ECONOMY

The Congo's economy is based primarily on its petroleum sector, which is by far the country's major revenue earner. The Congolese oil sector is dominated by the French oil company Total. In second position is the Italian oil firm ENI. The two American players in the petroleum production sector are Chevron and Murphy Oil. Chevron is a longtime player in the Congolese market, but they play a limited role in 30-70 non-operator joint venture partnership with Total. Chevron finances Total’s projects, but is not currently involved in exploration or production. Murphy Oil exported its first shipment of 600,000 barrels of oil in October 2009 and is currently producing 15,000 barrels per day, or about 5% of Congo’s daily production. American companies including Baker-Hughes, Halliburton, Nabors, Schlumberger, and Weatherford also have an important stake in the oil services sector. The return of stability to Congo is also leading to increased foreign investment in other areas. President Sassou-Nguesso sees the industrialization of the Congo as a key component of his plan to modernize Congo. Mineral extraction is one key growth sector. MagMinerals, a Canadian company, recently began construction of a new potash mine that is expected to produce 1.2 million tons of potash per year by 2013. This will make Congo the largest producer of potash in Africa. The President’s plans also call for new lead, zinc, and copper concessions. There are also plans in the works to revitalize Congo’s agricultural sector, through a long-term land lease agreement of some 100-200,000 hectares of idle farmland to a consortium of South African farmers.

The country's abundant northern rain forests are the source of timber. Forestry, which led Congolese exports before the discovery of oil, now generates less than 7% of export earnings. Wood production came to a standstill during the war years but has recommenced, and new concessions were leased in 2001.

Earlier in the 1990s, Congo's major employer was the state bureaucracy, which had 80,000 employees on its payroll--enormous for a country of Congo's size. The World Bank and other international financial institutions pressured Congo to institute sweeping civil service reforms in order to reduce the size of the state bureaucracy and pare back a civil service payroll that amounted to more than 20% of GDP in 1993. The effort to cut back began in 1994 with a 50% devaluation that cut the payroll in half in dollar terms. By the middle of 1994, there was a reduction of nearly 8,000 in civil service employees.

Between 1994-1996, the Congolese economy underwent a difficult transition. The prospects for building the foundation of a healthy economy, however, were better than at any time in the previous 15 years. Congo took a number of measures to liberalize its economy, including reforming the tax, investment, labor, timber, and hydrocarbon codes. In 2002-2003 Congo privatized key parastatals, primarily banks, telecommunications, and transportation monopolies, to help improve a dilapidated and unreliable infrastructure.

By the end of 1996, Congo had made substantial progress in various areas targeted for reform. It made significant strides toward macroeconomic stabilization through improving public finances and restructuring external debt. This change was accompanied by improvements in the structure of expenditures, with a reduction in personnel expenditures. Further, Congo benefited from debt restructuring from a Paris Club agreement in July 1996.

This reform program came to a halt, however, in early June 1997 when war broke out, and the return of armed conflict in 1998-99 hindered economic reform and recovery. President Sassou-Nguesso has moved forward on improved governance, economic reforms, and privatization, as well as on cooperation with international financial institutions. President Sassou-Nguesso also has made speeches outlining the need for good governance and transparency in the Congo, particularly during his 2003 and 2004 National Day Addresses.

Before June 1997, Congo and the United States ratified a bilateral investment treaty designed to facilitate and protect foreign investment. The country also adopted a new investment code intended to attract foreign capital. The country has made some commendable efforts at political and economic reform, but despite these successes, Congo's investment climate has challenges, offering few meaningful incentives for new investors. High costs for labor, energy, raw materials, and transportation; a restrictive labor code; low productivity and high production costs; and a deteriorating transportation infrastructure have been among the factors discouraging investment. Five years of civil conflict (1997-2003) further damaged infrastructure, though the privatization of some statal and parastatal enterprises has generated some interest from U.S. companies.

In March 2006, the World Bank, International Monetary Fund (IMF), and the Paris Club group of official creditor countries approved interim debt relief for Congo under the Heavily Indebted Poor Countries (HIPC) Initiative, noting that Congo had performed satisfactorily on an IMF-supported reform program and developed an interim Poverty Reduction Strategy. Resources that are freed by interim debt relief granted to Congo must be used for poverty reduction under a reform program closely monitored by the international financial institutions. The London Club of commercial creditors and Congolese Government also signed an agreement in November 2007 forgiving 77% of the country’s London Club debt. In 2007, however, Congo’s reform program went off-track, leading the Paris Club and the international financial institutions to suspend their debt relief measures. The poverty reduction program has been marked by continued delays, and progress in 2008 was incremental at best. In late 2008, Congo re-engaged with the IMF and World Bank, paving the way for a new IMF program that the IMF Executive Board approved in December 2008 and a new Paris Club agreement with Congo that resumed interim debt relief.

Congo still needs to address serious concerns about governance and financial transparency in order to complete the HIPC Initiative process and qualify for additional debt cancellation. Specifically, Congo needs to reform its procurement code and the forestry sector and needs to improve petroleum sector transparency. The Congo Government continues to face lawsuits from companies who purchase the country’s debt at deep discounts on the secondary markets and then attempt to recover the full value of the debt through Western legal systems.

In November 2007, Congo was readmitted to the Kimberley Process, an international multi-stakeholder initiative designed to stem the trade of conflict diamonds. Congo had been suspended from the Kimberley Process in 2004 after reviews showed its diamond exports vastly outnumbered its production capacity. Congo’s government estimates current diamond capacity to be 5,000 carats, with a potential for 50,000 to 70,000 carats.

GDP (2008 est.): $15.6 billion.
Real GDP growth rate (2008 est.): 5.6%
Per capita income (2008 est.): $4,000.
Inflation (2008 est.): 5%.
Natural resources: Petroleum, wood, potash, lead, zinc, uranium, phosphates, natural gas, hydropower.
Structure of production (2001): Government and services--40.3%; petroleum sector--38.9%; agriculture and forestry--10.5%; utilities and industry--6.0%; other--4.3%.
Agriculture: Products--manioc, sugar, rice, corn, peanuts, vegetables, coffee, cocoa, forest products. Land--less than 2% cultivated.
Trade (2008 est.): Exports--$9.009 billion (f.o.b.): petroleum (89% of export earnings), lumber, plywood, sugar, cocoa, coffee, diamonds. Exports to the U.S. (2007 est.)--$3.099 billion. Imports--$2.722 billion (f.o.b.): capital equipment, construction materials, foodstuffs. Imports from the U.S. (2007 est.)--$140 million.