 1,202.7 1,427.7 1,356.4 1,815.8 December 1,194.5 1,750.3 1,202.6 1,249.0 1,222.5 1,466.8 1,420.8 2,1,5J4 1970 June 1,193.4 1,746.3 1,253.9 1,478.2 1,437.2 2,143.8 Source: Institut de Recherches Economiques et Sociales, Lovaaium. Table 8.1 EMPLOYMENT IN LARGE ENTERPRISES 1960 1966 1967 1968 Agriculture 1,008,069 346,297 368,831 363,698 Miling and metallurgy 81,524 58,988 59,274 56,694 Food industries 41,269 33,o88 33,106 34,989 'Other manufacturing 12,807 14,876 17,155 15,729 Building and Construction 17,179 15,049 15,906 15,050 Transport and Communications 60,172 51,543 56,697 60,067 Commerce and banking 20,913 22,305 24,408 29,467 Total 1,241,933 542,146 575,377 575,694 of which: African salaried workers 379,175 303,933 327,514 335,257 Other African workers 847,699 227,358 237,002 230,651 Expatriates 15,059 lo,855 10,861 9,756 Source: National Bank of the Congo. Table 8.2 j EVOLMTION OP T9R NUME OF pUILS DNRIO)LL IN VARIOUS TYPES OF EWXCATIONAL INTrIruTIONs, 1959-60 TO 1968-69 Types of Institution 1959-61 1962-63 1963-64 1964-65 1965-66 1966-67 1967-68 1968-69 All Types 1,704s698 19975,490 20100,409 1,711 a96 2,198,834 2,346,441 2,516,010 2,669,018 1,644,a44 1,863,914 1,995,230 1,610,159 2,066,809 2,193,200 2,338,895 2,455,840 Post-primary 22,505 11,222 10,543 6,432 6,894 7,070 9,051 10,000 Dmesetio sclice teachsr tralning 2,887 5,234 4,528 3,117 2,677 2,932 3,445 Danoetic acleaie 2,186 1,541 2,593 1,945 2,700 720 3,985 Apprentice teacher training 5,575 488 373 41 168 - - Artisan 11,857 3,959 3,o49 1,329 i,349 3,413 1,621 Secondary 27.386 68,350 92,273 92,069 121,232 140,620 162,237 194,777 Two year.' gezral - 49,482 55,929 57,254 78,941 92,021 101,994 Normal school (4 years) 139740 5s686 9,057 8,064 10,772 14,178 20,000 Gewral aadentie (4 years) 13,517 8j234 17,304 15,691 18,233 21,214 23,781 Technical and profesBioal (2 and 4 yra.) 6,763 4,447 9,964 10,937 13,254 13,207 16,462 Niddle 3,366 501 19 123 32 21 - Higher 763 2.004 2,363 3,136 3,899 4,651 5,827 8,401 Universitise 763 1,198 1,542 1,734 2,148 2,925 3,476 Niddle level narmal achoos - 263 398 483 635 829 1,171 Other higer education 543 423 919 1,116 897 1,180 Saorce: Miistry of Nationa Education and Cultural Affairs. gIiDEMOCRATIC REPUBLIC OF THE CONGO!iXET9, r; 'EPL ADMINISTRATIVE DIVISIONS ,_ 4 | ~~~~~~~~~~~~~~~~~~~~ F o 9 E ti T A L E $ , ~~~~~~E CQ ti A T E u, Ff .- 1, rlai , .- I ,t MBANDAKA -. 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