Governance roadblock to economic and human development
KINSHASA, DRC / WASHINGTON D.C., APRIL 12, 2012 – In its first detailed economic analysis in twenty-five years, the World Bank projects the economy of The Democratic Republic of Congo (DRC) is set to grow at up to 7 percent annually for the next two years.
However, commodities remain important, both directly and indirectly as these sectors finance construction, trade and other activities. Over the medium term sustained growth and job creation will depend on the ability of the government to develop infrastructure, improve the business climate, boost the private sector and spur innovation.
Maintaining economic stability, the Bank says, is the best opportunity the country has had in more than a quarter of a century to return the country to economic prosperity and to help the central African nation to “turn the page in the history of the country’s economic and human development.”
The Bank’s new Country Economic Memorandum (CEM) titled Resilience of an African Giant: Boosting Growth and Development in the Democratic Republic of Congo released in Kinshasa today says enduring economic growth since the end of the war has yet to restore the Democratic Republic of Congo (DRC) to peace and prosperity. As a percentage of growth (GDP), wholesale and retail (40%), agriculture (24%), mining (12%), construction (11%), and transport and communications (10%) have led the economic recovery. It appears that economic growth, notably in the agricultural sector,, was on average over 7 percent during 2007-10, more than double the officially reported three percent.
World Bank economists note that after its long running civil war (1994-2002), economic growth averaged some 5.8 percent a year during 2002-10. By 2007, after five years of growth, the economy had returned to prewar (1994) levels, but the population was by then almost 50 percent larger than in 1994.
On behalf of the Government, Mr. Olivier Kamitatu Etsu, Minister of Planning, Democratic Republic of Congo, said the detailed analysis of administrative, political, and economic governance over the past 20 years provides a clearer understanding of the context and the fragile situations faced by the DRC.
“As the Minister of Planning and the former President of the National Assembly, I found this report to be particularly interesting as it calls for a hard look at the way matters of State are broached. It urges us to abandon egotism, to repudiate self interest in favor of the search for the common good, and to cultivate a sense of nationhood,” said Mr. Kamitatu.
Sustained economic growth key to long-term economic prospects
The World Bank says recent economic growth provides the best opportunity for the country to attract foreign investment, boost trade, and encourage small farmers and entrepreneurs to increase production.
With a total surface area of 234 million hectares, the DRC is the largest country in Sub-Saharan Africa. It has the largest rain forests in the world, after Brazil, and 80 million hectares of arable land. Historically the DRC was among the world’s largest producers of copper, cobalt, and gold, but after years of a lack of exploration, known reserves remains relatively untapped. Today the Congolese population is estimated to be around 71 million, projected to reach 85 million by 2020.
Mining accounts for some 12 percent of GDP, and yet its economic impact is much larger because of the businesses and services that support the sector. However, the Bank cautions that mining revenues are also the cause for and the means of financing conflict. For its part, the Bank cautioned the government to ensure environmental safeguards are in place to protect one of the most important ecosystems on the planet.
Economic mismanagement triggered disruptive fiscal and monetary cycles, loss of hard currency through falling export revenues, financial meltdown, and hyperinflation. This cycle, in turn, led to a virtual halt in private and public investment.
“New economic analysis for the Democratic Republic of Congo points to a positive trajectory for economic growth and human development,” said Eustache Ouayoro, World Bank Country Director for the Democratic Republic of Congo. “However, The Government must take credible measures to invigorate long-term private investments, while ensuring that economic growth is inclusive and benefits all of the country’s citizens,” concludes Ouayoro.
DRC’s young people are eager for employment opportunities, according to the new report. The formal private sector, excluding recently converted state-owned enterprises, may generate as few as 300,000 jobs, 1.2 percent of the workforce. The remainder is forced to engage in subsistence farming or in the informal sector. As the situation has not improved substantially since 2006, the Bank cautions the government will need to ensure youth has employment opportunities in all growth sectors.
In the spirit of the Bank’s Open Data Initiative, the Congolese authorities, local universities and the Bank established a detailed database that documents recent economic developments that are published on the World Bank website as part of this publication. By allowing the publication of the entire database, the DRC authorities are demonstrating their commitment to transparency and accountability.
Transparency and Accountability
The primary challenge facing the DRC Government is to be transparent and ensure accountability on all aspects of the economy, the Bank says. Development during the past 15 years has been seriously lacking because of the limited effectiveness of the state. The current state of governance not only reduces the incentives for those who control or influence policies to protect the public interests, it also makes it difficult for them to make lasting agreements with each other. Trust among the population and potential investors needs to be rebuilt.
The DRC and the World Bank
The CEM, jointly prepared by The World Bank Group and the Congolese authorities, is the first comprehensive economic analysis for the country in more than twenty-five years. The report launched today in Kinshasa highlights the major challenges that the country needs to confront in order to promote growth and shared prosperity in the years to come.
The World Bank’s current portfolio in DRC consists of 19 national and regional of IDA-financed projects with a net commitment of approximately US$3 billion.