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TITLE:  ZAIRE ECONOMIC POLICY AND TRADE PRACTICES                              
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE
                              
                              
                              
                              
                              ZAIRE

                     Key Economic Indicators

                                  1991      1992      1993 /1
Income, Production,
 and Employment

Real GDP                          n/a       n/a       n/a
Real GDP Growth (percent)         -7.2      -10.6     -16.4
GDP (at current prices)           n/a       n/a       n/a
GDP Growth by Sector (percent)
  Agriculture                      3         2        -4
  Mining                          -22       -32       -22
  Energy and Water                -5          5       -28
  Manufacturing                   -21       -54       -22
  Construction                    -32       -22       -36
  Retail Trade                    -6         -9       n/a
  Other Services                  -6        -13       n/a
GDP Per Capita                    n/a       n/a       n/a
Labor Force                       n/a       n/a       n/a
Unemployment (percent)            n/a       n/a       n/a


Money and Prices

Money Supply
 (trillions of zaires)            18        770       4,518
Interest Rate
 (rediscount in pct.)             55        55        95
Investment rate (pct. of GDP)     4.5       n/a       n/a
Consumer Price Index
(pct. change)                     3,750     3,030     1,900
Exchange rate
 (end-of-year, 000's of zaires/$)
  Official                        63        1,900      13,500
  Parallel                        66        2,200     120,000


Balance of Payments and Trade
 (Millions of U.S. dollars)

Total Exports FOB                 1,600     1,370     n/a
  Exports to U.S.                 n/a         235     n/a
Total Imports CIF                 860       731       n/a
  Imports from U.S.               n/a        36       n/a
Aid from U.S. /2                  11.9      0.7       7.0
Aid from Other Countries          14.9      n/a       n/a
External Public Debt              9,606     9,473     9,469
Actual Debt Payments                205        79        11
Gold and FOREX Reserves           n/a       n/a       n/a
Merchandise Trade Balance         n/a       n/a       n/a
Current Account Balance           n/a       n/a       n/a



Notes:

1/ Estimated, As of December 1, 1993
2/ Fiscal year figures.

Source:  Due to the breakdown of government administration in
Zaire over the past two years, few economic statistics are
published by Zairian authorities, and available statistics are
highly unreliable.



1.  General Policy Framework

    Despite Zaire's wealth of natural resources and a promising
early start towards economic development, the country's economy
has been in a free-fall since September 1991, when mutinous
military troops looted all major urban centers.  As a result of
the accompanying widespread uncertainty and civil disorder,
most businesses that are unable to leave the country have
adopted a defensive stance, minimizing their exposure in Zaire
and waiting for an upturn in the economy.

    As of November, 1993, the regime of President Mobutu was
highly corrupt, heavily indebted, and its economic policies
were generally ineffective.  Limited government income came
from import and export taxes, with income from mineral,
petroleum and coffee exports providing most foreign exchange
revenue.  A large government deficit, primarily to pay salaries
for the military and civil servants, was financed by printing
currency.  Hyperinflation, rapid devaluation, and abandonment
of the formal economy were the result.

    Although Zaire possesses large amounts of unused
agricultural land, its urban population is dependent on
imported food due to the lack of a transportation network. 
Foreign exchange for food and other imports is generated
primarily through export of diamonds, crude petroleum, and
coffee.  Although small amounts of copper, zinc, cobalt and
other metals are still exported from the country's mineral-rich
Shaba Province, a collapse in production facilities has led to
a similar collapse in mineral revenue.

    Zaire's economy is mixed.  The state dominates the mining
and utility sectors, but private industry is dominant elsewhere
(increasingly so as the economy has deteriorated).  Except for
petroleum products, utilities and parts of the transportation
sector, market-determined prices are the norm, and many
parastatal enterprises compete with private ones.


2.  Exchange Rate Policies

    The availability of foreign exchange depends chiefly on
revenues from Zaire's major exports: minerals and coffee. 
Although the government sets an official exchange rate and
requires foreign exchange transactions to be done at that rate,
in practice nearly all commercial transactions are done at a
freely-floating and widely-quoted parallel rate.  Government
attempts to restrict this parallel market have failed.  Some
parallel transactions are brokered by commercial banks, and
others are handled by wealthy individuals in the informal
economy.

    Because hyperinflation and accompanying devaluation erodes
the buying power of local currency so quickly, businesses
generally convert the currency into foreign exchange or
commodities as quickly as possible.  To facilitate foreign
exchange conversion, importers and exporters establish informal
exchange arrangements with each other, sometimes brokered by
commercial banks.  Although hard-currency denominated accounts
are available at commercial banks, most businesses avoid these
accounts out of fear they will be frozen or confiscated by the
government.  During periods of political and economic unrest,
speculation and the parallel foreign exchange market's relative
thinness cause large swings in the value of local currency.


3.  Structural Policies

    Lack of effective enforcement mechanisms and the
questionable legitimacy of ruling politicians have made
pre-existing structural policies obsolete and have encouraged
widespread disregard of newly-declared policies.

    Government control remains strict, however, in the
distribution of petroleum products.  Prices are set by the
government, and when they fall far enough below the market
level, deliveries are cut back until a price which permits
costs to be covered is renegotiated.

    During the fall of 1993, the government attempted to impose
price controls on all consumer products, enforcing the controls
with intrusive inspection teams.  Although the price controls
failed to stop hyperinflation, they succeeded in alienating a
large part of the business community.


4.  Debt Management Policies

    At the end of 1993, Zaire's external debt exceeded $10
billion.  However, the Zairian government's payments on this
debt were insignificant.  Non-payment led both the IMF and the
World Bank to declare Zaire ineligible for financial support
from those organizations and jeopardized Zaire's status as a
member in good standing.  At late-1993 export levels, Zaire's
debt-service ratio would have exceeded 100 percent, even with
re-scheduling, but the country's lending partners were unlikely
to cancel or reschedule its debts without significant changes
in the country's political landscape.


5.  Significant Barriers to U.S. Exports

    U.S. traders and investors face generalized impediments
that effect all economic activity in Zaire.  The country has no
reliable national network of telephonic communications or
mail.  Although the Zaire river serves as a major 
transportation artery, the vast majority of pre-existing roads,
bridges, and railroads have deteriorated to the point of
unusability.  Several private air transportation companies
operate, but at high cost.

    Corruption at all levels of government makes the conduct of
business difficult, especially for those operating under the
Foreign Corrupt Practices Act.  Expatriates are subject to
selective application of the law, as well as numerous,
imprecise, and changing residency regulations.  Insurance is
usually unavailable or priced at war-risk levels.  As of late
1993, the Birindwa-led government was not recognized as
legitimate by the United States.


6.  Export Subsidies

    There are no export subsidies in Zaire, nor any government
programs to assist the export sector.


7.  Protection of U.S. Intellectual Property

    In theory, the Government of Zaire acknowledges the value
of intellectual property.  The country is a party to the Bern
and Paris conventions and is a member of the World Intellectual
Property Organization.  The government's Department of National
Economy and Industry protects privileged technology and
production information, as well as trademarks.  International
franchises operate comfortably in Zaire within the protection
granted by the state.  A national society of editors,
composers, and authors oversees copyright protection due
artists under the law, but it is a private organization and not
an official agency.  There is very limited production of books
and sound recordings in Zaire, so the potential for pirating is
small at the moment.  The U.S. Embassy reports no knowledge of
patent infringement in the country.

    In the event of future infringement, the legal and
administrative system is ill-equipped to enforce intellectual
property regulations.  The Government of Zaire is also unable
to prevent most pirated goods from crossing into the country
and being sold.  Cartier watches, U.S. brand name jeans, and
designer label clothes of questionable origin are all available
in Kinshasa.


8.  Worker Rights

    a.   Right of Association

    The constitution provides the right to form and join trade
unions to all workers, except soldiers and employees of the
judicial system.  Approximately 80 labor-related organizations
are legally registered, although many exist mainly on paper. 
Although workers have the right to strike legally, the process
is lengthy, and laws are often disregarded, so few legal
strikes occur.  Instead, workers stage technically illegal
strikes, especially in the public sector.  Few strikes are
suppressed forcibly.

    b.   Right to Organize and Bargain Collectively

    Legislation provides for the right to organize and bargain
collectively.  Although many organizations exist, they have
little effectiveness in Zaire's conditions of massive
unemployment and poverty.

    c.   Prohibition of Forced or Compulsory Labor

    The constitution and labor code forbid forced labor.  The
U.S. Embassy knows of no instances of forced or compulsory
labor.

    d.   Minimum Age for Employment of Children

    The legislated minimum age for employment is 18, although
those between the ages of 14 and 18 can legally engage in
"light work" if a parent or guardian consents.  Many children
under 14 work in the informal sector, especially in subsistence
agriculture, and neither the government nor labor unions
attempt to prosecute such instances.  Larger enterprises do not
commonly exploit child labor.

    e.   Acceptable Conditions of Work

    The majority of the population is engaged in subsistence
agriculture and small-scale commerce outside the formal
sector.  In recent years income in the modern economy has not
kept up with inflation, and the minimum daily wage to which
workers are entitled does not provide a decent living for them
and their families.  Public sector remuneration remains low,
and workers are often driven to corruption or to take second
jobs in the private sector.

    f.   Rights in Sectors with U.S. Investment

    There are U.S. investments employing Zairian labor in the
petroleum, agribusiness and service sectors.  These enterprises
are subject to the labor laws that cover all Zairian workers. 
There is no forced labor or child labor at U.S. companies in
Zaire.  Although health benefits and salaries are low at some
companies, they generally compare favorably with local
practice.  Rights do not differ significantly from sector to
sector.


         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                                13
Total Manufacturing                                       0
    Food & Kindred Products                     0
    Chemicals and Allied Products               0
    Metals, Primary & Fabricated                0
    Machinery, except Electrical                0
    Electric & Electronic Equipment             0
    Transportation Equipment                    0
    Other Manufacturing                         0
Wholesale Trade                                           0
Banking                                                   5
Finance and Insurance                                     D
Services                                                  D
Other Industries                                          0

TOTAL ALL INDUSTRIES                                     28


(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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