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Zaire Table of Contents

Zaire

Foreign Investment

In the early 1970s, direct foreign investment ranged from US$50 million to US$100 million annually before dropping with the onset of Zairianization. To entice foreign investors to return to Zaire after the economic decline brought on by nationalization, in 1981 the government created a free-trade zone in Bas-Za´re under the direct authority of the president. Zaire hoped to attract powerintensive export-oriented industries with the offer of relatively inexpensive power and tax incentives. But although there had been many proposals to establish industries in the free-trade zone, at the end of the 1980s there had been no firm commitments.

Zaire and the United States signed a bilateral investment treaty in 1984. The treaty was, in part, aimed at supporting Zaire's economic reform efforts. The treaty proved to be more symbolic than practical. Little new United States private investment ensued, despite promotion by the Overseas Private Investment Corporation (OPIC), which led a small investment mission to Zaire in 1986. Zaire also had bilateral investment agreements with France, Belgium, Switzerland, West Germany, Canada, Denmark, and the Netherlands. Most foreign investment, albeit a significantly smaller share than at independence, was still Belgian.

The new investment code promulgated in April 1986 was an important step toward restoring investor confidence and mobilizing foreign capital. It incorporated various existing tax benefits and introduced new ones. Further advantages were offered to investors depending on the location of the enterprise, number of jobs generated, type of activity, training and promotion of local staff, export orientation, and value added to local resources. Most of the benefits were available for five years, but some ranged from one to ten years and even longer for mining ventures, which were also exempted from taxes on reinvested profits. Repatriation of profits and earnings was guaranteed for foreign investors. Despite the code's enticements, Zaire experienced only a marginal increase in foreign direct involvement. Moreover, not all projects approved under the investment code were actually started.

Despite increasing incentives, foreign investment was slow and fitful. The transportation system was still in a state of gross disrepair, although rehabilitation efforts had been under way for some time. Communication was also difficult, and the population's purchasing power remained low. In addition to the daunting physical and logistical difficulties of doing business in Zaire, new investors, especially nontraditional ones such as United States business interests, were discouraged by Zaire's reputation for unbridled corruption. It was thought in many circles that these irregularities were among the reasons that the United States business community had largely ceded Zaire to Belgium and other European countries as their sphere of economic influence.

Data as of December 1993