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By Katrina Manson

KINSHASA, Sept 1 (Reuters) - Democratic Republic of Congo is
still seeking political stability, battling economic woes and
must decide on the future role of U.N. peacekeepers ahead of
elections, due next year.

The polls for the presidency and parliament, due to start in
November 2011, will be the second since the official end to the
1998-2003 war, which drew in six foreign armies and resulted in
the deaths of 5 million.

Here are some factors to watch.


President Joseph Kabila came to power when his father was
assassinated in 2001, winning presidential elections in 2006.
But he still relies on the support of other parties such as
PALU, a veteran opposition party, for a parliamentary majority.

Factions within the coalition have complained about Prime
Minister Adolphe Muzito, from PALU, while opposition parties in
parliament have repeatedly tried to topple the government by
seeking votes of no confidence.

Rather than pushing through steps towards decentralisation
as set out in the constitution, analysts say Kabila's rule has
seen a concentration of power around him and a rising culture of
political oppression.

This perception was exacerbated in June when leading human
rights activist Floribert Chebeya was mysteriously found dead in
his car, prompting the suspension and questioning of police
chief John Numbi, previously thought to be a key Kabila ally.

What to watch:

-- Growing political instability. With politicians looking
to 2011 elections, factions within and outside the coalition
have already started jockeying for positions. Vital Kamerhe, a
key Kabila ally in 2006 and a popular leader of the lower house
of parliament, has spoken of the need to change the old order.
Etienne Tshisekedi, based in Belgium and head of the UDPS
long-time opposition party, has already said he will run.

-- Provinces seek more power. Congo missed a May 15 deadline
for decentralisation, which would see its 11 provinces divided
into 26 and receive more local funding. The failure to do so has
led to several districts, including oil-rich Ituri, to declare
themselves as provinces. Further moves by other districts would
worsen instability and deepen the discontent between them and
their distant capital.

-- Political crackdown. Should the coalition waver or face
serious internal opposition, it could trigger unrest given the
the government's track record of cracking down on dissent.


As part of efforts to secure $8 billion debt relief,
achieved at the start of July, and keep in step with conditions
for a three-year $550 million IMF loan, Congo has taken steps to
stabilise the economy.

Interest rates have come down to 22 percent, from 42 percent
at the start of July. Congo is on target to reduce annualised
inflation to 15 percent by the end of the year, from 69 percent
in January. The Congolese franc has stabilised against the
dollar in the past months, hovering just above 900 Congolese
francs to the dollar after falling 40 percent in 2009.

The central bank forecasts growth of 5 percent in 2010. But
80 percent of a population of 67 million live on less than $2 a
day and the country struggles with a budget of $5.69 billion.

What to watch:

-- Impact of debt relief. Congo won debt relief despite G8
member Canada raising concerns over a row with Canadian mining
firm First Quantum. Congo says from 2011, $520 million a year
intended for debt service will be freed up as a result, allowing
more to be spent on social spending.

-- Macroeconomic policy. The central bank and ministry of
finance have kept spending down this year, but a looming
election year may prompt a hike over the next 12 months.


The World Bank ranks Congo as the second worst place to do
business after Central African Republic in a list of 183
nations. Kabila wants the country to rise 20 places.

Model contracts in accordance with the new mining and oil
codes have been drafted, but they are yet to be decreed by
government. And in a series of disputes, several investors are
seeking international arbitration and complaining about how
contracts are awarded.

What to watch:

-- First Quantum case. The Canadian firm is seeking
international arbitration after its $750 million KMT project was
closed and rights handed to mining group ENRC, after the Kazakh
company said it would pay $175 million for five Congo projects
acquired through listed and offshore entities. Rights to two
other First Quantum site have also been disputed. First Quantum
may go after the third parties in the courts too.

-- Vodacom dispute. A shareholder dispute between Vodacom
Congo's minority shareholder CWN and Vodacom, which holds 51
percent, is also to go to international arbitration.

-- Congo's nascent oil sector. After awarding two oil blocks
on the Uganda border to surprise new entrants, both claimed by
South Africa President's nephew Khulubuse Zuma, Congo may face
legal action from the ousted Tullow Oil and South Africa
consortium Divine Inspiration Group. After announcing it had
bought into a block in the west, Italian major Eni has also
signalled it would like oil blocks in the east.