(Corrects Ban stance on U.N. peacekeepers in final section)
By Jonny Hogg
KINSHASA, Jan 13 (Reuters) - The stability of the Democratic Republic of Congo hangs in the balance after a disputed presidential election marred by violence and allegations of fraud.
Official results gave incumbent leader Joseph Kabila victory in the Nov. 28 poll. International observers said the results "lack credibility" and the influential Catholic Church accused the government of "treachery, lies and terror".
Disputes over the outcome of parliamentary polls held the same day could deepen divisions within the ruling coalition and create trouble for Kabila, who vows to focus on infrastructure- building and improving the business climate as the country struggles to recover from a civil war which ended in 2003.
Here are some factors to watch:
POLITICS
President Joseph Kabila came to power after his father was assassinated in 2001, and comfortably won November's single round elections with 49 percent of the vote.
The polls have been widely criticized by international observers citing evidence of irregularities and fraud, whilst the opposition has rejected the results and rival Etienne Tshisekedi declared himself president in a parallel ceremony.
The country's performance under Kabila has been lacklustre: it lies on the bottom of the U.N. Human Development Index and investors say it is one of the world's most challenging in which to do business.
What to watch
- Security crackdown. The disputed polls sparked a strong response from security forces, with Human Rights Watch saying at least 24 people were killed by police and military after the results were announced. Analysts say the government could become more repressive to stamp out opposition.
- Tshisekedi? Under heavy guard in his Kinshasa residence, the veteran opposition leader seems unable to mobilize the population or rally international support for his cause, whilst neither he nor the government look likely to compromise.
Kabila has admitted that some "mistakes" were made in the election process, but said the results must not be put in doubt.
- Parliamentary polls. There have been allegations of fraud from all sides, with politicians warning of splits within the ruling coalition as 18,000 candidates fight for 500 seats.
- Anger over elections could lead to instability in parts of the country, including the opposition supporting Kasai provinces and the volatile east, where armed groups still roam.
- International ties. Kabila's relations with Western donors could be strained by his controversial victory, although regional partners including South Africa have backed his re-election and China may increase its influence.
- The security forces will be crucial to Kabila's political survival and remain largely loyal, although the UN warned in a report last month of divisions following a controversial restructuring in the east.
THE ECONOMY
Despite achieving nearly 7 percent growth in 2011, Congo's economy remains fragile and heavily reliant on outside help. After securing debt relief in 2010 the country's external loan commitments fell to $2.9 billion. The government has been praised for its efforts to stabilize the economy although the latest payment of a $550 million IMF loan deal has been blocked after Congo refused to publish mining contracts as part of an internationally backed transparency programme.
The official leading interest rate sits at 20 percent whilst annualized inflation is 17.97 percent, although the rate jumped sharply at the beginning of 2012 after a chaotic implementation of new a VAT tax pushed market prices up.
Sustained economic growth is vital to a country where 80 percent of Congo's 67 million people live on less than $2 a day and 75 percent of the working population is unemployed according to the World Bank.
What to watch:
- New VAT. A lack of communication has led to widespread confusion and price hikes following the introduction of the new tax, leading to fears it could spark a spiral of inflation if not managed.
- Congo is still hoping to access the latest tranche of cash for the IMF loan but has yet to comply with transparency rules by publishing mines contracts.
- Donors disappointed with elections may take a tougher line with the government before disbursing funds.
INVESTMENT CLIMATE
Congo is the sixth worst place to do business out of 183 countries ranked by the World Bank. State-owned mining giant Gecamines has refused to publish all its mining contracts despite ministers agreeing to the move last year to improve transparency.
What to watch:
- The country has so far avoided serious electoral violence but it remains unclear how confident investors will feel following Kabila's controversial victory.
- Audit of Gecamines contracts. Gecamines says it plans to fund a near-$1 billion expansion in part by auditing its joint-venture partners to ensure it is "getting all its dues" . The plan could put Gecamines, a former mining heavyweight created by authoritarian leader Mobutu Sese Seko after independence in 1960, on a collision course with joint-venture partners like Freeport McMoRan and Glencore-owned Katanga Mining.
- Efforts to trace "conflict minerals". Trade is down and smuggling up in eastern Congo, the United Nations has said, amidst confusion over the details of U.S. legislation aimed at increasing traceability. Due diligence programmes have been successfully implemented in some areas.
- Congo's nascent oil sector. French Oil giant Total has taken a share in another eastern oil block near Virunga. After buying into a block in the west, Italian major Eni would also like oil blocks in the east.
SIMMERING CONFLICTS
Rebel groups continue to roam the east of the country, and the UN has warned a controversial re-structuring of the army which favoured some ex rebels in return for electoral support, could lead to splits and increased support for armed groups.
Despite numbering only an estimated 2,500 fighters, the Rwandan Hutu FDLR rebels continue to target civilians, with at least 45 people, mainly women and children, killed since the beginning of the year. Several other rebel groups including the former pro-government Mai Mai militia, LRA and Islamic ADF-NALU fighters still operate in Congo's eastern provinces.
Attempts to break links between the Congolese army and illegal mining have only been partially successful, with several key figures, including former CNDP rebel Bosco Ntaganda, implicated in smuggling.
What to watch:
- Restructuring of regiments in the east of the country has favoured those close to Ntaganda according to some, and has led to desertions and insecurity.
- U.N. peacekeepers. The world body renewed its mandate in June and U.N. Secretary-General Ban Ki-Moon has been quoted as noting that significant peace-building challenges remain. But following his victory, Kabila may push for withdrawal.
- LRA threat. The United States has agreed to send 100 troops to the region to help tackle the rebels, leading to hopes of improved security.
- Ethnic tensions. The elections rekindled historic tensions between ethnic groups in Katanga, Kabila's heartland and the neighbouring Kasai provinces who back Tshisekedi.
- Intervention from neighbours. Relations with neighbouring Uganda and Rwanda have warmed but remain fragile. Meanwhile analysts say latent tensions with Angola remain due to a row over ownership of oil rights. (Editing by Mark John)
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