MONUCMONUCGlobal Forum VGlobal Forum V

Hot spots: non state sectors Hot spots: non state sectors vulnerable to corruptionvulnerable to corruption

The DRC ContextThe DRC Context

– History of colonial exploitation History of colonial exploitation and dictatorship;and dictatorship;

– Emerging from/struggling with Emerging from/struggling with conflict;conflict;

– fledgling democracy;fledgling democracy;– Weakened and dysfunctional Weakened and dysfunctional

institutions and limited institutions and limited extension of state authority, in extension of state authority, in a vast geographic territory a vast geographic territory ((2,345,410

sq. km bordering 9 countries);;– Collapsed justice systemCollapsed justice system– Extensive natural resource Extensive natural resource

wealth.wealth.

Natural Resources in the DRCNatural Resources in the DRC

Natural Resources: Coltan (cassiterite)cassiterite), copper, gold, silver, diamonds,

niobium, tantalum, zinc, manganese, tin, uranium 50% of Africa’s hardwoods50% of Africa’s hardwoods 10% world’s hydro-electric capacity10% world’s hydro-electric capacity

(Source: UN Reports)(Source: UN Reports)

Mining:Mining: 1980 – generated 66% budgetary receipts1980 – generated 66% budgetary receipts 1990 – export receipts = 1 billion USD1990 – export receipts = 1 billion USD

– 465,000 tonnes of copper465,000 tonnes of copper Today – no significant contribution to budgetToday – no significant contribution to budget

– 20,000 tonnes of Copper (2006)20,000 tonnes of Copper (2006)

(source: Programme du gouvernement 2007-2011)(source: Programme du gouvernement 2007-2011)

Extractive industries in the DRCExtractive industries in the DRC

““IF THE DRC IS TO EMBARK ON A IF THE DRC IS TO EMBARK ON A PROCESS OF RECOVERY, IT WILL PROCESS OF RECOVERY, IT WILL

HAVE TO RELY ON THE HAVE TO RELY ON THE GENERATION OF STATE GENERATION OF STATE

REVENUES FROM EXTRACTIVE REVENUES FROM EXTRACTIVE INDUSTRIES” INDUSTRIES” (s/2007/68)(s/2007/68)

Extractive industries - challengesExtractive industries - challenges

Limited extension of state authority creates Limited extension of state authority creates vacuums vacuums (imposed “taxes”)(imposed “taxes”)

Corporate entities engage “protection forces” who Corporate entities engage “protection forces” who extort payments from local populationsextort payments from local populations

Government troops at border often complicit (note: Government troops at border often complicit (note: many elements of the FARDC are not paid on a many elements of the FARDC are not paid on a regular basis and only receive minimal salary)regular basis and only receive minimal salary)

Limited technology/investment required and Limited technology/investment required and desperate, unskilled labour easily exploiteddesperate, unskilled labour easily exploited

Parallel systemic corruptionParallel systemic corruption

Extractive industries - challengesExtractive industries - challenges

Formal sector undermined by vulnerability to interference Formal sector undermined by vulnerability to interference from military elements, rebel groups, foreign interests and from military elements, rebel groups, foreign interests and unscrupulous traders – allegations of protection by DRC unscrupulous traders – allegations of protection by DRC personalities;personalities;

State mining companies unable to protect concessions, State mining companies unable to protect concessions, enabling unregulated diggersenabling unregulated diggers

Vast wealth both a source of financing for armed groups, Vast wealth both a source of financing for armed groups, and also a motive to continue and also a motive to continue

Corruption and mismanagement – resulting in large Corruption and mismanagement – resulting in large majority of sales and exports outside authority of statemajority of sales and exports outside authority of state

Legitimate, conscientious mining companies, Legitimate, conscientious mining companies, comptoirscomptoirs, , négociantsnégociants, find it impossible to compete, find it impossible to compete

Illegal Exploitation of Natural Resources: Illegal Exploitation of Natural Resources: Non-State ActorsNon-State Actors

Artisanal miners Artisanal miners __________________________________________________________________________

Economic operators violating Congolese law: Economic operators violating Congolese law: (potential targets of UN sanctions)(potential targets of UN sanctions)

Middlemen – buyers and traders engaged in fraudulent Middlemen – buyers and traders engaged in fraudulent activities (activities (subcontractorssubcontractors, , négociants, comptoirs/ négociants, comptoirs/ exportersexporters))

Mining companiesMining companies______________________________________________________________________________

Artisanal MinersArtisanal Miners

2 million artisanal miners2 million artisanal miners Subsistence income at best – often in debtSubsistence income at best – often in debt Required to pay string of charges – i.e. local Required to pay string of charges – i.e. local

chief, unintegrated FARDC elements, chief, unintegrated FARDC elements, mining police, de facto authoritiesmining police, de facto authorities

Subjected to intimidation and violence Subjected to intimidation and violence (armed (armed gangs – gangs – suicidaires – 38 deaths registered by HR in Kasai Oriental suicidaires – 38 deaths registered by HR in Kasai Oriental 20062006))

Other non-state actorsOther non-state actors

Fraudulent exporters or Fraudulent exporters or comptoirscomptoirs – – buy most cassiterite at prices legitimate exporters cannot affordbuy most cassiterite at prices legitimate exporters cannot afford– Cassiterite exports undervalued by 50-60-%Cassiterite exports undervalued by 50-60-%– control of cassiterite estimated 70-75% or morecontrol of cassiterite estimated 70-75% or more– None contribute to the building of formal sectorNone contribute to the building of formal sector– 80-90% of gold exported fraudulently (8 million USD/month)80-90% of gold exported fraudulently (8 million USD/month)– 40% diamonds exported illegally; large portion sold by 40% diamonds exported illegally; large portion sold by négociantsnégociants

with no fees paidwith no fees paid– Hire and exploit childrenHire and exploit children– Tax evasionTax evasion– Corrupt paymentsCorrupt payments

(Source: estimates quoted in S/2007/60)(Source: estimates quoted in S/2007/60)

Corrupt economic operators Corrupt economic operators illegal activitiesillegal activities

– FraudFraud– Use of armed groups to secure access to Use of armed groups to secure access to

concessions and/or to extort payments from concessions and/or to extort payments from minersminers

– Tax evasionTax evasion– Corrupt payments to officialsCorrupt payments to officials– SmugglingSmuggling

IS THERE JUSTICE IN THE IS THERE JUSTICE IN THE DRC ?DRC ?

ACCESS TO ACCESS TO CIVILIAN CIVILIAN JUSTICEJUSTICE

60 of 180 required first instance courts are yet established

Less than half of the required 5000 magistrates

Total dilapidation of existing court, prosecution- and detention premises, especially in the interior of the country

ADMINISTRATION OF ADMINISTRATION OF JUSTICEJUSTICE

CIVILIAN & MILITARYCIVILIAN & MILITARY

CourtsExisting critical mass

of competent jurists, desiring reform, retraining

Lack of basic equipment

Absence of case tracking leading to excessive detention, archives, case law

Interference/ pressure from

government officials

Alleged corruption – lack of confidence of population

Need for national training capacity

ADMINISTRATION OF ADMINISTRATION OF JUSTICEJUSTICE

Prisons Starvation deaths - 1/145

prisons has budget for food

No high security facility

Abuse of authority leading to unlawful detention

Crumbling and non-existent walls, inadequate surveillance, resulting in:

escapes regular assault and rape overcrowding inability to accommodate

serious offenders risk of creating flash-

points for violence

Children, women, military, militia, all detained in the same facilities

URGENT NEEDSURGENT NEEDS

Legislation

High security military detention facilities

Court and prison facilities (infrastructure)

Food for prisoners

Increase number and rank of military prosecutors and judges

Increase in support staff

Technical assistance (material needs and expertise) to provide immediate national capacity required to investigate, prosecute and administer justice, including in regard to serious human rights abuses

Support for development of independent “watchdogs” (counterbalances), i.e. regulatory bodies, media, independent NGO’s, etc)

Support for the development of state capacity to provide intra-governmental human rights guidance and sensitization (i.e. Ministry of Human Rights)

Support for development of sustainable national training programme and institution(s)

Extractive Industries - ReportsExtractive Industries - Reports

NATIONALNATIONAL

Lutundula Commission Lutundula Commission (February 2006)(February 2006)

INTERNATIONALINTERNATIONAL UN Panel of Experts– reports on illegal exploitation of UN Panel of Experts– reports on illegal exploitation of

natural resources natural resources (2001-2003)(2001-2003)

UN Group of Experts monitoring the arms embargo – report UN Group of Experts monitoring the arms embargo – report to Security Council on feasible and effective measures to to Security Council on feasible and effective measures to prevent illegal exploitation financing armed groups prevent illegal exploitation financing armed groups (res 1698 of (res 1698 of 2006)2006)

UN Secretary-General – report to Security Council UN Secretary-General – report to Security Council (8 February (8 February 2007, pursuant to res 1698 of 2006 – currently the subject of informal debate)2007, pursuant to res 1698 of 2006 – currently the subject of informal debate)

Lutundula CommissionLutundula Commission

Set up by the peace accords of 2003Set up by the peace accords of 2003 Lutundula Commission included representatives Lutundula Commission included representatives

from all major parties to the conflict from all major parties to the conflict Highly controversial: allegations of withdrawing Highly controversial: allegations of withdrawing

names, not dealing with important actors, certain names, not dealing with important actors, certain sectors not included – no follow-up sectors not included – no follow-up (electoral period)(electoral period)

Sent a signal to companies that they could be Sent a signal to companies that they could be exposed – naming and shamingexposed – naming and shaming

Lutundula ReportLutundula Report Investigated 50 mining contracts signed during the Investigated 50 mining contracts signed during the

conflict conflict Found that dozens of contracts were either illegal Found that dozens of contracts were either illegal

or of limited value for the development of the or of limited value for the development of the countrycountry

Recommended that 16 contracts be ended or Recommended that 16 contracts be ended or renegotiatedrenegotiated

Recommended that 28 Congolese and Recommended that 28 Congolese and international companies be investigated for international companies be investigated for violation of Congolese lawviolation of Congolese law

Recommended that 17 persons be prosecuted for Recommended that 17 persons be prosecuted for crimes including fraud and theft. crimes including fraud and theft.

Implications of sanctions in Implications of sanctions in extractive industriesextractive industries

On armed conflict – financing armed groupsOn armed conflict – financing armed groups Artisanal miners – sanctions likely to affect Artisanal miners – sanctions likely to affect

them most severely – livelihood security them most severely – livelihood security issuesissues

Impact on/of existing (corrupt) trading Impact on/of existing (corrupt) trading system – mushroom effect (cut one, another system – mushroom effect (cut one, another grows in its place)grows in its place)

Conclusion: Sanctions may not be the answer Conclusion: Sanctions may not be the answer (under consideration)(under consideration)

Addressing illegal exploitationAddressing illegal exploitation

Recommended governmental reform initiatives:Recommended governmental reform initiatives: Reinforce/build institutions capable of promoting legitimate trade, Reinforce/build institutions capable of promoting legitimate trade,

reducing criminal involvement and raising public revenues (regulatory reducing criminal involvement and raising public revenues (regulatory bodies, bodies, security sectorsecurity sector))

Extractive industries transparency initiative Extractive industries transparency initiative (Min of Plan supporting technical committee with a view to implementation)

Recommended non-state initiatives: Recommended non-state initiatives: Organize producers to create mechanisms to promote social

development Engagement to respect best practices through voluntary principles,

code of conduct, and respect for rule of law

Recommended regional initiative: a cross-border commission to stem Recommended regional initiative: a cross-border commission to stem fraudulent exports (requires viable national counterparts, i.e. justice)fraudulent exports (requires viable national counterparts, i.e. justice)

Attacking CorruptionAttacking Corruption

Culture:Culture:• Integrity vs. Corruption – long-term vs. short-termIntegrity vs. Corruption – long-term vs. short-term• Regaining public trust through participation, consultation Regaining public trust through participation, consultation

- fostering perception of integrity- fostering perception of integrity

Political will:Political will:• Creation of personal and corporate risks to engage in Creation of personal and corporate risks to engage in

corruption – judicial, administrative, regulatory, financial, corruption – judicial, administrative, regulatory, financial, and economic sanctionsand economic sanctions

What future?What future?

DRC Government Programme 2007-2011DRC Government Programme 2007-2011 JUSTICE AT THE FOUNDATION OF REFORMS – JUSTICE AT THE FOUNDATION OF REFORMS – SINE QUA NONSINE QUA NON

– Calls for restructuring public enterprises and a mechanism for monitoring Calls for restructuring public enterprises and a mechanism for monitoring the execution of mining contractsthe execution of mining contracts

– Proposes reform that will include transparency, increasing revenues, as Proposes reform that will include transparency, increasing revenues, as well as environmental and social sustainabilitywell as environmental and social sustainability

– Recruitment and deployment of consultants to assist DRC mining officials Recruitment and deployment of consultants to assist DRC mining officials to conduct inspectionsto conduct inspections

– Publication of key elements and analyses of partnership agreements, and Publication of key elements and analyses of partnership agreements, and the renegotiation of agreements as requiredthe renegotiation of agreements as required

– Adoption of a business plan and reform programme for Gecamines and Adoption of a business plan and reform programme for Gecamines and short-term reform programmes for other public enterprises;short-term reform programmes for other public enterprises;

– Adoption of transparent procedures for awarding mining rights (exploration Adoption of transparent procedures for awarding mining rights (exploration or exploitation)or exploitation)

– Political will, including justice reform, together with private enterprise Political will, including justice reform, together with private enterprise support are key for executing the government’s plans.support are key for executing the government’s plans.