Country Brief

Last updated September 2008

Guinea covers 94,000 square miles and is divided into four natural regions: the coast of lower Guinea; the central, mountainous Fouta Djallon; the savanna of upper Guinea; and the forest in the southeast. Guinea had a population of about 9.4 million in 2007. Up to half a million refugees arrived during the ten years of civil war in the 90s from neighboring countries. The capital city is Conakry, with 1.8 million inhabitants.

History

The population of Guinea evolved over thousands of many years. In the tenth century A.D., Soussou and Malinke groups began to move into the area, and the currently known structure of population groups developed. The Fulani moved into Guinea in the 17th century, bringing Islam with them and pushing the Soussou to coastal areas. Upper Guinea was part of the Ghana Empire in the 10th and 11th centuries, then the Mali Empire until the 14th century, and finally the Songhai Empire until the 19th century. French rule began in the 19th century.

After World War II, several labor movements and political parties were established, including the Parti Démocratique de Guinée led by Ahmed Sekou Touré. In 1958, this party organized support to vote against Charles de Gaulle’s, France President, proposed French community. The party then went on and then declared independence the same year which led France by reaction to retreat completely and to cutting off financial aid and other assistance to Guinea. Other Western nations also shunned the country. Because of Guinea’s relative isolation, the country developed a strong national identity and opted for a socialist development path with strong ties with the former Soviet Union and other Eastern European countries. Sekou Touré, the first President, governed a one-party state from 1958 and progressively developed strong dictatorial tendencies. He survived several attempted coups and continued to rule Guinea until his death in 1984.

Two weeks after Sekou Touré’s death, the military took control of the government and established the Second Guinean Republic under Lansana Conté, a military officer. Following a complete revision of the constitution to reflect Guinea’s shift to a democratic society and market based economy, first presidential and parliamentary elections took place in late 1993; and Lansana Conté was declared president. He won the presidential elections again in 1998 for a five-year term.

Economy

Guinea has abundant natural resources, including 30 percent of the world’s known bauxite reserves, along with diamonds, gold, and other metals. The country also has great potential for hydroelectric power. While bauxite is currently the major exports product, the Guinean government encourages the broadening of the mining sector through adding higher value refining capacity for its traditional bauxite exports as well as through developing the country ‘s large iron ore resources. Large foreign investors are currently investing or exploring to invest in these areas.

Apart from the mining industry, the country’s industries are mainly based in the processing of agricultural inputs, including a plant for beer, juices, soft drinks, and tobacco processing. The rural population represents 64 percent of the poor and 80 percent of the population. Women are the mainstay of subsistence farming, accounting for 80 percent of food crop production. The government encourages a free market economy and is determined to promote foreign investment.

Although Guinea has always preserved internal peace since its independence, conflicts in neighboring countries have had an adverse impact on the economic performance. They caused unplanned defense and security expenditures, and social costs to accommodate the inflow of refugees. In combination with falling terms of trade, which persisted until early this decade, such events undermined the fiscal balance, compounded by an inefficient tax and customs administration and a weak monetary policy implementation. Poverty has increased to 53 percent since the last household survey of 2002, which concluded a poverty rate of 49 percent.

A second generation Poverty Reduction Strategy Paper (PRSP) was launched in August 2007. An Annual Progress Report is expected to be received this fall .A three-year PRGF arrangement for Guinea was approved by the IMF Executive Board on December 21, 2007 following successful economic stabilization and structural measures. Satisfactory first review under PRGF arrangements were completed on July 28, 2008. HIPC Completion Point could be achieved by end 2008 depending on the IMF’s second PRGF review and on improvements in governance in line with the countries’ PRSP. The recent cancellation by Government of a concession agreement attributed to Rio Tinto in 2006 for the exploitation of a large iron ore deposit at Simandou could undermine future FDI inflows, and thereby undermine progress towards macroreconomic stabilization and the restoration of growth.

Government continues to implement the PRGF arrangement with the IMF. Ambitious targets may be difficult to meet in light of rising food and fuel costs and the implementation of wage bill increases agreed with Trade Unions in 2007.However, strong fiscal reforms and improved coordination of fiscal and monetary policies helped lower inflation from almost 40% to 12.8 % between end 2006 and end 2007, but it had risen again to 24.6 percent at end June 2008. However, core inflation shows a declining trend. Growth is expected to recover in 2008 to 4.7 percent, up from an average of 2.3 percent over the period 2001 to 2007 and the 2007 fiscal balance (after grants) registered at a positive [0.3; unclear yet] percent of GDP, up from a deficit of 3.2 percent in 2006.

Politics

Since the fall of Sekou Touré’s socialist regime, Guinea has undergone substantial political liberalization, enshrined in the Constitution approved by referendum in December 1990, and which paved the way for a multi-party system in 1994 and legislative elections in 1995.

However, the subsequent imprisonment of Alpha Condé, one of the main opposition leaders, was perceived as a reversal of this trend and, although he was later released from prison, both foreign observers and national opposition groups continue to claim that the democratization process remains flawed. All opposition parties except one boycotted the July 2002 legislative elections to express their dissatisfaction with the conduct of the elections. Guinea’s bilateral partners also voiced their concerns with regard to the referendum and parliamentary elections, touching mainly on the mandate and independence of the electoral committee, the neutrality of the public service, and the access of political parties to the media. The 2005 local elections were set to be having been an important test for improving the framework for the next national elections, now foreseen for late 2008.

Severe electricity and water shortages in the capital and major cities, compounded by an increase in fuel, food (mainly rice), and other prices led to civil unrest in mid-2004. The continuous difficulties to contain inflation in 2005 and 2006 eroded the real value of income and contributed to two major strikes in early March and July 2006, which ended peacefully based on a negotiated agreement on wage increases and other government concessions.

While most refugees from Sierra Leone and Liberia have returned home (many who came to Guinea remained) and the peace agreement reached in Côte d’Ivoire in 2007 has stopped the inflow of refugees, the ongoing instability in Côte d’Ivoire is fueling a fresh influx of refugees and adding to Guinea’s security challenges. There is close collaboration among the presidents of Guinea, Côte d’Ivoire, Liberia, and Sierra Leone to review security and cooperation matters in the framework of the Mano River Convention.

In December 2004, Mr. Cellou Dalein Diallo was appointed prime minister. His government was viewed as a major attempt to overcome the country’s difficult situation. Indeed, Mr. Diallo took on a number of initiatives aiming at: (i) resuming the political dialogue between the authorities and the opposition, thus lightening the political climate; (ii) restoring fiscal discipline and financial orthodoxy, as well as reinforcing governance; and (iii) establishing a candid social dialogue with unions and other civil society members.

Mr. Diallo was relieved of his responsibilities as prime minister early April, 2006. From that time to early January 2007, the government was coordinated directly from the president’s office. It claimed to continue the reform policies. Then due to the poor living conditions of the population the country went though two major strikes that lead to the nomination of a consensual Prime minister in March 2007. In May 2008, the Prime Minister of consensus was sacked and replaced by Dr. Souaré a former Mining and Education Minister under past President Conté governments. Although the sacking of PM Kouyaté was a breach of the 2007 Agreement between Trade Unions, Civil Society Organizations, President Conté and political parties, the new PM was widely accepted on the conditions that he sticks to the reforms initiated since March 2007.

Donor Involvement

Donor assistance to Guinea has focused on investments to reconstruct or expand economic infrastructure (with substantial concentration on rural development) and improve the public administration’s management capacity. France is among the largest bilateral donors. The Bretton Woods institutions have been very supportive of Guinea's economic rehabilitation and reform program since 1986. The EU is also strongly involved in Guinea, especially in the infrastructure and governance sector. Other donors include the African Development Bank, UNDP, the Islamic Development Bank, the United States, Germany and Japan. Spain is considering joining the donor community in Guinea.

NGOs play an important role in project implementation in Guinea and help reduce dependency on the public administration. They have played particularly useful roles in the agriculture, education and health sectors, and are key implementing agencies in the ongoing cross-cutting World Bank-funded Village Support Program (FY99) aimed at reducing rural poverty and promoting sustainable rural development.

World Bank

The World Bank now supports a portfolio of eleven projects including three regional projects and totaling about US$224 million in IDA commitments, with US$120 million remaining undisbursed. These projects are concentrated in the following areas: community development, rural infrastructure, education, transport, electricity, Health/HIV/AIDS, water basin management, and rural electrification. In July 2007, the Bank has approved the second phases of both the Village Community Support Project and the Third Urban Project. As the macroeconomic situation and governance improve, the lending options will be enhanced. The Bank is revising its Country Assistance Strategy. The upcoming Interim Strategy Note (early 2009) will cover Bank activities for 2009 and 2010. Given the limited IDA allocation the Bank’s new operations will therefore aim to leverage non-Bank financing and to have a catalytic impact. The team will seek maximum effectiveness in the use of remaining funds in the current portfolio, as well as to maximize trust fund use. Four priorities have been identified around which to build the ISN: (i) to improve mining sector governance through the implementation of a holistic approach, (ii) to help government continue to deliver and if possible improve the current level of basic services, regardless of political ups and downs, (iii) to demonstrate that better management of utilities can improve water and electricity service delivery, and (iv) to prioritize binding constraints on agriculture and propose or begin to implement solutions.

IFC Role in Country Strategy:

• In Guinea, IFC focuses primarily on supporting the mining sector as well as improving access to finance for SMEs and the agribusiness sectors, via financial intermediaries. In the Mining Sector, IFC has a strong pipeline of high profile investments with strategic partners, which projects are at various stages of development and total over US$15 billion. Also, IFC already has a 5% stake in the Simandou Iron Ore Project being developed by Rio Tinto. While IFC’s is willing to support private sector involvement in the infrastructure, mining and agribusiness sector, the current situation surrounding the Rio Tinto concession, will limit IFC’s ability to invest in Guinea in such strategic sectors for the country.
• Also, IFC has a team in Conakry working on developing a linkages program to provide opportunities for SMEs to access contracts for goods and services from the mining sector.
• As of June, 30 2008, IFC’s committed portfolio in Guinea stands at US$36.89 million and includes a US$35million investment in Simfer, the mining company which operates in Simandou, and a US$1.77 million line of credit to SGHI, a Novotel hotel owned company, which is being managed by Accor.

MIGA Role in Country Strategy :

Exposure . MIGA’s portfolio in Guinea consists of two projects (sponsored by investors from Luxembourg, Senegal and Switzerland) in support of the country’s agribusiness and infrastructure (telecommunications) sectors. The outstanding gross exposure from these investments is $67.6 million. In its most recent project, MIGA issued guarantees (against the risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract) to Sonatel of Senegal for its equity investment in Orange Guinée S.A. The project involves the operations and maintenance of a GSM cellular network. It is one of the largest foreign investments made in Guinea and offers a number of benefits, among which are government revenues in the form of taxes, license and monthly and fees and direct employment and training to about 400 Guineans. MIGA’s participation in this project supports several Agency priorities including south-south investment, investment in Africa and the infrastructure sector.

Pipeline . MIGA has not received any further requests to support FDI in Guinea during the first half of FY09.

Contacts

Ishac Diwan
Country Director
World Bank
Address: 69 Dr. Isert Road
North Ridge Residential Area
Accra, Ghana
(postal address: P.O. Box M. 27)
Tel.: (233-21) 21 41 00
fax.: (233-21) 227887
Email: Idiwan@worldbank.org
Web: http://www.wordlbank.org/gh

Siaka Bakayoko
Country Manager for Guinea
Address: Banque Mondiale
Immeuble de l’Archevéché
Face Baie des Anges
Conakry, Guinea
Mailing Address: Banque Mondiale, B.P. 1420
Conakry, Guinea
Tel: (224) 415 059
Fax: (224) 415 094
Email Sbakayoko@worldbank.org

Michelle Keane
Acting Country Program Coordinator for Guinea
World Bank
1818 H Street, N.W., MSN J8-806
Washington, DC 20433
Tel: 202 473 2534
Fax: 202 473 5139
Email: Mkeane1@worldbank.org

Wilfried Engelke,
Sr. Country Economist
World Bank
1818 H Street, N.W. MSN J9-903
Washington, DC 20433
Tel: 202 473 2062
Fax: 202 614 1302
Email: Wengelke@worldbank.org

Asmaou Diallo-Bah
Sr. Country Program Assistant for Guinea
World Bank
1818 H Street, N.W.MSN J8-806
Washington, DC 20433
Tel: 202 473 6046
Fax: 202 473 5139
Email: Adiallobah@worldbank.org