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GDP (2002 est.): $5.3 billion.
Annual economic growth rate (2002): (4.2%)
Per capita GDP (2002 est.): ($340).
Avg. inflation rate (2002): (8.9%)
Natural resources: Bauxite, iron ore, diamonds, gold, water power, uranium, fisheries.
Industry (28.4% of GDP): Types--mining, light manufacturing, construction.
Trade (of GDP 25.4%): Exports--$981.30 million: bauxite, alumina, diamonds, gold, coffee, pineapples, bananas, palm products, coffee.
Agriculture (11.8% of GDP): Products--rice, cassava, fonio, millet, corn, coffee, cocoa, bananas, palm products, pineapples, livestock, forestry. Arable land--35%. Cultivated land--4.5%. Major markets--European Union, U.S., Commonwealth of Independent States, China, eastern Europe, Japan, Saudi Arabia, Morocco.
Official exchange rate (2002): Approximately 1995 Guinean francs=U.S.$1. Fiscal Year: January 1-December 31.
Economy of Guinea
Richly endowed with minerals, Guinea possesses an estimated one-third of the world's proven reserves of bauxite, more than 1.8 billion metric tons (MT) of high-grade iron ore, significant diamond and gold deposits, and undetermined quantities of uranium. Guinea has considerable potential for growth in the agricultural and fishing sectors. Soil, water, and climatic conditions provide opportunities for largescale irrigated farming and agroindustry. Possibilities for investment and commercial activities exist in all these areas, but Guinea's poorly developed infrastructure and rampant corruption continue to present obstacles to largescale investment projects.
Joint venture bauxite mining and alumina operations in northwest Guinea provide about 90% of Guinea's foreign exchange. The Compagnie des Bauxites de Guinea (CBG), a joint venture in which 49% of the shares are owned by the Guinean Government and 51% by an international consortium (mostly U.S. and Canadian interests), exported about 14.5 million MT in 2000. The Compagnie des Bauxites de Kindia (CBK), a joint venture between the Government of Guinea and Russki Alumina, produces some 2 million MT, nearly all of which is exported to Russia and Eastern Europe. Dian Dian, a Guinean/Ukrainian joint bauxite venture, has a projected production rate of 1 million MT per year, but is not yet under production. The Alumina Compagnie de Guinée (ACG), which took over the former Friguia Consortium, produced about 2,400,000 tons of bauxite in 2001.
Diamonds and gold also are also mined and exported on a largescale. AREDOR, a joint diamond mining venture between the Guinean Government (50%) and an Australian, British and Swiss consortium, began production in 1984 and mined diamonds, which are 90% gem quality. Production stopped from 1993 until 1996, when First City Mining of Canada purchased the international portion of the consortium. More recent diamond mining ventures include HYMEX and the South African De Beers Corporation. DeBeers has operated in Guinea since 1994. The largest gold mining operation in Guinea is a joint venture between the government and Ashanti Gold Fields (85%) of Ghana. Other concession agreements have been signed for iron ore, but these projects are still awaiting preliminary exploration and financing results.
The Guinean Government has adopted policies to return commercial activity to the private sector, promote investment, reduce the role of the state in the economy, and improve the administrative and judicial framework. Guinea has the potential to develop, if the government carries out its announced policy reforms, and if the private sector responds appropriately. So far, corruption and favoritism, the border conflict, lack of long-term political stability, and lack of a transparent budgeting process continue to dampen foreign investor interest in major projects in Guinea.
Reforms since 1985 include eliminating restrictions on agriculture and foreign trade, liquidation of some parastatals, the creation of a realistic exchange rate, increased spending on education, and cutting the government bureaucracy. Since the beginning of the reform programs, both the number of public enterprises and the civil service payroll have been cut in half. Under 1996 and 1998 IMF/World Bank agreements, Guinea continued fiscal reforms and privatizations, and shifted governmental expenditures and internal reforms to the education, health, infrastructure, banking, and justice sectors.
In July 1996, President Lansana Conté appointed a new government, which promised major economic reforms, including financial and judicial reform, rationalization of public expenditures, and improved government revenue collection. A concerted effort by the government to implement this program had begun to bear fruit in advancing Guinea's economy and commercial sector into the intermediate stages of development, expanding international trade, agricultural production, and manufacturing capabilities. Then in 1997 the head of that government was stripped of his responsibilities, which were mainly economic, and finally fired in 1999. The economy has shown little progress since and growth has slowed. Corruption and a lack of set goals in development are the main causes of this downward turn of the economy. The informal sector continues to be a major contributor to the economy.
The government revised the private investment code in 1998 to stimulate economic activity in the spirit of a free enterprise. The code does not discriminate between foreigners and nationals and provides for repatriation of profits. While the code restricts development of Guinea's hydraulic resources to projects in which Guineans have majority shareholdings and management control, it does contain a clause permitting negotiations of more favorable conditions for investors in specific agreements. Foreign investments outside Conakry are entitled to more favorable benefits. A national investment commission has been formed to review all investment proposals. The United States and Guinea have signed an investment guarantee agreement that offers political risk insurance to American investors through OPIC. In addition, Guinea has inaugurated an arbitration court system, which allows for the quick resolution of commercial disputes.
Until June 2001, private operators managed the production, distribution and fee-collection operations of water and electricity under performance-based contracts with the Government of Guinea. However, both have continued to battle inefficiency, corruption and nepotism over the past year, and foreign private investors in these operations have recently departed the country in frustration.
In 2002, the IMF suspended Guinea's Poverty Reduction and Growth Facility because the Government of Guinea had failed to meet key performance criteria. In reviews of the PRGF, the World Bank noted that Guinea is meeting 100% of its goals on spending in targeted social priority sectors. However, this spending contributed to a significant fiscal deficit. The loss of IMF funds and the pursuit of unsound macroeconomic policies have placed the nation's poor at greater risk.
More recently, the government's excessive spending has created an environment nonconducive to local and foreign investment in Guinea's private sector. The government spends more than 50% of its budget on military expenditures, while neglecting the country's infrastructure. Major roadways connecting the country's trade centers are in poor repair or non-existent, slowing the delivery of goods to local markets. Electricity shortages are frequent and sustained, and many businesses are forced to use expensive generators. Since revenues (primarily from the mining sector) are low, the GOG finances its deficit through Central Bank advances. As a result, inflation has risen dramatically since January 2003. Climbing inflation combined with the government's enforcement of price controls have served to dampen interest in the private sector; even stalwart foreign investors in the mining sector are hesitant about future investment.