2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report

Openness to Foreign Investment

Guinea constitutes a small, underdeveloped market that remains heavily reliant upon revenue from customs, mining companies and international aid. Since Guinea’s independence in 1958, the country has been ruled by a succession of military strong-men, each of whom has severely weakened an already fragile economy. Despite Guinea’s first free and fair democratic elections in November, 2010, corruption and fraud remain endemic throughout the country.

Following the death of President Lansana Conte and a subsequent coup in December, 2008, Guinea’s economy has spiraled continuously downward. The December 2008 coup leaders established a military junta calling itself the National Council for Democracy and Development (CNDD), led by Moussa Dadis Camara. Upon seizing power, Dadis Camara declared that all commercial contracts negotiated under the former regime would be subject to immediate audit and review. True to his word, Camara made several attempts to alter the contracts of large international mining companies including Rio Tinto, Rusal, and AngloGold Ashanti. Political and economic insecurity reached a zenith in September 2009 when government forces fired upon pro-democracy protestors, killing over 150 civilians, and raped dozens of women. In December, 2009, junta leader Dadis Camara was the victim of an assassination attempt which forced him to leave the country. At the urging of the international community, then CNDD Minister of Defense, Sekouba Konate, assumed the role of Interim President of Guinea. After signing the Ouagadougou Accord in January, 2010, Konate formed a Transition Government led by a civilian Prime Minister, and with a mandate to hold democratic elections. The first round of presidential elections - in which no member of the Transition Government ran - occurred in June, 2010. The second round of presidential elections, between opposition figure Alpha Conde and former Prime Minister Cellou Dalein Diallo, took place in November, 2010. Following the Supreme Court validation of the election results, Alpha Conde was declared the victor, carrying 52% of the vote. The Transition Government voluntarily handed over power to Alpha Conde’s democratic administration in December, 2010.

Political instability in Guinea, compounded with government hostility toward investment, has severely restricted economic output. Companies already operating in Guinea slowed exploration efforts considerably in fear that falling prices and government intervention could precipitate massive investment losses. New investments also decreased significantly in 2009 and 2010. Although the political situation seems to be improving as of December, 2010, the future of Guinea’s investment climate will depend not only on how well the government facilitates outside investment, but also the relationship between the civilian government and the Guinean military.

Guinea’s Investment Code of 1987 guarantees, in theory, the right of all individuals (of both Guinean and foreign nationality) to undertake any economic activity in accordance with current laws and regulations. Foreign ownership of up to 100% is permitted in commercial, industrial, mining, agricultural and service sectors. However, some industries, such as radio, television, and print media, are legally restricted from having a majority foreign ownership. Revised in 1992, the Investment Code authorizes private investment of all types: foreign private, mixed foreign and local, and mixed public and private. The Guinean government provides a guarantee in the Investment Code that it will not, except for reasons of public interest, take any steps to expropriate or nationalize foreign or locally held assets or businesses. In reality, this guarantee is insufficient protection, as both the CNDD and the Transition Government carried out (or threatened to carry out) expropriations in 2009 and 2010 in the sake of “public interest”. Since 2008, successive governments have pledged to review the 1987 Investment Code, but no formal changes have yet been made.

The Petroleum Code of September 23, 1986 is currently under revision by a commission consisting of members from the Ministries of Commerce, Mines, Environment, the Office of the President, and other government cabinets. It is expected that the commission will tie all future mining contracts with concessions for infrastructure development. There is currently only one oil company operating in Guinea - U.S. owned Hyperdynamics. In 2010, Hyperdynamics avoided expropriation, but had to relinquish 70% of its original concession area to the Transition Government. Since then, Hyperdynamics has conducted seismic studies within its remaining concession and has announced its intention to begin drilling for oil in 2011. However, the future of the concession is unclear, as newly-elected President Conde has pledged to review all contracts signed from 2006 to present. The 1995 elimination of the public monopoly on petroleum product importation and commercialization allows private distributors to operate in Guinea. At present, French oil company Total and Shell-Guinea (currently an independent company, but in merger talks with potential foreign partners), and small, local company COPEG are the dominant companies in the petroleum sector.

The law governing wholly owned private ventures was originally implemented in 1985 and with its revision, became the Mineral Liberalization Policy of 1992. The law legalized wholly private ventures in the mining sector. In theory, the Ministry of Mines adjudicates authorization and licensing at its own discretion, though most licensing negotiations involve a high-level of oversight and involvement by the offices of the President and Prime Minister.

In the mining sector, the 1995 Mining Code is the operative legal framework. The Code provides that the Guinean government is entitled to a ‘founder's share' in all gold, diamond and other precious stone mining activities. The founder’s share equals 15% of the capital of the operating company, and no financial contribution may be required from the government for such shares. For ‘substances of special interest,’ such as bauxite, iron ore, and solid hydrocarbons, no such free shares are authorized. The government is still allowed to hold a stake in substances of special interest, but the terms are negotiated on an individual basis. Both the previous junta government and the Transition Government have declared that all contracts must allow for a sufficient percentage of capital to be returned to the GOG. Since 2008, each successive GOG has signed several non-transparent contracts with Chinese and other “low-level” mining companies, guaranteeing access to minerals in exchange for infrastructure development projects. As with the petroleum contracts, newly-elected President Conde has pledged to review all contracts signed from 2006 to present, to ensure Guinea receives a “fair deal” in the contracts.

In 2004, the Guinea Alumina (GAC) joint venture (with investments by Global Alumina, BHP Billiton, Dubai Aluminum, and Abu Dhabi’s Mubadala Development) began feasibility studies on a 650 sq. km bauxite mining site. In 2008, the company started the early works phase of their project which includes infrastructure construction on the mining site, the refinery facility, and a transportation network. Alcoa and Rio Tinto-Alcan are also in the early construction phase of a smaller refinery in the area. Taken together, they represent the largest private investment in sub-Saharan Africa since the Chad-Cameroun oil pipeline, and could see a 40% increase in Guinea’s bauxite production upon completion. The $5 billion GAC project is currently moving slowly due to a mix of falling commodity prices, massive government intervention, and political instability. Though production from the site was originally scheduled to commence in mid-2012, it is not likely to reach the production stage until 2014 or 2015. GAC announced in November 2009 that they plan to continue with the construction of their refining plant in 2011.

Rio Tinto signed an agreement with the GOG in 2003 to develop a 110 sq. km iron mine in Simandou. The company has invested nearly $650 million to date in feasibility studies and early development of their mining site. In December 2008, the government announced that it would be revoking part of Rio Tinto’s Simandou contract, alleging a breach of contract and citing numerous delays in developing the concession. Though the case is still being heard in Guinean court, the Ministry of Mines has awarded the rights to the disputed concession to Benny Steinmetz Global Resources (BSGR). In 2010, the Ministry of Mines threatened further expropriation of Rio Tinto’s remaining concession. Due to the security situation, government interference, and global commodity prices, Rio Tinto has considerably slowed down its operations at Simandou.

The Telecommunications Liberalization Policy of 1992 allows for private activity in the “value added” services sector, including cellular, radio, satellite, on-line data transmission, and other services. The Ministry of Communications regulates licensing and administration. In 2007, several new operators entered the market including the U.S./Israeli telecommunications firm Cellcom. While this sector presents tremendous opportunity for growth, price competition from established providers is intense. Established carriers have publicly attempted to thwart other companies from entering the market by utilizing non-price tools, such as refusing to connect existing networks with new entrants. During times of political upheaval, the GOG has exerted their influence on the telecommunications sector, including forcing several cellular companies to block text messaging capabilities. Furthermore, the government-owned telecommunications company Sotelgui commonly receives special government protection from outside competition, leading to a sector-wide “down-grade” of telecommunication capabilities. Although there is a fiber optic cable bypassing Guinea, the GOG has denied access to telecommunication companies, in an effort to protect its own state-run telecom. In 2010, telecommunications company Cellcom was repeatedly the target of aggressive GOG pressure to “pay-off” certain Guinean shareholders, despite the absence of an explicit contractual obligation to do so.

Other international investments have slowed considerably in the face of government harassment and political upheaval. Companies already operating in Guinea have largely decreased operations while new investment has been stifled by the threat of political harassment and instability. Although the GOG has apparently signed an MOU with the Chinese Development Fund and China Sonangol, the details of the deal have yet to be publicly released (see Foreign Direct Investment Statistics).

The judicial system, which has been historically underfunded, inefficient, and overtly corrupt, has consistently ruled in favor of government expropriation. Government officials, notably the Minister of Mines, wield enormous influence in judicial matters and decision-making.

Key Economic Rankings:

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.

Measure

Year

Index/Ranking

TI Corruption Index

2010

164 of 178

Heritage Economic Freedom

2011

137 of 179

World Bank Doing Business

2010

179 of 183

MCC Gov’t Effectiveness

2011

21%

MCC Rule of Law

2011

6%

MCC Control of Corruption

2011

16%

MCC Fiscal Policy

2011

37%

MCC Trade Policy

2011

20%

MCC Regulatory Quality

2011

24%

MCC Business Start Up

2011

22%

MCC Land Rights Access

2011

38%

MCC Natural Resource Mgmt

2011

36%

Conversion and Transfer Policies

Individuals or legal entities considering investment in Guinea are guaranteed the freedom to transfer the original foreign capital, profits resulting from investment, capital gains on disposal of investment, and fair compensation paid in the case of nationalization or expropriation of the investment, to any country of their choice. Although there have been no recent changes to remittance policies, it is becoming increasingly difficult to obtain foreign exchange in Guinea’s suffering economy. Guinea has significantly weakened liquidity levels due to government mismanagement, populist policies, corruption, a decrease in mining revenue due to political unrest, and dwindling foreign aid levels. World Bank estimates peg Guinea’s annual budget deficit at nearly 12% of total GDP. International transfers are currently using rates up to 20% higher than the official rate.

Expropriation and Compensation

Guinea’s Investment Code states that the GOG will not, except for reasons of public interest, take any steps to expropriate or nationalize investments made by individuals and companies. It also promises fair compensation for expropriated property.

There were no expropriation cases in 2010, however, the northern half of Rio Tinto’s Simandou mining facility remains under threat of expropriation by the GOG (see Openness to Foreign Investment above). To date, no compensation had been rewarded to Rio Tinto for its expropriated area. The threat of further expropriation looms, as President Alpha Conde has called for a review of all contracts signed from 2006 to present.

Dispute Settlement

The Investment Code states that competent Guinean judicial authorities shall settle disputes resulting from interpretation of the Code in the accordance with laws and regulations. In practice, however, fair settlements may be difficult. The current Guinean constitution mandates an independent judiciary, although many business owners and high level government officials frequently claim that poorly trained magistrates, high levels of corruption, and nepotism plague the administration of justice.

Guinea established an arbitration court in 1999, independent of the Ministry of Justice, to settle business disputes in a less costly and more expedient manner. The Arbitration Court is based upon the French system in which arbitrators are selected from among the Guinean business sector, rather than from among lawyers or judges, and are supervised by the Chamber of Commerce.

The country’s legal system is largely based upon French civil law. However, the Guinean judicial system is reported to be understaffed, corrupt, lacking in transparency, and accounting practices are frequently unreliable. U.S. businesspersons should exercise extreme caution when negotiating contract arrangements, and do so with proper local legal representation. From 2008 to 2009, the CNDD-led military junta reportedly sidelined the role of the formal judiciary in legal proceedings by transferring much of its power to a parallel military legal system. Though the Transition Government promised to address these issues and reform the judicial process, no major initiatives were taken. The newly-installed Alpha Conde government has targeted judicial reform as a major issue in need of renovation.

In 1993, Guinea became a member of the Organisation pour l’Harmonisation du Doit des Affaires en Afrique (Organization for the Harmonization of Commercial Law in Africa), known by its French initials, OHADA, which allows investors to appeal legal decisions on commercial and financial matters to a regional body based in Abidjan. The organization also seeks to create harmonization of commercial law, debt collection, bankruptcy, and secured transactions throughout the OHADA region. The treaty superseded the Code of Economic Activities and other national commercial laws when it was ratified in 2000, though many of the substantive changes to Guinean law have yet to be implemented. U.S. companies seeking to do business in Guinea should be aware that under OHADA, managers may be individually liable for corporate wrongdoing. See the OHADA website for specific OHADA rules and regulations (http://www.ohada.com). Guinea is also a member of the International Center for the Settlement of Investment Disputes (CSID).

In many cases, the Guinean government does not meet payment obligations to private suppliers of goods and services, both foreign and Guinean, in a timely fashion. There is no independent enforcement mechanism for collecting debts from the government, although some contracts have international arbitration clauses. The government, while bound by law to honor judgments made by the arbitration court, often actively influences the decision itself.

Business executives, Guinean and foreign, have publicly expressed concern over the absence of rule of law in the country. In 2009, Guinean business leaders were targeted by the military for burglary and wide-scale harassment. Although the levels were significantly reduced in 2010, some businesses were still subject to sporadic harassment and “requests” for donations from military and police personnel.

Performance Requirements/Incentives

The Investment Code, last revised in 1992, provides tax advantages for certain priority investments. The government’s priority investments are: promotion of small and medium-sized Guinean businesses, development of non-traditional exports, processing of local natural resources and local raw materials, and establishment of activities in less economically developed regions. Priority activities include agricultural promotion, especially of food, and rural development; commercial farming involving processing and packaging; livestock, especially when coupled with veterinary services; fisheries; fertilizer production, chemical or mechanical preparation and processing industries for vegetable, animal, or mineral products; health and education businesses; tourism facilities and hotel operations; real estate development with social benefit; and investment banks or any credit institutions settled outside specified population centers.

Right to Private Ownership and Establishment

There is a right to private ownership of property in Guinea. The government’s regulations provide for a complex set of tax and duty exemptions and rebates in order to encourage private investment.

Protection of Property Rights

The Land Tenure Code of 1996 provides a legal base for documentation of property ownership. As with ownership of business enterprises, both foreign and national individuals have the right to own property. However, enforcement of these rights depends upon a corrupt and inefficient Guinean legal and administrative system. To date, although the proportion of land dispute cases is significant in relation to all cases filed, it is not clear that enforcement of such judgments is possible.

Guinea is a member of the African Intellectual Property Organization (OAPI) comprised of 15 African countries and the World Intellectual Property Organization (WIPO). OAPI is signatory to the Paris Convention for the Protection of Industrial Property, the Bern Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty, the TRIPS agreement, and several other intellectual property treaties. Guinea modified its intellectual property right laws in 2000 to bring them into line with established international standards. There have been no formal complaints filed on behalf of American companies concerning intellectual property rights infringements in Guinea. However, it is not certain that an intellectual property judgment would be enforceable, given the general lack of law enforcement capability. The Property Rights office in Guinea is severely understaffed and underfunded.

Transparency of the Regulatory System

While Guinea’s laws promote free enterprise and competition, the government often lacks transparency in the application of the law. Business owners openly assert that application procedures are sufficiently opaque to allow for corruption, and regulatory activity is often applied based on personal interest.

Major expatriate companies operating in Guinea have reported the government’s periodic failure to rebate value-added taxes or to grant guaranteed tax exemptions. Several businesses reported practices such as judges’ requests for payments to “escrow accounts” pending court decisions. There have also been reports of judges and other government officials closing businesses and demanding arbitrary “taxes” to be paid before allowing them to reopen.

In their annual “Ease of Doing Business” index, the World Bank ranked Guinea as the 179th worst country for doing business in the world out of 183 countries. Guinea scored particularly poorly the indicators of “starting a business” with 13 procedural steps required to open even a small business operation, “dealing with construction permits” requiring 32 procedural steps, and “protecting investors” which points out shortcomings in the ‘extent of disclosure index,’ ‘extent of director liability index,’ and ‘ease of shareholder suits.’ (See World Bank indicators: (http://www.doingbusiness.org/data/exploreeconomies/guinea/)

Under the Transition Government, several large contracts were negotiated through the office of the Prime Minister and Interim President without any international bidding process. Many of these contracts were awarded to military or political party allies, and the terms of the agreements remain opaque.

Increasingly, the GOG has annulled existing contracts in favor of contracts with an assortment of small companies, many of which have direct ties to the Chinese International Fund (CIF). These contracts stipulate that, in return for unfettered access to minerals (bauxite, iron ore, diamonds, gold, petroleum), the companies must improve the infrastructure of Guinea – usually by constructing roads and railroads in the interior of the country. In July, 2009, the GOG signed a Memorandum of Understanding with the CIF for mining and infrastructure projects, totaling over US$2 billion. Since 2009, the CIF and GOG have announced numerous projects, such as the re-launch of a national airline industry, Air Guinee International, and a Trans-Guinean railroad, linking the cities of Conakry and Kankan. However, as of December, 2010, the only project that has been completed is a 36km passenger rail line, connecting the port of Conakry to an area outside of town.

Efficient Capital Markets and Portfolio Investment

Commercial credit for private and public enterprise is difficult and expensive to obtain in Guinea. The GOG passed a Build, Operate, and Transfer (BOT) convention law in 1998, which provides rules and guidelines for BOT and related infrastructure development projects. The law lays out the obligations and responsibilities of the government and investors and stipulates the guarantees provided by the government for such projects.

The Investment Code allows transfers of income derived from investment in Guinea, the proceeds of liquidating this investment, and the compensation paid in the event of nationalization to any country in convertible currency. The legal and regulatory procedures, while based on French civil law in theory, are not always applied uniformly or transparently.

Individuals or legal entities making foreign investments in Guinea are guaranteed the freedom to transfer the original foreign capital, profits resulting from investment, capital gains on disposal of investment, and fair compensation paid in the case of nationalization or expropriation of the investment, to any country of their choice. Although there have been no recent changes to remittance policies, it is becoming increasingly difficult to obtain foreign exchange in Guinea’s suffering economy. Due to government mismanagement, populist policies, corruption, a decrease in mining revenue due to political uncertainty, and suspension of nearly all foreign aid, Guinea is likely nearing a foreign exchange crisis. The World Bank estimates that the current availability of foreign-exchange reserves is equivalent to less than one month of import cover.

The Guinean Franc uses a managed floating exchange rate. Over the past year, the spread between the black market rate and the official rate has been as high as 20%. The average official exchange rate for 2010 was around 6,100 to the dollar, though the rate has seen a considerable rise since late 2009. The flourishing parallel currency market, with an average 2010 exchange rate of 7,000 to the dollar, exists due to the under-valuation of the official rate, the difficulty in buying foreign exchange to complete transactions at the Central Bank, and the general informal nature of the majority of Guinea’s commercial transactions. In addition, the previous junta government often printed money to pay off its spiraling debt, further increasing the exchange rate. The few commercial banks in Guinea are dependent on the Central Bank for foreign exchange liquidity, making large transfers of foreign currency difficult. In addition, banking regulation, while technically possible, is in practice virtually non-existent. Banking regulations are part of the legal framework; however, lax enforcement is the rule rather than the exception, due to the lack of funding and political will.

Laws governing takeovers, mergers, acquisitions, and cross-shareholding are limited to rules for documenting financial transactions and filing any change of status documents with the economic register. There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation that limit or prohibit investment.

Competition from State Owned Enterprises (SOE’s)

While Guinea maintains some SOE’s for public utilities (water and electricity), the new Alpha Conde government is slowly curbing the trend towards allowing private enterprises to operate in this sphere. Recent failures and allegations of corruption of the state owned energy company have led the Ministry of Energy to revise the management framework of the company and bring in private company experts to evaluate and repair Guinea’s dilapidated energy grid. Several private projects aimed at harnessing Guinea’s hydroelectric energy potential are currently undergoing feasibility studies, with the goal of producing and selling energy throughout Guinea and to neighboring countries, such as Sierra Leone, Liberia, and Cote d’Ivoire.

Corporate Social Responsibility

There is no set framework outlining corporate social responsibility for Guinea. In recent years, the majority of high-profile mining company contracts have been linked with social programs, such as railroad projects, building schools, and providing electricity and water to areas surrounding mining operations. While these social programs are not mandated by the government of Guinea, they do increase public support of private enterprises, thereby increasing the likelihood that the government will honor the terms of the contract.

Political Violence

Political instability, along with corruption, is the most significant barrier to investment in Guinea. Presidential elections took place in November, 2010, installing Alpha Conde as Guinea’s first-ever, democratically elected president. However, events of the last few years still weigh heavily on the political and economic situation in Guinea, and the new President’s strategies have yet to be tested.

Political upheaval is not new in Guinea. In January and February of 2007, street demonstrations and a two-month general strike solicited a violent response by the military that resulted in the killing of at least 137 and the injury of at least 1700 others, many of whom were unarmed civilians. The violence ended with the appointment of a consensus Prime Minister in late February of that year. A military mutiny in May 2008 over a disputed pay increase led to several deaths as well.

Following the death of President Lansana Conte on December 22, 2008, a military junta calling themselves the National Council for Democracy and Development (CNDD) took power in a bloodless coup. Immediately following the coup, the USG suspended all but its humanitarian and election assistance to Guinea. The African Union (AU) and the Economic Community of West African States (ECOWAS) suspended Guinea’s membership pending democratic elections and a relinquishment of power by the military junta.

After months of public opposition to the tactics of the military regime, the Forces Vives, a group formed of political opposition, civil society, economic actors, and labor unions, organized a large rally at the capital’s soccer stadium to symbolize their rejection of junta-leader Moussa Dadis Camara’s intention to run in upcoming presidential elections. Soon after the rally began, members of Guinea’s armed forces entered the facility and opened fire on the crowd, killing at least 150 people and injuring over a thousand others. Many of the female protestors were also publicly and brutally raped. In the aftermath of the massacre, the military continued to target political and economic opposition. Please see Human Rights Watch’s report on the massacre for further information on the subject (http://www.hrw.org/en/news/2009/12/17/guinea-stadium-massacre-rape-likely-crimes-against-humanity).

Much of the international community condemned the massacre and the subsequent gross human rights abuses. The European Union (EU) and the AU implemented targeted financial and travel sanctions against the regime. The USG also implemented travel restrictions on many members of the junta while ECOWAS and the EU both imposed an arms embargo on the country. The UN created a special commission of inquiry into the September 28 massacre and its members visited Guinea in December 2009 to investigate the killings.

On December 3, Moussa Dadis Camara was shot by his Aide-de-camp Lt. Abubaker “Toumba” Diakite. The junta leader was immediately flown to Morocco for treatment. After over a month of recuperation in Morocco, Camara flew to Burkina Faso on January 13. On January 15, Camara, Burkinabe President Blaise Compaore, and Guinean Minister of Defense Sekouba Konate signed the Ouagadougou Accord, creating a transition government and naming Konate as the Interim President of Guinea, and a civilian, Jean Marie Dore, as Prime Minister. The Transition Government was tasked with organizing presidential and legislative elections to usher in a new democratic government of Guinea.

The impunity the military had previously enjoyed is now slowly being reversed. Security Sector Reform (SSR) training has identified and targeted the need to retrain and reorganize some elements of the security forces. In the uncertainty surrounding Guinea’s first democratic elections, ethnic and political tensions sparked election-related violence that resulted in the deaths of over 15 people. The success of the new democratic government will hinge upon President Alpha Conde’s ability to restructure and maintain control of the security forces, and to create a government that fairly represents citizens of all ethnicities across Guinea.

Since 2008, the uncertain security climate in Guinea has caused several mining and construction companies to draw down their staffing levels and suspend operations. Each round of presidential elections produced heightened security concerns throughout Guinea, prompting several business owners to close or limit their operations.

Although none of the violent events detailed above specifically targeted American or foreign investors, they were disruptive to business in general and eroded confidence in the already tenuous security situation under which investors must operate in Guinea. Although the country’s political future in late 2010 is brighter than in recent memory, the newly elected government must act quickly to improve the investment climate for 2011.

Corruption

Poor governance, which includes corruption, is a serious barrier to investment in Guinea. The business and political cultures, coupled with low salaries, have combined to create and encourage a culture of corruption throughout Guinea’s government system. Business is routinely conducted through the payment of bribes rather than by the rule of law. It is common for government officials to demand everything from money to gasoline for their personal use, in exchange for favors or to just perform their duties. Though it is illegal to pay bribes in Guinea, there is no enforcement of these laws. In practice, it is difficult and time-consuming to conduct business without paying bribes in Guinea, and as they must comply with the Foreign Corrupt Practices Act, this leaves U.S. companies at a disadvantage. Enforcement of the rule of law in Guinea is irregular and inefficient. Businesses report that one must pay a bribe to see that law is enforced, and then a bribe is paid by the offender to reduce or eliminate any penalties.

Both the military junta and the Transition Government made promises to combat corruption in both the government and in commercial spheres. These reforms have yet to come to fruition, and businesspeople still report corruption as a major obstacle to investment. Guinea places 164th out of 178 countries on Transparency International’s annual “Corruption Perceptions Index” list.

Bilateral Investment Agreements

Countries with bilateral investment protections agreements with the Guinean government include Belgium, China, France, Germany, Great Britain, Iran, Italy, Japan, Morocco, Nigeria, Saudi Arabia, Senegal, South Africa, South Korea, Switzerland, and Tunisia. See the next section for U.S.-Guinea private investment guarantees.

OPIC and Other Investment Insurance Programs

Guinea and the U.S. have had an agreement on private investment guarantees in effect since 1962, making investors eligible for Overseas Private Investment Corporation (OPIC) insurance programs.

Labor

Guinea’s workforce is largely uneducated. Education in Guinea is compulsory for six years - to the end of primary school - but enforcement mechanisms are limited. In 2009, Guinea scored 173rd out of 177 rated countries in UNESCO’s literacy index, as only 29.5% of Guinea’s population is considered literate.

Government policy provides for tuition-free, compulsory primary school education for six years, and an average of 71% of children were enrolled in primary school in 2008. Of these, 62% of male students and 47% of female students continue their studies to complete their primary school education. However, only around 66% of girls eligible for education attended primary school. Despite the government providing tuition-free schooling, the GOG spends only a meager 1.7% of its GDP on primary education. Lack of funding, a paucity of qualified instructors and over-populated classrooms has led to the creation of a large number of private schools centered around urban centers. Nearly 60-70% of primary and secondary school students in urban areas are enrolled in these private schools.

Guinea’s Labor Code strictly protects the rights of employees and is enforced by the Ministry of Social Affairs. The Labor Code sets forth guidelines in various sectors, the most stringent being the mining sector. Guidelines cover wages, holidays, work schedules, overtime pay, vacation, and sick leave. The National Assembly increased employer rights to hire and fire under the 1999 revision of the Labor Code. Employers no longer need to go through the labor office in order to contract or terminate the work of an employee, and the Act removed the requirement to hire only Guinean employees. Some employers, including the Guinean Government, avoid paying mandatory benefits by employing people as contractors for years at a time rather than as permanent employees. Many foreign managers cite incidents of theft, low productivity, and difficulty in terminating an employee as major problems. On average, employers must contribute 18% of the value of the employees’ salary toward social security, with an employee contribution of 5%. The Labor Code outlines general guidelines related to health and safety, but the Guinean government has yet to articulate a set of practical occupational standards. The government has limited resources for this activity.

The Labor Code also legalized employee labor unions and the right to collective bargaining. In 2006, Guinea’s labor union gained strength and the independent unions joined with the National Labor Confederation (the government union) to form a union coalition that represented a vast majority of organized labor. The unions also had large numbers of retirees and workers in the informal sector supporting their actions. There are about six major unions with national membership, and another eight or nine local unions in Conakry, all of which lobby for improved wages, benefits, and working conditions. They are also often used as avenues for voicing political dissent.

The law provides that the government should support children’s rights and welfare, although in practice, the government has neither the capability, nor the political will, to curb the high rate of child labor. By law, the minimum age for employment is 18 years. Apprentices may start to work at 13 years of age. Workers and apprentices under the age of 18 are not permitted to work at night, for more than 10 consecutive hours, or on Sundays. The Labor Code also stipulates that the Minister of Labor maintain a list of occupations in which women and youth under the age of 18 cannot be employed. In practice, enforcement by ministry inspectors is limited to large firms in the modern sector of the economy.

Foreign-Trade Zones/Free Ports

There are no Foreign-Trade/Free Ports in Guinea

Foreign Direct Investment

Statistics on FDI are difficult to obtain in Guinea. For 2009, the only FDI statistics are rough estimates, as the CNDD-led military junta manipulated budgetary data. The 2009 estimates show a decrease in foreign investment from the historically high $1.35bn 2008 level (around 4% of GDP). This spike, up from around US$380m in 2007, was caused by a growing interest in Guinea’s mineral resources. Political instability, however, and falling global commodity prices contributed to a sharp drop in FDI and precipitated an estimated 4.5% decrease in GDP in 2009. Despite a rise in FDI from 2004-2008, Guinea suffered a sharp decrease in new FDI in 2009 due to political instability and the government’s public review of foreign contracts.

In 2010, FDI is expected to increase due to a high number of mining contracts awarded by the Transition Government. These contracts are many times in the billions of USD, and are tied to infrastructure development projects such as railroads and port facility construction. FDI levels could diminish or increase depending upon investor’s confidence in the new government, a government that has promised to review all mining contracts awarded under the military junta and the Transition Government. In January, 2011, the Ministry of Finance announced that 2010 mining production had increased 49% from 2009 levels – further indicating the drastic increase in investment and revenue that Guinea can look forward to if the political situation remains stable.

In 2004, the Guinea Alumina (GAC) joint venture (with investments by Global Alumina, BHP Billiton, Dubai Aluminum, and Abu Dhabi’s Mubadala Development) began feasibility studies on a 650 sq. km bauxite mining site. In 2008, the company began the “early works” phase of their project which includes infrastructure construction on the mining site, the refinery facility, and a transportation network. Alcoa and Rio Tinto-Alcan are also in the early construction phase of a smaller refinery in the area. Taken together, they represent the largest private investment in sub-Saharan Africa since the Chad-Cameroun oil pipeline, and could provide for a 40% increase in Guinea’s bauxite production upon completion. The $5 billion GAC project is currently moving slowly due to falling commodity prices and massive government interference. Though production from the site was originally scheduled to commence in mid-2012, it is now not likely to reach the production stage until 2014 or 2015. GAC announced in November that they plan to continue with the construction of their refining plant in 2011.

Rio Tinto signed an agreement with the GOG in 2003 to develop a 110 sq. km iron mine in Simandou. The company has invested nearly $650 million to date in feasibility studies and early development of their mining site. In December 2008, the government announced that it would be revoking part of Rio Tinto’s Simandou contract. Though the case is still under consideration in Guinean court, the Ministry of Mines has awarded the rights to the disputed concession to Benny Steinmetz Global Resources (BSGR). In 2010, the Ministry of Mines threatened further expropriation of Rio Tinto’s remaining concession area, and due to the security situation, government interference, and falling global commodity prices, Rio Tinto has temporarily suspended its operations at Simandou.

Three gold mining companies, Societé de Miniére de Dinguiraye (SMD), Societé Aurifére de Guineé (SAG – a subsidiary of AngloGold Ashanti), and SEMAFO have significant investments in Guinea’s interior, though small-scale artisanal mining is also a major factor in that sector. In 2009, the CNDD military junta awarded the operating rights to Guinea’s largest diamond mine, formerly operated by AREDOR, to Bouna Mining Corporation, which was owned by CNDD advisor Bouna Keita. Though the purchase reportedly cost the Corporation $30 million, the bidding process was not transparent or public. In 2010, Bouna Mining Corporation was reportedly expelled from its mining concession due to failure to pay the purchasing costs, although there has not been an official decree from the Ministry of Mines. The majority of Guinea’s diamond production is artisanal.

Hyperdynamics, a U.S. oil exploration company, relinquished 70% of its 31,000 sq. km offshore oil concession in 2010 to the Transition Government. Many other companies have expressed interest in the relinquished concession, but there is speculation that officials in the Transition Government have already awarded much of the acreage to China Sonangol, a joint venture between the Angolan national oil company and Duyuan International Development. Duyuan is the main shareholder in the Chinese International Fund (CIF), a company with which the Government of Guinea signed a Memorandum of Understanding (MOU) in July of 2009, for a nearly US$2.2 billion mining and infrastructure deal. In October, 2009, the Ministry of Mines announced that the government had negotiated a deal with the CIF totaling US$7bn over five years. Although the terms of the deal have not been released, the MOU stipulates a joint venture between the CIF, China Sonangol, and the GOG. The new oil company which is to be named the Guinean Development Corporation (GDC) will be 15% government owned with the option of further expansion. Local media reports that the new oil company has received the rights to much of Hyperdynamics’ former offshore oil concession, though these reports have not been verified by the GOG.

The MOU also outlines a CIF funded plan for extensive infrastructure development including the construction of railways, roads, ports, hydroelectric power stations, city transportation infrastructure, and the creation of a national airline. As of the time of this report, no significant projects have been completed except for a 36km passenger railway, connecting the port of Conakry to an area outside the city.

[This is a mobile copy of Guinea]