GUINEA

COUNTRY OVERVIEW

LOCATION AND SIZE.

Guinea lies on the West African coast, bordered by Sierra Leone and Liberia to the south, Guinea-Bissau and Senegal to the north, and Mali and Côte d'Ivoire inland to the east. It has 320 kilometers (199 miles) of coastline, and a land area of 245,857 square kilometers (94,925 miles). Comparatively, the country is slightly smaller than Oregon. The capital of Conakry is on the coast of the Atlantic Ocean and has the only international airport.

POPULATION.

The population was estimated to be 7,613,870 in July of 2001, a figure which includes up to half a million refugees from the neighboring countries of Sierra Leone and Guinea-Bissau. According to the United Nations, Guinea is the largest provider of shelter for refugees in the region, with an estimated 650,000 refugees in 2000, and the pattern has been for refugees to drift to the capital, putting pressure on municipal services. The population growth rate in 2001 was estimated at 1.96 percent. The majority of the population is rural, with just 29.6 percent of the population living in urban areas. The capital is home to 1.1 million people, and a further 9 towns have populations of between 25,000 and 100,000.

The population is composed primarily of 3 indigenous ethnic groups: the Peuhl (40 percent), Malinke (30 percent), and Soussou (20 percent). Fully 85 percent of the population are Muslim, while 5 percent are Roman Catholic and the rest follow traditional beliefs. The population is quite young, with 43 percent between the ages of 0 and 14, and 54 percent between the ages of 15 and 64. The life expectancy in the country is 45.91 years (43.49 for men and 48.42 for women).

OVERVIEW OF ECONOMY

Guinea is a small economy in terms of the total value of its output. The population is small, at around 7.6 million, and not very productive: the amount of output produced per person is very low at US$540 a year (by way of comparison the U.S. figure is US$29,340 per person, per year). This low output level, combined with poor educational prospects and inadequate access to health care and other human services, has earned Guinea a place near the bottom of the United Nations (UN) Human Development Index, with a ranking of 162 out of 174 countries. The population is growing fairly rapidly, at 1.96 percent a year, with the average woman giving birth to 5.5 children during her lifetime, and this rate adds to the problems of generating higher incomes. Most people— 80 percent—depend on agriculture for their livelihoods, mainly on small family farms. Despite these limitations, in the last several decades Guinea's economic output has increased more rapidly than its population, and average living standards have improved. The agriculture and services sectors have performed better, with industry doing less well.

Following independence from France in 1958 all opposition was ruthlessly crushed, and Guinea pursued a Marxist development strategy, which continued until 1984. Inefficient public companies controlled all economic activity, discouraging all private enterprise, and the economy was centrally planned. Vestiges of the old system remain, despite 15 years of support from the International Monetary Fund (IMF) for economic reforms. Only the mining sector remained productive over this entire period, as it operated mainly in enclaves isolated from the rest of the economy.

Some liberal policies were brought in towards the end of President Ahmed Sékou Touré's First Republic, but his death in March 1984 brought a fundamental change in policy. The new government embarked on an economic and financial reform program with IMF support and foreign creditor banking. Phase One of the program concentrated on removing the worst distortions in the economy. This task involved a massive devaluation of the Guinean franc; the privatization or liquidation of government-owned enterprises; trade liberalization and the removal of price controls; the abolition of state marketing boards; the creation of a commercial banking system; and the review of civil service employment. The initial success of the program won Guinea partial debt rescheduling in 1986 and further IMF funding in 1987.

A second phase of reforms was designed to change attitudes in the public and private sectors. It included reorganizing the Customs Service, widening the tax net, and introducing stricter budgetary controls. Guinea failed to secure an extension to the 1987 loan, however, because of budgetary overspending, inadequate revenue generation, privatization delays, and a failure to cut public sector employment. Some of the more serious structural problems were addressed in the early 1990s on the signing of a new loan agreement which brought further support and debt relief from the donor community.

In 1992 the IMF had again to address the government's inability to reach targets, and in 1994 it extended its lending for 12 months while it constructed a new package. Performance was good in early 1995 but fell again later in the year. An army mutiny in February 1996 compromised donor aid and business confidence and caused the government to be unable to balance the budget after it gave in to the mutineers' demands for pay increases.

When Sidya Touré, an economist by profession, became prime minister in mid-1996, he led a sustained attempt to stick to IMF targets, especially in the field of budgetary shortfalls, public expenditures, and revenue collection. Thus, the structural adjustment loan was renewed in 1997, and lenders rescheduled Guinea's debts on exceptionally generous terms. However, the appointment of a new prime minister, Lamine Sidime, in 1999 led to further IMF and donor problems because, despite allowances being made for the exceptional circumstances of the period, the reform program had drifted off-track and had been suspended. By late 1999 the donor community felt that the situation had improved enough to release further funds to Guinea, under tight conditions. By the turn of the century, however, Guinea had labored for twenty years to improve the structure of its economy and had little to show for its efforts. Despite millions of dollars of foreign aid and loans, the government is still unable to stick to budgetary schemes, unemployment remains high, and the country remains overly dependent on the mining sector.

Agriculture accounted for 22 percent of the GDP in 1998, but it offered employment to 80 percent of the population. Most people involved in the agricultural sector are engaged in some form of subsistence agriculture, which means that they are producing goods for their own consumption or for barter. Mining provides the largest source of foreign exchange earnings and government revenue, but its share in the economy is declining due to under-investment and falling world prices. Due to the poor state of the government-owned industries, there has been little interest in the government's privatization program, and only 4 percent of the GDP is generated by formal manufacturing. Altogether, industry provided 35.3 percent of the GDP in 1998. There has, however, been large growth in services, with banking reforms stimulating the financial services sector and external financing bringing a boom in trading and utilities. Services contributed 42.4 percent to the GDP in 1998. Together, industry and services employed 20 percent of the workforce in 2000. The informal sector, comprising small-scale manufacturing and services operating from no permanent premises, is also thriving.

Consumer inflation has run in single figures since 1992, after hitting a high of 72 percent in 1986. This rate is mainly due to low price rises for local goods and necessities, a fall in the price of imported rice, and the tight monetary policy of the government.

POLITICS, GOVERNMENT, AND TAXATION

European traders settled on the coast of Guinea in the 1600s, and the French military laid claim to Guinea in the 19th century after defeating tribal chieftains in the region. Guinea became a colony in 1891, though French forces took until 1898 to consolidate the interior of the country.

Ahmed Sékou Touré led Guinea to independence at the head of the Democratic Party of Guinea (PDG), which he founded in 1947. In 1958 Guinea rejected joining the French African community, and on being granted independence in October 1958, it severed all links with France. Touré set up a Marxist state with a 1-party dictatorship; it is known as the First Republic. Touré's regime quickly became oppressive and totalitarian, and by the time of his death in 1984, about 1 million Guineans lived abroad, while the ruling party enjoyed no popular support. On Sékou Touré's death in 1984, the military seized power, led by Lansana Conté.

Lansana Conté has dominated the political scene in Guinea since 1984. He directed the economy away from socialism. Under Conté, the military government sought to decrease the size of the public sector and increase private ownership and investment in a program of sweeping economic changes. Conté invited prominent exiles back into government. However, Conté's early years retained the pattern of eliminating opponents and engaging in frequent coups, along with regularly changing the cabinet.

In 1989, Conté paved the way for democratic political institutions. The Third Republic began in 1991 with the adoption of a new constitution, under which the president is elected to a 5-year term by popular vote. Conté and the PUP have dominated the New Republic, winning all elections by large majorities. However, questions about how the elections were conducted led to controversy. In February 1996 a group of officers opposed to Conté's regime tried to seize power. Conté was held for some hours until he agreed to certain concessions, including doubling army salaries and conferring amnesty on those involved in the mutiny. In 1998 the presidential election was marred by the arrest of the main opposition party leader, Alpha Condé, on charges of trying to overthrow the government. Local elections in 2000 brought a landslide victory for the PUP and widespread condemnation of how the elections were held.

Cabinet reshuffles have followed every election and the 1996 mutiny. The 1996 mutiny also led to budgetary problems and the cessation of IMF support. Following the mutiny political appointees were replaced with technocrats, and the prime minister became head of government. Prime Minister Sidya Touré, who had restored donor relations, was replaced by Lamine Sidime in March 1999.

Guinea has 40 registered political parties, with 9 being represented in parliament. The PUP has its stronghold in the Soussou-speaking coastal areas, although through patronage, it holds influence in most towns as well. Most other parties have strong regional support, but little else. The main opposition to PUP comes from its own reformers and the traditional political elite.

The 1982 constitution, which was suspended in 1984, was replaced in 1991 by the "Loi Fondamentale." The president is elected by universal suffrage and serves a renewable 5-year term. The president appoints the Council of Ministers to share executive power. Their decisions are subject to approval by the Legislative Assembly, though opposition from the Legislative Assembly may be overruled by decree.

The 114-member People's National Assembly is elected in a complicated way. One-third of the parliament is elected by a simple majority, and two-thirds by proportional representation. The legal system in Guinea is based on French civil law, but with local additions, and may be modified by decree. Guinea was originally supported by the Soviet bloc, but in 1975 Guinea's attitudes changed with the signing of the Lomé Convention (a European Union aid scheme), joining the Economic Union of West African States (ECOWAS), and repairing strained relations with the West, particularly France. Conté has politically realigned the state and has now fully restored Western ties. He is active regionally, and his troops often skirmish with neighbors, as political unrest in Guinea-Bissau, Liberia, and Sierra Leone have created refugees and rebel groups that operate across Guinea's borders.

Mining revenue accounts for 20 percent of government income (including taxes, royalties, and export duties), but this figure has fallen with falling world prices since 1987. Guinea has also significantly widened its tax net on incomes and profits, goods and services, and trade; in fact, this source of revenue has multiplied tenfold from 1989 to 1999, though this amount has not been enough to offset the reductions in mining revenue and the increased state wage bill. Overall government expenditures have been reduced since 1991, though not enough to consistently balance the budget.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

There has been a great improvement since the mid-1980s to Guinea's transport infrastructure. The road network has quadrupled in size and several projects are under way to further expand it. In 1996, about 16.5 percent of the country's 30,500 kilometers (18,953 miles) of main routes were paved. Most routes link urban areas to mining areas, and access to the remainder of Guinea is difficult. Half of the 80,000 vehicles on Guinean roads provide public transport.

The only functioning railway links the ports to the mines and carries no passengers. The Kamsar to Kankan railway line no longer operates. Renovation of the railway system is under consideration.

Conakry port is operating at near saturation levels, handling 94 percent of imports. Plans are afoot to build an inland container terminal and reactivate Benty port. The country has 1 international airport, with Air Guinea operating an erratic regional schedule and internal flights to a dozen airstrips around the country.

Telecoms are handled by Sotelgui, which has been managed by Telekom Malaysia since 1995. The number of telephones increased to 25,000 by 1998, up from 19,000 in 1996. Sotelgui was scheduled to introduce a mobile cellular network in late 1997. The number of telephones

is set to double by the end of 2000, although most are still only used in the capital. However, the system is still inadequate, and most companies continue to rely on their own communication services.

A vigorous independent press competes with a state-run newspaper. However, the broadcast media, especially influential in rural areas, are controlled largely by the state.

Guinea has no proven fossil fuel reserves but enormous hydro-electric potential. Nevertheless, firewood accounts for 85 percent of domestic energy needs, and petroleum products are imported. Of the 320 megawatts of installed energy production capacity, 40 percent is privately owned. Only 6 percent of the population receive grid electricity, and this group is mainly in the capital. Several projects are underway to increase electricity production.

ECONOMIC SECTORS

Agriculture generated 22.3 percent of the GDP in 1998, and the major products are rice, coffee, pineapples, and palm kernels. Industry provided 35.3 percent of the GDP. The most important part of the industrial sector is mining, providing approximately 20 percent of GDP. Guinea has major mineral resources and is the world's second largest bauxite producer (bauxite is used to produce aluminum). Services were estimated to provide 42.4 percent of the GDP in 1998.

AGRICULTURE

Agriculture provided 22.3 percent of GDP in 1998, and 80 percent of the employment of the economically active population. Guinea has a climate that allows for a range of activities, but only 15 percent of cultivable land

is farmed, and most production is for subsistence. After independence in 1958, agricultural production stagnated, and growth in production did not meet growth in population as many cash crop plantations were abandoned. Self-sufficiency in food production is still elusive, despite the end of Marxist economic policies in 1984.

There are projects in hand to improve rice production, which is the main staple and covers 50 percent of cultivable land. However, around 40 percent of the national consumption of rice is still imported. The country is self-sufficient in most other foodstuffs and is even able to export some vegetables and fruit to Europe. Oil palm, rubber, and cotton plantations have received foreign investment.

Approximately 30 percent of rural families own livestock, mainly in the Kankan and Labe regions. The UN estimates that there are 2.4 million cattle, 1.5 million sheep, 54,000 pigs, and 9 million chickens in Guinea. Guinea imports 1,500 tons of meat and 10,000 tons of dairy products for urban use every year, though several projects designed to increase production in these items are under way.

Fishing provides less than 1 percent of the GDP, but 6 percent of exports. Industrial fishing provides half of the 120,000 ton catch, and 65 percent of the industrial catch is caught by foreign-registered boats. A lack of infrastructure reduces the domestic market for fish.

INDUSTRY

MINING.

Mining is the most important sector in the economy, providing approximately 20 percent of GDP, 90 percent of recorded exports, and 70 percent of government revenue, though world commodity price declines in the 1990s have hurt the industry. A new mining code has been an incentive to investors, and foreign companies are now responsible for 85 percent of new developments.

Guinea has 30 percent of the world's known reserves of bauxite and is the world's second largest producer of the ore. The biggest company in the sector is owned by the U.S. company, Alcoa, and produces 12.5 million tons per year, and through further investment this figure should rise to 13 million. A Soviet-backed company has had erratic production since the downfall of the Soviet system and produced only 1.5 million tons in 1998, though its capacity is 5 million tons per year. There is also a joint venture with Iran, though production has yet to start, as it is still waiting for improvements of the rail links with the capital to make the venture viable.

The parastatal Frigvia has the capacity to produce 700,000 tons per year of alumina (the processed form of bauxite), though heavy losses in the years 1991-96 and internal disputes have caused the French advisers to pull out. The privatization sale of Frigvia to a U.S. company is well advanced, and other nations have also shown interest in other smelting ventures elsewhere in the country.

Small-scale gold-mining takes place throughout the country, and several large ventures are planned or have recently come into production. Gold generates about 13 percent of export revenues according to the official figures, but the amount of small-scale mining and smuggling means that much gold production goes unrecorded, and the importance of gold to the economy is significantly greater than the statistics indicate.

The 1985 ban on small-scale diamond mining, which was designed to encourage large-scale foreign investors, was lifted in 1992, and small-scale operators are now responsible for the bulk of the national production of an estimated 80,000 to 125,000 carats per year. Official diamond exports are about US$40 million a year, but because only 15 percent of diamond mining goes through official channels, the real benefit to the economy is closer to US$250 million. The new mining code has sparked considerable international interest.

Guinea has 6 percent of the world's iron-ore, though plans to exploit the deposits have been held back due to their location near Liberia during a period of regional tension. Other reserves include chrome, cobalt, copper, lead, zinc, manganese, molybdenum, nickel, platinum, titanium, uranium, chalk, graphite, and granite. Guinea almost certainly has undiscovered deposits of commercial minerals as only one-third of the country has been surveyed.

MANUFACTURING.

Formal manufacturing is small and has fallen from 4.3 percent of the GDP in 1993 to 3.9 percent of the GDP in 2000. The majority of production is in the agro-industry sector, although manufacturing in Guinea also includes brewing, soft drinks, cement, and metal manufacture. The cigarette producer, Entag, closed following a fire in 1999, and most state-run enterprises have closed, and no major enterprise opened in the 1990s. Most manufacturing is concentrated around the capital.

Publicly-funded construction accounts for one-half of total construction, and most of it was concentrated on improving the infrastructure. However, recently the private sector has become more active.

SERVICES

Guinea's financial sector includes the Central Bank, 7 deposit-taking banks, 4 insurance companies, a social security institution, 2 small co-operative banks, and 50 bureau de change (currency exchanges). Most banking is in the capital, and the banking system is slowly gaining in public confidence, and more people are prepared to hold their money in the form of bank deposits.

Interest rate controls were lifted as part of monetary reforms in 1993, which also reinforced banking supervision. Banks may set lending and deposit rates, subject to a maximum spread about the Treasury bill rate. Short-term loans accounted for 83 percent of the US$170 million credit distribution to the private-sector in 1998, with 55 percent going to trading activities. The increasing funding needs of mines and the increase in deposits have led to an increase in medium-term lending.

Guinea's small tourism industry collapsed after independence and is unlikely to be rejuvenated in the near future. Despite government efforts, only 17,000 people visited in 1998, and most of those were for business. Tourism is mainly limited to wealthy locals and expatriates. A new ministry has been set up to deal with hotels and tourism. The capital has 4 international standard hotels.

INTERNATIONAL TRADE

Guinea's trade balance varies, depending on the output of the mining sector and prices in the international commodity markets. Guinea enjoyed a trade surplus in 1998 of US$135 million, on exports of US$695 million and imports of US$560 million. That surplus jumped to US$186 million on exports of US$820 million and imports of US$634 million in 2000. Bauxite and alumina have contributed approximately 70 percent of official export earnings in recent years, with diamonds and gold contributing 20-25 percent. All other exports come from agriculture and fishing. The main destinations for exports in 1999 were the United States, the Benelux countries (comprised of the Netherlands, Belgium, and Luxembourg), Ukraine, and Ireland; major importers were France, Belgium, the United States, and Côte d'Ivoire.

The lack of oil deposits and significant manufacturing means that imports are largely fuels, heavy machinery, transport equipment, and consumer manufactures. The increase in mining is reflected in the increase in machinery imports since 1995. Semi-finished goods have also increased, due to the boost in the construction industry.

Developing countries now provide one-third of Guinea's imports, whereas before industrialized countries supplied more than 80 percent. This change is mainly due to the forging of new links and a shift towards new inexpensive suppliers, predominantly the Côte d'Ivoire and China.

MONEY

Guinea is a member of the Economic Community of West African States (ECOWAS). Unusual for a former French colony, Guinea did not join the Franc Zone at independence. The exchange rate remained virtually unchanged from independence in 1958 until 1985 at around GF20-25:US__BODY__ but had depreciated substantially to GF1,940:US__BODY__ in 2001.

Since 1985, economic liberalization measures and a tight monetary policy have been undertaken, as advocated by the IMF and World Bank, and by the late 1990s Guinea had succeeded in reducing the rate of inflation, increasing foreign exchange reserves, and raising private investment. Fiscal reform and the elimination of administrative inefficiency and corruption are ongoing concerns.

Consumer inflation has run in single figures since 1992 (but stood at 72 percent in 1986) and this fact is mainly due to low price rises for local goods and necessities, a fall in the price of imported rice, and the tight monetary policy of the government. The inflation rate was estimated to be 4.5 percent in 1999.

POVERTY AND WEALTH

Guinea is a poor country by any measure. The GDP per capita (according to the purchasing power parity conversion, which allows for the low price of many basic

commodities in Guinea) stood at US__BODY__,300 in 2000. A 1994 survey indicated that 40 percent of the population was below the US__BODY__ per day poverty line. About 80 percent of the labor force is employed in agriculture, most of which is subsistence farming, and the greatest incidence of poverty is in the rural areas.

Education was severely disrupted after independence in 1958, with teachers being one of the first groups to seek exile. The change of government in 1984 brought a greater emphasis on primary education, which, although it is universally compulsory, achieved only 48 percent enrollment in 1996. Secondary education enrollment stood at 12 percent in 1996. Guinea devotes 25 percent of its budget to education and is backed by the IMF and World Bank, with the aim of achieving 60 percent primary enrollment by the end of 2000. Male literacy stands at 50 percent, but the female figure is much lower at 22 percent, according to a 1995 estimate.

Guinea's health statistics are amongst the worst in sub-Saharan Africa. Life-expectancy in 2000 at birth was 46 years. This estimate is an increase from the 1965 figure of 35, although it is far below the sub-Saharan average of 51 years. Moreover, 1 in 6 live births die before the age of one year, and 12 percent die in infancy (between the ages of 1 and 5). Only 45 percent of the population has access to medical care.

WORKING CONDITIONS

Wages are fixed according to the Government Labor Code. The official maximum working week for industrial workers is 48 hours, but there is little enforcement.

Guinea has a total labor force of some 3 million workers, and according to official 1995 statistics, some 50 percent of the workers had no formal employment. However, estimates that include participation in the informal economy and subsistence agriculture indicate an unemployment rate of between 8 and 11 percent. Unemployment figures have little significance in Guinea. There are very few with no work at all.

The civil service is the largest formal employer, engaging 3.6 percent of the population. An estimated 16.4 percent of the population earns wages from industry, commerce, and services, with 80 percent of the population employed in agriculture, of which most are engaged in subsistence farming. There is no unemployment benefit, and those who do not work rely on support from charities or their families. Many people would like a modern sector job but eke out an existence on family farms or in casual informal sector activities (such as hawking, portering, scavenging) in the urban areas.

The Confederation des Travailleurs de Guinée (Confederation of Guinea Workers, CTG) is the main trade union in Guinea. However, it has done little to improve working conditions and has generally lacked the ability to confront the government or large employers.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1600. European traders settle on the West African coast.

1891. Guinea becomes a French colony.

1898. French troops consolidate the Guinean interior.

1947. Sékou Touré forms the Democratic Party of Guinea (PDG) party.

1958. Guinea rejects joining the French African community and becomes independent, with Sékou Touré as the first president.

1984. Sékou Touré dies. Colonel Lansana Conté leads a military takeover of the government.

1984. The constitution is suspended.

1991. The constitution is replaced by the Loi Fondamentale. Multi-party politics are introduced.

1993. Conté is elected as head of state in presidential elections.

1996. A group of officers attempt a military coup but are unsuccessful.

1998. Conté is re-elected as president.

FUTURE TRENDS

It is very difficult to have economic progress without a platform of political stability, as both domestic and foreign investors are unwilling to risk resources which may not be secure. Conté has improved the domestic environment for business, but conflict with rebels on Guinea's borders with Sierra Leone and Liberia continues to dominate the political scene, though most regional leaders are expected to work together to try to restore stability. Rebel groups from Liberia have destroyed several towns in Guinea. Refugee transfer has started, with the aid agencies struggling to cope with the numbers. ECOWAS troop deployment in the region is attempting to restore order.

Most of the population of Guinea will continue to depend on agriculture for their livelihoods, and progress in this sector is expected to be slow. Guinea's undoubted mineral wealth has created income for only a small section of the community and does little to improve living standards or reduce poverty.

The IMF has pledged further support, and as a highly indebted poor country Guinea is expecting further debt relief. Aluminum companies are showing renewed interest in the country, but realization of investment plans will depend on improving regional stability. The United Nations has asked for stricter diamond controls to keep gems out of the hands of rebel groups in Sierra Leone who are looking for sources of income.

DEPENDENCIES

Guinea has no territories or colonies.

BIBLIOGRAPHY

Economist Intelligence Unit. Country Profile: Guinea. London: Economist Intelligence Unit, 2001.

"Guinea and the IMF." International Monetary Fund. <http://www.imf.org/external/country/GIN/index.htm>. Accessed October 2001.

La Guinée. <http://www.guinee.gov.gn>. Accessed October 2001.

Hodd, Michael. "Guinea." The Economies of Africa. Aldershot:Dartmouth, 1991.

U.S. Central Intelligence Agency. World Factbook 2001. <http://www.odci.gov/cia/publications/factbook/index.html>. Accessed September 2001.

U.S. Department of State. Background Notes: Guinea, December 1999. <http://www.state.gov/www/background_notes/guinea_ 9912_bgn.html>. Accessed October 2001.

U.S. Department of State. FY 2001 Country Commercial Guide: Guinea. <http://www.state.gov/www/about_state/business/com_guides/2001/africa/index.html>. Accessed October 2001.

Jack Hodd

CAPITAL:

Conakry.

MONETARY UNIT:

Guinea franc (GF). One franc equals 100 centimes. There are notes of 25, 50, 100, 500, 1,000, and 5,000 francs.

CHIEF EXPORTS:

Bauxite, alumina, diamonds, gold, coffee, fish, agricultural products.

CHIEF IMPORTS:

Petroleum products, metals, machinery, transport equipment, textiles, grain and other foodstuffs.

GROSS DOMESTIC PRODUCT:

US$10 billion (purchasing power parity, 2000 est.).

BALANCE OF TRADE:

Exports: US$820 million (f.o.b., 2000). Imports: US$634 million (f.o.b., 2000).