GUINEA-BISSAU

COUNTRY OVERVIEW

LOCATION AND SIZE.

Guinea-Bissau lies on the west coast of Africa, with Senegal to the north and Guinea to the east and south. With a total area of 36,120 square kilometers (13,946 square miles), the country is a bit less than 3 times the size of the U.S. state of Connecticut. It has about 300 kilometers (186 miles) of coastline along the Atlantic Ocean. Guinea-Bissau also controls a set of islands, named Bolama, about 50 kilometers (31 miles) off the coast. The capital and largest city, Bissau, is located on the coast and has the only international airport in the country.

POPULATION.

The United Nations estimated that in 1997 the population stood at 1.1 million. As of July 2001, the World Factbook estimated the population to be 1,315,822. United Nations estimates put population growth at 2.7 percent in the years 1975 to 1997. By 2001, the World Factbook had estimated population growth to have dropped to 2.23 percent. The average woman in Guinea-Bissau has more than 5 children.

The population is composed of many ethnic groups, with the largest being the Balanta (30 percent), followed by the Fula (20 percent), Manjaca (14 percent), and Mandinga (13 percent). Other groups include Cape Verdean expatriates, Syrian Lebanese, and some Portuguese. Nearly half (45 percent) of the population is Muslim, and the Muslim community dominates the commercial sector and, increasingly, the government.

About 20 percent of the population was estimated to live in or near Bissau. The rest of the population lives as agriculturists in 8 mainly rural regions.

OVERVIEW OF ECONOMY

Guinea-Bissau has one of the least developed economies in the world. The economy relies mostly on agriculture. Nearly 80 percent of the workforce is engaged in agriculture; most work on small family farms and some work as laborers on cotton or cashew nut plantations. The production of cashew nuts is vital to the economy, making up 70 percent of the country's total exports. The gross domestic product (GDP) grew by 4.7 percent per year in between 1995 and 1997, compared to 2.6 percent between 1993 and 1994. However, the civil war caused output to fall by 28 percent in 1998, with the industry and services GDP output falling by 40 percent. This decline was a serious setback, as Guinea-Bissau was already one of the 15 poorest countries in the world.

The economy of Guinea-Bissau has not performed well in recent years. Output has increased less rapidly than population, and average living standards have fallen. But development in its widest sense involves more than just income, and in that sense Guinea-Bissau also suffers. The United Nations (UN) includes education and health as well as income in its Human Development Index, for which Guinea-Bissau was ranked 169 out of the 174 countries listed in 1998. The gross national product (GNP) per capita (converted using the exchange rate method) was low at US$160 per year. The purchasing power parity conversion (which makes allowance for the low prices of many basic commodities in Guinea-Bissau) puts GNP per capita at US$616. The World Factbook estimated the GDP per capita (based on purchasing power parity) to be US$850 per capita in 2000. These measures place Guinea-Bissau near the bottom of the low human development and low income categories.

The reasons for such poor economic performance stem from the country's tumultuous political situation. At the end of the 1990s, Guinea-Bissau weathered corruption, a devastating civil war, a coup d'etat, near destruction of Bissau, and displacement of more than 250,000 people. The problems in the country can be traced back to the end of the colonial period in 1974. Since independence, the economy and infrastructure has been poorly managed, leading to a reliance on international aid and imports. Weak infrastructure, the lack of equipment, and unskilled labor are the major obstacles to increasing output in the country's main economic sector: agriculture. Without these resources, Guinea-Bissau is also unable to exploit its abundant fish reserves, due to its lack of a modern fleet and port facilities. Hence, fishing is contracted out to foreign fleets. Manufacturing is also small, and mining is undeveloped.

After the decline caused by the centrally planned economy that was introduced after independence in 1974, the government began liberalizing the economy in the late 1980s. Since 1987, the World Bank and the International Monetary Fund (IMF) have had almost complete control of Guinea-Bissau's economic policy, and structural adjustment programs (SAPs) have aimed at removing price controls, increasing private enterprise, and reforming the public sector. However, the programs have been suspended periodically due to the government's inability to meet fiscal targets, and only after 1994 did the situation start to improve, mainly due to a $15 million 3-year IMF loan. The GDP growth was restored, inflation fell, and the trade deficit was reduced. The civil war also disrupted the plans, but by 2000 the programs were getting started again, and Guinea-Bissau was aided by the receipt of US$790 million in debt relief.

Guinea-Bissau's 1997 entry into the Franc Zone meant that the country adopted the CFA franc as its official currency and required the membership of the regional central bank, the Union Economique et Monetaire Ouest-Africaine (West African Economic and Monetary Union, UEMOA). UEMOA demanded expenditure cuts and higher tax collection. A comprehensive tax reform in 1997 involved the introduction of a generalized sales tax, streamlined custom tariffs, and reformed excise tax. The government also began eliminating 4,000 civil service posts. However, government expenditure rose due to reform costs and the re-capitalization of Banco Central de Guinea-Bissau. In addition, the rise in prices following Guinea-Bissau's entry into the Franc Zone led to a 50 percent pay raise for civil servants in late 1997. Inflation, which ran at 107 percent per year (1992-96), was chronically high before Guinea-Bissau entered the Franc Zone due to a rise in credit to the economy and the depreciation of the peso (the country's old currency). With the adoption of the CFA franc the government was able to reduce inflation to 17 percent at the end of the year, and, despite the civil war, it fell to 8 percent in 1998 and is estimated to have been 6 percent in 1999 and 3 percent in 2000.

The outbreak of civil war in June 1998 created turmoil in the reform program and put an end to US$10 million of the IMF loan. During the civil war, most economic activities were disrupted, especially in urban areas where most of the fighting took place. The government requested US$138 million in post-war assistance in May 1999. However, only in September 1999 did the IMF give US$3 million, which was designed to help prepare Guinea-Bissau for another 3-year loan program to support economic reforms. At the same time, the IMF urged Guinea-Bissau to increase tax revenue, control expenditure, restructure public enterprise, and re-capitalize the financial sector. This action led to a US$25 million Economic Rehabilitation and Recovery Credit (ERRC) loan in November, and in conjunction with other loans, this should help with the rebuilding of Guinea-Bissau.

POLITICS, GOVERNMENT, AND TAXATION

Guinea-Bissau was first colonized by Portugal in the 15th century, but later incursions met with resistance which culminated in a series of wars (1878-1936). However, during the colonial period Guinea-Bissau remained undeveloped. After a 10-year guerrilla war, Guinea-Bissau unilaterally declared independence in 1973, and Guinea-Bissau's independence was recognized by Portugal in 1974, following a military coup. A new government was formed by the African Party for the Independence of Guinea-Bissau and Cape Verde (PAIGC), which wished to unite Guinea-Bissau with Cape Verde. In 1980, Commander Joao Vieira overthrew the government and severed Guinea-Bissau's link with Cape Verde. The political situation remained unstable in the 1980s, with many attempted coups and much civil unrest.

Since 1991, the country has been a multi-party republic. The president is elected to a 5-year term by popular vote and appoints a prime minister after consultation with the leaders of the unicameral National Assembly, the country's legislature. Legislators are elected to 4-year terms. The court system ranges from a Supreme Court, whose members serve at the pleasure of the president to 9 regional and 24 sectoral courts.

Although Vieira forcibly took control of the government in 1980, he had agreed in principle to the implementation of a multi-party democracy in the early 1990s. Predominantly due to a fragmented opposition, PAIGC won the first election, but Vieira won a disputed presidential election in the second round in 1994. The change in government did not erase its economic ineptitude, however. The bad handling of the country's entry into UEMOA in 1997 led to strikes, and although a change of prime minister restored some confidence, corruption scandals soon struck the government. In June 1998, Vieira dismissed the army chief Brigadier Ansumane Mane, for alleged involvement in supplying arms to separatists from the Senegalese region of Casamance, which sparked a civil war. Despite a peace accord, tensions continued until Vieira was ousted in May 1999.

In November 1999, in a multi-party election, PAIGC was defeated, and Kumba Iala (also spelled Yala), the head of the Social Renovation Party (PRS), was elected president in January 2000.

The country implemented a constitution in 1984, which has been amended 5 times, the latest change approved in 1996. The original constitution of 1984 allowed a 1-party state and reforms, instituted by Vieira. The document put all power in presidential hands. In 1990, reforms led to a multi-party state. A crisis was narrowly averted in 1997, when the president unconstitutionally dismissed the prime minister without consulting the Assembly, which was later revoked after referral to the Supreme Court, with Prime Minister Correira reappointed in October with the full support of the main opposition parties. Later electoral organizational problems culminated in civil war and unrest that ended with the dismissal of Vieira.

After the problems of 1997, a committee was set up to revise the constitution and reinforce the judiciary's independence. In 1999, the Assembly passed the new constitution with a two-thirds majority. The constitutional amendments specified that any president could only be elected twice, with each term lasting 5 years, it abolished the death penalty, and it specified that only nationals born in Guinea-Bissau of parents born in Guinea-Bissau may hold high offices of state. The constitution still requires President Iala's approval, but this point is problematic because several incumbents (including Fadul and Brigadier Mane) are not of local descent. Also, the military junta's future plans are uncertain, as it has announced that it would rule alongside the new government for the next 10 years.

Since 1999, 2 parties have dominated the National Assembly—the PRS and the Resistance Ba-Fata Movement (RGB-MB)—and these 2 parties are likely to form a coalition. PAIGC's representation in the Assembly has dropped, despite its change from socialist ideals to those of democracy and market economics. The infighting between the new and old guard in Guinea-Bissau was responsible for the expulsion of Vieira and others and has continued. Since the civil war, for example, there has been a rift in the army between the old guard and the new professional soldiers. Because the military is underpaid and promotion is an arbitrary process, the rift could cause military problems in the long term. Some think the political situation in Guinea-Bissau remains very unstable.

Since the civil war, Guinea-Bissau has had intermittent security concerns along its border with Guinea and Senegal. Vieira had requested the assistance of Senegalese and Guinea troops to protect his administration during the civil war, which turned the coup into a regional conflict. In addition, Guinea-Bissau had also been a haven for Senegalese rebels. However, since the end of the war, the new government has sought to mend relations with Guinea and Senegal, and relations with Gambia are good.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Guinea-Bissau does not have a very developed or well-maintained infrastructure. Since the early 1980s, one of the country's main goals has been to develop its infrastructure. The 4,400 kilometers (2,734 miles) of roads in Guinea-Bissau, of which about 10 percent (453 kilometers, 281 miles) are paved, has attracted foreign aid in the form of sealing the main road to the northern border and constructing a major bridge at Joao Landin. About 85 percent of the population lives within 20 kilometers (12 miles) of a navigable waterway. Guinea-Bissau has many rivers that could be accessible to coastal shipping, but water transport needs vast improvement. Bissau is the main port, and there are plans for a European Union-sponsored deep-water port that will specialize in minerals and will be linked to Guinea by rail. (As of 2000, the country had no railways.)

Since the liquidation of the privatized national airline, Guinea-Bissau has had to rely on foreign-owned carriers. The civil war severely disrupted flights and the main airport only reopened in July 1999. In 2000, the country had about 29 airports, but only 3 had paved runways.

The government has announced its intention to liberalize the telecom industry, which is at present dominated by Portugal Telecom, which has a 51 percent stake in Guinea-Telecom. The government has also announced the extension of telecommunications to the whole country and the introduction of a cellular network, while USAID will provide Internet access. In 1997, there were 8,000 telephones in the country. By 2000, there was 1 Internet service provider and about 1,500 Internet users.

An experimental television service was started in 1989; by 1997 there were 2 television stations. The country's 3 private radio stations broadcast to nearly 49,000 radios in the country in 1997. Since 1991, a number of private newspapers and magazines have been launched, though all depend on the state printing house for publication. In 1998, there were several newspapers: 1 government biweekly, 1 private daily newspaper, and 3 private weeklies. The national printing press had difficulty maintaining enough raw material to print all the newspapers during the civil war, and publication was sporadic. By the end of the war, more regular publication had returned.

Guinea-Bissau has one of the lowest electrification rates in Africa, mostly because of corruption and inefficiency. The country is completely dependent on petroleum products, despite its own high energy potential, especially in hydroelectric power. Construction of a dam at Saltinho could eventually supply the whole country and provide excess electricity for export. After the development of an offshore upstream oil industry had been delayed by border disputes with Senegal, the United Kingdom's Monument Oil and Gas company and the Chilean company, Sipetrol, agreed to acquire the 3,500 square kilometer block with Guinea-Bissau receiving 22.5 percent of the output. In 1998, the state-owned electricity company was put up for a long-term lease to a private company, but little progress has been made.

ECONOMIC SECTORS

Although all economic sectors in Guinea-Bissau were damaged by the civil war, agriculture remained the most dominant economic sector. Agriculture (including forestry and fishing) contributed 62 percent of the GDP in 1998 and 83 percent of the labor force were employed in the sector in 1994. The World Factbook reported that agriculture contributed 54 percent of the GDP and employed 78 percent of the workforce in 1997. Industry (including mining, manufacturing, construction and power) employed an estimated 4 percent of the economically active population in 1994 and provided around 13 percent of the GDP in 1998, down from the

15 percent reported by the World Factbook for 1997. According to World Bank figures, the industrial GDP contribution increased in real terms by an average of 2.7 percent per year from 1990 to 1997, although it rapidly decreased by 12.7 percent in 1998 during the civil war. Services employed an estimated 19 percent of the economically active population in 1994 and provided an estimated 25 percent of the GDP in 1998, down from the 31 percent reported by the World Factbook for 1997. Despite the disruptions caused by the civil war, the economic sectors were not and still are not able to sustain the country. The economy of Guinea-Bissau is truly reliant on international aid.

AGRICULTURE

Agriculture is the most important sector in the economy, providing well over half of the GDP. Food self-sufficiency has been the target of several governments, with the main products being rice, cassava, beans, potatoes, yams, sugar-cane, and tropical fruits. Rice production covers 30 percent of the arable land. The livestock population has recovered after the war, with the number of cattle reaching 550,000 in 2001, which is high in relation to a population of just over 1 million people. The changes in the agriculture sector have sparked much debate about land tenure issues as a result of the conflict between traditional village-based farms ( Tabancas) and the encroaching large-scale commercial sector ( Pontas). Even though the first development plan calling for self-sufficiency in food supplies was created in 1983, by the late 1990s foodstuffs remained the largest portion of imports.

The legacy of the Portuguese colonial period lives on in Guinea-Bissau because cash crops grown on vast plantations remain the largest export products for the country. Cashew nuts are the most important cash crop (cashew nut output has quadrupled since 1988). Despite suffering setbacks during the civil war, cashew nut production is expected to reach 60,000 metric tons in 2001 from 38,000 metric tons in 1997.

Forestry resources are abundant but under-used. The 2.35 million hectares of forest could produce 100,000 metric tons per year without disturbing the ecology. Under privatization the former parastatal, Socotram, has become 4 separate private companies, with a view to increasing competition and raising timber production.

The coastline is rich in fish and shellfish, and joint fishing ventures have been set up with Russian, Algerian, and Portuguese companies (with licensing for this fishing accounting for 40 percent of government revenue [1992-96]). However, over-fishing and lax controls have led to a drop in fishing potential and the introduction of a European Union-backed modernization program, with a quota system and more maritime patrols. In 1996, Guinea-Bissau also signed agreements to cross-monitor fishing zones with 6 other West African nations. Estimated catches of 0.25 to 0.3 million metric tons are possible if illegal fishing can be eliminated.

INDUSTRY

Industry is very small, providing only 13 percent of the GDP in 1998 and 4 percent of employment in 1994. Apart from construction, output consists largely of consumer goods for the domestic market. A brewery opened in 1997 and was the only large venture with international investment. Mostly there is little investment due to the poor power supply situation, the unskilled labor force, and the small market size. What little industry existed was heavily affected by the war. The mining sector is completely undeveloped, though prospecting is under way for bauxite, petroleum, and phosphate.

SERVICES

The banking system was radically reformed in 1989 to reflect economic liberalization and again in 1997 with Guinea-Bissau's entry into UEMOA. There are 2 private commercial banks in Guinea-Bissau, and an investment bank was launched with Portuguese capital. All banks were closed during the civil war and only re-opened in July 1999. Loan repayments are difficult due to the effects of the war, and credit availability is also set to contract due to reduced savings. The central bank was replaced by the Banque Centrale des États de l'Afrique de l'Ouest (Central Bank for West African States, BCEAO) when Guinea-Bissau joined UEMOA, and BCEAO has taken over part of the former central bank's assets and liabilities.

INTERNATIONAL TRADE

Since independence Guinea-Bissau has been internationally non-aligned, in order to solicit aid from all available quarters. While trading mostly with Western countries, it has also courted the other countries (including China and Brazil). In March 1997, Guinea-Bissau joined UEMOA as a full member and also became a full member of ECOWAS.

Since independence, trade has experienced many years of deficit. In 1999, imports were US$101 million. The World Factbook estimated that by 2000 imports had dropped to $55.2 million. Government efforts to diversify exports and to reduce export taxes have improved exports from US$27 million in 1998 to US$48 million in 1999, but this growth still left a trade deficit of US$53 million. Port closures during the war hindered exports, but the IMF expects exports to reach previous levels of

60,000 metric tons per year from 1999 onwards. By 2000, exports had risen to US$80 million, according to the World Factbook, giving the country a small surplus. Exports go mainly to India, Singapore, Italy, and Portugal, with imports mostly coming from Portugal, France, Senegal, and the Netherlands.

MONEY

Guinea-Bissau since 1997 has been a member of the 8-member UEMOA, and the currency is the CFA franc. The BCEAO issues currency notes and regulates credit expansion throughout the region. Since 1999, the CFA franc has been tied to the euro at 655.959:1 given that France has joined the European Monetary Union.

POVERTY AND WEALTH

Guinea-Bissau is one of the poorest countries in the world, and its population suffers. According to 1991 estimates, 50 percent of the population lives below the poverty line. The GDP per capita was estimated to be US$850 at purchasing power parity in 2000. Although the World Factbook estimated in 1991 that the poorest 10 percent of the population controlled 0.5 percent of the GDP and the richest 10 percent controlled 42.4 percent

of the wealth, there are few reliable figures for the distribution of wealth.

Economic development has been hampered by both low quality and poor coverage of education. Although education is compulsory between the ages of 7 and 13, barely half of the children in that age group attend school regularly. Primary enrollment stood at 60 percent, and secondary enrollments stood at 6 percent in 1997. Most students also supplement family income and frequently miss school. Education has also been hit by strikes over reforms and was badly disrupted by the war. According to 1997 estimates, male literacy was estimated to be 67 percent and female literacy 41 percent.

Health in Guinea-Bissau is in a state of crisis. About 90 percent of the needed funding comes from abroad, though this money is often diverted through corruption and does not reach its intended recipients. There are 1,300 hospital beds in Guinea-Bissau, and Bissau Hospital was badly affected during the war. The spread of disease and endemic malnutrition with resultant high death rates have made the level of health care in Guinea-Bissau the lowest in West Africa. Infant mortality stood at 138 per 1,000 before the war, but this figure has dropped to an estimated 112 deaths per 1,000 live births in 2000. Only a quarter of the population has access to clean water, sanitation, and health care, leading to frequent outbreaks of cholera and meningitis. HIV is also spreading, with an estimated 14,000 adults having been infected by the end of 1999.

WORKING CONDITIONS

The constitution of Guinea-Bissau makes little provision for workers and that which exists is not necessarily heeded. Forced labor is prohibited, and the economy is run along centralized lines, although this is changing under IMF and World Bank pressure. However, most of the population is employed in subsistence farming and the formal employment sector is small. There is no formal minimum wage. Children often work to help the household, leading to poor school attendance figures. Unions in the formal sector have been active, as was shown in strikes following the poorly handled entry into UEMOA in 1997.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1878. Portugal begins the colonization of Guinea-Bissau.

1973. Guinea-Bissau declares independence.

1974. Guinea-Bissau becomes independent from Portugal. Luis Cabral becomes president.

1980. Joao Vieira overthrows Cabral and assumes the presidency.

1997. Guinea-Bissau joins UEMOA.

1998. Civil war breaks out after Vieira dismisses the army chief.

1999. Government of national unity is installed. The Senegalese and Guinean troops who had come to aid Vieira withdraw.

1999. Vieira is ousted. Multi-party elections are held.

2000. Kumba Iala is elected president.

FUTURE TRENDS

It is very difficult to have economic progress without a platform of political stability. Given the fragile peace in Guinea-Bissau, both domestic and foreign investors hesitate to risk their resources. The damage of the civil war and the continuing role of the military have been major concerns for international donors and the business community. Until confidence is restored, Guinea-Bissau cannot expect to make progress in improving the living standards of its people.

On the positive side, the general election was held without major incident and the opposition party gained the majority. It is expected that the former ruling party will continue to be a minority in the Assembly and that the military junta will struggle to reposition itself in the new political landscape. (The political parties have refused to endorse the military junta's proposed pact, which would allow it to participate in government for 10 more years.) Internal security could be unstable as demobilization of the armed forces begins. With the resumption of aid, the economy is expected to continue to recover, but long-term progress will depend on political stability and commitment to economic reform programs.

DEPENDENCIES

Guinea-Bissau has no territories or colonies.

BIBLIOGRAPHY

Economist Intelligence Unit Country Profile: Guinea-Bissau. London: EIU, 2000.

Forrest, Joshua. Guinea-Bissau: Power, Conflict, and Renewal in a West African Nation. Boulder: Westview Press, 1992.

"Guinea-Bissau." World Yearbook. London: Europa Publications,2000.

Hodd, M. "Guinea-Bissau." The Economies of Africa. Aldershot:Dartmouth, 1991.

U.S. Central Intelligence Agency. World Factbook 2001. <http://www.cia.gov/cia/publications/factbook/geos/pu.html>. Accessed October 2001.

U.S. Department of State. Background Notes: Guinea-Bissau, April 1994. <http://www.state.gov/>. Accessed October 2001.

U.S. Department of State. Guinea-Bissau: Country Reports on Human Rights Practices, 2000. <http://www.state.gov/>. Accessed October 2001.

Jack Hodd

CAPITAL:

Bissau.

MONETARY UNIT:

Communauté Financiére Africaine franc (CFA Fr). The CFA franc is tied to the French franc at an exchange rate of CFA Fr50 to Fr1. One CFA franc equals 100 centimes. There are coins of 5, 10, 50, 100, and 500ÊCFA francs and notes of 500, 1,000, 2,000, 5,000, and 10,000ÊCFA francs.

CHIEF EXPORTS:

Cashew nuts, shrimp, peanuts, palm kernels, and sawn lumber.

CHIEF IMPORTS:

Foodstuffs, machinery and transport equipment, and petroleum products.

GROSS DOMESTIC PRODUCT:

US__BODY__.1 billion (purchasing power parity, 2000 est.).

BALANCE OF TRADE:

Exports: US$80 million (f.o.b., 2000 est.). Imports: US$55.2 million (f.o.b., 2000 est.).