ECONOMY
Richly endowed with minerals, Guinea possesses over 25 billion metric tons (MT) of bauxite--and perhaps up to one half of the world's reserves. In addition, Guinea's mineral wealth includes more than 4 billion tons 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 large-scale irrigated farming and agro industry. 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 large-scale investment projects. The CNDD announced in January 2009 that it would review and possibly revise all existing mining contracts.
Joint venture bauxite mining and alumina operations in northwest Guinea historically provided about 80% of Guinea's foreign exchange. The Compagnie des Bauxites de Guinea (CBG) is the main player in the bauxite industry. CBG is a joint venture, in which 49% of the shares are owned by the Guinean Government and 51% by an international consortium led by Alcoa and Rio Tinto-Alcan. CBG exports about 14 million MT of high-grade bauxite every year. The Compagnie des Bauxites de Kindia (CBK), a joint venture between the Government of Guinea and Russki Alumina (Rusal), produces some 2.5 million MT annually, 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 expected to begin operations for several years. The Alumina Compagnie de Guinée (ACG), a subsidiary of Rusal which took over the former Friguia Consortium, produced about 2.4 million MT of bauxite in 2004, which is used as raw material for its alumina refinery. The refinery supplies about 750,000 MT of alumina for export to world markets. Both the Alcoa-Rio Tinto-Alcan consortium and the Guinea Alumina Corporation (GAC), whose stakeholders include BHP-Billiton, the Global Alumina Corporation, the Dubai Alumina Corporation, and the Mubadala Development Company, have signed conventions with the Government of Guinea to build large alumina refineries with a combined capacity of about 4 million MT per year.
Diamonds
and gold also are also mined and exported on a large scale. 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 that are 90% gem quality.
Production stopped from 1993 until 1996, when First City Mining
of Canada purchased the international portion of the consortium.
The largest gold mining operation in Guinea is a joint venture
between the government and Ashanti Gold Fields of Ghana. SMD also
has a large gold mining facility in Lero near the Malian border.
Other concession agreements have been signed for iron ore, but
these projects are still awaiting preliminary exploration and
financing results.
The Guinean Government adopted policies in the 1990s 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, after decades of socialism under President Sekou Touré. Despite the initial success of these programs to promote economic growth, changes in policy over the following decade up to the time of President Conté’s death made little headway in addressing the structural problems afflicting Guinea’s private sector, although there was some growth. Though growth has since slowed, 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 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 the Overseas Private Investment Corporation (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 utilities are plagued by inefficiency and corruption. Foreign private investors in these operations departed the country in frustration.
In 2002, the IMF suspended Guinea's Poverty Reduction and Growth Facility (PRGF) because the government failed to meet key performance criteria. In reviews of the PRGF, the World Bank noted that Guinea had met its spending goals in targeted social priority sectors. However, spending in other areas, primarily defense, contributed to a significant fiscal deficit. The loss of IMF funds forced the government to finance its debts through Central Bank advances. The pursuit of unsound economic policies has resulted in imbalances that are proving hard to correct.
Under then-Prime Minister Diallo, the government began a rigorous reform agenda in December 2004 designed to return Guinea to a PRGF with the IMF. Although exchange rates temporarily improved, these reforms did not slow down inflation, which hit 27% in 2004, 30% in 2005 and, according to the Economist Intelligence Unit, 34.7% in 2006 and 23.4% in 2007. Exchange rate stability is an ongoing concern. The Guinea franc (GNF) was trading at 2,550 to the dollar in January 2005, reached a high of 5,554 to the dollar in October 2006, and averaged approximately 4,500 to the dollar in 2007 and 2008. In 2007, the IMF launched a new Poverty Reduction Growth Facility for Guinea to support a three-year IMF program with the objective of reducing poverty and securing debt relief for the country under the Heavily Indebted Poor Countries (HIPC) initiative. As of late 2008, Guinea was on track to achieve debt reduction under the HIPC initiative. When Guinea reaches this HIPC completion point, lenders are expected to provide substantial debt relief. However, after the December 23, 2008 coup d’état, the status of the HIPC program remains unclear.
Despite the opening in 2005 of a new road connecting Guinea and Mali, most major roadways connecting the country's trade centers remain in poor repair, slowing the delivery of goods to local markets. Electricity and water shortages are frequent and sustained, and many businesses are forced to use expensive power generators and fuel to stay open.
Even though there are many problems plaguing Guinea's economy, not all foreign investors are reluctant to come to Guinea. Guinea Alumina Corporation's proposed alumina refinery has a price tag above $2 billion. Alcoa and Alcan are proposing a slightly smaller refinery worth about $1.5 billion. Taken together, they represent the largest private investment in sub-Saharan Africa since the Chad-Cameroun oil pipeline. Mining giant Rio Tinto has also begun a multi-billion dollar operation in the Simandou iron fields, located in Guinea's forest region, and is in talks with the government to construct a transnational railway from southeastern Guinea to Conakry. Additionally, BHP-Billiton has begun laying the groundwork for iron mining operations near Mt. Nimba in the Forest Region. The December 23, 2008 coup, however, has cast doubt on whether these projects will move forward.
GDP (2007 Economist Intelligence Unit est.): $4.8 billion.
Annual real economic growth rate (2007 Economist Intelligence Unit est.): 1.5%.
Per capita GNI (2007 World Bank est.): $400.
Avg. inflation rate (2007 Economist Intelligence Unit est.): 23.4%.
Natural resources: Bauxite, iron ore, diamonds, gold, salt, hydropower, uranium, fisheries.
Industry (36.1% of GDP, 2007 CIA est.): Types--mining, light manufacturing, agricultural processing.
Agriculture (23.7% of GDP, 2007 CIA est.): Products--rice, cassava, coffee, bananas, palm products, pineapples, livestock, forestry.
Trade: Exports (2007): bauxite, alumina, diamonds, gold, coffee, pineapples, bananas, palm products. Major markets--European Union, U.S., China, Eastern Europe, South Korea, Cote d’Ivoire. Trade balance (2006 CIA est.): -$344 million.
Official exchange rate (Nov. 2008): Approx. 4,824 Guinean francs=U.S. $1.
Fiscal year: January 1-December 31.
