Apr 2, 2021 in Analysis

Democratic Republic of Congo
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Abstract

Democratic Republic of Congo belongs to a group of the underdeveloped countries with unstable political, economic, and social systems. Over recent years, the country has been gradually developing comparing to the situation several decades ago. At the same time, its main economic and social indicators are unsatisfactory, and are often below the level of Sub-Saharan Africa and low human development countries. Moreover, many international organizations, especially economic corporations, such as International Monetary Fund, the World Bank, and World Trade organization, contribute to the DRC economic development eliminating poverty in the country in their specific ways. They implement different initiatives and programs to resolve the most urgent problems and search for foreign donors to participate in the process as well. However, Democratic Republic of Congo has many issues, especially within the social sphere. High crime and poverty rates retard economic development and make the country a challenging destination for foreign investors.

Democratic Republic of Congo (DRC) is one of the least developed countries in the world with 62 million people, who live under $1.90 per day. Deeply ingrained dictatorship regime, failed democracy, and frequent military conflicts on the border of the country have caused political and social instability. United Nations as well as different political and economic organizations started to cooperate to provide the DRC with the assistance to fight poverty and establish effective system that will ensure social security for its citizens. However, high poverty, corruption, and increasing crime rate still remain unsolved problems, which undermine security and stability of the whole Sub-Saharan Arica region. DRC is a low-income, underdeveloped, and unstable country as its poor socio-economic development, lack of interaction with international organization, and major social problems stifle the progress.

 

Socio-Economic SnapShot

DRC is on the 176 place out of 188 countries in the world according to the Human Development Index (HDI) calculated by the UN. Countrys GDP and GNI per capita have grown from 2011 till 2015 by 16.3% and 14.1% correspondingly. In 2015, DRCs GDP was $737 per capita, whereas GNI amounted to $680. Growing income that helped to improve living conditions fostered gradual growth of the Congolese life expectancy. In 2015, the average life expectancy at birth reached 59 years. Although the healthcare expenditures decreased in 2012, they were recovered only in 2015 that comprised 4.3% from the total GDP. Furthermore, according to the Uppsala Conflict Data survey form 2007 till 2014, around 70,000 woman and children perished because of political instability. Thus, deliberate GDP and GNI growth boosted the life expectancy; however the government did not incur additional healthcare expenses.

Many social issues are urgent in the DRC. For example, the main part of the Congos population still lives in the rural areas. Accordingly, the rate of urban population has grown only by 2% since 2011 and reached 42,5% of all citizens in 2015. Despite the fact that DRC is slowly develops economically and socially, the country still faces electricity shortage. Only 13.5% of the whole population has the access to the electricity, and predominantly, it concerns the people who live in the cities. Moreover, another problem is education. The compulsory term of schooling is growing, and in 2015, this index was 9.8. In reality, actual mean years of schooling comprise 6.8 years. Additionally, only urban population has an opportunity to study. Thus, DRC has a low social development index.

DRC has low development indices in the region. In 2015, the countrys HDI was 0.435, which was lower than an average index in the Sub-Saharan African and even under the average of the low human development countries group. At the same time, life expectancy rate was a little higher than average in the region; however, it still falls behind compared to low human development countries. Moreover, DRCs GNI per capita ($680) is more than three times less than the average in the Sub-Saharan Africa ($3,383) DRC has the high index of income inequality that amounts to 28.2%, which is above the regional level. Thus, many DRCs socio-economic measures are under the average in the region.

However, some DRCs rates are better than in the region. For example, the mean years of schooling are higher than in most countries in the Sub-Saharan Africa. Moreover, another positive tendency is that women have a high labor force participation rate that is almost equal to the percentage of the opposite sex. In fact, it is more than 5% higher than an average rate in the Sub-Saharan Africa. At the same time, males labor force participation rate is under the regions level by around 5%. Thus, access to the education and gender representation in the workplace rates are higher than in most countries in the Sub-Saharan Africa.

Environmental problems together with the low level of the social development and economic poverty gradually affect DRCs progress. For example, the abnormal changes in temperature maximum and minimum in January-March together with undue rains in April-December caused the choleras outbreak in 2013. Scholars discovered that climate changes tend to exacerbate already existing problems and, as a result, create new threats to peoples welfare. At the same time, the implementation of different measures to prevent environmental crisis often face various barriers, especially from the officials side. Thus, climate changes affect the development of DRC; however, the government does not fully exploit its efforts to solve this problem.

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Relationship with organizations

Democratic Republic of Congo and International Monetary Fund

DRC became a member of the IMF in September 1963. IMF has 1,066.00 millions SDR as DRC holdings of currency. Moreover, during 2000-2010, IMF provided ESF RAC Loan and ECF Arrangements for DRC. From 2017 till 2011, DRC received one loan in 2011 from the Poverty Reduction and Growth Trust of the IMF of around $98 million. The government invested the funds in economic governance sector to improve public security and start decentralization. It was the last financial credit to the DRC till now. In 2015-2017, DRC repaid the Trust nearly $107 million of the previous loans. Thus, at the moment, IMF has not granted any credits to DRC. Currently, the country is repaying its previous loans.

Democratic Republic of Congo and the World Bank

The World Bank started to implement its projects in DRC from 2001. Sustainable development is a current Banks policy in the DRC. Around $2.51 billion is involved in 24 projects in the country. 63% of the projects are connected with the infrastructure development (water supply, energy development, and transportation). 16% of them work on Human development, 15% of the projects involve private sector and agriculture, and 6% are aimed at mining industry and governance. Thus, the World Bank is actively involved in implementing various welfare programs in DRC.

The Country Assistance Strategy for the DRC 2013-2016 is currently in progress in DRC. The main objectives of this strategy are to ensure effective governance, motivate the growth of the private sector that will create new jobs, and improve connectivity in the DRC. These tasks can be achieved by improving public finances management at the central and provincial levels, strengthening governmental role in the mining sector, as well as creating and developing partnership with the Proactive Investment Promotion Platform and the Project Development Facility. This program will be substituted by another Country Partnership Framework that will have come into operation by 2021. Thus, the World Bank proposes and executes specific projects and programs to fight poverty in the DRC.

While implementing its plans, the World Bank cooperates with other organizations and states. The Donors Coordination Group emerged as a communication platform between different organizations and the Government of DRC. For instance, the World Bank together with UNICEF and USAID helps to organize governmental control of the services provided for children. Moreover, the Bank combined the financial backing of the United Kingdom, Belgium, and France to found public administration and financial management agencies. Thus, the World Bank embraces international cooperation to help DRC.

Democratic Republic of Congo and the World Trade Organization

Democratic Republic of Congo became the member of the WTO in January 1997. The main initiative of WTO is the Aid for Trade that serves a purpose of promoting cooperation between donors and developing countries and contributing to least-developed countries progress. According to this program, main AFT priorities in the DRC are the development of transport infrastructure, trade facilitation, and export diversification. In 2013, the WTO managed to engage reputable donors, including IDA, EU institutions, African Development Fund, Belgium, and the United Kingdom. All financial aid was involved in several core sectors, such as transport and storage, energy generation and supply, agriculture, forestry, fishing, as well as trade policy and regulations. Thus, Aid for Trade initiative is the main program that the WTO implements for DRCs development.

 
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Social Problems

High corruption level is one of the main social problems that hinder local business and also discourage foreign investors. According to the World Banks index on the CPIA transparency, accountability, and corruption in the public sector rating, DRC has received the rate 2, which means a relatively high level of corruption. As a result, many financial and administrative difficulties create unfavorable business environment that increases risks and costs of running a company in DRC. Moreover, poor legal regulations oblige people who want to start their business in DRC make unofficial donations to different officials to get a permit or a license. Thus, DRC is a country with high-level corruption, which stifles the business and economic development.

Several corruption indicators are very high in DRC. For example, the Graft index, which measures times when a business owner was asked to pay bribe in order to obtain an official document, was 44,7% in 2013. Comparing this figure in DRC with other countries, it is twice higher than in Sub-Saharan Africa. Moreover, over 50% of businessmen were expected to give some kind of remuneration to a tax inspector during the control or to secure the government contact that is higher than similar rates in the region. Thus, DRC has one of the highest corruption rates among the Su-Saharan Africa and low-income countries.

High crime rate is another social problem that prevents business development. Tendencies connected with illicit activities double expenditures on the security measures and increase social instability, which, as a result, poses a threat to the profitability of running a business. Moreover, another problem is inefficient legal institutions that are unable to settle disputes and resolve legislation issues related to a victim and perpetrator as well as firms and their clients. For example, only 26.9% of enterprises, which operate in DRC, believe that the court system is fair and incorruptible. Additionally, flawed legislation system encourages illegal business to spread. For instance, only around 69% of all enterprises or companies that start to operate in the DRC are formally registered. Thus, widely spread crime limits economic development and investments.

Conclusion

Although the DRCs GDP and GNI per capita are gradually growing, they are still three times lower compared to the entire Sub-Saharan Africa and the group of the low-income countries. Its average life expectancy has improved, but, surprisingly, it reduced healthcare expenditures, which recovered only in 2015. The number of the urban population is rising; however, more than a half of the Congolese still live in the remote rural areas. Moreover, relatively insignificant part of the DRCs citizens has the access to electricity. Another important socio-economic indicator is the education. Again, the schooling rates are growing, becoming one of the highest in the region. DRC has the low HDI that is below regional and low-developed countries level. At the same time, DRC is leading among Sub-Saharan Africa countries in terms of women labor force participation rate.

IMF, the World Bank, and the WTO cooperate with the DRCs government and implement various initiatives to improve life quality coefficient. IMF gave several credits and loans to DRC in the past; however, during the last five years, the cooperation between the IMF and DRC has come to a halt. On the other hand, the World Bank is one of the most active organizations in the country, which implements over 20 projects, cooperate with the central and provincial authorities, as well as governmental and public sectors, and involves other foreign donors. The World trade organization has launched Aid for Trade program in the DRC that focuses on the reconstruction of infrastructure, trade development, and export diversification. Moreover, it also motivates other countries and organizations to involve in the process of democratization and modernization of the DRC.

One of the most urgent the DRCs social problems is alarming corruption and crime rates that are the highest in the region. Poor legal regulations and flawed jurisdiction system create unfavorable conditions for foreign investors in the DRC. Moreover, insecurity, lack of transparency in the court system, and spread of illegal businesses make economic development stagnate as well.

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