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NON-PAPER

TOWARDS A GOVERNANCE COMPACT


FOR THE DEMOCRATIC REPUBLIC OF CONGO

INFORMAL BACKGROUND NOTE


JOINTLY PREPARED BY
THE EUROPEAN COMMISSION
AND
THE WORLD BANK
FOR THE MAY 31-JUNE 1, 2006 MEETING

May 22, 2006


OBJECTIVE AND STRUCTURE OF THE PAPER

1. This paper aims to stimulate a brainstorming session on governance issues in the


Democratic Republic of the Congo (DRC). It does not represent a formal position by the World
Bank, the European Commission, nor any of the participants in the session on any of the issues to
be discussed.

2. The paper consists in a first section which discusses the concept of a Governance
Compact, and a series of subsequent chapters on each of the key issues which could be
included in the Compact. For each of the issues, it proposes a possible strategic approach and
key questions for discussion.

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THE COMPACT CONCEPT

CONTEXT

1. There is a general consensus that a deep reform of the governance framework and
major improvements in the functioning of the public sector are needed to consolidate peace
and make progress towards economic and social recovery in DRC. This is one of the pillars of
the PRSP and is high on the electoral platform of the various candidates to the Presidential and
Parliamentary elections.

2. Overall, the governance agenda is very broad, with major structural reforms needed in
most, if not all, sectors. The challenge is not only to mitigate and remedy the impact of a decade
of political instability and conflicts, but also to turn around many of the institutions and policies
inherited from the Mobutu era – in short, to build an effective State, in a country where there
never was one. The breadth and scope of the necessary reforms, however, stand in sharp contract
with the Government’s political and technical capacity to adopt and implement them in a still
very fragile post-conflict environment where administrative capacity has been severely
compromised.

3. The new Government will hence need to prioritize and sequence its efforts, and focus
its limited resources on those activities which are likely to have the largest impact. The
challenge is to balance the need for urgent action and the authorities’ effective ability (both
technical and political) to implement the necessary reforms. Such a prioritization is not an easy
exercise as most sectors are in dire need of urgent action and as delays will have major
consequences in terms of economic growth and living conditions. Still, the reality is that choices
have to be made, and that progress will be uneven across sectors.

4. Similarly, donors will need to coordinate their support and focus it on those activities
with the highest potential impact. In a context of overwhelming needs and limited resources,
concentrating efforts around key priorities and closely coordinating implementation are critical to
success. This requires a shared understanding and agenda to underpin individual efforts.

OBJECTIVE

5. The proposed “Governance Compact” would provide the priority framework for
governance reforms to be implemented over the next four years. The Compact would both
constitute the priority agenda for Government action and the basis for donor programs in the
governance area. It would also be the template against which progress could be measured
through a formal process, including through the Consultative Group process.

6. The Compact should be a Government document, prepared with the support of external
partners but truly owned by the post-elections authorities. It should reflect the authorities’
understanding of the political and technical constraints they will be facing and the extent of their
own commitment to reform. It should also reflect the consensus among key stakeholders, as
articulated through the PRSP process, expressed during the elections, and possibly further
discussed with key constituencies. While external partners can assist in the Compact’s
preparation, and make a judgment as to whether the eventual document provides a framework
which is worth supporting, they cannot substitute to the elected authorities in defining policy
priorities for the period to come.

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7. The Compact should complement the PRSP, by articulating a sequencing and
prioritization for the implementation of key reforms included in the PRSP. While the PRSP is a
strategic document, the Compact should be a practical, result-oriented action plan to translate the
broad strategies agreed upon under the PRSP into action on the ground. The two documents are
hence not redundant, but complementary.

CONTENT

8. The Compact would be a living document. In a fluid and rapidly-changing environment,


it would be regularly adjusted (possibly through annual reviews), to take into account emerging
priorities and constraints, as well as to reflect increased knowledge and understanding of critical
issues.

9. The Compact would focus on a few critical areas only. Its coverage would be limited to
those areas which are most critical for transforming DRC’s political economy. Those could
include: transparency, public expenditure management, public administration reform,
decentralization, investment climate and public enterprises reform, natural resources
management, justice, and security sector reform.

10. The Compact would provide in each area an operational action plan focused on the
core reforms needed to make progress towards the PRSP objectives. For each area, it would
articulate an overall approach, set priority objectives, identify corresponding activities, and define
a tentative timetable.

11. Implementation of the Compact would require considerable external support, including
political support (to help pass difficult measures), technical assistance (both to design and
implement key reforms), budget support (to finance reforms), and capacity building programs.
The Compact would provide a framework for partnerships with individual donors, and could be
instrumental in identifying priorities for support as well as lead partners in each area.

PROCESS

12. Prior to the elections. While it may be difficult to engage the authorities during this
phase, a substantive amount of technical work could already be done. This is the time where
donors could provide most assistance by putting together a set of recommendations on strategic
approaches, key activities, and possible timetables. In this context, a detailed first draft
contribution could be elaborated by a working group composed of selected external partners (as
an outcome of, or building on discussions during the May 31-June 1 brainstorming meeting).
This draft contribution would then be shared with bilateral and multilateral donors for review and
comments. In parallel, it could be sent to all candidates to the Presidency for information and
possible comments.

13. After the elections. Once a new Government is formed, a revised draft contribution
(incorporating comments by all donors) could be presented to the new authorities to help them
rapidly prepare the Compact. The Compact would be finalized by the new authorities in
consultation with external partners, and could constitute the basis for the first post-elections
Consultative Group meeting.

14. During implementation. A formal follow up process would be put in place – as


discussed in the last section of this paper.

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KEY QUESTIONS FOR DISCUSSION

(1) Is there a consensus around the nature and objective of the Compact ? How should the
concept be adjusted if at all ?
(2) Is the list of priority areas appropriate ? What should be added or removed ?
(3) Is the proposed preparation process adequate ? How should it be adjusted ?

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THEME 1: TRANSPARENCY

PROPOSED STRATEGIC APPROACH

Proposed focus

1. The Compact could recommend to focus transparency efforts on public decisions


which have a significant financial impact (and which have the potential to derail the country’s
medium-term recovery and stability). While it would be desirable to move on all fronts at once,
the scope of the corruption issue in a country with the history of DRC is potentially
overwhelming, and priorities have to be set. The Compact could recommend to focus on the
misappropriation of relatively large amounts of resources by persons in position of responsibility
– rather than on the widespread pattern of small-scale bribe-taking by lower level officials.

2. The Compact could explicitly identify the list of sectors and activities on which to
focus. Such list could include, for example: (i) tax administration, especially collection of
revenues from large taxpayers (over an amount to be set), and award of exemptions; (ii) custom
administration, especially transfers from custom stations to the budget; (iii) receipt of fees and
royalties from extractive industries, and award of exemptions; (iv) budget execution, including
payment of salaries (for civil servants and armed forces); (v) public procurement of large
contracts (above an amount to be set); (vi) transfers of resources to public enterprises; (vii)
financial management of large public enterprises (those with a turnover above an amount to be
set); (viii) award and monitoring of forestry concessions and mining rights; (ix) management of
the Central Bank of Congo (BCC); and (x) other public decisions (e.g., administrative
authorizations, license granting, etc.) which may result in large benefits for specific private
parties.

3. The Compact could recommend to focus efforts on systems and processes, rather than
individual cases. In a context of limited resources, the challenge is to strike a balance between,
on one hand, putting in place and strengthening the entities and mechanisms that are needed to
improve transparency both in the short-term and over the medium-term, and, on the other hand,
dealing with the most egregious corruption cases that may emerge. Overall, the Compact could
propose to focus on systems and processes – without precluding individual donors to take action
on specific cases, and, if they reach exaggerate proportions, to organize a concerted response by
DRC’s external partners.

4. The Compact could focus on a three-fold approach: (i) make key decisions transparent,
through open publication (in the media, on the net, etc.); (ii) strengthen key internal and external
entities so that they can effectively exploit the information made available; and (iii) ensure
effective sanction of corruption.

5. The Compact would need to call on bilateral partners to help in this endeavor. In some
key areas, including the mining sector, significant resistance can be expected from private
investors to full transparency. A significant amount of diplomatic (and possibly NGO) pressure
may be necessary for the anti-corruption agenda to be successfully implemented.

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Make key decisions transparent

6. The Compact could require the Government to publish on the internet extensive
information on a bi-annual basis (say, by January 31 and July 31 of each year) such as: (i) list of
large taxpayers (above a certain amount) and amounts of taxes received by Treasury from each of
them during the period; (ii) list of all tax exemptions awarded during the period and for each of
them name and title of the person having granted it; (iii) list of all custom stations and amounts of
custom revenues transferred to Treasury by each of them during the period; (iv) list of all
extractive companies subject to the payment of fees and royalties, and for each of them
corresponding contracts and amounts received by Treasury during the period; (v) list of all
exemptions for payments of fees and royalties awarded during the period and for each of them
name and title of the person having granted it; (vi) biannual report on budget execution, with the
highest level of details available; (vii) list of all large public contracts (above a certain amount)
awarded during the period, and for each of them the text of the contract, the procurement agency,
the procurement method, and the name of the company to which it was awarded; (viii) list of all
public enterprises and for each of them amount of resources transferred from Treasury during the
period; (ix) list of all forestry concessions and mining rights awarded during the period with the
neames of the contracting company, price, map and duration for each contract, as well as a list of
controls carried out, infractions detected, and penalties levied during the period; (x) quarterly
operations report from the BCC; and (xi) other public decisions (e.g., authorizations, license
granting, etc.) which may result in large benefits for specific private parties. Publication could
initially start with a limited focus, and be gradually extended to all key information.

7. The Compact could propose to publish (in full) all mining and forestry contracts to
which the Government or public enterprises are a party. This will be a difficult endeavor as: (i)
it may require amending some of the contracts (those which include confidentiality clauses); (ii)
it will require public pressure, including by donor Governments on their own companies,
especially in the mining sector; (iii) it may deter some companies from investing in DRC; and
(iv) it will unveil some of the vested interests in DRC. Still, in a country scarred by decades of
corruption in the natural resources sectors, and where the interests at stake are so high that they
could easily re-create a system of institutionalized corruption, full publication may be the best
safeguard against the return of the past.

8. The Compact could require the preparation and publication of a series of audits and
surveys. This would help unearth information, as a first step to making it public. These audits
and surveys would be prepared by reputable firms or entities on the basis of solid terms of
reference. They would be made public on the internet upon completion. They could include: (i)
annual public expenditure tracking surveys (to identify “leaks” in the chain that leads from the
budget to the beneficiaries); (ii) annual audits of budget execution; (iii) annual financial audits of
public enterprises; (iv) annual audits of the BCC; (v) registration of annual declarations of assets
by members of the Government and key officials; and (vi) ad hoc audits or analysis of key
economic decisions which could have been distorted by corruption, as may be necessary.

9. The Compact could also call on all donors to publish on the internet the list of all
contracts awarded under the projects they finance, and for each of them the text of the contract,
the procurement agency, the procurement method, and the name of the company to which it was
awarded.

10. The Compact could require the Cour des comptes to publish a bi-annual analysis of
the published information. The analysis would provide a critical review of the quality of the
data which are published, and identify potential transparency issues. It would be complemented

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by a set of recommendations, and an analysis on the way past recommendations have been
followed up by the Government. The analysis could be published on the internet on a biannual
basis (say, within two months after publication of the information referred to above).

Strengthen internal controls and external watchdogs

11. The Compact could recommend strengthening the capacity of key control institutions,
as a pre-requisite for the sustainability of the transparency effort. The Compact could propose to
focus on the Cour des comptes and the Inspection générale des finances, with a view to
strengthening their auditing, analysis, and reporting capacities. The challenge is to organize this
support in such a way that it can be coherent and comprehensive, and deliver results. The
Compact could ask each of these institutions to prepare (and later implement) a two-year action
plan (possibly with some external support), including both needs for external support and
accompanying measures the Government would need to take.

12. The Compact could recommend parallel action to strengthen the capacity of external
watchdogs, who are in a position to apply pressure for better governance. The Compact could
propose to focus on the two chambers of Parliament, the press, business organizations (FEC), and
civil society (including faith-based groups and NGOs). The objective would be to enhance the
capacity of these groups to analyze the information that is made public, so that they can
effectively fight for enhanced transparency. Once again, the challenge is to organize such support
so that it can be coherent and comprehensive, and deliver results. The Compact could ask for a
group of external experts to prepare a two-year action plan (which should then be implemented)
for external watchdogs as a whole, including detailed action plans for each key entity.

Ensure effective sanction of corruption

13. The Compact could finally call for sanctions to be taken against persons and entities
involved in corruption. This is related to the reform of the judiciary, but also requires political
commitment. Sanctions would be expected to be taken not only for small-scale bribery, but also
for large-scale fraud.

14. The Compact would focus on ensuring that adequate systems are in place to handle
such cases, rather than on applying pressure for a specific outcome in individual cases. The
Compact could require an independent and reputable legal firm to be recruited to prepare an
annual report on all key corruption cases unveiled during the year in DRC, their handling by the
executive or the judiciary as may be appropriate, and the eventual sanction applied. The reports
could also include recommendations for ensuring a fair and effective handling of such cases, and
an opinion on the actions effectively taken by the authorities to implement recommendations of
the previous report. Some of the key recommendations could be incorporated in the Compact
during regular reviews, if and as relevant. The reports would be published on the internet.

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated ?
(2) Is the proposed strategic approach appropriate ? What should be added, removed, modified,
or nuanced ?
(3) Is the proposed strategy too ambitious ? or not ambitious enough ?

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Focus
(4) Is the proposed focus on large-scale corruption appropriate ?
(5) In broad terms, how should the list in para 2 be amended (if at all) ?
(6) Is the proposed focus on systems rather than individual cases adequate ?
(7) Are partners ready to help in dealing with the corruptors ?

Publications
(8) In broad terms, how should the lists in para 6 and 7 be amended (if at all) ?
(9) Should publication start with a limited set of information and be gradually expanded or should
the Compact immediately aim for full publication ?

Control entities and watchdogs


(10) Is there a critical entity which should be added to / removed from the list of entities to be
supported ?
(11) Is the (relatively unspecific) approach of action plan + implementation adequate – or are
there more detailed measures which could already be included in the Compact ?
(12) Should the Compact focus on existing entities or call for the establishment of new ones (e.g.,
anti-corruption committee) ?

Sanctions
(13) Is the proposed approach of an annual report by an independent firm on the enforcement of
sanctions adequate ?

Final
(14) Are there other questions that should be discussed ?

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THEME 2: PUBLIC FINANCE MANAGEMENT

PROPOSED STRATEGIC APPROACH

Increase revenues

1. The Compact could focus on further increasing Government revenues. Significant


progress has been made over the last years (with revenues increased from 5.9 percent of GDP in
2001 to 11.2 percent in 2005), but there remain both a large financing gap and a significant
untapped revenues potential. The Compact could focus on consolidating and expanding past
efforts.

2. The Compact could propose quantified objectives, rather than discuss specific
measures. The measures needed are very detailed and technical by nature, and priorities need to
be regularly adjusted to reflect changing circumstances. These measures are likely to constitute a
key element of the new IMF program, and to be reviewed through the regular SMP / PRGF
review process. Incorporating specific recommendations in the Compact may reduce the
flexibility in identifying and adjusting priorities – and the Compact could hence be limited to
setting up quantified objectives, leaving it to the Government (with IMF support) to design and
implement the corresponding actions.

Improve expenditure

3. On the expenditure side, the Compact could focus on two issues: increasing allocations
to pro-poor sectors and activities; and improving transparency and effectiveness in the spending
of public resources.

4. With regard to budget allocations, the Compact could propose quantified targets for
increasing pro-poor expenditure. The Compact could propose a list of key sectors and activities
in which increases are required (e.g., education, health, etc.) and specific quantified targets for
each of these areas (annual increases in terms of percentage of planned expenditure). The
Compact could also propose minimal allocations for pro-governance expenditure (e.g., forestry
monitoring, revenue collection). These targets could be revised based on the Government’s
performance and the overall macro-economic environment. The challenge would be to include a
sufficiently large number of sectors and activities to have a meaningful impact, without over-
limiting flexibility (and sovereignty) in budget preparation.

5. With regard to transparency and efficiency of public expenditure, the Compact could
recommend to focus on three areas: (i) budget process (preparation, execution, and monitoring);
(ii) pay reform; and (iii) public procurement reform.

6. With regard to the budget process, the Compact could focus on the implementation of
recommendations included in the recent Bank-supported fiduciary assessment (CFAA). These
recommendations include a very detailed set of measures with a corresponding timetable. The
Compact could require the translation of these recommendations into a specific three-year action
plan (including priorities and deadlines) and its implementation.

7. With regard to pay reform, the Compact could focus on the implementation of the
reforms currently underway. This would focus essentially on establishing a reliable system, in
Kinshasa and in the provinces, to make regular payments of salaries, in both a transparent and an

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effective manner. The Compact could require the preparation of a specific two-year action plan
to that effect (including priorities and deadlines, and based on activities already underway) and its
implementation.

8. With regard to procurement reform, the Compact could focus on the continuation and
consolidation of the ongoing reform process. This would require in particular: (i) the adoption
of the new Procurement Code, which is being prepared by international consultants, and its
dissemination to all relevant administrative entities; (ii) the promulgation of related
implementation decrees; (iii) the adoption and implementation of a two-year capacity building
program for all relevant entities; (iv) the adoption and implementation of a two-year capacity
building program for the private sector (to make them familiar with the provisions of the new
code).

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated ?
(2) Is the proposed strategic approach appropriate ? What should be added, removed, modified,
or nuanced ?
(3) Is the proposed strategy too ambitious ? or not ambitious enough ?

Revenues
(4) Is the proposed focus on solely increased revenues appropriate ?
(5) Is the proposed approach in terms of quantified objectives rather than detailed measures
appropriate ?

Expenditure
(6) Is the proposed three-fold focus adequate or is it too limited ?
(7) How far should the Action Plan’s recommendations go in terms of pro-poor allocations ?
(8) Should the definition of pro-poor sectors and activities for which specific allocations would
be recommended be restrictive (e.g., social sectors) and extensive (e.g., also growth-related) ?
(9) Is the CFAA the appropriate guide for reform of the budget process ?
(10) Is the consolidation of the ongoing pay reform adequate and sufficient as a focus for efforts
to increase transparency and efficiency in civil service pay ?
(11) Is the consolidation of the ongoing procurement reform adequate and sufficient ?

Final
(12) Are there other questions that should be discussed ?

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THEME 3: PUBLIC ADMINISTRATION REFORM

PROPOSED STRATEGIC APPROACH

1. The Compact could recommend to focus efforts and attention on laying the ground for
an eventual medium-term reform program. In a country where there never was a well-
functioning public administration, even by regional standards, and where a decade of political
instability and conflict have left deep scars, the needs are enormous. Building an effective public
service is likely to take years, if not decades – but will critically depend on the successful
implementation of a series of pre-requirements. The Compact could propose to focus on these
pre-requirements, which are likely to require considerable efforts.

2. The Compact could hence propose a strategy focused on three key issues: (i) restoring
control of the civil service payroll, as a way to re-establish the foundation of a functioning
administration and to save public resources (which could then be partly or fully used to increase
the very low salaries in the public service); (ii) clarifying roles and responsibilities of key entities
to reduce overlaps in mandates, and institutional confusion (which is a source of waste,
regulatory uncertainty, and potentially corruption); and (iii) building a core high-level civil
service which is effectively in a position to prepare and implement the critical reforms proposed
under the Compact.

Restore control of the payroll

3. While complex and potentially fraught with political risk, regaining control of the
payroll is a pre-condition to both public administration reform and effective public finance
management. Regaining control of the payroll may create some space for a (although limited)
broad-based increase of salaries, help clarify responsibilities, and allow for new recruitments as
may be needed. It will, however, be a complex endeavor, with many potential technical
difficulties. It may also raise political concerns – although the political risks may be mitigated if
a significant share of the benefits of the elimination of ghost workers and of the retirement of
aged workers are effectively passed on to the pay of those who remain in service.

4. The Compact could focus on a four-fold process: (i) complete the ongoing civil service
census and extend it to those categories which are not covered in the current exercise (e.g.,
judiciary, etc.); (ii) reflect the results of this census in the payroll (which has started); (iii)
complete the Government’s retirement program, to allow all civil servants who have passed
retirement age to effectively retire; and (iv) design and adopt a clear set of rules for new
recruitments, with a view to allowing such recruitments but preventing excessive hiring,
including and in particular at the decentralized level.

5. In parallel, the Compact could include some provisions on salaries increases. The
objective of such provisions would be two-fold: (i) ensure that the benefits of a cleaner payroll
are adequately passed on to civil service; and (ii) help the Government prevent an unreasonably
rapid increase under the pressure of labor unions.

Clarify roles and responsibilities

6. The clarification of roles and responsibilities will require both technical work and
political arbitrations. In a fluid political environment characterized by a legacy of weak
governance, many administrative structures have overlapping attributions and are not adequately

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structured to face their basic responsibilities. The Compact would require a clarification of
mandates, the design of an adequate organizational structure, and its implementation within a
relatively short period of time. This would also include, where appropriate, a clarification of
relationship between the central and decentralized levels of Government, as well as between the
Government and non-Government service providers.

7. The Compact could recommend to focus such efforts on a targeted set of entities, in
order to avoid dispersing efforts. The Compact could explicitly propose a list of such target
entities, typically at departmental level (technical departments are expected to be less affected by
changes in the definition of ministerial portfolios than ministries as a whole). Such entities would
be those with the highest potential impact on economic recovery and governance. Where there is
an overlap between the mandate of a target entity and a non-targeted entity, the new mandate of
the target entity would prevail.

8. The Compact could recommend a methodology for that effort. The challenge is to find
adequate solutions, without spending too much time and resources on background studies. The
proposed approach would not aim for perfection, but for rapid improvements, which could be
further enhanced at a later stage. External advice is likely to be needed, both to share
international experiences and to avoid vested interests and internal bureaucratic battles. To that
effect, the Compact could recommend to hire a series of external consultants to help re-design
target entities – without going through users’ surveys or overly elaborate processes. The
consultants would propose a re-focused mandate, and the corresponding organization structure,
including key documents (decrees, key processes and procedures, contractual arrangements with
non-Government service providers, etc.) within a few months, for implementation within a year.

Build a core high-level civil service

9. The Compact could recommend a set of special actions aimed at building a core high–
level civil service. The objective would be to place in positions of responsibility a group of
people who are capable of designing and implementing key reforms. This would require in
particular that such people are properly selected and evaluated (based on merit), adequately
compensated (at levels far above the standard pay scale), and sheltered from excessive political
interference. While the establishment of such a group of high-level civil servants is not a
sufficient condition for reforms, it is a necessary one. The measures to be taken are of an interim
nature since over the long-term the core high-level civil service should be part of the normal civil
service – but in view of the current wage levels, the interim period is likely to last for a relatively
long time.

10. Specific measures in the Compact could build on two experiences: Afghanistan and
Tanzania. Indeed, the need for a qualified and effective is not specific to DRC. In Afghanistan,
entire departments are requested to prepare a reform plan, and once such plan is approved become
eligible for access to an “increased salary scale” (typically two- to three-fold normal wages) for
all departmental staff. In Tanzania, salary increases are significantly larger but are limited to a
small number of key positions, which have been identified by the Government and its partners as
priorities.

11. The Compact could recommend detailed arrangements to make this happen. For
example, the Compact could propose to put in place a Trust Fund to finance additional salaries
(and define a co-financing arrangement with the Government, which could evolve over time).
The Compact could specify the positions which could benefit from such arrangement (typically
linked to the departments that are target for a restructuring). It could specifically set the level of

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increased salaries. It could define in broad terms recruitment and evaluation processes, with a
view to both leaving a degree of managerial discretion to the ministers while emphasizing the
notion of merit-based recruitments and evaluations and mitigating the potential for excessive
political interferences. It could propose performance indicators for the program (which would
eventually rest on performance indicators for those occupying the positions) to monitor its
implementation and prevent its misuse.

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated ?
(2) Is the proposed strategic approach appropriate ? What should be added, removed, modified,
or nuanced ?
(3) Is the proposed strategy too ambitious ? or not ambitious enough ?

Payroll
(4) Is the proposed approach adequate ?
(5) Should the Compact include guidance on the pace of salary increases ?

Roles and responsibilities


(6) Is the proposed approach adequate ?
(7) Is the proposed preference of speed over comprehensiveness appropriate ?
(8) In broad terms, what would be criteria to select the key target entities for reform ?

High-level civil service


(9) Is the need properly identified ?
(10) Is the proposed approach adequate ?
(11) What mix of the Afghanistan and Tanzania model (or any other model) should be used in
DRC ?

Final
(13) Are there other questions that should be discussed ?

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THEME 4: DECENTRALIZATION

SELECTED ELEMENTS OF BACKGROUND

Context

1. The decentralization process is organized by the December 2005 Constitution which


foresees: (i) an increase in the number of provinces, from 11 to 26; (ii) the transfer of significant
responsibilities from the center to the provinces; and (iii) the transfer of significant revenues from
the center to the provinces.

2. The process carries both opportunities and risks. The potential benefits of
decentralization are obvious in terms of local governance and service delivery, in a vast country
plagued by significant capacity and logistics issues. Effectiveness and accountability are
expected to be significantly strengthened by the devolution of responsibilities to a set of local
institutions controlled by elected bodies. The decentralization process, however, is also fraught
with political, macro-economic, and fiduciary risks which need to be carefully managed.

Risks

3. Political risks are essentially three-fold: (i) the “ethnicization of power” in some of the
new provinces (especially where a specific ethnic group constitutes a majority of the population);
(ii) the exacerbation of clientelism in provincial administrations (provincial authorities have the
sole authority for recruitment and management of provincial civil servants); and (iii) the
emergence of severe, and potentially conflictual, imbalances between rich and poor provinces
(since provinces will be mostly financed through locally-generated revenues).

4. Economic and macro-economic risks derive from the ambiguities of an incomplete legal
framework and are five-fold: (i) unchecked borrowing by provinces (the Constitution allows
provinces to borrow on the internal market, but does not set a limit or an oversight mechanism);
(ii) uncontrolled taxation by the provinces (the Constitution is ambiguous on provincial
prerogatives to set taxes, cf. Art. 174, 203, and 204); (iii) confusion of responsibilities between
the Government and provincial authorities for the management of natural resources, including the
award of concessions, etc. (cf. Art. xxx); (iv) conflicts between the Government and provinces
over the type of revenues to be kept at provincial level and over the corresponding expenditure
responsibilities; and (v) emergence of a significant budgetary gap for the Government as revenues
if the transfer of revenues and expenditure responsibilities are not well synchronized.

5. Fiduciary risks are caused by weak capacity and the lack of control mechanisms at
decentralized levels, in a context where provincial authorities expect to manage about half of all
national level revenues. Indeed, while significant efforts have been made over the last years to
improve transparency and efficiency in the management of public resources in Kinshasa, no such
effort has taken place in the provinces (on a meaningful scale).

6. Capacity risks result from the lack of skilled administrators at provincial level (especially
in the newly-created provinces). The success of decentralization rests on the ability of provincial
authorities to deliver improved services to the population. This will require substantial capacity-
building efforts.

14
PROPOSED STRATEGIC APPROACH

7. The proposed strategic approach could be three-fold: (i) clarify the legal and regulatory
framework; (ii) strengthen administrative capacity at the decentralized levels in key areas; and
(iii) put in place a moratorium on large transfer or retention of fiscal resources for an interim
period.

Clarify the legal framework

8. The Compact could focus on the drafting and passing of the key laws foreseen in the
Constitution to set the modalities of decentralization, the preparation and signing of the related
implementation decrees, as well as the adoption of complementary legal texts as may be
necessary. Key legal texts covered by the Compact would include: (i) an organic law on the
composition, organization, and functioning of decentralized entities and related implementation
decrees; (ii) an organic law on the organization and functioning of provincial public service and
related implementation decrees; (iii) a law defining the nomenclature of local taxes, and the
distribution modalities between the various levels of Government and related implementation
decrees, complemented by regulatory texts on the implementation of the provision that 40 percent
of national taxes are kept at provincial level; (iv) the law presenting the first budget of the
provinces; (v) an organic law defining the organization and functioning of the inter-province
redistribution mechanism (“Caisse nationale de peréquation”).

9. The Compact could insist on the need for quality over speed. In view of the importance
of these texts, and of the likely debates they may generate in Parliament and in the opinion,
quality of both the drafting and the process is essential. In particular, the Compact could call on
donors to assist with the legal work, and encourage the relevant authorities to share these texts
and the corresponding decrees and regulations with its external partners for comments prior to
their discussion in the Council of Ministers.

Strengthen administrative capacity at decentralized level

10. The Compact could recommend to focus capacity strengthening efforts on a few
technical areas. Needs for capacity support are immense compared to the available resources.
Implementation is also likely to be challenging, especially in the newest provinces (where access
and accommodation are “difficult”). Technically, the Compact could recommend to focus on
functions related to the collection of revenues and management of public expenditure (i.e. tax
administration; budget preparation, execution, and monitoring; “chaine de la dépense”;
procurement; contract supervision).

11. The Compact could also recommend to focus initial efforts on a few geographical
areas before gradually expanding them to the entire country. This would allow both to focus
efforts and resources and to test approaches (since this is a relatively new area). The Compact
could recommend to initially focus on the provinces with the largest potential revenues (i.e. those
which include the cities of Matadi, Goma, Bukavu, and Lubumbashi). To ensure coordination
and coherence of donor efforts, the Compact could recommend pooling resources in a multi-
donor trust fund managed by one of DRC’s partners.

Put in place a moratorium on financial transfers

12. The Compact could call for the adoption and enforcement of a moratorium on large
transfer or retention of fiscal resources for an interim period. The Constitution specifies that

15
the creation of new provinces will take place within 36 months from the establishment of the
authorities emerging from the elections (i.e. late 2009). It does not specify, however, a deadline
for the actual transfer of revenues and responsibilities to the provinces. In view of the macro and
fiduciary risks associated with too hasty a decentralization process, the Government would be
asked to maintain arrangements currently in place (especially for public finance management)
until all regulatory texts have been approved and a minimal capacity exists in key provinces.
This could be a difficult political decision, but is key to avoiding a large-scale misuse of fiscal
resources.

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated ?
(2) Is the proposed strategic approach appropriate ? What should be added, removed, modified,
or nuanced ?
(3) Is the proposed strategy too ambitious ? or not ambitious enough ?

Background
(4) Are there other key elements of background that should be taken into account ?
(5) How should the risk analysis be nuanced or amended (if at all) ?
(6) What is the assessment of the relat6ive gravity of the risks ?

Legal framework
(7) In broad terms, how should the lists in para 8 be amended (if at all) ?
(8) Is the preference to quality over speed adequate ?

Capacity strengthening
(9) Is the focused approach adequate ?
(10) In broad terms, are the areas of technical focus adequately identified ?
(11) Is the proposed approach of having geographical pilots in a first phase, and a gradual
extension to the rest of the country in a second phase adequate ?
(12) In broad terms, is the list of proposed pilot areas adequate ?
(13) Are partners supportive of the proposed financing through a Trust Fund (rather than, say, a
series of twinning arrangements) ?

Moratorium
(14) Will a moratorium be possible ?

Final
(13) Are there other questions that should be discussed ?

16
THEME 5: INVESTMENT CLIMATE AND PUBLIC ENTERPRISES REFORM

SELECTED ELEMENTS OF BACKGROUND

Investment climate

1. DRC ranks last of the countries rated in the Bank’s report Doing business in 2006.
While there has been a debate on the report’s methodology, there is no doubt that the country’s
performance is very low against each of the key indicators (starting a business, dealing with
licenses, hiring and firing workers, registering property, getting credit, protecting investors,
paying taxes, trading across borders, enforcing contracts, and closing a business), whether in
terms of numbers of procedures, delays, or costs. Part of the issues are related to infrastructure
constraints (which are not discussed in the Compact), and part to the way justice is (not)
administered (which is discussed in the justice section) – still, many of the identified problems
are caused by ill-adapted regulations and their poor administrative implementation. While
companies already active in DRC and large newcomer investors may find their ways around such
issues, they constitute a strong deterrent for the entry of new medium-size operators (which are
critical for the development of non-mining activities in the medium-term).

2. The problems are compounded by the lack of a solid financial sector. Financial entities
are currently mostly limiting their activities to taking deposits and making transactions – with no
significant provision of credit. While reform will take time, it is important to launch it as early as
possible. The legal framework was revised in 2002 through laws on the Central Bank, and on
banking activities. A series of financial audits were completed in 2003, showing significant
losses at the Central Bank and viability problems for several commercial banks. Three public
banks (BCA, BCCE, and NBK) and two private banks (BCD and First Banking Corporation)
were liquidated in 2003 and 2004 respectively. For each viable bank, an agreement was reached
with BCC on restructuring plans and schedule.

3. In spite of these difficulties, the level of private investment has been relatively high,
although gradually decreasing (probably due to continued political uncertainty) This reflects the
relative wealth of the country and its attractiveness for investors – but investments to date have
been focused on: (i) extractive activities; (ii) activities with a relatively rapid return, low added
value, and based in Kinshasa.

Public enterprises

4. A number of key segments of DRC’s economy remain dominated by public enterprises.


The Government portfolio includes 58 enterprises fully owned by the State, 51 enterprises in
which the State has a minority stake, and 5 joint ventures in which the State owns a majority
stake. These enterprises cover most sectors of the economy, and in general have a very low
performance and large debts, and operate with a quasi-complete lack of transparency in an
outdated legal environment. Some of them are natural candidates for privatization (e.g., hotels,
agricultural exploitations), some for a managed withdrawal of the public sector (e.g., where there
is a natural monopoly, such as the operation of the Matadi port), and some for an integration in
the public sector (e.g., OGEDEP, the entity in charge of managing DRC’s public debt, or OFIDA,
the customs agency). A relatively large number of them will have to be liquidated.

17
PROPOSED STRATEGIC APPROACH

Enhance the investment climate

5. The Compact’s approach could be three-fold: improve the regulatory framework,


follow up on its implementation, and consolidate the financial sector reform. The underlying
assumptions are: (i) the key issues in DRC have to do not only with the regulatory framework,
but also its implementation; (ii) improvements on the ground will take time, in an environment of
political fluidity, weak administrative capacity, and low public service salaries; (iii) the resolution
of the internal debt issue and the negotiations with London Club creditors (which are both
underway) may create a short-term boost of investments in the coming year or two; and (iv)
DRC’s economic potential is such that investors may be interested in the country even prior to
major changes – and improvements in the investment climate are hence more important for
medium-term than for short-term growth. It is also clear that regulatory reforms will only yield
their full results if large-scale infrastructure programs are implemented and the judiciary
strengthened.

6. With regard to improving the regulatory framework, the Compact could focus on the
adoption of OHADA and the passing of complementary regulations. To revamp the legal
business framework, the Compact would recommend to adopt the regional code as a whole (in
the form of an international treaty) rather than to draft and to pass through Parliament a series of
laws. A draft law on OHADA has already been presented to Parliament (but not voted). The
Government and its external partners could focus on ensuring it is passed, and that all relevant
implementation decrees are rapidly published.

7. With regard to following up on the actual implementation of business environment


reforms, the Compact could require the business organization, FEC, to produce an annual
report on the obstacles to doing business and changes over time. In a fluid environment where
regulations can be rapidly introduced, modified, or withdrawn by a variety of administrative
entities, and with a number of differences across regions and sectors, making sure that the new
regulations are effectively implemented and enforced will be extremely difficult for both the
Government and its external partners. In such a context, it may be most effective to ask business
people for their views and experiences, possibly in the form of an annual synthetic report by the
FEC. Such reports should include a detailed description of regulatory and implementation
obstacles to doing business (including those pertaining to administrative and tax administration
issues), an analysis of progress realized during the previous year in improving the business
environment, and a set of proposed priority measures for the following year. These reports would
then be discussed between the Government, external partners, private sector, and civil society as
may be appropriate, including possibly through annual investors forums, to identify a detailed
core set of issues on which to focus efforts in the coming year (which may or may not fully
include those proposed by FEC), which would be included in the Compact.

8. With regard to the financial sector, the Compact could limit its recommendation in this
area to the implementation of the bank’s restructuring plans and the strengthening of
supervision capacities. The restructuring plans include specific milestones and deadlines which
could be closely followed up (possibly within the context of the IMF program). The capacity
effort could be managed through the adoption and effective implementation of an action plan to
that effect (to be prepared by the Central Bank of Congo, possibly with external support).

18
Prepare for the reform of public enterprises

9. The Compact’s approach in this area could be two-fold: manage a medium-term public
enterprises reform process while taking some immediate measures for key enterprises. The
underlying assumptions are: (i) the current environment in DRC is not propitious to a successful
privatization process in the short-term, but the situation may be significantly better in a few years
(as stability gets consolidated); (ii) the reform process needs to be well thought through since
public enterprises reform is likely to be both one of the socially most difficult set of reforms (it
will affect tens of thousands of people, who are spread all over the country and are often in a
position to cause significant havoc if they wish to do so), and one of the politically most difficult
reforms as it will affect a number of powerful constituency; (iii) attention also needs to be paid to
the impact on social services delivery (as public enterprises are the main provider of such services
in some areas – and an orderly transfer to relevant and capable entities will be needed); and (iv) in
spite of all difficulties, action is urgently needed in some areas where public enterprises de facto
hamper economic recovery and development.

10. With regard to the reform process, the Compact could focus on strengthening efforts
which are currently underway. Recommended actions would include in particular: (i) the rapid
adoption by Parliament of laws on State divestiture (to pave the way for public-private
partnerships), on corporate governance of public enterprises, and on the transformation of public
enterprises; (ii) the rapid setting up of qualified boards, management teams, and audit committees
in all public enterprises (which could be certified through an independent review); (iii) the rapid
adoption and enforcement of strict limits (to be agreed upon with the IMF) on financial transfers
to public enterprises during the reform period; (iv) the preparation by COPIREP, the discussion
with all key stakeholders, and the adoption of a comprehensive action plan, which would identify
for each public enterprise an eventual strategy (privatization, concession, integration in the public
sector, or liquidation) and a corresponding set of milestones and deadlines, and would propose a
comprehensive approach to deal with the transfer of social services and the necessary
retrenchments; (v) the implementation of this plan (progress could be assessed through an
independent review); and (vi) the completion and publication of annual audits of all public
enterprises (and implementation of the corresponding recommendations).

11. With regard to immediate measures for some of the key enterprises, the Compact could
recommend to focus on those entities which could hamper the country’s recovery process if not
rapidly dealt with. The focus would be on putting in place some transition mechanisms to limit
the negative impact of these companies while the public enterprises reform is underway, but the
target enterprises would remain subject to the same overall reform process as other public
enterprises. In view of the technical and political difficulties associated with this approach, the
Compact could recommend to focus efforts on a very limited number of enterprises, and to design
ad hoc transition arrangements for each of them. As a minimum, these enterprises could include:
Gécamines (consolidation of the management contract, implementation of the business plan
prepared by the consultant); SNCC (management contract or lease for the railways part of the
company to effectively restore service in Katanga, towards Kasai and Maniema), ONATRA
(management contract or lease for the port of Matadi, to remove one of the key obstacles to
international trade), and SNEL (improvements of corporate governance and internal controls).
Possible other candidates could include: non-railways activities of SNCC, non-port activities of
ONATRA, RVA, Régidéso, Office des Mines de Kilo-moto, and MIBA.

19
KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated ?
(2) Is the proposed strategic approach appropriate ? What should be added, removed, modified,
or nuanced ?
(3) Is the proposed strategy too ambitious ? or not ambitious enough ?

Background
(4) Are there other key elements of background that should be taken into account ?

Investment climate
(5) Is the proposed three-fold strategy appropriate ?
(6) Is there a consensus that this is an issue which may be more critical for medium-term than for
short-term growth prospects ?
(7) With regard to regulatory reforms, is the proposed focus on adoption of OHADA adequate
and sufficient in the period covered by the Compact (and in view of other priorities) ?
(8) Should this be accompanied by more explicit efforts towards tax reform ?
(9) With regard to implementation, is the proposed approach of cooperation with FEC and regular
reporting adequate ?
(10) With regard to financial sector reform, is the proposed focus adequate and sufficient ?
Should it be accompanied by other measures aimed at jump-starting credit activities ?

Public enterprises reform


(11) Is the proposed two-fold approach adequate ?
(12) With regard to the overall reform, is the proposed two-step approach (reforming public
enterprises before privatizing) adequate ?
(13) With regard to the overall reform, have key activities been adequately identified ?
(14) With regard to dealing with key enterprises, how extensive should be the list of targets ?
(15) Are the proposed list of target enterprises and (in broad terms) the directions for reform
adequate ? How should this be amended ?

Final
(16) Are there other questions that should be discussed ?

20
THEME 6: NATURAL RESOURCES MANAGEMENT

BACKGROUND ON THE EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI)

1. DRC has formally joined the EITI which provides a framework for reform of natural
resources management in the country. During the EITI London Conference in March 2005,
Jean Pierre Bemba, Vice President in charge of Economic and Financial Affairs, expressed his
country’s intention to adhere to the EITI. In August 2005, an Interim EITI Committee was
created with the objective of initiating discussions towards creating a permanent commission,
drafting a work plan and agreeing terms of reference to implement the EITI. From August 27 to
September 1, 2005, an EITI workshop was held in Kinshasa with the participation of
representatives from Government, industry and civil society. On November 18, 2005, President
Kabila signed Decree No. 05/160 establishing a multi-stakeholder National EITI Committee. The
National Committee is in charge of assuring the implementation process complies with EITI
criteria. For specific tasks, it receives the support of Steering and Technical subcommittees, as
well as of a Permanent Secretariat. Further information on the EITI Committee’s functions and
membership are contained in the Decree.

2. For background, the EITI criteria are as follows: (i) regular publication of all material
oil, gas, mining, and timber payments by companies to governments (“payments”) and all
material revenues received by governments from oil, gas, mining, and timber companies
(“revenues”) to a wide audience in a publicly accessible, comprehensive and comprehensible
manner; (ii) where such audits do not already exist, payments and revenues are the subject of a
credible, independent audit, applying international auditing standards; (iii) payments and
revenues are reconciled by a credible, independent administrator, applying international auditing
standards and with publication of the administrator’s opinion regarding that reconciliation
including discrepancies, should any be identified (iv) this approach is extended to all companies
including state-owned enterprises; (v) civil society is actively engaged as a participant in the
design, monitoring and evaluation of this process and contributes towards public debate; and (vi)
a public, financially sustainable work plan for all the above is developed by the host government,
with assistance from the international financial institutions where required, including measurable
targets, a timetable for implementation, and an assessment of potential capacity constraints.

PROPOSED STRATEGIC APPROACH

3. The Compact could underline that priority reforms in the natural resources sectors
revolve around issues of transparency, fiscal revenues, and sustainability (environmental and
social). A large part of the transparency and fiscal agenda is discussed above. Although these
points are not repeated in this section, they remain at the core of any meaningful agenda in the
mining and forestry sectors in DRC. In addition to the transparency and revenues measures
already discussed, the Compact could propose a set of reforms to implement the commitments
made by the Government in the EITI context, ensure sustainable management of the forestry
sector, and tackle some of the key issues in the mining sector.

EITI

5. With regard to EITI, the Compact could encourage the authorities to develop an EITI
action plan and implement it, as per the initiative’s normal process. This would require rapidly
making the EITI committee operational and working closely with the EITI Secretariat. While a

21
more concrete program of action could be desirable, it is important not to by-pass the EITI
process (in particular the involvement of stakeholders). The Government would be encouraged
(and assisted) to prepare an action plan in line with the EITI principles and criteria, key
recommendations of which would then be incorporated in the Compact.

Forestry

6. In the forestry sector, the Compact could propose a four-fold agenda: (i) continued
implementation of the moratorium on new concessions; (ii) consolidation of the legal framework;
(iii) review and confirmation, abrogation, or transformation of existing concessions; and (iv)
supervision and enforcement. This agenda is consistent with the agreements already reached
within the forestry community (including donors and most, but not all, NGOs) through several
meetings in Kinshasa

7. With regard to the moratorium, the Compact could require that it be effectively
maintained untill three conditions are met, as the Government has already committed to through
a Presidential decree. The three conditions are: (i) completion of the legal review of logging
concessions; (ii) adoption of transparent auction procedures for future allocations; and (iii)
adoption, through an adequate participatory process, of a three-year plan for new concessions. No
exception should be allowed under the moratorium and the three-year plan should be based on a
clear technical rationale.

8. With regard to the consolidation of the legal framework, the Compact could propose to
focus on the adoption of both the key implementation decrees of the forestry code and the law
on nature conservation. Key decrees include those pertaining to: (i) contents of concession
contracts (in particular as regard environmentally sustainable exploitation, consultations with
local communities), and related control mechanisms; and (ii) modalities for attribution of forestry
concessions (which should be preceded by local consultations, and be competitive). Other
implementation decrees, while important for the sector, may not have the type of over-arching
impact that would qualify for inclusion in the Compact. The key decrees should be prepared
through a consultative process involving all key stakeholders, and provide simple, clear, and
easily implementable regulations. The law on nature conservation is being drafted and should be
submitted to Parliament: it would provide for a framework to preserve DRC’s unique
biodiversity.

9. With regard to the existing concessions, the Compact could focus on the completion of
the ongoing legal review and the implementation of its recommendations. The review should
proceed and reviewers have adequate access to all required information. In accordance with the
October 2005 presidential decree, completion of the legal review requires that invalid concessions
be cancelled, that valid concessions be transformed into improved concessions (aimed at ensuring
environmentally and socially sustainable forest management) and that final results be published,
all within one year. Progress reports should be published as provided for by the decree, and
discrepancies noted by the independent observer should be corrected.

10. With regard to supervision, the Compact could recommend the strengthening of the
agencies in charge of forest and biodiversity, as well as the engagement of third-party, civil
society monitoring of key reforms.As in other Central African countries, a third-party observer
would be mandated to assist the forest department in controls on the ground, to engage with local
NGOs and communities, and to publish annual reports on controls, findings and penalties. The
Compact could also recommend that civil society groups be mandated to monitor: the
implementation of social responsibility contracts by companies, the use of transferred revenues

22
by local entities, the development of community-forests, and other sector reforms aimed at
improving rural livelihoods, and to publish annual reports.

Mining

11. In the mining sector, the Compact could propose a three-fold agenda: (i) reform of the
public enterprises active in the sector; (ii) review and clarification of mining rights; and (iii)
specific actions on artisanal mining.

12. The reform of public enterprises is discussed above. With regard to Gécamines, the
Compact could recommend to rapidly approve and decisively implement the business plan which
is under preparation by the consultant who is currently managing the company. This would
assume that both the Government and its partners have first had an opportunity to ensure the
restructuring plan is appropriate. The objective of the plan would be not to rebuild Gécamines as
a large industrial structure, but to transform it into a holding managing mining rights. It would
also propose a realistic solution for dealing with the large debt that has been accumulated over the
years.

13. With regard to mining rights, the Compact could propose to focus on clarifying all
mining rights through an adequate process within a relatively short timeframe. As this may
include confronting powerful constituencies, speed should be of the essence. Clarification would
require among other things: (i) implementing the recommendations of the ongoing review of
partnerships entered into by Gécamines; (ii) strengthening the mining cadastre institution and
completion of the cadastre; (iii) identifying conflicting rights, establishing an independent
arbitration instance, and proceeding with the actual arbitration; and (iv) developing adequate and
transparent procedures for award of new mining rights (for both exploration or production). As
discussed above, the Compact could also require publication of confirmed mining titles.

14. An alternative proposal would be to take drastic measures to denounce or terminate all
or some of the partnership arrangements entered into by Gécamines (and possibly other public
mining companies). Available information suggests that these arrangements are both broadly
valid from a legal perspective and very unfavorable to the Congolese party – and cover a very
significant part of Gécamines mines and facilities. Denouncing or terminating them would raise
significant legal and practical issues (in addition to the outcry that can be expected from the
private partners). But keeping them as is (or marginally adjusting them) would imply that the
flow of revenues from mining activities to the budget would be much more limited than what it
could otherwise be.

15. With regard to artisanal mining, the Compact could recommend to develop an action
plan and implement it. While a more concrete program of action would be desirable,
information available to date is too limited to define a meaningful strategy. The Government
would be encouraged (and assisted) to prepare an action plan, key recommendations of which
would then be incorporated in the Compact. The action plan would essentially aim to reduce the
extent of illegal exploitation of natural resources by armed groups and organized criminal
networks, and to the extent possible to increase Government revenues from this sector.

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated ?

23
(2) Is the proposed strategic approach appropriate ? What should be added, removed, modified,
or nuanced ?
(3) Is the proposed strategy too ambitious ? or not ambitious enough ?

Forestry
(4) Is the proposed strategy appropriate ?

Mining
(5) Is the proposed strategy appropriate ?
(6) Is the proposed approach for clarifying mining rights appropriate ?
(7) Is the proposed recommendation to move quickly on mining rights appropriate ?
(8) How could the Government deal with valid but unfavorable contracts with private investors
(e.g., some of the Gécamines partnerships) ? Should radical solutions (à la Liberia) be considered
or should the situation be taken as a given with only marginal adjustments if any ?
(9) Is there more that could already be done for artisanal mining ?

Final
(10) Are there other questions that should be discussed ?

24
THEME 7: JUSTICE

1. Well- functioning justice systems are a key component of the Rule of Law. That is why
reform of the justice system has become an important area for the process of economic reform
and development cooperation.

SELECTED ELEMENTS OF BACKGROUND

2. Dysfunction areas in DRC justice sector, include: (i) organisational and institutional
weakness within the minister for justice (lack of human resources and funding); (ii) obsolete
justice framework (procedures and processes); (iii) failing judiciary and penitentiary
infrastructures; (iv) lack of equipment and means of communication; (v) weakness in the training
and updating of skills for people working in the area; (vi) limited access to services (cost of using
the system and cover in each jurisdiction); (vii) overcrowding, serious hygiene and security issues
in prisons; (viii) impunity and corruption which result in : an increase in popular vindications and
private vendettas/revenges; (ix) lack of coordination between different stakeholders (police,
prison officers, bailiffs, lawyers, judges etc.), and (x) lack of confidence by the general
population and investors with regard to the justice system

3. Significant progress has been made over the last years. In October 2003 an
organisational audit of the justice system in the DRC began, supported by the European
Commission and other partners (Belgium, France, the UK, the United Nations mission in DRC,
the High commission for human rights and UNDP). In November 2004 the Congolese
government agreed to put in place a structured programme in the area of justice. This programme
aims to contribute to the setting up of a judiciary system that would be capable of supporting a
rights based state and effectively fight against impunity. The minister for Justice in DRC and
development partners officially created the justice joint committee (”Comité mixte de suivi du
programme cadre de la justice”). Subsequently, a number of donors are presently programming
their intervention in this sector.

PROPOSED STRATEGIC APPROACH

4. The Compact could focus on consolidating past efforts, and make the justice sector
reform a priority issue from 2007. Justice sector should receive increased funding, both in the
national budget (part of its budget dedicated to justice) and from the donor contributions. The
key conditions are: (i) elaboration and adoption of a national policy of the justice sector including
an outline of a work plan in this area over the next ten years; (ii) finalisation of documents
relating to the status of magistrates and the High Council of Magistrates (HCM); (iii)
reinforcement of the HCM (according to the new Constitution the HCM becomes a management
arm of judiciary power); (iv) also according to the new Constitution, development and
implementation of new jurisdictions (the Court of Appeal, Government Council, Constitutional
Council, …); and (v) development of human resources through training of personnel, including
judges, members of the bar and public servants in order to promote change within the existing
legal system.

5. The Compact could recommend focusing such efforts on enhancing the efficiency and
quality of the court system. A model for case management could be developed and implemented.
A case management is a series of administrative procedures and tasks (such as creating a file,
establishing a calendar for court hearings, communicating with witnesses and police, and

25
transferring files to other courts) performed in order to ensure that cases proceed in an effective
way through the court system from their initiation to a final disposition.

6. The Compact could recommend establishing / introducing a legal information system


and promote better use of information in support of strategic management. The establishment
of base-line data and the development of an on-going system to collect and distribute law-related
statistics will provide policy makers and program managers a reliable source of information. The
information available will support better planning, adequate human resources management, the
establishment of performance standards, as well as monitoring of the system as a whole.

7. In parallel, the Compact could include some provisions on salaries increases. The
objective of such provisions would be to ensure that the benefits of a case management and a
transparent payroll system which reflects actual numbers of staff employed in the institution are
adequately transferred to increase justice wages. In order to do so, a census of judiciary staff
completing the ongoing civil service one should be undertaken.

8. Regarding modernisation of the legal system, the Compact could recommend


reinforcing the Commission permanente de Réforme du Droit Congolais (CPRDC). Law
reform initiatives are currently promoted from the ministry of Justice. At various points,
discussion has taken place concerning the need for CPRDC, the mandate of which could be to
investigate areas of law in need of reform and to propose structural changes and new legislation
where required.

9. The Compact could promote greater fairness and adaptability in the legal system with
respect to prevention, settlement, sentencing and rehabilitation. The objective of any legal and
judicial reform program is to increase both efficiency and fairness of the justice system. Different
actions will include: (i) increase access to legal services and advice; (ii) enhance capacity to deal
with youth and gender issues by selective law revision and training; (iii) mobilize community-
based counselling capabilities; (iv) explore and introduce alternative justice mechanisms and
practices; (v) encourage public information; (vi) establish coordination structures and areas of
mutual dialogue between various stakeholders (lawyers, magistrates, bailiffs, prison officers etc.).

10. The reinforcement of the prison system (rehabilitation and maintenance of the prison
buildings; prison staff training and wages) should go hand in hand with the reinforcement of
the judiciary system. Malnutrition, dramatic hygiene condition and overcrowding characterise the
current situation. A more functional justice risks dramatizing this situation, if this is not addressed
simultaneously. Actions could be targeted at: (i) combating illegal arrest and detention by
strengthening control over respect of procedures instructing detention and arrest and control of
detention centres by public officers, providing for an advocate, identifying and closing all illegal
detention centres; (ii) diminishing the number of preventive detention and reducing its duration,
through judge, magistrate but also prison staff training and capacity building.

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the problems correctly articulated?
(2) Is the proposed strategic approach appropriate? What should be added, removed, modified, or
nuanced?
(3) Is the proposed strategy too ambitious? or not ambitious enough?

Justice sector become a priority sector

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(4) Is the proposed approach adequate?
(5) Are the key conditions properly identified?

Case management and legal information system


(6) Is the proposed approach adequate?
(7) Is the cost of acquiring, maintaining and using high technology systems crucial to ensure the
success?

Increase salaries
(6) Is the proposed approach adequate?
(7) Should the Compact include guidance on the strategy to increase salaries?

Legal framework
(8) Is the focus approach adequate?

Efficiency and fairness justice system


(9) Is the proposed approach adequate?
(10) With regard to the overall reform, is the proposed list of actions adequate?

Final
(11) Are there other questions that should be discussed?

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THEME 8: SECURITY SECTOR REFORM

1. Including governance issues within the general framework of security sector reform must
be carefully considered, especially in relation to the police and army, in a post conflict
environment. Bringing “reform” too drastically and too quickly could reinforce resistance to
change. However, restoration of Rule of Law can only be achieved through reform and the
existence of a well operating army and functioning police services. Security sector reform should
be included as one of the key recommendations in the operational plan to be proposed by the
Consultative group, especially given the particular context and history in DRC where security
forces have been involved in numerous pillages and corruption at every level which has led to a
total lack of confidence of local populations in the very people who are supposed to protect them.
Furthermore, security sector reform – as defined by the OECD-DAC - should be proposed as one
of the PRSP objectives. In this way ownership of the sector is assured at the highest level.

2. Coordination between key actors is essential and a debate needs to open on who is best
placed to take the lead in this sector, taking note of different institutional capacity to work in this
particular area (several institutions have already begun reflections on security sector reform
proposals for DRC and these need to be examined so that a realistic time frame can be proposed
to the government, post transition). Given the broad nature of SSR, ranging from military reform
to parliamentary oversight, it is necessary that different institutional actors will lead different
aspects of the reform agenda. The SSR programme of action can be outlined in the PRSP, while
the overall coordination of different ‘SSR work streams’ can be undertaken by technical
committees (Comité de Justice, Comité de Police etc), that would answer periodically to the
Consultative Group.

SELECTED ELEMENTS OF BACKGROUND

3. Particularity of the sector: Following the Sun City Agreement army and police forces of
all the former belligerents had to be integrated within National institutions in order to ensure the
integrity of the State and its border and to improve the security of inhabitants and goods. An
important DDR programme has been set up for the army, while in the police services only some
specific units with national mandates have been created and integrated, leaving the territorial
police within their community, but allocating the major management positions too the different
political components.

4. Progress has been made with the DDR programme as 6 integrated brigades have now
been deployed on the East of the country, participating with the MONUC forces to the defence of
the territory with relative success. Potentially 18 integrated brigades should be deployed before
elections take place, however the deployment of a total number of twelve brigades before
elections (including the existing 6) is a more realistic target. While the integrated brigades will
help ensure a certain level of security in the initial period following the presidential elections,
they will require support from MONUC, given their basic level of training, equipment and
relatively weak chain of command. In addition to delays in deployment due in large part to a lack
of political will, it is highly unlikely that certain groups (the presidential guard for example) will
be integrated which creates a potential risk. Demobilisation has reached 68 000 (approx) and
most (58 000) are involved in reinsertion projects. However, especially in Ituri, reintegration is
difficult and can be a source of permanent insecurity as ex combatants opt to re-enrol in an armed
group or attempt to join the police force without any proper training. (Latest reports show that up
to 25 percent re-enrol in armed groups in the Ituri region)

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5. A programme aiming at improving the “chain of payment” of the new integrated brigades
is currently under implementation by EUSEC. But it is facing numerous resistance and
difficulties. The programme aims to separate the chain of command from the chain of payment.
In order to achieve this, the programme must first carry out a census of the military population, in
order to establish who is in and who is not. This, though faced with numerous logistical
difficulties, is at least assuring that soldiers receive their monthly salary in a realistic timeframe.
Recently, the Minister of Defence announced an increase in salary to $50 per month per soldier
which will also go a long way (if implemented) towards improving the otherwise precarious
situation that many soldiers find themselves in.

6. Efforts of the International Community have been focussing on the election and funds
have been made available to improve the operational capacity of the police who are in charge of
the protection and the securing of the electoral process. In order to secure the election process,
35,000 police have received some level of training, while MONUC hope to provide training for a
further 15,000 before elections. Beyond this basic training, the police can count on two main
integrated units, (i) An Integrated Police Unit “Unité de Police Intégré” whose mandate is to
protect the transitional Institutions, (ii) a Rapid Intervention Police unit “Police d’Intervention
Rapide” whose mandate is national and can therefore intervene to maintain order throughout the
entire territory.

7. Beyond this short-term training component, which is the immediate priority, a Mixed
Group, composed of both Congolese and internationals, has been set up by the Minister of the
Interior to prepare the legal framework and provide elements for the necessary longer-term
reform of the police. The final report to be produced by this group in July 2006 will pin-point
necessary reforms including the need to further developed a qualitative police census, a unified
police curricula and the development of core police legislation, human resource management etc.

PROPOSED STRATEGIC APPROACH

8. The Compact should encourage the efforts and attention already accorded to this
sector in order to attain a minimum number of results required, while at the same time improving
and proposing a reform programme. The DDR programme has allowed a very basic “brassage” or
mixing of different factions. Integrated brigaded passed through a process of 45 days training but
once deployed lack basic equipment as well as food, water, clothes etc. that are required to have a
fully functioning army. The chain of command within the new integrated brigades is also poor
and requires strengthening. If we are to ensure that the new integrated army is to effectively
ensure internal security within the country efforts need to be taken to address these problems. A
certain amount of confidence building is also required to reassure local populations that the army
is there to protect them and not, as currently is the case in some parts of the country, just another
menace to their everyday struggle to survive. Efforts made in ensuring the effective payment of
their salary are a visible and concrete step before tackling the long term and costly reform of the
army. In looking towards the post election environment, the objectives for the military sector are
twofold. Firstly, the capacity of the military sector must be developed, so that the DRC has an
army that can protect its citizens and borders. Secondly, the accountability and transparency of
the military sector must increasingly be brought under civilian control. Donors can play an
important role in both these objectives.

9. Regarding the first objective of building the military sector, key projects can be
prioritised including: (i) he Chain of Payments and human resources; (ii) Strengthening the Chain
of Command (through training); (iii) Support for the integrated brigades in the form of flanking
measures

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10. Regarding the second objective of building military oversight, key actions can be
pinpointed in a number of areas, including: (i)Technical support for the military committee in
parliament; (ii) Technical support for the Ministry of Defence (Etat Major, SMI, CCOC); (iii)
Adoption of key laws in order to regulate the army (laws affecting the supreme defence council,
military expenditure, military organisation and function); (iv) Regulate the military courts in line
with international standards

10. Ex-combatants that have chosen reintegration into communities as part of the DDR
process must also be prioritised in the post-election period. As part of the DDR process the
demobilised will stop receiving cash payments after twelve months in the system and will only
receive a minimal three or four months of practical work training as part of the programme.
Therefore, up to a potential of 90,000 ex-combatants will require longer term support when the
initial MDRP program comes to an end. In a volatile country such as the DRC with such a large
number of demobilised, it may be worth undertaking an evaluation of how to support the
demobilised ‘within their communities’ in the longer term subsequent to the MDRP programme.
This type of support could well prevent future instability, especially in the East. One way of
supporting the demobilised ex-combatants in the future is through budgetary support for local
municipalities on condition that the demobilised living in municipalities also benefit from budget
allocation in addition to the local community at large.

11. In practical terms the police sector can benefit from activities in a number of sectors as
outlined in the upcoming report of the Cellule de Réflexion. Priorities can be sub-divided as
follows: (i) Police census (which will enable proper budgeting of salaries and effective payment);
(ii) Strengthening police accountability and democratic oversight; (iii) Enhance strategic planning
and human capacity training so as to improve service delivery; (iv) Focus on the “corporate
department” (human resources, budget, logistics, procurement); (v) Develop policing with strong
links to communities (ethos shift from service of power to service to citizens); (vi) Improve
police training and the reform of the police education system; (vii) Reviewing police structure,
management and practice; (viii) Develop an integrated approach with other parts of the security
system.

12. Based on the above, the Conpact could focus on a four-fold process: (i) carry out an
army and police service census, quantitatively and qualitatively; (ii) reflect the results of this
census in the payroll (which has already began); (iii) support the corporate services in order to
improve the internal management of those two institutions; (iv) within the reform of the two
institutions adopt the necessary rules and regulation allowing for new and transparent recruitment
mechanisms, as well as establish those unfit to continue their service; (v) support and develop the
committee system in parliament so as to ensure proper democratic oversight over the police and
military.

Clarify roles and responsibilities

13. The clarification of roles and responsibilities will require both technical work and
political arbitrations. This will need to be carried out within each of the two institutions and also
between themselves. Within the army there are two institutions, the Etat Major and the Structure
for Military Integration. On top of this there are elements such as the presidential guard who are
not under and structured military control. Roles and responsibilities need to be clearly defined in
a post-transition period which could be proposed through a white paper on defense.

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14. The Police have already worked on some recommendations in this regard, one of which
includes the centralization of all the police services within one institution- the National Police.
The compact would require a clarification of mandates, the design of an adequate organizational
structure, and its adoption by a law following a parliamentary debate. This would also include,
where appropriate, a clarification of the relationship between the central and decentralized levels
of Government, as well as between the Government and non-Government service providers,
especially in relation to private security companies.

15. The Compact could recommend to focus such efforts on a targeted area, in order to
avoid dispersing efforts. For example a proposal could be put forward to focus on the security of
a particular production centre or area of natural resources where currently too many security
providers are present without clear mandates and which are in turn contributing to the insecurity
and the spoiling of resources. The Compact should aim at defining a legal framework taking into
consideration the integrity of the territory, the security of the population and the goods as well as
security of companies or production centre.

16. The Compact could propose a methodology for that effort. The difficulty will be on the
acceptance of the different actors to renounce to their current power. This will have to be in
accordance with the Constitutional framework where it is required to have two organic laws for
the police and the army. Before the establishment of the parliamentary assembly, time should
continue to be used in preparing, with external advice, re-focused mandate, corresponding
organization structure and key documents (decrees, key processes and procedures, contractual
arrangements with non-Government service providers, etc.). This should be done for each
security sub- sectors, i.e. army, police, justice and penitentiary, and then consolidated at the level
of the overall security

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated?
(2) Is the proposed strategic approach appropriate? What should be added, removed, modified, or
nuanced?
(3) Is the proposed strategy too ambitious? or not ambitious enough ?

(4) Are there other questions that should be discussed?

31
THEME 9: POST-CIAT FOLLOW-UP ARRANGEMENTS

SELECTED ELEMENTS OF BACKGROUND

1. The Comité international d’Accompagnement de la Transition will cease to exist with


the election of a new government, and the end of the Transition. The new legitimate authorities
are likely to claim for their sovereignty, but they will be quickly confronted with an upsurge of
claims and demands coming from a population eager to see its life conditions improve rapidly. It
is probable indeed that the new government calls upon the international Community to help it
face the first difficulties in terms of humanitarian and cooperation needs. An effective
mechanism for international assistance coordination and political dialogue with the new
authorities will therefore need to be put in place.

2. The CIAT has shown its limitations. The CIAT is composed of the 5 permanent
members of the Security Council of the United Nations (China, United States, France, United
Kindgom, Russia), together with South Africa, Angola, Belgium, Canada, Gabon, the Zambia,
the African Union (the Commission and the Presidency), the European Union (Commission and
presidency) and the MONUC. Its tasks were essentially of political nature with very limited
impact on overall coordination of exeternal support.

3. Additional local policy coordination mechanism. Other key issues, for instance security
sector reform, justice, poverty reduction, regional integration, have been also tackled in other
fora, such as the contact group on SSR, the electoral commission, the joint commissions on SSR,
the Comité Mixte de la Justice, the consultative group, the international conference on the Great
Lakes or the Tripartite initiative (US). These fora have different mandates, objectives and
participants, and sometimes overlap. In some of them, moreover, the government was invited to
participate, while in others it was completely excluded. With new legitimate authorities, certain
of these discussion groups will have no raison d’être as such (such as the election Commission),
or will need to be reshuffled.

PROPOSED STRATEGIC APPROACH

Coordination

4. The mechanism should be established with the double objective of (i) associating the
Congolese authorities by giving them responsibilities in their management, and (ii) offering
some guarantees to the international community that its efforts, likely to be increased, will not
be vain and will be efficiently used.

5. There is the need for an integrated donor support approach among the international
community. The international community should be able to propose to the newly elected
authorities a new ‘post-CIAT’ mechanism which would ensure better donor coordination and
policy and political dialogue, inter alia on the relevant issues of a DRC programme or compact
for Governance.

6. This mechanism should also provide for a reliable monitoring on the use of external
funding. It should enable cooperation based on a joint analysis of the difficulties and needs of the
country and a predictable source of funding.

32
7. In the interest of developing local ownership and respecting the new DRC democratically
elected government, it is necessary that the post-CIAT arrangement is co-chaired by the DRC. If
the DRC authorities are not represented at the highest level in the future arrangement, the
international community run the risk of returning to the latter days of the CIAT. The
international community must also show that it is serious about local ownership and respecting
the full sovereignty of the DRC.

8. Specifically there are two levels that require coordination, namely;

• Donor Coordination

9. In the case of donor coordination, a revised ‘special’ PRSP (including SSR and justice)
could be proposed as the basis for donor coordination. Based on the PRSP and a DRC
programme for governance (developed by the DRC authorities and coherent with the PRSP),
donors could meet regularly in an enlarged consultative group forum. The consultative group
would be chaired by the DRC Prime Minister and would cover all issues outlined in the DRC
programme for governnace and in the PRSP.

10. Moreover, the Consultative Group could reserve the right to create technical working
groups in order to focus attention on certain aspects of the post-transition agenda as well as a
permanent secretariat to day to day follow up. It is likley that such thematic groups would need to
be created in areas such as SSR, Justice, Natural Resources etc. Such technical groups would be
chaired by the appropriate DRC Minister and include representatives from the Consultative
Group, together with relevant technical bodies (EUSEC for example in the case of an SSR
working group).

11. The basis of success for this proposal demands full participation by the DRC authorities.
Should such participation not be forthcoming, certain procedural mechanisms should be set in
place to entice the DRC authorities to fully participate. Uniform donor conditionality may be
required in this regard.

• Political coordination between donors and the DRC authorities

12. Regarding political coordination between the DRC authorities and the donor community,
evidently much of the coordination within the enlarged Consultative Group will be of a
political/policy nature. However political issues which are too sensitive for the enlarged
Consultative group could be dealt at a general level within the UN Security Council and UN
resolutions as a political framework for pursuing UN targets.

13. For its part the European Union, as in other ACP countries, will utilise article 8 of the
Cotonou Agreement in order to enhance structured political dialogue with the DRC elected
government. This dialogue will be chaired by the European Commission and EU presidency with
the association of the other relevant actors and will cover all aspects relating to the Cotonou
Agreement, including human rights, governance, conflict prevention, rule of law.

KEY QUESTIONS PROPOSED FOR DISCUSSION

Overall
(1) Are the issues properly articulated?
(2) Is the proposed approach of having a two-level coordination mechanism appropriate /
realistic? Will some donors insist on a more traditional Post-CIAT structure?

33
(3) What should be added, removed, modified, or nuanced?
(4) Is the proposed strategy too ambitious? or not ambitious enough ?
(5) Is the suggestion to have a particular PRSP adequate and feasible?
(6) Is it feasible to ensure that the EU could co-chair with other relevant actors the political
dialogue with the new elected GoDRC;
(7) Is it feasible for the DRC authorities to create its own realistic programme for governance
(based on joint analysis) that can be coherent with the PRSP?
(8) What other considerations need to be taken into account?
(9) Are there other questions / aspects that should be discussed?

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