FACTBOX-Key political risks to watch in DR Congo

KINSHASA, July 1 (Reuters) - Democratic Republic of Congo this week celebrates 50 years of independence from Belgium but attention will soon turn to elections due next year.

The polls will be the second since the end of the war of 1998-2003 which drew in six foreign armies and resulted in the deaths of five million. But the country is still seeking political stability, battling economic woes and must decide on the future role of United Nations peacekeepers in ending simmering conflicts.

Here are some factors to watch.

POLITICS

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 like 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 sought 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 calls for international probes.

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.

-- Chebeya's autopsy results. These are due in July and may increase tensions, as well as prompt another shakeup in police circles. The head of police has already been suspended.

-- 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.

THE ECONOMY

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

Interest rates stand at around 42 percent. 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. Mining is forecast to contribute $88 million in government revenues in 2010, triple the 2009 amount.

The central bank forecasts growth of 5 percent in 2010. But 80 percent of the country's 67 million people live on less than $2 a day.

What to watch:

-- Debt relief. The IMF is seen giving the go-ahead for an $8 billion write-off, despite G8 member Canada raising concerns over a row with Canadian mining firm First Quantum (FM.TO).

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

INVESTMENT CLIMATE

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

However, in a series of disputes, several investors are seeking international arbitration and complaining about how contracts are awarded.

What to watch:

-- First Quantum's case. The Canadian firm is seeking international arbitration after its $700 million KMT project was closed. Rights to two other projects have also been disputed.

-- Vodacom (VODJ.J) dispute. A shareholder dispute between Vodacom Congo's minority shareholder CWN and Vodacom, which holds 51 percent, is also to go to international arbitration. Both cases will be closely watched by other investors.

-- New oil and mining codes. Ministries have prepared model contracts but they are yet to be decreed by government. Miners are already on edge and several oil firms saw their contracts awarded this month to new rivals.

SIMMERING CONFLICTS

The intervention of Rwanda in 2009 helped end fighting by Rwandan Tutsi-led CNDP rebels, whose leader Laurent Nkunda was arrested and is awaiting trial in Kigali.

CNDP have since officially been integrated into the army, but rights groups say they maintain control of swathes of land and are extracting taxes and mining cassiterite and coltan.

Congo's army continues to try to oust Rwandan Hutu FDLR rebels. While busy backing the army, U.N. peacekeepers are under pressure from Kabila to pull out of Congo by the end of 2011.

Former government militias, known as the Mai Mai, have splintered and mount random attacks. A rebel assault in western Equateur province in April has prompted an exodus of 100,000 refugees to neighbouring Congo Republic, while attacks from Uganda's rebel LRA in the north underscore wider instability.

What to watch:

-- U.N. peacekeepers. The U.N. acquiesced to Congolese demands and withdrew nearly 2,000 in June, leaving 20,000 others still in country. The U.N. says further withdrawals will depend on the security threat, but Congo insists on all blue helmets leaving by the end of next year.

-- Land and ethnicity. These two issues remain at the heart of Congo's simmering conflicts, especially in the eastern Kivu provinces. Land rights, the movement of people and political manipulation of these issues risk leading to further violence.

-- CNDP rebels. Current leader Bosco Ntaganda is wanted by the International Criminal Court for war crimes, and he could face a challenge from General Gad, a rising CNDP figure.

-- Intervention from neighbours. Once hostile due to support for local rebel groups, relations with neighbouring Uganda and Rwanda have warmed. But both countries face a testing year and any trouble in either country could have repercussions in Congo. (Writing by David Lewis; Editing by Giles Elgood)