2012 Investment Climate Statement
Bureau of Economic and Business Affairs
June 2012
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.

Guinea’s economy spiraled downward following the death of President Lansana Conte and a subsequent coup in December, 2008. 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, Camara made several attempts to alter the contracts of large international mining companies including Rio Tinto, Rusal, and AngloGold Ashanti. Political and economic insecurity peaked 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 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.

The first year of the Conde administration has been marked by slow but significant progress towards democratization, public sector reform, and economic development. With the exception of an unsuccessful attempt to assassinate President Conde in July, insecurity has decreased since the beginning of 2011. Guinea has re-engaged with the World Bank and the International Monetary Fund (IMF), made strides in security sector reform, and prioritized attracting foreign investment as a way to restart Guinea’s economy after years of economic decline. However, one crucial reform has not yet been carried out: under the provisions of the Ouagadougou accord signed by President Konate, legislative elections should have been held within the first six months of 2011, but have not yet taken place because of a variety of political and technical obstacles. Although an official date has not been set, the Conde administration is working towards holding free and fair legislative elections in 2012.

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”. The Conde administration has announced its intent to revise the Investment Code sometime in 2012.

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. 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 began drilling exploratory wells in late 2011. 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, and small, local company COPEG are the dominant companies in the petroleum sector.

On September 9, 2011, Guinea’s Transitional National Council (CNT) approved a new mining code, which will establish the legal framework for current and future mining projects in Guinea. replacing the previous law established in 1995 under the presidency of Lansana Conte. The new code significantly increases the share of state ownership in the mining industry, extending a 15 percent share of future mining projects to the GOG, without financial compensation. The GOG also has the option to purchase up to an additional 20 percent of each project. New tax breaks and other financial incentives encourage projects to include a processing facility such as an alumina refinery, aluminum smelter, or steel mill. The 2011 code also includes new measures designed to protect the environment, stimulate local development, fight corruption, and increase transparency in the sector. Although much of the code outlines the conditions under which future mining projects will be established, it also contains provisions that apply to companies already operating in Guinea. Measures pertaining to royalties, employment, training, customs, transparency, and corruption apply from 60 days after the code’s adoption. Other discrepancies must be negotiated individually between mining companies and the GOG. However, as of January 2012 the Government of Guinea had only announced that it would form a mining commission, which will include representatives from the Ministries of Mines, Justice, Economy, and Public Works, to review mining 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 could see a 40% increase in Guinea’s bauxite production upon completion. The $5 billion GAC project continued to move slowly in 2011 because of falling commodity prices, shareholder disagreements, and uncertainty about the regulatory environment. Though production from the site was originally scheduled to commence in mid-2012, it is not likely to reach the production stage until 2015.

Rio Tinto signed an agreement with the Government of Guinea in 2003 to develop a 110 sq. km iron mine in Simandou. In December 2008, the government announced that it would be revoking part of Rio Tinto’s Simandou contract. The site remained in dispute until April 2011, when Rio Tinto signed an agreement with the government to develop its two remaining blocks of Simandou in exchange for a $700 million payment to the government. As of October 2011 the company had invested nearly $3 billion in feasibility studies and early development of the mining site and associated infrastructure. Rio Tinto is expected to begin exporting iron ore from Simandou in 2015.

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. In 2010 and 2011, 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. As part of its re-engagement, in June 2011, the World Bank signed a $34 million agreement with Guinean authorities to connect Guinea to the global broadband network via submarine fiber optic cable. The project was established in December 2011 and is scheduled to be completed by 2014.

Foreign investors have responded positively to Guinea’s improving political and economic climate, particularly in the mining, electricity, and construction sectors. However, dilapidated infrastructure, an entrenched culture of corruption, and lingering concerns about the permanence of Guinea’s democracy continue to make Guinea a difficult place to do business (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 182

Heritage Economic Freedom

2011

137 of 179

World Bank Doing Business

2011

179 of 183

MCC Gov’t Effectiveness

2012

31%

MCC Rule of Law

2012

7%

MCC Control of Corruption

2012

19%

MCC Fiscal Policy

2012

5%

MCC Trade Policy

2012

21%

MCC Regulatory Quality

2012

25%

MCC Business Start Up

2012

21%

MCC Land Rights Access

2012

6%

MCC Natural Resource Mgmt

2012

27%

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 difficult to obtain foreign exchange in Guinea’s suffering economy. Guinea has experienced significantly weakened liquidity levels over the last several years due to government mismanagement, populist policies, corruption, a decrease in mining revenue due to political unrest, and dwindling foreign aid levels. The return of mining investment and foreign assistance following the 2010 elections has made some improvement in foreign exchange availability; however, banking sector experts estimate that Guinea’s Central Bank has approximately one month of foreign exchange reserves.

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.

In 2011, the GOG claimed full ownership of several industrial facilities it had previously held partial shares in as part of joint ventures—including a canned food factory and processing plants for peanuts, tea, mangoes, and tobacco—with no compensation for the private sector partner. Each of these facilities had been founded as a state-owned enterprise and languished following privatization under corrupt circumstances in the late 1980s and early 1990s. According to GOG representatives, a joint committee composed of representatives from the Ministry of Industry and the Ministry of the Economy and Finance is preparing dossiers on each facility in order to solicit bids by public auction; the GOG plans to maintain a 20 to 30 percent share in each business. By retaking these businesses from the present owners, whom the GOG considers to be corrupt and ineffective, and putting them to public auction the GOG hopes to correct past mistakes and put those assets in more productive hands. The private partner in at least one of these joint ventures has protested the seizure of its assets and plans to fight it in court. GOG representatives have said that this expropriation applies only to former state-owned firms and that fully-owned private businesses and other joint ventures with the GOG will not be affected.

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 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 and 2011, some businesses were still subject to sporadic harassment and “requests” for donations from military and police personnel. Armed robbery of homes and businesses seems to be on the increase, though targets have mostly been pharmacies, currency traders, and other Guinean-owned businesses that keep large amounts of cash on the premises.

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.

Under the 2011 Mining Code mining companies are required to hire Guinean citizens as a certain percentage of their staff and to award a certain percentage of contracts to Guinean-owned firms; the percentage varies based on employment category and the chronological phase of the project.

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.

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.

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.

Expatriate companies have reported difficulty getting shipments of equipment and supplies through customs; in part this stems from congestion at the port of Conakry but also reflects the practice of government officials asking for payments in order to get shipments released.

In their 2011 “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,” and “dealing with construction permits” because of the numerous procedural steps required, as well as “protecting investors” which points out shortcomings in the ‘extent of disclosure index,’ ‘extent of director liability index,’ and ‘ease of shareholder suits.’ However, Guinea did show improvement in the “getting credit” category, moving from 170th to 150th between the 2011 and 2012 rankings (See World Bank indicators: http://www.doingbusiness.org/data/exploreeconomies/guinea/). The Ministry of Industry and Small and Medium Enterprises opened a “one stop shop” on December 7, 2011 specifically to streamline the procedural process to register businesses and reduce the opportunities for corruption.

As part of the 2011 Mining Code the GOG has committed to increasing transparency in the mining sector. In the code the GOG commits to award mining contracts by competitive tender and to publish all past, current, and future mining contracts for public scrutiny, regardless of any confidentiality clauses in the contract itself. Members of mining sector governing bodies and employees of the Ministry of Mines are prohibited from owning shares in mining companies active in Guinea or their subcontractors. Each mining company must sign a code of good conduct and develop and implement a corruption monitoring plan.

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 difficult to obtain foreign exchange in Guinea’s suffering economy. Guinea has experienced significantly weakened liquidity levels over the last several years due to government mismanagement, populist policies, corruption, a decrease in mining revenue due to political unrest, and dwindling foreign aid levels. Although the return of mining investment and foreign assistance following the 2010 elections has made some improvement in foreign exchange availability, 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 26 percent, though it had decreased to 9 percent by the end of 2011. The average official exchange rate for 2011 was around 6,600 to the dollar, though the rate has seen a considerable rise since late 2009. The flourishing parallel currency market, with an average 2011 exchange rate of 7,500 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.

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 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. The Conde administration also took steps toward dissolving state-owned transportation company Soguitrans and is in discussions with private operators to take over its management.

Corporate Social Responsibility

The 2011 Mining Code includes Guinea’s first legal framework outlining corporate social responsibility. Under the provisions of the code, mining companies must submit social and environmental impact plans for approval before operations can begin and sign a code of good conduct, agreeing to refrain from corrupt activities and to follow the precepts of the Extractive Industry Transparency Initiative (EITI). Similar provisions are expected to be included in the revision of Guinea’s Investment Code, planned for 2012. However, lack of capacity in the various ministries involved will make monitoring and enforcement of corporate social responsibility requirements difficult.

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 since the election still weigh heavily on the political and economic situation in Guinea, and the President’s strategies are only in their earliest stages of implementation.

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.

Guinea experienced two other violent incidents during 2011. On July 19, the President’s personal residence was attacked with small arms fire and rocket propelled grenades. Following the attack the government arrested and charged 38 people, mostly military personnel. The government also temporarily reinstituted road blocks nationwide with night time check points continuing for months.

Complaining that the government was making unilateral decisions on planning for legislative elections, opposition political parties staged a protest on September 27. At least two protesters were killed and another 30 injured during the march.

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 a number of international companies increased staffing levels in 2011, uncertainty surrounding legislative elections continues to be a concern for the business community.

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. In late 2011, the government and opposition initiated a political dialogue with the goal of holding free and fair legislative elections in a timely manner. The dialogue, however, was suspended in early January 2012. Despite individual incidents, the political situation in Guinea remained stable through 2011. To maintain the stability and improve the investment climate for 2012 the government must move towards holding peaceful legislative elections.

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.

Successive governments, including the Conde administration, have 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 182 countries on Transparency International’s “Corruption Perceptions Index 2011” list.

Bilateral Investment Agreements

Countries with bilateral investment protections agreements with the Guinean government include Belgium, Benin, China, France, The Gambia, 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, the UNESCO Institute for Statistics estimated that only 39.5% of Guinea’s adult population was 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. In 2011, following poor university entrance examination results, the government promised to increase educational related funding. As of January 2012, the additional funding was not yet available. 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. Because of political infighting, the coalition has elected two different presidents, each claiming that the election of the other was illegitimate. The union remains divided at the beginning of 2012. 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. Central Bank estimates show a continuing decrease in foreign investment from a high of around US $386 million in 2007, reflecting Guinea’s years of political instability and falling global commodity prices. By 2010 FDI had declined to approximately US $101 million. Figures for 2011 are not yet available; however, renewed interest in Guinea among foreign investors following 2010’s successful elections is likely to result in some improvement, although concerns about the regulatory environment and the durability of Guinea’s new democracy have held some investors back. If Guinea can consolidate its democracy and improve its overall business climate, the country should see additional FDI growth over the coming years.

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 could see a 40% increase in Guinea’s bauxite production upon completion. The $5 billion GAC project continued to move slowly in 2011 due to falling commodity prices, shareholder disagreements, and uncertainty about the regulatory environment. Though production from the site was originally scheduled to commence in mid-2012, it is not likely to reach the production stage until 2015.

Rio Tinto signed an agreement with the Government of Guinea in 2003 to develop a 110 sq. km iron mine in Simandou. In December 2008, the government announced that it would be revoking part of Rio Tinto’s Simandou contract. The site remained in dispute until April 2011, when Rio Tinto signed an agreement with the government to develop its two remaining blocks of Simandou in exchange for a $700 million payment to the government. As of October 2011 the company had invested nearly $3 billion in feasibility studies and early development of the mining site and associated infrastructure and planned to begin iron ore export in 2015.

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. SEMAFO’s Kiniero gold mine remained inoperative in January 2012 since protesting locals damaged housing and machinery on the complex in September 2011; the future of the mine remains uncertain.

U.S. oil exploration company Hyperdynamics commenced drilling its first exploratory well in its 9,650 square mile offshore oil concession in October 2011. Hyperdynamics relinquished 70% of its original 31,000 square mile concession in 2010 to the Transition Government. Some speculated that officials in the Transition Government had awarded much of the acreage to China Sonangol, a joint venture between the Angolan national oil company and Duyuan International Development. However, the Conde administration has said it will review all agreements made by previous regimes.

In August 2011 the GOG began negotiations with China International Water and Electric Corporation on the construction of a 240 megawatt hydroelectric dam at Kaleta, located 150 km northeast of Conakry. The project is estimated to cost $526 million. Construction on the dam is scheduled to begin in December 2011 and expected to take four years to complete. Additional investment will be needed to build a distribution system to connect the dam to existing electric grids in Guinea and neighboring countries.

[This is a mobile copy of Guinea]