Before the social movements of plunder and anti-plunder of 1990s, wars and other civil revolts, the Republic Democratic of the Congo, (“DRC”) was among the most industrialized countries of Central Africa. To regain its tarnished prestige, the DRC Government has set goals to boost the industrial sector by encouraging a large number of industrialist companies to invest in the national territory to reduce the high rate of unemployment and create jobs which are the levers of the economic growth and the fight against poverty. Those goals have been set within the framework of its supported Economic Program of Government (EPG) through the "Facilité pour la Réduction de la Pauvreté et pour la Croissance" (FRPG) of the International Monetary Funds ( IMF) since June 2002.
This goal was materialized by the submission to the Parliament of the bill setting the rules on the conditions and procedures to rescue the vital national industry in danger (“bill on the rescue of the industry in danger”), which was examined, discussed and adopted by the Senate and the Congolese parliament‘s upper chamber on the ordinary session of September 2012. But in which context, the bill was initiated? What are the goals pursued by the bill and its scope? What are the conditions and procedures for granting the advantages of customs, tax, special taxation and other advantages considered by the bill on the rescue of industry in danger? What is its content?
I. Context of the development of the bill setting the rules on the 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 aids which are generally given to conditions that infringe the sovereignty of the State.
However, the Congolese industrial sector is confronted since a time relatively long to difficulties preventing thus the rapid expansion of its industry, if not the effective realization of the Reform program installed.
In the past, the first difficulties are due to the effects of Zaïrianisation and radicalization occurred in the country in 1970s. The economic stagnation of the years 1980 made the situation worse before the plundering which occurred between September 1991 and January 1993 and completely destroyed the economic fabric.
The armed conflicts currently happening in the East of the DRC pushed most of the investors to involuntary terminate their activities pulling in this way certain provinces without industries in the oriental part of the country whereas by their upstream and downstream effects these industries played a vital role for some local communities. Therefore, this dramatic picture deserved that the State provides with a rescue plan. Aware of these difficulties both structural and cyclical and the risk for the long term existence of the viable industries for the economic development, the government of the DRC has initiated a bill in accordance with the provisions of articles 34, subparagraph 3 and in article 174, subparagraph 3 of the Constitution allowing the State to support and to secure the industry facing such situation.
By this text, the Congolese Government wants to equip the country with a legal framework of intervention and to set the tax incentives and facilities related to administrative, financial and infrastructures matters which constitute the measures to rescue the vital national industry in danger. The bill thus intervenes in a context of economic liberalism and will be without any doubt a safety device that will prevent against all possible threats 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 encourage the 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 to this, it should be noted that the current Investment Code is a major support to the improvement of the business climate that passes through the promotion of new investments and the sustainability of current investments.
The purpose of the bill on the rescue of the industry in danger is to determine customs, tax, special taxation and tariff advantages, to organize the administrative facilities and the involvement of the State in financial and infrastructures matters which constitute the rescue measures of the 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 branch production in danger due to external factors which have caused or may cause serious damages.
III. Conditions and procedures of granting customs, tax, special taxation and other advantages included in the bill onthe rescue of the industry in danger
The bill on the rescue of the industry in danger organizes the admission requirements of the industrial companies to the advantages and facilities referred to above on the following conditions:
- To be an economic entity of Congolese law;
- To be recognized as a vital national industry in danger by the ministries in charge of industry,the economy, the budget, the finances and the plan on basis of certain criteria indicated by the law;
- To be in a situation of risk due to external factors;
- To file a program of rescue and revival of the company;
- To commit to maintain, increase and train national staff in specialized technical functions and those of supervision and responsibility.
As regards to the approval procedure or the granting of all these advantages 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 the industry.”
The application to benefit from the custom, 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 the industry. For this purpose, the inter-ministerial commission includes the experts of the ministries in charge of the industry, the economy, the budget, the finances, and the plan 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 of the experts.
V. Contents of the bill on the rescue of the industry in danger
The bill on the rescue of the industry in danger consists of 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; branch of production; serious damage; external factors; industrial sector; vital industry; industry in danger; intervention in financial matters; intervention related to infrastructures and threat of serious damage. Its second chapter relates to its sphere of operation such as specified above.
The first chapter of the second title determines the admission requirements to the advantages considered in the law as mentioned above. And the second chapter of the second title specifies the methods of granting of the aforesaid advantages 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 advantages the approved industrial company in danger will benefit from; II) the administrative facilities and the interventions of the State in financial and infrastructures matters; III) the duration attached to the program of recovery 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 the 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, 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.