(Updates)
By Jonny Hogg
KINSHASA, June 14 (Reuters) - Democratic Republic of Congo's future remains uncertain after contested elections last November and a new rebellion in the east of the country.
President Joseph Kabila was named winner of the vote and has vowed to focus on improving infrastructure after decades of corruption and successive wars. But his victory was marred by international observers saying the vote lacked credibility.
Renewed fighting in the east between mutinous factions in the army and Kinshasa loyalists risks reversing three years of relative stability. Evidence that Rwanda is backing the rebellion will test the rapprochement between the two countries seen as crucial for regional peace.
Here are some factors to watch:
POLITICS
Kabila came to power after his father was assassinated in 2001. Having won a 2006 poll, he comfortably won re-election in November with 49 percent of the one-round vote.
His PPRD party won 63 of the 500 seats in the National Assembly, down from 111 in the 2006 vote, meaning he is once more reliant on a messy coalition of parties to govern.
The elections were widely criticized by international observers who cited evidence of irregularities and fraud.
The death of chief adviser Katumba Mwanke in a plane crash earlier this year has deprived Kabila of his closest advisor, but his appointment of Matata Ponyo Mapon, a technocrat prime minister, has been largely welcomed.
Congo's performance under Kabila has been lacklustre: It lies at the bottom of the U.N. Human Development Index and investors say it is one of the hardest places to do business.
What to watch:
- Matata Ponyo's new government contains many new faces, seen as an attempt to focus on economic growth. It remains unclear if the economist and former finance minister has the experience to navigate Congo's complex political landscape.
- Deteriorating security situation in eastern Congo. There are fears of renewed war after ex-rebels who had been integrated into the army deserted in the east. A return to conflict in the east will drain precious government time and resources.
- Relations with Rwanda are increasingly strained after Congo's government said the rebels were receiving cross-border support, a claim strongly denied by Kigali. The spat could spell the end of a three-year rapprochement between the former foes and risks worsening the conflict in the east.
- Cracks may appear in the coalition without Katumba Mwanke's presence, although some believe his death could give Kabila an opportunity to assert himself.
- International ties. Kabila's relations with Western donors have been strained by his controversial victory. Regional partners, including South Africa, have however backed his re-election and China may increase its influence.
SIMMERING CONFLICTS
Nearly a decade after the official end to Congo's wars, the nation is still crippled by several simmering conflicts.
The defection of renegade general and wanted war criminal Bosco Ntaganda with hundreds of men is the biggest threat to the fragile east since rapprochement with Kigali led to a 2009 peace deal with Tutsi-led rebels experts say Rwanda previously backed.
The defection, which came after Kabila said he wanted to arrest Ntaganda, has sparked clashes that have displaced at least 100,000. The army has made advances but has been unable to dislodge rebels from hills near the Rwandan border.
Congo says that soldiers in Rwanda have provided as many as 300 recruits as well as arms and ammunition to the rebels but it has stopped short of directly blaming the government.
Despite numbering only an estimated 2,500 fighters, Rwandan Hutu FDLR rebels also continue to target civilians, and have been involved in tit-for-tat massacres with a local auto-defence group, Raia Mutomboki, leaving possibly hundreds dead.
Several other rebel groups including the former pro-government Mai Mai militia, LRA and Islamic ADF-NALU fighters, both from Uganda, still operate in Congo's eastern provinces.
What to watch:
- Will more former rebel fighters desert the national army and join Ntaganda's rebellion or can the government arrest him?
- Will Rwanda, whose army took part in Congo's two wars, be drawn back into either a direct or indirect conflict with Congo as it attempts to protect its interests in eastern Congo?
- U.N. peacekeepers. The world body renewed its mandate in June and U.N. Secretary-General Ban Ki-moon has been quoted as saying that significant peace-building challenges remain. But following his re-election, Kabila may push for their withdrawal.
- LRA threat. A massive internet campaign by NGO Invisible Children has raised the profile of the hunt for LRA leader Joseph Kony. The U.S. has dispatched 100 troops to the region to provide advice and intelligence but poor relations between countries continue to hamper regional efforts.
- Ethnic tensions. After nearly two decades of killings and exactions at the hands of Rwandan FDLR rebels, there are worrying signs that Raia Mutomboki is tapping into xenophobic sentiment, targeting all Rwandophones in eastern Congo.
THE ECONOMY
Despite achieving 7 percent growth in 2011, Congo's economy remains fragile and heavily reliant on outside help. After securing debt relief in 2010, external loan commitments fell to ${esc.dollar}2.9 billion.
The government has been praised for its efforts to stabilise the economy and hopes to receive the latest payments in a ${esc.dollar}550 million IMF loan deal after belatedly publishing mining contracts as part of a push for greater transparency.
The official leading interest rate has dropped to 12.5 from 17 percent whilst annualised inflation is 9.3 percent.
Sustained economic growth is vital to a country where 80 percent of Congo's 67 million people live on less than ${esc.dollar}2 a day and 75 percent of the working population is unemployed, according to the World Bank.
What to watch:
- Global markets. Congo is aiming for 6.6 percent economic growth in 2012, with prime minister Matata Ponyo saying this could be revised up after a strong start to the year. The long-term aim is to hit double-digit growth within five years.
- Mining contracts were published as part of an internationally backed drive for better governance of natural resources. But contracts from the forestry and oil sectors have yet to be made available, undermining claims of transparency.
- Donors disappointed with elections may take a tougher line with the government before disbursing funds.
INVESTMENT CLIMATE
Congo is the sixth worst place to do business out of 183 countries ranked by the World Bank and analysts say political uncertainty could further unnerve investors.
What to watch:
- If Kabila's new technocrat government succeeds in attracting investors as it also tackles the worsening security in the east?
- Audit of Gecamines contracts. State-run miner Gecamines says it plans to fund a near-${esc.dollar}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 reduced to a minor player in joint ventures, on a collision course with partners like Freeport McMoRan and Glencore-owned Katanga Mining.
- Asset sales. A number of Congolese mining assets have been sold to fund the Gecamines revamp but the firm has said no more will be put on the block, despite still needing cash.
- Efforts to trace "conflict minerals". Trade is down and smuggling up in eastern Congo, the U.N. has said, amid 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.
- Analysts have warned of "semi-nationalisation" of the agriculture sector after the government passed a law in December saying all agri-business must be majority Congolese owned. (Editing by David Lewis, Adrian Croft)
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