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Project Title: Multimodal Transport Project in the Democratic Republic of Congo

Essay by   •  January 13, 2012  •  Case Study  •  1,795 Words (8 Pages)  •  1,999 Views

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Executive Summary:

The Multimodal Transport Project (MTP) for the Democratic Republic of the Congo (DRC) was envisioned in 2005 towards reviving the economic growth of DRC by improving the transport infrastructure and thus the industries that depend on it. This team has analyzed the project, utilizing resources made available on the World Bank website as well as information on the political and economic situation in DRC. The project was also assessed in light of ideas in the macroeconomics of developing nations propounded in 'The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else" by Hernando De Soto.

The goals of the project were assessed as aspiration and guided by broad economic objectives that were dependent on several factors beyond the immediate scope of the operations of the project itself. Some of these factors include deep-rooted culture of corruption, civil unrest, and issues with property rights, land acquisition and the resettlement of displaced locals. The historic security problems and political conflicts in the DRC were also referenced as relevant barriers to the success of the project. It was however found that the crux of project's objectives would be essential to the development of DRC due to the dependence of the primary industries of agriculture and mining on the institution of efficient transport. Other factors such as poor communication and information technology levels were found to be problematic.

In conclusion, the team believes that the project may very well achieve the laying out of a basic infrastructure for transport, but the long term sustainability and link to economic growth is drawn to question by the various external factors that were listed. Unless the fundamental problems of corruption, instability and poor property rights are fixed, the MTP will ultimately fail to sustain itself and contribute to the economy of DRC.

1. What are the economic goals of the project? Will reaching these goals make a large, positive difference in the lives of individuals in the region or country in which the project is taking place? Why or why not? List and justify any assumptions you make in your evaluation.

As stated in a project appraisal document, "The main goals [of the MTP] are to promote good governance and consolidate macroeconomic stability and economic growth through the rehabilitation of key transport infrastructure which, in turn, will help improve the provision of social services and reduce vulnerability of the poor". The economic goals are fairly broad and avoid specific deliverables. The Democratic Republic of Congo's economy is struggling: "Today, DRC is one of the poorest countries in the world, with a per capita gross domestic product (GDP) of about US$180 (2008). Although significant progress has been made over the last five years, DRC's political, economic and social challenges remain daunting".1 One specific goal of the MTP is to turn the transport sector away from the publicly run state-owned enterprises (SOEs) and into privately led growth. Due to chronic mismanagement and governmental corruption, the heart of DRC's transport sector struggle lies with the inefficiencies of the SOEs. To counteract these issues, "The MTP seeks to generate private sector-led growth with the expected outcome of improving transport connectivity nationwide as well as improving DRC's investment climate. Furthermore, the subordination of the majority of the MTP investment to the establishment of public-private partnerships (PPPs) in key SOEs will support the government's transport sector reform agenda which relies on commercially viable operations for securing financing and/or know-how from private operators".1

The current DRC government understands where improvement must be made in order to attain its economic goals. For instance, "In the short to medium term, the mining sector is expected to be the main engine of DRC's economic growth although providing a nurturing environment for the agricultural sector development is likely to be critical to ensure that the future benefits of the country's economic growth reach its poorest members"1. The MTP seeks holistic growth, as evinced in a project appraisal document: "The development of the transport sector in DRC is a major element of the government's policy towards economic growth and poverty reduction. This sector is a key enabler in increasing agriculture sector output, improving internal and external trade competitiveness, supporting mining sector growth and combating the economic malaise that affects isolated communities".1 At first glance, the MTP's goals should make a large positive difference in the lives of individuals in DRC. The country's major future economic growth is expected to come from the mining sector; the MTP will support this growth and others. Of the situation of the transport sector: "with productivity ratios up to twenty times lower than the best performing transport companies in sub-Saharan Africa (SSA), excluding South Africa, and tariff up to three times higher than the Continent's average, DRC's transport SOEs have the dismal record of being the most expensive, yet the least productive, transport enterprises in Africa".1 It is reasonable to conclude that achieving the stated goals of the project would bridge these gaps and benefit the people of DRC. However it is crucial that the infrastructure be supported by sustained development and stable land acquisition, which threaten the MTP's success.

2. Examining the economic institutions and structure of the economy in which the project is taking place, what barriers or enablers, if any, do you anticipate will pay an important role?

The Democratic Republic of the Congo's (DRC) economy is primarily based on agriculture and mining. Though its economy is slowly improving, the DRC is still struggling. Years



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