Doing Business in Guinea

Despite the fact that mining revenues drive the economy, with royalties and taxes providing the largest portion of exports and government income, GOG policy has been consistently hostile to foreign investment since December, 2008. Political and economic management, which has been plagued by corruption and mismanagement for decades, has worsened significantly since a military coup in December, 2008. The country remains extremely poor and has limited capacity to absorb investment.

Due to the tenuous security situation in 2009, the International Monetary Fund (IMF) and the World Bank (WB) reduced their staff and limited their collection activities. The junta itself placed very little emphasis on economic record keeping both for reasons of political expediency as well as data collection capacity gaps. As such, there are few statistics available for 2009. Those that are available show both exports and imports diminishing from Guinea. At the beginning of the year, the U.S. had a trade surplus of $4.7 million with Guinea - $11.9 million in exports to and $7.2 million imports from Guinea. By September, trade with Guinea had resulted in a trade deficit of $300,000 with only $5 million in exports and $5.3 million in imports. Guinea had a net current account deficit of $488.8 million in 2008.

§ China is Guinea‟s largest trading partner, supplying nearly 28.2% of the country‟s imports. France is also a net exporter to Guinea, accounting for 21.5% of Guinea‟s imports while the Netherlands and Spain comprise the other major importers. Spain and Russia are the main destinations for Guinea‟s exports, accounting for 16% and 15% respectively of Guinea‟s total exports.

§ Guinea‟s notoriously poorly governed economy is now feeling the chokehold of the global economic crisis and the inexperience of the ruling junta. A majority of commodity prices, on which the government budget relies, sunk precipitously since 2008. International aid isolation has removed several external sources of funding and the GOG is facing massive budget shortfalls, but the junta continues to spend significant resources in the defense sector. Since taking power, the CNDD did not have any clear plan on how to manage their clearly worsening economy and spent well beyond its means. The junta consistently courted quick revenue investments in the place of long-term business ventures throughout 2009.

Market Challenges

§ Ease of business: In their annual “Ease of Doing Business” index, the World Bank ranked Guinea as the 171st worst country for doing business in the world – twelfth from the bottom. Due to pervasive corruption, inadequate infrastructure, a lack of skilled workers, political uncertainty, and government harassment, Guinea is a challenging place to invest and work.

§ Infrastructure: Guinea lacks the infrastructure necessary to support advanced commercial activities. Electricity and water are irregular in Conakry and largely unavailable throughout the interior. The transportation infrastructure is incomplete and badly deteriorating, including the road, railroad, and port systems. Operating costs are incredibly high due to the necessary installation of the private telecommunication, transportation, and electricity infrastructure necessary for competitive production.

§ Political instability: Since the December 2008 coup d‟etat, Guinea has become increasingly politically and economically unstable. The CNDD expropriated several international mining interests and called into question contracts negotiated under the former regime.