UPDATE 2-Congo on track for 8 pct growth, fighting corruption - PM

Thu Jun 6, 2013 1:40pm EDT

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* Prime Minister says growth could reach double digits next year

* Inflation forecast to end 2013 at below one percent

By Jonny Hogg

KINSHASA, June 6 (Reuters) - Democratic Republic of Congo's economy will grow by more than 8 percent this year thanks to a booming mining sector but the government knows it must do more to stamp out corruption, the prime minister said on Thursday.

Congo, a country the size of Western Europe at the heart of Africa, has some of the world's largest copper and cobalt reserves as well as rich deposits of coltan, tin and diamonds.

But investors have been deterred by infrastructure and institutions ravaged by decades of mismanagement and war.

Prime Minister Augustin Matata Ponyo denied that Congo's mineral wealth and turbulent history condemned it to a "resource curse" of economic underperformance and said his government was striving to strengthen economic governance.

"The level of growth this year...will be 8.3 percent," he told a forum in the capital Kinshasa, adding the economy could reach double-digit growth as soon as 2014, a year earlier than forecast by the International Monetary Fund.

Pointing to the economic progress achieved since President Joseph Kabila took office 11 year ago, Matata Ponya said copper production hit 600,000 tonnes last year, versus 19,000 in 2002. Inflation, which stood at 135 percent in 2002, was on track to end this year below 1 percent.

The benefits of Congo's economic progress have been slow to reach its 65 million inhabitants, however, two-thirds of whom survive on less than a dollar a day.

The IMF warned recently that Congo's rising debt and poor governance in extractive industries was weighing on its economy.

"I want to assure you this country is in the process of changing," Matata Ponyo said. "I'm convinced the question of development is mainly an issue of governance and leadership."

WORLD BANK URGES REFORM

Plagued by decades of misrule since independence from Belgium in 1960, Congo has offered cut-prie deals to attract investors as it seeks to recover from two wars, the last of which officially ended in 2003.

Last month, a panel led by former U.N. secretary general Kofi Annan found that Congo had lost $1.36 billion in tax revenues between 2010 and 2012 from opaque, cut-price mining asset sales to foreign firms.

The World Bank's director in Congo, Eustache Ouayoro, said the economic picture had improved under Kabila but the government must tackle a notoriously hostile business climate.

Congo ranked 181 out of 185 countries in the Bank's annual Doing Business survey this year, which measures the ease of running a company around the world. Factors like unreliable electricity and slow and costly bureacracy weighed on its score.

"The government must eliminate as soon as possible all the things that are poisoning that business climate," he said.

The government has repeatedly vowed to tackle graft but a persistent culture of corruption permeates everyday life.

Even the smallest requests to officials are met with demands for bribes and policemen block roads in the capital to extort money from motorists, often in sight of anti-corruption posters.

Congo ranked 160th from 174 countries in Transparency International's rankings of perceptions of corruption last year.

Tackling the problem will take time according to Paul Collier, director for Oxford University's Centre for the Study of African Economies: "You don't change cultures: you change specific institutions, specific rules and you build understanding around them bit by bit," he said.

Investing mining taxes in education and infrastructure to diversify the economy and avoid boom-bust cycles was critical if progress in Congo in Africa is to be sustained, Collier said.

"There's a sense across Africa, including here, of 'never again'," he said. "That energy can translate into learning from history instead of repeating it."

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