Congo Case Study

Since Congo’s independence in 1960, its history has been marked by a series of political conflicts. The economy of Congo, a nation endowed with resources of vast potential wealth has declined drastically since the mid-1980s. The two political conflicts (first and second Congo wars), which began in 1996, have dramatically reduced national output and government revenue, have increased external debt, and have resulted in deaths of more than one million people.
The war has intensified the impact of such basic problems as an uncertain legal framework, inflation, and lack of openness in government economic policy and financial operations.
Foreign businesses have curtailed operations due to uncertainty about the outcome of the conflict, and the difficult

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, and hydrocarbon codes. Planned privatizations of key parastatals, primarily telecommunications and transportation monopolies, were launched to help improve a dilapidated and unreliable infrastructure. To build on the momentum achieved during the two-year period, the International Monetary Fund (IMF) approved a three-year ESAF economic program in June 1996.
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

The country also adopted a new investment code intended to attract foreign capital. Despite this, Congo's investment climate is not considered favorable, offering few meaningful incentives. High costs for labor, energy, raw materials, and transportation; a restrictive labor code; low productivity and high production costs; militant labor unions; and an inadequate transportation infrastructure are among the factors discouraging investment. The recent political instability, war damage, and looting also will undermine investor confidence. As a result, Congo has little American investment outside of the oil