2009 Investment Climate Statement - Guinea
Openness to Foreign Investment
Guinea constitutes a small, underdeveloped market open to U.S. direct investment. Guinea’s Investment Code of 1987 guarantees the right of all individuals or private legal entities of both Guinean and foreign nationality to undertake any economic activity in accordance with current laws and regulations. An investment promotion unit exists within the Ministry of Commerce.
Laws governing takeovers, mergers, acquisitions, and cross-shareholding are limited to rules for documenting financial transactions and for filing changes of status documents with the Economic Register.
The Investment Code, passed in 1987 and revised in 1992, 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. Foreign investors and corporations receive the same treatment as Guinean nationals in this regard.
The Petroleum Code of September 23, 1986 (Code Petrolier du 23 Septembre 1986) provides the legal framework for the exploration and exploitation of all liquid or gaseous hydrocarbons in the national territory of Guinea. The Petroleum Code is administered under the Ministry of Mines. Under the Code, companies exploring or exploiting hydrocarbons in Guinea may negotiate with the Government for exemptions from taxes and customs duties. The Code is currently under revision, but the Ministry has not announced a timeline for completion.
The Mineral Liberalization Policy of 1992, put into effect in 1985, and revised in 1992, legalized wholly private ventures in the mining sector. The Ministry of Mines adjudicates authorization and licensing at its own discretion.
In the mining sector, the 1995 Mining Code is the operative legal framework. The Code provides that the Guinean Government is entitled to 'founder's shares' in all gold, diamond, and other precious stone mining activities. The 'founder's shares' equal 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 with the investor. The Mining Code allows favorable tax treatment for the duration of mining claims (including VAT exemptions during prospecting, construction, and expansion stages). Alcoa and Global Alumina, two companies that have undertaken the construction of new Greenfield alumina refineries in Maritime Guinea near the port of Kamsar, both received preferential tax treatment under the Basic Agreements negotiated with the government.
The Telecommunications Liberalization Policy of 1992 allows for private activity in the "value added" services sector, including cellular, radio, satellite, online data transmission, and other services. The Guinean Government-owned telecommunications company, Sotelgui, and the Ministry of Communications regulate licensing and administration. In 2007, several new operators entered the market; the U.S. telecommunications firm Cellcom entered in mid 2008. While this sector presents tremendous opportunity for growth. price competition from established providers is intense. Established carriers have attempted to thwart other companies from entering the market by utilizing non-price tools, such as refusing to connect existing networks with new entrants. Efforts have been made to control this anti-competitive practice.
Until 2001, private operators managed the production, distribution and fee-collection operations of water and electricity under performance-based contracts with the government, but private operators exited both sectors in 2002 due to reported government inefficiency, corruption and nepotism. While major donors have encouraged the government to contract with new private partners in these sectors, no company has stepped forward. Inadequate water and electricity provision contributes to continued political tension.
The 1995 elimination of the public monopoly on petroleum product importation and commercialization allows private distributors to operate in Guinea. At present, the French oil firm Total is the dominant company in the petroleum sector with over 80% of the market. Foreign ownership of up to 100% is permitted in commercial, industrial, mining, agricultural, and service sectors. However, some industries are restricted from having a majority foreign ownership, such as radio, television, and newspapers. In 2005, the late President Conte signed a decree establishing the process for private ownership of broadcast media, and Guinea liberalized its radio waves in 2006, issuing five licenses to private radio broadcasters. Recently, requests for new private radio licenses have multiplied, along with requests for private TV licenses. Currently, there are 12 private radio stations. While some licenses have been issued for private television stations, these stations are not yet operational. Several controversial local business owners received television licenses before the December 2008 coup d’etat. As of January 2009, the ruling military junta has not confirmed if these licenses are valid.
Conversion and Transfer Policies
Individuals or legal entities making foreign investments in Guinea are guaranteed the freedom to transfer to any country of their choice 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. Barring a foreign exchange crisis, such transactions can take place upon request, although business owners complain of periodic delays, shortages, and unofficial caps on the amount exchanged. These complaints reached a high-point following the strikes of January and February, 2007, but have since ebbed.
Expropriation and Compensation
The Government of Guinea provides a guarantee, in the Investment Code, that it 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.
Although the law states that expropriation is permissible, there were no known cases in 2008. Guinea is a member of the World Trade Organization (WTO), and its government generally obeys rules preventing discrimination against U.S. investments, companies, and representatives in expropriations.
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. Although the Guinean constitution creates an independent judiciary, 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 on 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.
In 1993, Guinea signed the Organisation pour l'Harmonisation du Droit 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 treaty superseded the Code of Economic Activities and other national commercial laws when it was ratified in 2000.
The Treaty itself consists of two main components. The first of these is the enabling section which provides for the setting up of institutions charged with the realization of the terms of the Treaty. The second provides for the so-called Uniform Acts to be adopted. Several of these OHADA Uniform Acts, covering major aspects of Commercial Law, were recently enacted. These enactments, regarding subjects such as general commercial law, debt collection, bankruptcy, and secured transactions, provide the substantive basis for the development of a rational and harmonized legal system throughout the OHADA region. Of note, U.S. companies seeking to do business in Guinea should be aware that under OHADA, managers may be individually liable for corporate wrongs. In 1986, Guinea ratified the March 1985 International Convention on the Settlement of Investment Disputes between states and nationals of other states and is a member of the International Center for the Settlement of Investment Disputes (ICSID).
There was some controversy under the Conte regime surrounding several mining and oil contracts, most notably international mining giant Rio Tinto’s iron ore concession in southeast Guinea. The military junta has said that it plans to conduct a thorough review of all current mining concessions. It has not announced when it expects to complete this review.
In some 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 is bound by law to honor judgments made by the arbitration court.
Performance Requirements and Incentives
The Investment Code, last revised in 1992, provides for tax advantages for certain priority investments. The government’s priority objectives 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 of social benefit; and investment banks or any credit institutions settled outside certain areas.
Right to Private Ownership and Establishment
There is the right to private property in Guinea. The government attempts to encourage private foreign investment through a complex set of tax and duty exemptions and rebates.
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 on 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, in 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 up to 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 in Guinea, given the general lack of law enforcement. OAPI works with the Ministry of Commerce to assist in the protection of proprietary information and trade secrets.
Transparency of Regulatory System
The Guinean judiciary is plagued by corruption, lack of training, and a shortage of operating funds. Guinea's laws promote free enterprise and competition. However, according to local and expatriate business owners, the government lacks transparency in the application of the law. Business owners assert that application procedures are sufficiently opaque to allow for significant corruption, and regulatory activity is often applied based on personal interest.
The U.S. Government, the French Agency for Development, the European Union, the World Bank, and IMF have been working with the Guinean Government to increase the transparency and efficiency of government through technical assistance, and several training and awareness programs for both judicial and executive branch members. The World Bank and IMF have also made increased transparency and efficiency in government a requirement for Guinea to be put back on a funded program with the IMF. Guinea’s funded program was approved by the IMF in December 2007. Also, the installation of an independent arbitration court has reportedly helped protect business people from corruption with the judicial system (see "Dispute Settlement"). Only domestic cases have been tried in the Arbitration Court, so its effectiveness in handling international disputes has yet to be determined.
Major expatriate companies operating in Guinea have reported the government’s periodic failure to rebate value-added taxes or to grant guaranteed tax exemptions. Some business managers reported practices such as judges' requests for payments to "escrow accounts" pending court decisions and locking of office gates until payment of an arbitrary ‘tax.’
Efficient Capital Markets and Portfolio Investment
Commercial credit for private and public enterprises is difficult to obtain and expensive in Guinea. Guinea 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 in such projects and stipulates the guarantees provided by the government for such projects.
The Investment Code allows for the transfer--in convertible currency and to the country of their choice--income of any sort derived from investment in Guinea, the proceeds of liquidating this investment, and the compensation paid in the event of nationalization. The legal, regulatory, and accounting systems are based upon French civil law. The legal and regulatory procedures, however, are not always applied uniformly or transparently.
The Guinean Central Bank occasionally suffers from a critical shortage of hard currencies/foreign exchange, which has caused hardship and inconvenience to large and small business owners. The Guinea 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 10%. The average official rate for 2008 was GNF 4,560 to the dollar. The flourishing parallel currency market exists due both to the under-valuation of the official rate, and to the difficulty in buying foreign exchange to complete transactions at the Central Bank. The few commercial banks in Guinea are also dependant 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 nonexistent. Banking regulations are part of the legal framework; however, lax enforcement is the rule rather than the exception, due to lack of funding and political will.
Laws governing takeovers, mergers, acquisitions, and cross-shareholding are limited to rules for documenting financial transaction and filing any change of status documents with the economic register. As Guinea continues to implement the OHADA Uniform Acts, it is anticipated that the legal framework will become more robust. Currently, in reality there is little official oversight, and no enforcement. There are no laws or regulations that specifically authorize private firms to adopt articles of incorporation that limit or prohibit investment.
Following the death of President Lansana Conte on 22 December 2008, a military junta seized power. Coup leaders announced in December that they plan to hold elections within two years. The United States has suspended assistance to Guinea, with the exception of humanitarian aid and programs supporting the democratic process. The international community continues to press for elections in six to twelve months. While almost no political violence accompanied the coup, the current investment climate remains uncertain.
In January and February of 2007, Guinea suffered through its worst bout of political violence in recent memory. Though a two-month general strike resulted in the appointment of a new prime minister and ministerial cabinet, significant human rights abuses occurred during this period with estimates ranging between 137 and 186 killed and between 1700 and 2000 wounded. Many of the victims were unarmed civilians allegedly killed by security forces. Throughout 2007 and 2008, random street demonstrations occurred, sparked by political frustration and economic hardships. A military mutiny in May 2008 over a disputed pay increase led to several deaths. None of these demonstrations have targeted American or foreign investors. In August and September 2008, occasional protests targeted mining ventures accused of failing to adequately support their local communities. These protests resulted in the temporary cessation of activity and, in some cases, local injuries and deaths.
Political unrest in prior years (the 1993 presidential election, the 1995 legislative elections, a 1996 mutiny, the arrest of opposition figure Alpha Conde in 1999, the 2006 general strikes) impacted some investors, primarily retailers. In February and June 2006, Guineans staged two general strikes which were widely supported, and most businesses closed. Mining operations continued in some sectors on various scales of production. The strikes were generally peaceful, but during the June strike several people were arrested and police fired into crowds of protesters, killing at least 12 persons and injuring others. The government has not investigated the killings that occurred in 2006, 2007, or 2008.
Despite Conte's death, the region has remained relatively stable. In prior years, skirmishes between villages along the border with Mali have resulted in several deaths. National elections in both Sierra Leone and Liberia, and improved stability in Sierra Leone contribute to improved relations between these Mano River neighbors. Guinea at one time hosted hundreds of thousands of refugees from its regional neighbors. The vast majority has now been repatriated or permanently settled in Guinea.
Poor governance, which includes corruption, is the most significant barrier to investment in Guinea. The business and political cultures, along with poor salaries, combine to encourage corruption. 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. Though it is illegal to pay bribes in Guinea, there is no enforcement. In practice, it is difficult and time-consuming to conduct business without paying bribes, which as they must comply with the Foreign Corrupt Practices Act, 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 a law is enforced, and then a bribe is paid by the offender to reduce or eliminate any penalties.
Under the Conte regime, the government committed to combat corruption, and was working with the IMF, World Bank, and USAID on the issue. Efforts have focused on revising procedures, strengthening judicial institutions, creating an arbitration court, and investing in transparency, accountability, and systems, including performance budgeting systems. However, lack of funding and general resistance to reform hampered progress. Efforts by the government, including the creation of an anti-corruption committee to investigate and report on corruption did little to eliminate this widespread problem. Although the military junta has publicly announced its intention to combat corruption, it has not articulated a strategy for doing so. A survey published in 2005, featuring questions asked in 2003, suggested that corruption was a huge problem for most Guineans, and affected their lives daily. The report showed that judicial decisions, routine administrative tasks, even calls to the electrical utility, required payment of bribes. These practices continue unabated.
Bilateral Investment Agreements
Countries with bilateral investment protection 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 next section for U.S. Guinea private investment guarantees.
OPIC and Other Investment Insurance Programs
Guinea and the U.S. have an agreement on private investment guarantees in effect since 1962, making investors eligible for Overseas Private Investment Corporation (OPIC) insurance programs. In December 2005, OPIC offered political risk insurance to an American NGO, and was closely considering a significant investment in loans and risk insurance for refinery projects. In late 2007, OPIC froze insurance applications for projects under review by the Government of Guinea.
Education in Guinea is compulsory for six years, to the end of primary school. The World Bank estimates that for 2007 attendance at primary schools was 79%; and at secondary schools 36%. There are still fewer females than males in school. Guinea’s official illiteracy rate is 62%, although one survey put the rate higher. Thus, the labor pool in Guinea is ample, but generally not well educated.
Guinea's 1988 Labor code strictly protects the rights of employees, which is enforced by the Ministry of Social Affairs. The Labor Code sets forth guidelines in various sectors, the most stringent of which are in the mining sector. Guidelines cover wages, holidays and work schedules, overtime pay, vacation, and sick leave. The National Assembly increased employers' 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 now there is no obligation 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. Labor-management relations, defined by the provisions of the Labor Code, can vary from smooth to difficult. Many foreign managers cite incidents of theft, low productivity and the difficulty of 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 legalizes 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.
The law provides that the government should support children's rights and welfare, although in practice, the government did not effectively protect children. While access to primary education for both genders generally improved, government spending on education focused on higher learning with total spending declining by about four percent during the year.
Government policy provides for tuition-free, compulsory primary school education for six years, and enrollment rates were significantly higher than in recent years, although generally low by international standards. Based on data from the 2006-2007 school year from the Ministry of Education, 79%of children were enrolled in primary school. When considering girls only, the enrollment rate was 71% percent. In rural areas, 60% percent of all children and 51% percent of girls were enrolled in primary school. Several government programs resulted in an increase in girl's school enrollment, but enrollment rates for girls generally starts to decline at the middle school level. While girls legally have equal access to all levels of primary and secondary education, social norms and practices result in significantly lower attendance rates at the secondary level. Poor infrastructure, including a general lack of adequate educational facilities, also contributes to low enrollment rates, particularly at the secondary level.
Foreign-Trade Zones/Free Ports
There are no Foreign-Trade/Free Ports in Guinea.
Foreign Direct Investment Statistics
Statistics on foreign direct investment are difficult to obtain, but regional stability, improved economic management, and external market factors increased investment over the last two years.
The Guinean Central Bank estimates that Foreign Direct Investment (FDI) in Guinea was $125 million in 2006 and $385.9 million in 2007. Of the 2007 total, mining sector investment accounted for 67%, telecoms 25%, and commercial banks seven percent. Mining giant Rio Tinto accounted for 75% of the total investment in the mining sector.
Global Alumina and the Alcoa-Rio Tinto-Alcan consortium are at the early stages of building two alumina refineries in the Boke region of Guinea. The two projects have a combined value of close to $7 billion. In addition, Chinese and other mining companies have either signed agreements or are pursuing agreements to further develop Guinea’s massive bauxite potential, but these companies are still in exploratory stages. International mineral companies, Rio Tinto and BHP Billiton have both begun work on large multi-billion dollar iron ore projects in the Forest region of southeastern Guinea. However, Rio Tinto's claim is currently in dispute after the GoG revoked its concession in 2008. (See section on Dispute Settlement.)
Two gold-mining companies, Societé de Minière de Dinguiraye (SMD) and Societe Aurifère de Guinee (SAG) are investing and expanding their businesses, though smallscale artisanal mining is also a major factor in that sector. Lebanese traders have a visible foreign business presence, with interests in real estate, small manufacturing, and wholesale and retail import and sales. Chinese enterprises are a growing factor in health care, retail trade and other small firms.
Investing in Guinea is simplified through the Office of Private Investment Promotion (OPIP), created in 1992. OPIP is a one-stop business registration office, centralizing the administrative, legal, fiscal, and other formalities required to invest in Guinea. It also doubles as the office for promotion of the African Growth and Development Act (AGOA) in Guinea. Under the late President Conte, the GoG stated that the enhanced use of AGOA by Guinean exports is a priority for the nation; however, few concrete steps were taken to actively encourage export.
Office de Promotion des Investissements Privés (OPIP)
(224) 41 49 85 / 64 218 607
African Intellectual Property Organization (OAPI)