DRC: Adoption of New Legislation for Better Industrial Environment
Adoption of a new legislation for a better industrial environment in the DRC: bill on the rescue of the industry in danger
Before the series of lootings of the 90s, wars and other civil unrests, the Democratic Republic of Congo, (“DRC”) was considered one of the most industrialized countries of Central Africa. To restore its tarnished reputation, the DRC Government has set goals to boost the industrial sector by encouraging a large number of companies to invest in the national territory in order to reduce the high rate of unemployment and create jobs which are the levers (or the driving force) of economic growth and fight against poverty. Those goals have been set within the framework of its Government Economic Program (GEP) through the International Monetary Fund’s Poverty Reduction and Growth Facility implemented since June 2002.
This goal was substantiate by the submission to the Parliament of the Bill setting forth rules, for conditions and procedures for rescuing the vital national industry in danger (“Bill on Rescue of the industry at risk”), which was examined, discussed and adopted by the Senate, the Congolese Upper Chamber during its ordinary session of September 2012. But in which context was the Bill initiated? What are the goals pursued by the Bill and its scope? What are the conditions and procedures for granting customs, tax, special taxation benefits and others considered vital by the Bill for rescuing an industry in danger? What is its content?
I. Context of the development of the Bill setting rules, conditions and procedures to rescue the vital national industry in danger
The DRC wishes to rely on its local industry to maximize the budget revenue before turning to external aid facilities which are generally full of conditions that infringe the sovereignty of the State. However, the Congolese industrial sector has been confronted since a time relatively long to difficulties preventing the rapid expansion of its industry, if not the effective realization of the Reform Program. In the past, the main problem to the revival of the economy was the effects of Zaïrianisation and radicalization of the 70s. The economic stagnation of the years 1980 made the situation worse before lootings occurred between September 1991 and January 1993 and completely destroyed the economic fabric.
Armed conflicts currently happening in the East of the DRC are driving most of the investors away and pushing them involuntary withdrawing their activities and de-industrializing some provinces, especially in the Northeastern part of the country whereas those industries played a vital role in local communities. Therefore, this dramatic occurrence is inciting the Government to adopt a rescue plan.
Aware of both structural and economic problems and the risks endangering the long term existence of key industries for boosting economic development, the Government of the DRC has initiated a Bill in accordance with the provisions of articles 34, subparagraph 3 and article 174, subparagraph 3 of the Constitution allowing the State to support and secure the industry facing such situation.
With this Bill, the Congolese Government wants to equip the country with an action legal framework and to set tax incentives and facilities related to administrative, financial and infrastructure matters which constitute measures to rescue the vital national industry in danger. The Bill is set amidst a context of economic liberalism and will be without any doubt a safety device that will prevent any potential threat on the national industry.
II. Objectives and scope of the Bill on the rescue of the industry in danger
The forthcoming promulgation of the law on the rescue of the industry in danger and its publication in the Official Gazette will enhance modernization of industrial companies through restructuring and upgrading in order to make them more competitive in a context of opening of the Congolese market. In addition, the current Investment Code is a major tool to the improvement of the business climate that promotes new investments and the sustainability of current investments.
The purpose of the Bill on the rescue of the industry in danger is to set forth customs, tax, special taxation and tariff benefits, to organize the administrative facilities and the involvement of the State in financial and infrastructure matters which constitute the rescue measures of a national industry in danger as well as the rules related to the approval or admission conditions and procedures to benefit from the advantages. The Bill applies to any vital national industry or production entity in danger due to external factors which have caused or may cause serious damages.
III. Conditions and procedures for granting customs, tax, special taxation and other benefits included in the Bill on the rescue of the industry in danger
The Bill on the rescue of the industry in danger organizes the admission requirements of industrial companies for getting benefits and facilities referred to above on the following conditions:
1. To be an economic entity of Congolese law;
2. To be recognized as a vital national industry in danger by the Ministries in charge of Industry, Economy, Budget, Finance and Planning on the basis of certain criteria set by law;
3. To be in a situation of risk due to external factors;
4. To file a company rescue and revival program;
5. To undertake to maintain, increase and train national staff in specialized technical functions and those of supervision and responsibility.
With regards to the approval procedure or the granting of all above mentioned benefits and facilities, the Bill on the rescue of the industry in danger determines that “any vital industry in danger wishing to benefit from the advantages provided is required to file an application with the Ministry in charge of Industry.”
The application to benefit from customs, tax and special taxation and other administrative facilities is reviewed by an Inter-Ministerial Commission of experts which shall submit its technical opinions to the Ministry in charge of Industry. For this purpose, the inter-ministerial commission includes experts from the Ministries in charge of Industry, Economy, Budget, Finances, and Planning in their attributions as well as the National Agency for Investment Promotion. The decision of granting or refusal will be communicated to the applicant within a time that shall not exceed thirty working days as from the date of the submission of the conclusions of the Inter-Ministerial Commission.
V. Contents of the bill on the rescue of the industry in danger
The Bill on the rescue of the industry in danger contains 21 articles divided in four titles. The first title includes two chapters of which the first contains definitions of terms such as advantage for rescue; production entity; serious damage; external factors; industrial sector; vital industry; industry in danger; intervention in financial matters; intervention related to infrastructure and threat of serious damage. Its second chapter relates to its scope of operation as specified above.
The first chapter of the second title determines eligibility requirements to the benefits considered in the law as mentioned above. And the second chapter of the second title specifies the procedures for granting the aforesaid benefits by first describing the filing process and the instructions for the filing of the application, and then by specifying the elements of the contract-program concluded with the Government. The third chapter concerns I) the various benefits the approved industrial company in danger will receive; II) the administrative facilities and the interventions of the State in financial and infrastructure matters; III) the timeline of the recovery program included in the contract-program which cannot exceed five years; Finally, the fourth chapter lays down the obligations of the approved applicant.
The Third title is relating to the monitoring of the contract-programs (chap. I), the sanctions imposed to the approved industrial company in danger in the event of a breach of commitments or of a violation of the law (chap. II) and settlement of disputes arising in connection with the interpretation or of the application of the law or the programs contract (chap III). Finally, the Fourth title concerns transitional and final provisions.
The initiative taken by the Government of the DRC through this law should not be perceived as a kind of protectionism measure, rather it reflects the Government’s determination to promote the development of its industry at risk by granting advantages on customs, tax, special taxation and tariffs for a period which should not exceed five years to make the companies competitive in a context of market opening.