Report No: AUS0003433 . Guinea Elusive Quest for Jobs and Economic Transformation: How Guinea Can Leverage Trade and Investment for More Inclusive Growth . June 23, 2023 . FCI . Document of the World Bank © 2017 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. 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The Elusive Quest for Jobs and Economic Transformation: How Guinea Can Leverage Trade and Investment for More Inclusive Growth 2023-06-23 (FINAL) Michael Engman, Rodrigo Andrade, Mamadou Saliou Balde, Jeremy Strauss & Sarah Zekri Acknowledgements This study was prepared by a World Bank Group (WBG) team led by Michael Engman and including Rodrigo Bomfim de Andrade, Mamadou Saliou Balde, Jeremy Strauss and Sarah Zekri. The team worked under the guidance of Coralie Gevers, Nestor Coffi and Consolate Rusagara, and benefitted from the assistance provided by Salome Nadege Abomo Amougou, Ganna Musakova, Hannah Elizabeth Thomas, and Ngamet Toure. The team is grateful for the time, insights and background material provided by members of the Government of Guinea and business leaders in Conakry (see Annex 3). The team is also grateful for technical comments from the peer reviewers Mariama Cire Sylla, Adja Mansora Dahourou Simpore, Andres Garcia and Vincent Palmade, and from country context and project insights shared by WBG colleagues Pedro Andres Amo, Mehdi Benyagoub, Nfaly Berete, Boubacar Bocoum, Idriss Deffry, Bailo Diallo, Papa Mamadou Fall, Djamali Ibrahime, Massandje Kaba, Ange Claver Kouassi, Mahamoud Magassouba, Mariama Altine Mahamane, Jean-Christophe Maur, Odyssia Ng, Aissatou Ouedraogo, Jeanne Coulibaly Yepse Oyolola, Patrick Philippe Ramanantoanina, Susana Sanchez, Claudia Zambra Taibo, Boulel Toure and Christina Wood. 2 Background “Guinea is a country of extraordinary natural endowments!” Some version of this truism has for decades been presented as the opening statement or headline of studies of the Guinean economy. Despite this extraordinary natural wealth, Guinea has to date fallen behind rather than moved ahead of its peers on most social indicators. The country is hardly alone in struggling to create jobs and transforming the economy despite a wealth of natural resources. Political competition to control natural resources is fierce in many resource rich countries and policy makers too often fail to create a business environment that is conducive to trade, investment and private enterprise. The big question is what Guinea’s policy makers could and should do to derive greater development outcomes from this extraordinary wealth. The aim of this study is to contribute to the debate in Guinea on how to improve the conditions for jobs and economic transformation (JET). In the last decade, Guinea’s extractive industry has finally turned into an engine of export-oriented growth. If the political situation allows—and the policy environment remains somewhat stable—the extractive industry will likely help the economy power along in the foreseeable future. There is plenty of growth potential beyond extractives and in sectors such as hydropower, digital services, logistics and commercial agriculture. Many of these opportunities are directly or indirectly associated with the large investments in extractives. The private sector’s ability to create backward and forward business linkages to the mega investments will render them more successful and sustainable, and the economic benefits shared in a more inclusive manner. Guinea’s record of job creation and economic transformation has been underwhelming to date. The economy has absorbed several health-related shocks and other challenges in the last decade, including epidemics of the Ebola virus disease in 2013-15 and 2016, and a new outbreak in 2021; the COVID-19 pandemic that erupted in 2020; global price fluctuations of Guinea’s exported commodities; and social and political unrest. There has been a slow exodus of Guinean women from the labor force. The country’s positive record of reducing extreme poverty and tackling economic inequality in much of the 2000s and 2010s have likely been reversed in recent years. Most Guineans are economically vulnerable and have access to few public services. At the same time, public expectations about more and better job opportunities are on the rise. The question is therefore what Guinea’s policymakers can and should do to help more citizens realize their economic potential, and what the WBG can do to help the government be more effective at delivering on this agenda. This study looks at Guinea’s drivers of economic growth and competitiveness, the country’s record of job creation and economic transformation, and the WBG’s support to the Government of Guinea in addressing JET-related barriers. It applies a data-driven PowerPoint format to allow readers to more readily assess and analyze key data sources and draw conclusions. It builds on the WBG’s Guinea Country Private Sector Diagnostic (CPSD) that was prepared in 2019 with inputs from public sector and business leaders—many of whom the authors of this work consulted and whose insights informed the following analysis. It complements the World Bank Country Economic Memorandum (CEM, forthcoming) and informs the WBG’s Systematic Country Diagnostic (SCD). 3 Objectives, structure and data Objective This study analyzes the drivers of competitiveness of the Guinean economy to inform the national policy agenda on jobs and economic transformation. Structure The presentation is structured as follows: Section 1: Studies the growth record and the drivers of growth with particular focus on trade and private investment. Section 2: Studies trends in job creation, economic transformation, human capital accumulation, informality and entrepreneurship. Section 3: Assesses issues that impede competitiveness and the related policy agenda and reform record over the last decade. Section 4: Reviews the WBG portfolio and pipeline of JET-related lending operations and technical assistance projects to identify gaps and learn from project implementation and experiences from the lest ten years in Guinea. Section 5: Presents findings and conclusions from the preceding analysis to propose a way forward with priorities for a future reform program and possible WBG engagement around JET. Data The analysis draws primarily on: (i) macro- and microdata retrieved from the World Bank Open Data portal, which aggregates data sources from within the WBG and hundreds of secondary sources; (ii) enterprise survey data; (iii) data presented in the WBG operations portal; (iv) trade data from UN COMTRADE and the Observatory of Economic Complexity; and (v) findings from flagship reports from the IMF, the WTO, the ILO, etc., in addition to the WBG. 4 The following analysis uses the IDA-19/20 JET framework as guiding principle to determine the scope. It covers eight of the ten pillars and five of them in more detail whenever data availability allows. Area of core focus in the analysis (as agreed at the concept note stage). Area of partial focus in the analysis (ditto). The International Development Association (IDA) 19/20 JET framework offers a basic but practical structure around the entry points for public interventions to improve job creation and promote economic transformation. JET is a core pillar of IDA that supports green, resilient, and inclusive growth. It establishes a foundation for the private sector to invest, hire and grow. The focus on the private sector as the change agent is essential to the approach. The creation of more and better jobs is a top development priority in Guinea and the acceleration of economic transformation is the primary way to deliver on this objective. Source:. Special Theme : Jobs and Economic Transformation (English). IDA19 Washington, D.C. : World Bank Group. (link) 5 IDA20 Special Theme : Jobs and Economic Transformation (English). IDA20 Washington, D.C. : World Bank Group. (link) The JET framework is anchored in two stylized facts reflected consistently in cross-country data. 1. Productivity growth is necessary for economic transformation and involves a shift from lower productivity activities to higher value-added activities across firms and sectors, from rural to urban areas, and from self-employment to formal work. This process calls for significant investment in people—their health, skills, financial and market access—and in enabling infrastructure such as transport, equitable access to digital and financial services, and energy. 2. The private sector has been the main engine of economic transformation in countries with successful development outcomes. For Guinea, this would imply a significant shift in the role of the state—from generator of formal employment to facilitator of macro-financial stability, provider of quality services to an empowered domestic private sector, and regulator of functional, contestable markets. Source:. Special Theme : Jobs and Economic Transformation (English). IDA19 Washington, D.C. : World Bank Group. (link) IDA20 Special Theme : Jobs and Economic Transformation (English). IDA20 Washington, D.C. : World Bank Group. (link) 6 TABLE OF CONTENTS Executive Summary & Key Messages Emerging…………………………………………………………………………………..8 1. Drivers of Growth……………………………………………………………………………………………………………………………..10 2. Jobs and Economic Transformation.………………………………………………………………………………………………….26 3. Private Sector Competitiveness and the Government’s Policy Agenda…..…………………………………………42 4. WBG Portfolio and Pipeline Review…………………………………………………………………………………………………..93 5. Recommended Priorities for More Favorable JET Outcomes……………………………………………………………108 Annex 1. Project-by-project Overview………………………………….………………………………………………….…………………….113 Annex 2. Summary of Lessons Learned………………………………….………………………………………………….………………..…130 Annex 3. People Consulted in Guinea Conakry in the Spring of 2023.………………………………….…………………………133 7 Executive summary and key messages emerging SECTION 1 – DRIVERS OF GROWTH SECTION 2 – JOBS AND ECONOMIC TRANSFORMATION ❑ Guinea’s growth record over the last decade has been closely linked to ❑ Guinea has experienced modest outcomes in terms of economic transfor- FDI and exports of extractives; and it will most likely remain so in the mation, industrialization and manufacturing growth in the last decade. foreseeable future. ❑ There has been a shift from agriculture to services partly due to the ❑ Trade openness has increased multifold, but exports are increasingly urbanization trend, but services productivity has been stagnant. concentrated in gold and aluminum ore, and there are no signs of diversification or increasing value addition. ❑ Labor productivity in industry is roughly 12 times higher than in agriculture and 5 times higher than in services. It has risen recently due ❑ Non-extractive exports have been static or declining, with great to growth in extractives and hydropower. volatility within agricultural product categories, and there are no real champions emerging. Even extractives beyond gold and aluminum ore ❑ Guinea has one of the world’s lowest shares of wage and salaried have disappeared in the export basket over time. workers, with very high vulnerability in employment. Worryingly, there has been a major decline in labor force participation for women, with ❑ There has been limited economic integration with neighbors and only 1 in 100 women engaged in wage employment. African countries in general, though AfCFTA may offer opportunities in the long run if its protocols are respected. ❑ There is a marked skills mismatch with high levels of unemployment among Guineans with intermediate or advanced education; and far too ❑ The macro environment is reminiscent of Dutch decease. The economy many youth are neither in education, employment nor training. would grow faster and more resilient if the country could develop new sources of export revenue, but the continuous appreciation of the ❑ Informality is widespread, but the number of business licenses is growing Guinean Franc makes this unlikely to happen. fast, especially among women and young adults. ❑ There are challenges to jobs growth linked to the relatively high tax rate of labor and lagging ICT preparedness. 8 Executive summary and key messages emerging SECTION 3 – COMPETITIVENESS AND THE POLICY AGENDA ❑ Hydropower holds tremendous potential for electrification, exports growth, and export diversification whereas Guinea’s underdeveloped financial sector ❑ Political instability, general law-and-order-issues, and institutional should better leverage digital financial services for financial inclusion. fragility are major concerns for nearly all businesses. SECTION 4 – WBG PORTFOLIO AND PIPELINE REVIEW ❑ Simplifying and digitalizing trade rules and the administration of taxes are of high priority to the private sector. ❑ Agribusiness and power sector projects are extensively covered but face implementation issues, and regional connectivity is also relatively well ❑ Addressing gender inequality is essential to empower women and covered in select areas. promote inclusive growth, with Cote d’Ivoire offering lessons. ❑ Business enabling environment reforms, trade facilitation measures, skills ❑ Guinea’s policy makers must strengthen sector governance and fiscal development, and increased access to financial services are areas that are management in the extractive sector to render mining operations either missing in the portfolio and pipeline or warranting a scale up of legitimate in the public’s view and make them viable over time. interventions for JET-related outcomes. ❑ Guinea should adopt an economic corridor approach to new inland ❑ There is continued emphasis on entrepreneurship and MSME support, digital mega investments like the Simandou, with proactive urban planning, transformation, and institutional reform. a vision to promote shared services for road, rail, ports and utilities; and long-term programs to build stronger business linkages. It ❑ Mega investments in extractives and hydropower offer opportunities to build should also invest more in basic education and technical skills, which stronger business linkages with positive economic spillover effects, job is key to attain more inclusive and sustainable growth. creation, and value addition as main outcomes; and potential export diversification as well. The WBG has the capacity to advise and finance an ❑ A review of more than a decade of legal, regulatory and policy integrated approach of this kind although they carry risk due to complexity. reforms for private and financial sector development highlight that a lot of positive initiatives aren’t implemented either due to missing ❑ Long-term planning and focus to turn new transport corridors into economic guidelines for implementation or a lack of capacity for corridors would lead to the emergence of better planned and productive administration and enforcement. urban areas, a formal economy, and more and better jobs. 9 SECTION 1: DRIVERS OF GROWTH Economic growth performance Poverty and inequality Foreign direct investment Trade in goods and services The role of extractives 10 In the 2000s and 2010s, Guinea’s economic growth record contributed to a quite rapid reduction in extreme poverty and income inequality, but since 2020, this positive trend has been reversed. GDP and GDP per capita (PPP) growth 2000-2021 The Guinean economy grew quite rapidly in the last decade and Guinea may be on the 12 cusp of attaining lower-middle income country status. Percent 10 ➢ The gross domestic product (GDP) increased by 65 percent in the 2000s and by 115 percent in the 2010s (current US$, purchasing power parity (PPP) terms). 8 ➢ In 2021, GDP reached US$16.1 billion, or US$US1,189 on a per capita basis, and 6 US$2,900 on a per capita PPP basis. 4 ➢ The World Bank estimates that real GDP growth was 4.7 percent in 2022 and will be 2 5.6 percent in 2023. 0 ➢ Guinea could attain lower-middle income country status in the next few years. 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 -2 Growth was quite robust during the COVID-19 pandemic with mining acting as the -4 growth engine, contributing 35 percent of GDP. With an annual population growth of 2.4 GDP growth (constant 2015 US$) GDP per capita, PPP (constant 2017 US$) percent, the economic growth rate must remain high to raise living standards. Poverty headcount ratios (2017 PPP) Guinea has reduced extreme poverty and economic inequality in recent decades. Poverty is estimated to have increased since 2020 due to a series of shocks. 100 % of population 90 The extreme poverty headcount ratio at US$2.15 a day (2017 PPP) dropped from 48 80 percent of the population in 2007, to 24 percent in 2012, and to 14 percent in 2018. But 70 in 2023, it is expected to edge up and reach 16 percent. 60 Most Guineans still eke out a living in difficult circumstances and remain economically 50 vulnerable to external shocks. In 2023, an estimated 53 percent of the population lived 40 on less than US$3.65 a day (PPP). 30 20 Perhaps most striking is that economic inequality has fallen significantly: the Gini index 10 dropped from 46 in 1994, to 43 in 2002, to 39 in 2007, to 34 in 2012 and came in just 0 under 30 in 2018. It leaves Guinea has one of the lowest Gini coefficients in Sub- 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23* Saharan Africa (SSA), although it may have been reversed as well in recent years. US$2.15 a day US$3.65 a day US$6.85 a day * Forecast by the World Bank. Source: World Bank Open Data and www.imf.org/en/Countries/GIN#countrydata and World Bank (2023) Macro Policy Outlook. 11 FDI inflows in extractives and hydropower are lumpy but acting as engines of growth whereas the gold boom has led to large FDI outflows. ODA and personal remittances matter but are modest compared to in neighboring countries. Inflows of foreign direct investment (FDI) Guinea has attracted large inflows of FDI thanks in large part to the mining industry and 20 increasingly to hydroelectric dam construction. % of GDP 18 16 ➢ FDI inflows averaged 13.5% of GDP in 2016-21 and were boosted by the construction of 14 the Souapiti hydroelectric dam in 2017-20. 12 10 ➢ The World Bank and the International Monetary Fund (IMF) estimate that FDI inflows 8 will average 10% in 2022-25 thanks to the mining, electricity, and transport sectors. 6 4 ➢ FDI could nearly quintuple over a few years if there is rapid progress to develop the 2 Simandou iron ore projects according to optimistic industry forecasts. 0 16 17 18 19 20 21 22e 23e 24e 25e ➢ Net inflows of FDI, however, have been lumpy with large peaks of 14% of GDP in 2011 Net inflows of FDI & ODA and inflows of personal remittances and 19% of GDP in 2016. In 2019-21, net inflows of FDI averaged a measly 0.9% of GDP, 26 and it was at, or below 1% in 2010 and 2013-2015. Net ODA received (% of GNI) 24 22 Personal remittances, received (% of GDP) ➢ FDI outflows will likely remain high as proceeds from the boom in artisanal gold mining 20 Foreign direct investment, net inflows (% of GDP) have fueled large purchases of private assets abroad. 18 16 Inflows of overseas development assistance (ODA) and personal remittances are also 14 important for the economy but relatively less so than for other countries in the region. 12 10 ➢ Inflows of ODA averaged 6% of gross national income (GNI) in the last decade. 8 6 ➢ Inflows of personal remittances averaged 1% of GDP over the same period. 4 2 0 ➢ Inflows of ODA and personal remittances were both low compared to those in -2 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 neighboring Guinea-Bissau, Liberia, Mali, Senegal and Sierra Leone. Source: World Bank Open Data and IMF (2023) Guinea Country Report, No. 23/43, January 2023. and World Bank (2023) MPO. 12 Guinea has rapidly integrated in the global economy: exports nearly tripled in 2000-10, and more than quadrupled in 2010-20. The trade openness was 132% of GDP in 2021 and the country may have closed a long-term trade deficit in 2022. Trade in goods and services (% of GDP)* Guinea has recorded a trade deficit since 2003. The deficit may have closed in 2022. 90 135 ➢ Imports averaged 56 percent of GDP in 2011-2020 and exports averaged 35 percent % of GDP % of GDP 80 120 of GDP over the same period. 70 105 60 90 ➢ In 2021, Guinea’s exports reached US$10.4bn compared to imports of US$11.0bn. 50 75 2000 2010 2020 40 60 30 45 Exports $735m x2.8 x12.4 20 30 Imports $867m x3.4 x11.1 10 15 0 0 ➢ In 2022, IMF estimates that exports of goods and services increased by 14 percent 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 to US$10.3 billion, whereas imports dropped by 13 percent to US$8.8 billion.** Exports Imports Trade openness (right y-axis) ➢ If the forecasts were to hold, it would leave Guinea with a positive trade balance Trade in goods and services (current US$) for the first time in nearly two decades. 12 BoP, current US$'billion ➢ Guinea’s trade openness reached 132% of GDP in 2020-21; more than a doubling 10 compared to the 2000s. 8 ➢ In 2021, the main sources of imported goods were China (41%), the EU (19%), India 6 (11%) and UAE (5%) => in 2000, Asian imports made up less than 17% of total. 4 ➢ In 2021, the main export markets for goods were India (36%), the UAE (27%), China 2 (25%) and the EU (10%) => in 2000, Asia absorbed less than 9% of Guinean exports. 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Exports Imports Source: World Bank Open Data and IMF (2023) Guinea Country Report, No. 23/43, January 2023. … * 2020 and 2021 shows the same exports and imports amounts. ** The differences between 2021 and the projection for 2022 is linked to OEC’s use of mirror data. 13 Exports have grown rapidly but concentrated: the export basket is dominated by precious metals & minerals. In short: (1) gold production has rocketed; (2) diamonds, crude petroleum & gas have plummeted; and (3) aluminum ore has remained strong. There are signs of neither export diversification nor increasing value addition. Exports in 2000 (HS4 level) share of total (US$1.0bn) Exports in 2010 (HS4 level) share of total (US$1.9bn) Exports in 2020 (HS4 level) share of total (US$11.6bn) Source: The Observatory of Economic Complexity (OEC) accessed February 28, 2023, https://oec.world/en. Note that OEC data combine Guinea’s national customs data with mirror data. 14 Extractives dominate the export basket and the economy. Two commodities — bauxite/aluminum ore and gold —generate nearly all export income, Exports: a story of two commodities (thus far) The extractive industry went from strength to strength in the 2010s: 10000 100 ✓ In 2021, it made up 96% of the overall export basket of goods, and it Percent US$'million was dominated by unwrought gold (61%) and 9000 90 aluminum/ore/concentrates/oxide (34%). 8000 80 ✓ Exports of aluminum ore were static in 2000-15 before it started to rise in 2016. It reached an all time high of US3.2 billion in 2021 with 7000 70 China (71%) and the EU (12%) the main markets. Aluminum ore 6000 60 exports will likely continue to grow as several new mines are expected to start operations in the coming years. 5000 50 ✓ Gold exports started to take off in 2012 and reached an extraordinary 4000 40 US$8.2 billion in 2020 before dropping to US$5.8 billion in 2021, with India (55%) and the UAE (40%) the main markets. 3000 30 ➢ In the 2000s and early 2010s, Guinea exported significant amounts of 2000 20 diamonds, copper ore, and crude petroleum & gas, but these product categories have disappeared from Guinea’s export profile in recent 1000 10 years. 0 0 ➢ Export data on gold is occasionally inflated through smuggling and re- 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 exports given changes in export tariff policies in the region. A large increase in gold exports is a general trend across the Sahel and many Aluminum Gold Share of total goods exports (right y-axis) other countries in West Africa. Source: The Observatory of Economic Complexity (OEC). Note that OEC data combine Guinea’s national customs data with mirror data. 15 Besides gold and bauxite, the long-awaited development of the Simandou iron ore deposits could see the value of exports double in the second half of 2020s. Thus, if the estimated US$15bn investment is completed according to plan, Guinea would become even more dependent on the extractive sector. The development of the highly publicized Simandou iron ore …and it will leave Guinea even more dependent on the extractive deposit may finally be about to happen… sector and the economy progressing along dual trajectories. The development of the world’s largest (4 billion tons) and highest-quality For 2020-21, the IMF estimates that the mining output increased by 37% iron ore deposit is under way after more than a decade of delays. In whereas non-mining output increased by 4%. March 2022, Rio Tinto, Winning Consortium Simandou (WCS), and the Guinean Government signed a framework agreement to jointly develop In 2022-23, the IMF projects that mining output will increase by 24% the Simandou project. whereas non-mining output will increase by 7%. It covers four mine sites and the building of a 670 km multi-purpose and The FDI that would be sunk in the development of the four blocks is roughly multi-user railway, and a new deep-water port, at a cost of about US$15 the size of Guinea’s entire GDP. billion. A joint venture (JV)—Compagnie du TransGuinéen—will develop The boost to exports could be roughly three times the value of today’s the railway and port. A realistic start of production may be around 2027 bauxite exports. and there is already some progress in the construction of buildings, railway and roads. But there are still some agreements that need to be In the Changing Wealth of Nations 2021, the WBG showed how in 2018, concluded between the parties. Guinea had the world’s highest concentration of total wealth in metals and minerals (nonrenewable natural capital assets). Mongolia came a close Once operational, Simandou could produce >100 million tons or roughly second with Mauritania, Suriname and Peru further behind. US$10 billion of iron ore per year. The Simandou project covers four exploration blocks: Blocks 1-2 are owned by WCS (90 percent) and the The long-term sustainability of the mega investments and the development government (10 percent) and Blocks 3-4 are owned by SIMFER, which is a of FDI-driven extractive projects will be closely linked to the ability of the JV between Rio Tinto (45 percent), Chinalco (40 percent) and the government to raise royalties and income and reinvest them in social government (15 percent). programs and infrastructure. 16 Source: WBG (2021), The Changing Wealth of Nations 2021: Managing Assets for the Future. IMF (2023), Guinea, IMF Country Report No.23/43. …or as the IMF put it in its January 2023 Article IV Consultation: “Sound implementation of the Simandou project should be a key priority… Ensuring a good fiscal regime in the legal contracts under negotiation—by ensuring that the government extracts its fair share of revenues, while adhering to environment, social, and governance (ESG) best practices—can be a real gamechanger for Guinea.” The recent literature, economic reporting, and feedback from recent business roundtable discussions in Guinea all point in the same direction. The mega investments represent a unique—or once-in-a generation—opportunity to leverage foreign capital and technology to build a mutually beneficial partnership that can be used to invest in education and infrastructure, and build a stronger local private sector, in the interest of inclusive growth. There are many examples of countries in the region that have failed in the same endeavor, for example when it comes to hydrocarbon assets, and Guinea’s policy makers must do what it takes to make sure the investments benefit the country and its people without deterring investors. 17 The value of exports beyond extractives (previous metals, mineral products, chemical products) has decreased since 2000 - Exports of documents of title and raw cotton ceased in the 2000s whereas exports of rough wood and coffee collapsed in the 2010s. - Exports of natural rubber (2000s) and cocoa beans and cashew nuts (2000s and 2010s) grew into new important export products. Exports in 2000 (HS4 level) share of total (US$176M) Exports in 2010 (HS4 level) share of total (US$226M) Exports in 2020 (HS4 level) share of total (US$191M) Source: The Observatory of Economic Complexity (OEC) accessed February 28, 2023, https://oec.world/en. Note that OEC data combine Guinea’s national customs data with mirror data. 18 The agribusiness sector remains underdeveloped with a static export growth trajectory but great volatility within product categories. There is no clear export champion emerging. The IMF projects that Guinea’s food imports will reach US$1 billion in 2025; or roughly twice the amount of 2020. Exports of select agricultural products (HS4 level) Guinea’s export profile of agricultural products reveals: ✓ A static aggregate picture over the last 15 years. US$'million 375 350 ✓ Great volatility within individual product categories. 325 ✓ Very limited value addition to commodities. 300 - Cashew exports jumped from US$3mn in 2000 to US$10mn in 275 2010 to US$36mn in 2020 with a peak of US$160 in 2017. 250 - Cocoa bean exports rose from US$3mn in 2000 to US$9mn in 2010 to US$40mn in 2020. 225 200 - Palm oil exports took off in 2021 when it reached US$21 million; up from US$1 million per year in previous years. 175 - Exports of animal products (98% frozen fish in 2021) averaged 150 US$53mn over the period and was relatively stable. 125 - The rubber industry developed in the mid-2000s to generate 100 exports of US$20-60mn in the 2010s. 75 - Coffee exports dropped by over 90% in the last decade to 50 reach US$3.1mn in 2021. 25 - Textiles exports (mainly raw cotton) has largely ceased 0 (US$1mn in 2021), after peaks of US$11mn in 2000 and 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 US$8mn in 2001 and 2016. Coconuts, Brazil Nuts, Cashews Cocoa beans Coffee - Wood exports has also largely ceased (US$1.2mn in 2021), Rubber and Plastics Animal products Wood products after peaks exceeding US$50mn in 2008 and 2010. 19 Source: The Observatory of Economic Complexity (OEC) accessed March 9, 2023, https://oec.world/en. Note that OEC data combine Guinea’s national customs data with mirror data. HS4 level . IMF (2023), Guinea, IMF Country Report No.23/43. The formal trade profile illustrates Guinea’s economic disintegration with Africa: it trades relatively little with Africa and even less with its neighbors. Informal trade in some product categories (e.g. fruits, vegetables) may engage many farmers, but these trade flows are mostly small, irregular and disorganized. Guinea’s trade with Africa and the World 500 50% Guinea trades little with African countries and trade flows US$'million have been relatively static or declining over time. 450 45% 1. Guinea’s exports of goods to Africa have declined in 400 40% absolute terms since 2000-01. 350 35% => peaks in 2014-16 reflected adhoc gold exports to Ghana. 300 30% 2. The share of Guinea’s exports that went to Africa averaged 0.5 percent in 2019-21. 250 25% 3. Guinea’s main export markets (products) in 2019-21 were 200 20% Nigeria (petroleum gas), Morocco (coffee, bran), Senegal (coffee), Uganda (gold) and Mali (plastics). 150 15% 4. Guinea’s imports of goods from Africa were nearly identical 100 10% in value in 2000 and 2021. 50 5% 5. The share of Guinea’s imports that came from Africa averaged 8 percent in 2019-21 compared to 30 percent two 0 0% decades earlier. 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 6. Guinea’s main import markets in 2019-21 were Senegal, Guinea's goods exports to Africa (US$'mn) Guinea's goods imports from Africa (US$'mn) Morocco, South Africa, Cote d’Ivoire and Tunisia. Leading Exports to Africa as share of total (%) Imports from Africa as share of total (%) product categories were foodstuff, construction material and inputs, machines, fertilizer and paper goods. 20 Source: The Observatory of Economic Complexity (OEC) accessed March 9, 2023, https://oec.world/en. The (irregular) data on services trade highlight Guinea’s comparative disadvantage. Informal goods trade between Guinea and its neighbors is relatively high as a share of neighborly trade but small in absolute terms. The latest actual data (for 2019) on Guinea’s trade balance for services Guinea’s informal cross-border trade with its neighbors is estimated at indicate that the country imports approximately 10 times the value of between US$43million (low estimate, or 26% of formal trade) and what it exports. This negative balance is not unique for a low-income US$78 million (high estimate, or 48% of formal trade). Guinea’s informal country and services trade is a fraction in size of merchandise trade. The imports are roughly thrice the size of its informal exports. IMF’s preliminary data and projections indicate that in 2020-26, Guinea Estimate of informal trade (US$'mn) may import 30-40 times the value of services that it exports. TRADE FLOW LOW HIGH Imports from Cote d'Ivoire 13.4 24.6 Transportation Exports to Cote d'Ivoire* <1.0 <1.0 Imports from Guinea-Bissau negl. negl. Other business services Exports to Guinea-Bissau negl. negl. Imports from Liberia 2.5 4.5 Computer and information services Exports to Liberia 0.7 1.3 Imports from Mali 3.4 6.2 Financial services Exports to Mali 6.3 11.4 Imports from Senegal 10.0 18.3 Insurance services Exports to Senegal 0.5 0.9 Imports from Sierra Leone 3.7 6.7 IMPORTS EXPORTS 0 50 100 150 200 250 300 350 400 450 US$'million Exports to Sierra Leone 2.2 4.0 TOTAL IMPORTS 33 60 TOTAL EXPORTS 10 18 While modest in size, informal trade has important ramifications for food security and income generation for certain rural populations who would otherwise suffer from economic exclusion. Source: IMF (2023), Guinea, IMF Country Report No.23/43. UN COMTRADE (left) and United Nations Economic Commission for Africa (2021), “Towards an estimate of informal cross-border trade in Africa” (right). * WB estimates based on data from OEC (2023). 21 Export diversification is unlikely in a macro environment reminiscent of Dutch decease. Guinea’s economy would grow faster and more resilient if the country could develop new sources of export revenue. The continuous appreciation of the Guinean Franc makes this less likely to happen. Both the World Bank’s forthcoming Country Economic Memorandum for ▪ The REER has appreciated almost continuously since 2011 following a bauxite Guinea and the IMF recent Article IV Consultations have studied the real mini-boom; and since 2016 due to the bauxite take-off and gold boom. effective exchange rate (REER, below) appreciation in Guinea (2010=100). ▪ IMF’s data from late 2022 indicate that the REER index just reached 200 compared to 100 in 2010. Currency appreciation and declining competitiveness ▪ All else being equal, 1 kg of cashew, cocoa or coffee would be twice as expensive today as in 2010 from an exchange rate perspective. ▪ The appreciation has been much more pronounced in Guinea compared to countries such as Botswana and Nigeria with prominent extractive sectors. ▪ Projections about the Guinean Franc—for example by the Economist Intelligence Unit—point to continuous appreciation in 2024-25. ▪ Guinea’s exporters will thus face considerable headwinds in the foreseeable future, and it bodes ill for hopes about export diversification in the medium- term. Extractives is arguably the only goods sector where scarce international supply helps mitigate the overall exchange rate pressure. ▪ Hydropower is the only emerging source of new export revenue given large investments that are being made in Guinea and the government’s investment in distribution infrastructure for the regional integration of electricity markets. Source: World Bank (2023), Country Economic Memorandum: Guinea (forthcoming) and IMF (2023), Guinea, IMF Country Report No.23/43 and EIU (2023) Guinea: Country Report, April 12, 2023. 22 Trade transaction costs are high and compliance with trade liberalization commitments incomplete despite Guinea being a founding member of the Economic Community of West African Countries (ECOWAS, 1975) and the World Trade Organization (WTO, 1995). ▪ Tariff protection. At the WTO, Guinea has bound 40% of tariff lines, including all agricultural products, and 30% of non-agricultural products, at rates ranging from zero to 75%. The simple average of bound rates is 20.4%, or 39.6% for agricultural products and 9.9% for non- agricultural products. Since 2017, Guinea applies the ECOWAS Common External Tariff, which is ad valorem at rates of zero, 5%, 10%, 20% and 35%. Consequently, tariffs for more than 600 tariff lines exceed Guinea’s WTO bound rates. Overall, average tariff protection remains unchanged since 2011 at circa 12%. ▪ Other import duties. Guinea applies the ECOWAS Community levy and AU Community levy, registration tax, processing fee, and the centime additionel, in addition to CET accompanying measures (import adjustment and supplementary protection taxes), which further complicates border taxation. In addition, there are internal taxes such as VAT (18%) and excise duties. ▪ Customs administration. Despite recent progress in reducing the administrative burden of customs, the utility and cost of certain import and export documents such as the “descriptive import declaration” could be reviewed and progress on digitalization of trade consolidated. Guinea recently changed the customs system to ASYCUDA World, allowing electronic submission of documents. The Customs Code (2015) allows for an “approved economic operators” regime but the framework is still pending adoption of a modern, risk-based system of inspections and compliance verifications. Export procedures benefited from the introduction of a Single Window in 2017, but the customs declaration process is burdensome and imposes relatively high taxes and fees. ▪ Trade facilitation. Guinea has not ratified the Trade Facilitation Agreement and its various categories of measures. Several reforms have been undertaken to improve the investment climate and in particular the foreign exchange system to curb the black market. Guinea has adopted a new Investment Code featuring a single window for authorizations. Reforms have been introduced to enhance the financial supervision of State-Owned Enterprises (SOE) now governed by the OHADA Treaty. Source: World Trade Organization (2018), Guinea Trade Policy Review. 23 Guinea is a member of the new Africa Continental Free Trade Area (AfCFTA) that will create a single market in Africa. In the short- and medium-term, it will likely have little impact on the Guinean economy. In the long- term, and if properly implemented, it will offer new opportunities for Guinean businesses and workers. ▪ 54 African countries have signed the AfCFTA. Guinea signed it on March 21, 2018; ratified it on July 31, 2018; and deposited its instruments of ratification on October 16, 2018. However, the single market is work in progress. Once completed, the AfCFTA will be the world’s largest free trade area as measured by membership and affected population (1.3 billion people). It already covers a GDP of US$3 trillion. ▪ The AfCFTA treaty contains the legal framework for trade in goods, trade in services, the institutional setup, and provisions for state-to-state dispute settlement. The specific terms are still under negotiation in the form of annexes to the protocols of the treaty. The negotiations on trade in goods, including rules of origin, have been completed, but the negotiations on trade in services, additional protocols on investment, competition policy, intellectual property rights, and e-commerce are ongoing. ▪ Countries have agreed to progressively eliminate tariffs on at least 90 percent of goods, address non-tariff barriers, and reduce restrictions on trade in services. The tariff reductions will be phased in over 5-10 years. The agreement allows trade in sensitive goods (up to 7 percent of tariff lines) to be liberalized over longer time frames or exempted altogether (up to 3 percent of tariff lines) from liberalization. ▪ A team of WB economists recently estimated that the positive increase in inward FDI stock for Guinea will be US$1.0-1.5 billion by 2035. The positive increase in outward FDI stock will be around US$51-54 million over the same period. ▪ Country-specific estimates on trade flows will depend on the outcome of ongoing negotiations, but the conclusion of a deep AfCFTA could help raise incomes by 9 percent by 2035 on the continent. A reduction in non-tariff measures on goods and services and improvements in trade facilitation measures (cutting delays at borders) would produce most of these gains. ▪ Guinea is a member of ECOWAS, the West African Monetary Zone though it does not adopt the West African Franc, and the Mano River Union. Source: Echandi, R., Maliszewska, M. and Steenbergen, V. (2023), Making the Most of the African Continental Free Trade Area: Leveraging Trade and FDI to Boost Growth and Reduce Poverty. 24 Summary and conclusions - section 1 ❑ The economic progress that was achieved over the last decade has to a large extent been driven by FDI and growth of the extractive industry, and in particular exports of bauxite/aluminum ore and gold. The great challenge for Guinea’s policy makers is to ensure that the ass ociated benefits are shared in an inclusive way and royalties re-invested wisely in public services and infrastructure (more in section 3). ❑ Exports nearly tripled in the 2000s and more than quadrupled in the 2010s with the measure of trade openness reaching 132% of GDP in 2021. As a result, a large, structural trade deficit has just been turned into a minor trade surplus. The massive increase in trade has transformed the profile of Guinea’s trading partners with Asian markets replacing the EU market. ❑ Exports have grown increasingly concentrated, and the export basket is dominated by a few precious metals & minerals. Gold exports have rocketed, bauxite has grown strongly, whereas diamonds, crude petroleum and gas have plummeted. There are no signs of export diversification or increasing value addition to Guinea’s extractive commodities although there are some opportunities (more in section 3). ❑ Since 2000, the value of exports besides extractives has decreased in both real and nominal terms. Exports of wood and coffee have collapsed in the last decade. Cocoa beans and cashew nuts have become important export products. Thus, a static aggregate export profile masks great volatility within individual agricultural product categories. The lack of local value addition remains a constant and REER appreciation zaps competitiveness. ❑ Guinea is not integrating economically with the rest of the Africa region and its neighbors, despite longtime membership of regional blocs. It trades relatively little with the rest of Africa and even less with its neighbors. Informal trade matters for some product categories, but informal trade flows are small, irregular and disorganized. Guinea’s membership in AfCFTA will likely have a very small effect in the short- to medium-term. In the long- term, and if properly implemented, it will offer new opportunities for Guinean businesses and workers. ❑ Economic diversification will be essential to sustain growth over time and make it more resilient and inclusive. A sound implementation of the Simandou iron ore project should be a key priority, and so should the addressing of weaknesses in governance be. ❑ Recent data and consultations with a broad set of investors and government officials indicate that the extractive sector will remain the predominant growth engine for years to come in Guinea. The quality of public management of royalties and facilitation of complementary investments to strengthen backward and forward linkages to the extractive industry will help determine its sustainability. 25 SECTION 2: JOBS, ECONOMIC TRANS- Economic transformation FORMATION & THE QUEST FOR Jobs outcomes INCLUSIVE AND SUSTAINABLE Human capital DEVELOPMENT Informality Entrepreneurship 26 There has been little movement in terms of economic transformation, industrialization or manufacturing activities in recent decades. Value added in industry is elevated from a regional perspective due to the extractives industry. Value added by sector as a share of GDP 50 ➢ The share of value added from agriculture, forestry and fishing in the economy dropped by 4 percentage points Value added (% of GDP) 45 between 2000 and 2010 before bouncing back and increasing 8 percentage points over the next decade to 40 reach 26 percent in 2021. 35 ➢ Services added 37 percent to GDP in 2021, which was 4 percentage points lower than in 2000. 30 ➢ Industry, including construction dropped 3 percentage points between 2000 and 2021 to reach 29 percent. This 25 was above Senegal (25%), Cote d’Ivoire and Mali (both 21%), Liberia (18%), Guinea-Bissau (14%), Sierra Leone 20 (6%) 15 ➢ Manufacturing added nearly 10 percent in 2021, which was a jump from 4 percent in 2000, but it hardly moved 10 in the last 15 years. It is nearly on par with Cote d’Ivoire (11%) and Guinea-Bissau (9%); below Senegal (15%); and 5 above Mali (7%), Sierra Leone and Liberia (both 2%) 0 ➢ These are relatively modest fluctuations over a two- 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 decades long period and highlight the lack of economic Agriculture, forestry, and fishing Services Industry (including construction) Manufacturing dynamism. 27 Source: World Bank Open Data. There has been a large transfer of labor from agriculture to services in recent decades in line with migration from rural to urban settlements. Employment in industry is relatively small but it has increased a little in recent years. Services employment has increased by 11 percentage points as Guineans have moved from rural to urban areas In 2000-21, employment expanded in services, Employment as share of total employment (%) 100 50 % of total population contracted in agriculture, and grew modestly in 90 45 industry. 80 40 ➢ Services employment rose by 10.6 percentage points as a share of total employment to reach 70 35 34%. 60 30 ➢ Agriculture employment dropped by 12.1 50 25 percentage points during the same period to reach 59%. 40 20 ➢ Industry employment has been quite stable, but 30 15 with an all time high reached in 2021. Between 20 10 2015 and 2021, which covers the current boom in mining, employment in industry (including 10 5 construction) grew from 6.0% to 7.0% of total employment. 0 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 ➢ The urban population as a share of the total Agriculture Services Industry Urban population (2nd y-axis) population increased by 6.4 percentage points. 28 Source: World Bank Open Data. Labor productivity in services was more than twice as high as in agriculture, but it remained flat during the period. Labor productivity in industry has risen since 2016 in line with the start of the mining boom. Labor productivity in industry rose rapidly in 2016-19 In 2000-19, the labor productivity* gap grew (i) moderately between agriculture and services and (ii) significantly between agriculture and 18 services on the one hand and industry on the other hand. Constant 2015 US$'thousand ➢ Labor productivity in the services sector declined by 10% to US$3.400 16 in constant 2015 US$. 14 ➢ Labor productivity in the industrial sector was quite static in 2000-15 and then jumped by 48% in 2016-19. The sudden jump is attributed to 12 a large capital-intensive expansion in extractive industries’ output not accompanied by a commensurate increase in employment. 10 ➢ Time series data on labor productivity isn’t published for agriculture in the World Bank Databank. However, it can be derived through other 8 variables and indicates that labor productivity in agriculture dropped 6 by roughly 27 percent in 2000-19. 4 Agriculture** Services Industry Labor productivity in 2019 US$1.400 US$3,400 US$16,400 2 …order of magnitude in 2019 x1 x 2.4 x 11.7 0 …order of magnitude in 2000 x1 x 1.9 x 6.1 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 * Value added per worker is a measure of labor productivity—value added per unit of input. Value added denotes the net output of a sector after adding up all outputs and subtracting intermediate inputs. Data are in constant Services Industry (including construction) 2015 U.S. dollars. ** The labor productivity for “agriculture” is here comparing value added in agriculture + forestry + fishing but only employment in agriculture. Thus, the numbers are not perfectly comparable. 29 Source: World Bank Open Data. Guinea needs to tackle a host of challenges in parallel to promote structural change and productivity growth, and by extension reduce poverty and inequality. A recent IMF modeling exercise concluded that: Long-run impact of reforms on GDP growth (%) Mijiyawa & Conde’s study of structural change & productivity growth concluded that: Higher revenue mobilization would be best used to boost human capital and infrastructure. Structural change has made a positive contribution to labor productivity growth— Increased expenditures on education would be by 1 percentage point per year on effective for long-run poverty reduction and average—but it was modest and declined economic growth while investment in rural during the period (or by 20% from 2006-10 infrastructure development would be especially to 2011-15). effective at boosting economic growth. The structural change process benefited Together they could boost growth by around 1.2 from ‘control of corruption’, ‘access to percentage points and drastically reduce poverty. electricity’, and ‘primary commodities’ Guinea’s low human capital is exacerbated by share of merchandise exports’ in Guinea. disparities in access to services by gender. Closing Long-run impact of reforms on poverty/equality (%) The evolution of ‘labor market rigidity’ expenditure gaps on human capital for women and (labor taxation) and the level of the girls would be especially effective to boost growth. country’s ‘competitiveness’ (exchange rate Diversification, reforms to enhance governance appreciation) did not support structural and resilience, and improvements to the business change. Proxies for health and education as climate will be critical to ensure inclusive, more well as government effectiveness were resilient growth and improved social indicators. other brakes on structural change. Source: IMF (2023) and Mijiyawa and Conde (2020). 30 There are very few job opportunities in wage employment. 1 in 100 women (15 years and above) is in wage employment. Women are increasingly leaving the work force. Guinea’s labor force is currently growing by around 110,000 people per Guinea has one of the world’s lowest shares of wage and salaried year, but the labor force participation rate has slowly declined for workers/employees at 7.4% of total employment. It is 13.1% for men more than two decades; or from 64% in 2000 to 52% in 2021. It is and 2.3% for women. In comparison, Senegal (34%), Cote d’Ivoire (27%), among the lowest in the region: roughly at par with Senegal 51%) and Ghana (25%), Liberia (20%), Mali (19%) and Guinea-Bissau (18%) are way Sierra Leone (53%), but below Liberia (76%), Ghana (69%), Mali (67%) ahead of Guinea. The lack of “paid employment jobs” is likely a major and Cote d’Ivoire (65%). The decline is almost exclusively due to the reason why Guinea has a low labor force participation rate and an lower participation rate of women (42%). especially low and declining participation rate for women Labor force participation rate Wage and salaried workers* 100 5.0 16 million 90 4.5 14 80 4.0 12 70 3.5 60 3.0 10 50 2.5 8 40 2.0 6 30 1.5 4 20 1.0 10 0.5 2 0 0.0 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Labor force, total (right y-axis) Total (% of total population ages 15+) Total (% of total employment) Male (% of male employment) Female (% of female population ages 15+) Male (% of male population ages 15+) Female (% of female employment) * Wage and salaried workers (employees) are those workers who hold the type of jobs defined as "paid employment jobs," where the incumbents hold explicit (written or oral) or implicit employment contracts that give them a basic remuneration that is not 31 Source: Source: World Bank Open Data drawing on ILO Data. directly dependent upon the revenue of the unit for which they work. More then nine out of ten Guineans find themselves in vulnerable employment—a much higher share than in the regional neighborhood—and Guinean women are particularly badly off (2nd highest rate in the world after Niger). Guinea has one of the world’s highest shares of vulnerable employment at 91% of Guinea is doing somewhat better on the employer ratio. 1.4% of Guineans employ total employment. The situation has hardly changed over the last two decades someone else compared to 2.3% in the average Sub-Saharan African country. unlike the average in Sub-Saharan Africa (-5pp pre-COVID-19). Guinea is far Guinean female employers employ 0.7% of Guinean women and 2.1% of male behind Ghana (70%), Cote d’Ivoire (71%), Senegal (65%), Liberia (79%) and even employers employ Guinean men. On this entrepreneur index, Guinea lags Ghana Mali and Guinea-Bissau (both 81%). There is a marked difference between men (5.2%), Sierra Leone (2.9%), Senegal (1.9%) and Core d’Ivoire (1.6%) but does (85%) and women (97%). better than Mali (0.6%) and Guinea-Bissau (1.2%) Vulnerable employment* in Guinea vs. Sub-Saharan Africa Employers** in Guinea vs. Sub-Saharan Africa 100 2.75 97 2.50 94 2.25 2.00 91 1.75 88 1.50 85 1.25 82 1.00 79 0.75 76 0.50 73 0.25 70 0.00 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Sub-Saharan Africa total (% of total employment) Guinea total (% of total employment) Sub-Saharan Africa total (% of total employment) Guinea total (% of total employment) Guinea female (% of female employment) Guinea male (% of male employment) Guinea female (% of female employment) Guinea male (% of male employment) ** Employers are those workers who, working on their own account or with one or a few partners, hold the type of jobs defined as a "self- employment jobs" i.e. jobs where the remuneration is directly dependent upon the profits derived from the goods and services produced), and, in * Vulnerable employment is contributing family workers and own-account workers as a percentage of total employment. this capacity, have engaged, on a continuous basis, one or more persons to work for them Source: Source: World Bank Open Data drawing on ILO Data. 32 The jobs outcomes are not aided by the combined high tax rates on businesses and on labor. The high rates are a common complaint among small enterprises whereas large enterprises worry more about labor regulations. Total vs. labor taxation* 50 In 2019, among 192 countries, Guinea imposed one of the highest combinations Labor tax and contributions (% of commercial profits) of ‘total tax and contribution rate’ as share of profit (69%, 11th highest) and 45 ‘labor tax and contributions’ as a share of commercial profits (29%, 23rd highest). 40 The 25 countries that imposed the highest ‘labor tax and contributions’ included 10 EU countries, China, Russia (in total 7 FSU countries), Brazil and Argentina in 35 addition to Mali (43%), Congo, Rep (31%), Guinea and Chad (28%). Guinea 69.3, 28.6 In the World Bank Enterprise Survey in Guinea: 30 ▪ 12.0% of small enterprises (5-19 employees) chose ‘tax rates’ as their biggest 25 obstacle compared to none of medium (20-99) and large enterprises (100+). ▪ 4.2% of small enterprises chose ‘tax administration’ as their biggest obstacle 20 compared to none of the medium and large enterprises. 15 ▪ 7.4% of large enterprises chose ‘labor regulations’ as their biggest obstacle compared to none of the small and medium enterprises. 10 ▪ The total tax and contribution rate increased by 8% in 2019 (from 61% to 69%). 5 ▪ Manufacturers are roughly twice as likely as services companies to complain 0 about tax rates and tax administration. 0 10 20 30 40 50 60 70 80 90 100 ▪ On a positive note, the share of companies expected to give gifts in meetings Total tax and contribution rate (% of profit) with tax officials dropped from 57% in 2006 to 7% in 2016. *Labor tax and contributions is the amount of taxes and mandatory contributions on labor paid by the business. Total tax rate measures the amount of taxes and mandatory contributions payable by businesses after accounting for allowable deductions and exemptions as a share of commercial profits. 33 Source: Source: World Bank Open Data. Nearly one out of five Guineas with intermediate or advanced education are officially unemployed. At the same time, more than one out of three youth are neither in education, employment nor training. Literacy rates are low but rising. The official unemployment rate is generally a poor measure in low- More than one-third of youth are neither in education, employment nor income countries since few unemployed can afford to, or gain from, training with women more affected than men. registering as unemployed. Yet 18% of Guineans with intermediate or Share of youth not in education, employment or training (% of youth advanced education were officially unemployed in 2019 compared to 6% population) in 2019: for Guineans with basic education. There are marked differences between • Total: 34% men and women depending on the level of education • Of which men: 25% Unemployment among those with advanced education: • Of which women: 42% • Total: 18% The literacy rate for adults (15+ years) is only 45% with the share of literate • of which men: 17% men twice as high as the share of literate women. Among youth (15-24), it is • of which women: 20% higher at 60% and the gender gap smaller. Better than in Mali (46/31), but well behind Ghana (93/80)), Cote d’Ivoire (84/90) and Senegal (76/56). Unemployment among those with intermediate education: • Total: 18% Literacy rate (% of people ages 15 and above) in 2021 • of which men: 22% • Total: 45% • of which women: 8% • of which men: 61% • of which women: 31% Unemployment among those with basic education: • Total: 6% Literacy rate (% of people ages 15-24) • of which men: 4% • Youth, total: 60% • of which women: 9% • of which men: 71% • of which women: 49% 34 Source: Source: World Bank Open Data. Guinea is ranked 12th from the bottom in the World Bank’s 2020 Human Capital Index. It does markedly better than Mali and Liberia, somewhat better than Sierra Leone, worse than Cote d’Ivoire, and markedly worse than Senegal and Ghana. Educational outcomes are improving but from a very low level. ▪ A child who starts school at age 4 can expect to complete 7 years of ▪ The primary school completion rate was 59% school by the 18th birthday: 7.8 years for boys; 6.2 years for girls. ▪ The lower secondary school completion rate was 33% ▪ Factoring in what children actually learn, expected years of school is ▪ The tertiary education gross enrollment ratio is 7% only 4.6 years: 5.2 years for boys; 3.9 years for girls. => There are significant regional disparities. For example, the ▪ 82% of 10-year-olds cannot read and understand a simple text by UN’s Human Development Index for 2021 highlights that the end of primary school. Conakry has a huge advancement compared to the hinterland. Sierra Côte Mali Liberia Guinea Senegal Ghana Leone d'Ivoire Probability of survival to age 5 0.90 0.93 0.89 0.90 0.92 0.96 0.95 Expected years of school 5.2 4.2 9.6 7.0 8.1 7.3 12.1 Harmonized test scores 307 332 316 408 373 412 307 Learning-adjusted years of school 2.6 2.2 4.9 4.6 4.8 4.8 6.0 Fraction of children under 5 not stunted 0.73 0.70 0.71 0.70 0.78 0.81 0.82 Adult survival rate 0.75 0.78 0.63 0.76 0.66 0.83 0.77 HUMAN CAPITAL INDEX 2020 0.32 0.32 0.36 0.37 0.38 0.42 0.45 Source: Source: Source: World Bank Open Data and World Bank (2022), Guinea: Human Capital Country Brief, October 2022. 35 The interpretation of the World Bank’s Human Capital Index is that a child born in Guinea just before the pandemic will be 37% as productive when s/he grows up as s/he could be if s/he enjoyed complete education and full health. Human The low level of human capital productivity does not in turn signal a shortage of entrepreneurial spirit, drive and personal initiative. But the government should capital prioritize public expenditures on health and education if it wants to accelerate human capital accumulation. Government spending on education: ▪ 2.2% of GDP - government expenditure on education in 2020, which was around the average of 2.3% of the preceding decade. ▪ 12% of government expenditure was on education in 2021, which was around the average of 13% of the preceding decade. 36 There are numerous estimates of the size of the informal economy in Guinea. It is big but decreasing as a share of the formal economy because more businesses are registering, and the extractive sector is growing in importance. Depending on the method, data and underlying assumptions, the estimates of the size of the informal economy differ a lot: ▪ A dynamic general equilibrium model applied by Elgin et al. (2021) estimated Guinea’s informal output to 30% of official GDP. ▪ A multiple indicators multiple causes model applied by the same authors estimated the informal output at 37% of official GDP. ▪ The Quarterly Informal Economy Survey conducted by World Economics estimated Guinea’s informal economy at 39% of official GDP. ▪ The IMF has noted that the informal economy contributes between 25% and 65% of GDP and accounts for between 30% and 90% of total nonagricultural employment in Sub-Saharan Africa. Guinea is classified as one of the countries in Africa with a “high sized” informal economy or >40% of GDP (IMF (2017), Regional Economic Outlook: Restarting the Growth Engine, Sub-Saharan Africa). ▪ The WTO (2018) Trade Policy Review noted that Guinea’s informal sector exceeded 50% of GDP. ▪ National account data produced by INS for 2014-20 concluded that the informal sector makes up 34% of value added in the primary sector, 39% in the secondary sector, and 53% in the tertiary sector. ▪ Self-employment in Guinea: 90% of total employment. ▪ Share of firms competing against unregistered or informal firms: 76% (World Bank Enterprise Surveys). ▪ Share of firms identifying practices of competitors in the informal sector as a constraint: 39% (World Bank Enterprise Surveys). In terms of JET priorities, the main benefits will be realized through an accelerated transfer of labor from rural to urban and semi-urban contexts, and from agriculture to services, and services to industry (more on this below). Source: Elgin, C., M. A. Kose, F. Ohnsorge, and S. Yu. 2021. “Understanding Informality”, C.E.P.R. Discussion Paper 16497, Centre for Economic Policy Research, London. World Economics (2023), https://www.worldeconomics.com/National-Statistics/Informal-Economy/Guinea.aspx. 37 The annual # of new companies increased by >400% in 2014-22 and the share of women founders increased from 19% to 34% in 2018-22. For every 2 new LLCs there were 5 new sole proprietorships. Most new companies are engaged in commerce/trade, services and construction; and 96% of the companies were founded by Africans. Creation of new companies in Guinea in 2014-22 Sector by new companies created in 2018-22 16000 40 Share of women founders (% ot total) Number of new companies created B - Trade 14000 35 1345 1505 2438 D - Benefit of services 12000 30 2548 HAS - Construction 2561 I - Agriculture & Livestock 10000 25 21515 2619 H - Tourism, Hotels & Art 8000 20 2835 E - Transport & logistics 6000 15 F - Energy and Mining 2843 4000 10 G - Industries 2000 5 4456 VS - Communication & ICT K - Education & Health 0 0 5835 9721 L - Other 2014 2015 2016 2017 2018 2019 2020 2021 2022 New companies of which women (%) J - Finance Form of new companies created in 2022 Nationality of company founder in 2022 3% Guinea (92.2%) 28% Sole propretorship Rest of Africa (3.7%) Asia (2.7%) Limited Liability Company Europe (1.1%) 69% Other America (0.4%) Oceania (0.03%) Source: Government of Guinea (2023). 38 Company creation is concentrated in the capital region and nearly half of all new companies are established by people who are 35 years old or younger. In 2022: ▪ 72.3% of new companies were established in Conakry. ▪ Kindia (10.8%) and Kankan (6.5%) both registered more than 1,000 new companies. ▪ Boké, Mamou, Labe, Faranah and Nzerekore registered relatively few new companies. Youth entrepreneurship ▪ Nearly half (47%) of all new companies are established by people <35 years old. ▪ Around 750 companies (mainly sole proprietorships) are established using the APAP MOBILE—a digital platform created with support of the WBG. Business mortality ▪ A recent study of 5,547 companies established in 2014-2018 found that 25% remained active, 10% had closed, and 65% were impossible to find or reach. 39 Source: Government of Guinea (2023). Digital development and digital entrepreneurship are global trends in support of creative destruction and economic transformation. Guineans are increasingly connected to the Internet but still relatively poorly equipped to reap the full rewards of digitalization and ICT use. In 2021, Guinea’s mobile cellular subscription Mobile cellular subscriptions (per 100 people) International digital benchmarks still paints a rate reached 100 per 100 people, exceeding bleak picture of Guinea’s digital performance: 100 the averages of Western & Central Africa and ▪ Guinea ranked 132nd out of 132 countries in 80 SSA. the World Intellectual Property Organization’s 60 Following a slow start, Guinea is starting to Global Innovation Index (GII) in 2022: 40 catch up on Internet use: 35% of the population used the Internet in 2021 20 compared to 36% in SSA and 47% in Western 0 & Central Africa. 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Guinea Africa Western and Central Sub-Saharan Africa Guinea compares quite favorably on some other ICT indices, including the number of Individuals using the Internet (% of population) 50 secure Internet servers, and the growth in facilities and services are high. 40 The literacy rate of 45% (15 years and above) 30 and access to electricity rate (also 45%) may 20 hinder the sophistication of Internet use, but The WBG’s Digital Economy for Africa: Guinea 10 both rates are growing: the former roughly Diagnostic Report also concluded that despite doubled in 2000-20 and the latter tripled over 0 some positive trends, Guinea’s digital economy the same period. 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 is embryonic, and the country ill-prepared to Guinea Africa Western and Central Sub-Saharan Africa reap the gains from digitalization. Source: WBG (2020), Digital Economy for Africa: Guinea Diagnostic Report, WIPO (2022), Global Innovation Index 2022, and data.worldbank.org 40 Summary and conclusions - section 2 ❑ Value added in industry is elevated from a regional perspective due to the extractives industry, but there has been little movement in terms of economic transformation, industrialization or manufacturing activities in recent decades. ❑ Recent decades saw a large transfer of labor from agriculture to services, with services employment rising nearly twice as fast as the rise in the urban population ratio. ❑ Labor productivity in services is more than twice as high as in agriculture, but it has remained flat in recent decades. Labor productivity in industry is nearly 12 times that in agriculture and 5 times that in services. It rose by nearly half in 2016-19. ❑ Guinea’s labor force is currently growing by around 110,000 people per year, but the labor force participation rate has declined for more than two decades almost exclusively due to the lower participation rate of women. ❑ Guinea has one of the world’s lowest shares of ‘wage and salaried workers/employees’ at 8% of total employment, with one woman in a hundred engaged in wage employment. ❑ More then nine out of ten Guineans find themselves in vulnerable employment, which is a much higher share than in the neighborhood. ❑ Guinea imposes relatively high tax rates on both businesses and labor. The high rates are a common complaint among small enterprises whereas large enterprises worry more about labor regulations. ❑ There is a marked skills mismatch with nearly one out of five Guineas with intermediate or advanced education officially unemployed. At the same time, more than one out of three youth are neither in education, employment nor training. ❑ Informality is widespread in the business community, but the number of new business licenses are growing fast especially among youth and women, but with significant regional disparities. ❑ The promise of digitalization and ICT use as a catalyst for productivity growth is not as strong in Guinea as in a lot of other countries: mobile phone penetration is high and Internet use growing, but Guinea is still behind most countries when it comes to ICT preparedness. 41 The business enabling environment SECTION 3: PRIVATE SECTOR - political instability COMPETITIVENESS AND THE - general law-and-order issues GOVERNMENT’S POLICY AGENDA - taxation and regulation - essential enablers/inputs Lessons from the extractive industry Lessons from agribusiness A decade of government policy reforms 42 What are the main constraints to private enterprise in Guinea according to business owners? The answer to this question holds the key to the articulation of a government policy for job creation and economic transformation. Unsurprisingly, it covers anything from law and order, institutions and regulations to access to essential inputs and enabling services. The last WBG Enterprise Survey (WBG-ES) in Guinea was conducted before the COVID- 4.4 19 pandemic, but business roundtable consultations in Guinea in April 2023 indicate 6.5 that the concerns have not changed materially in most areas. The main challenges that businesses face are divided into four main groups in the following assessment: 6.9 1. Political instability was identified as the single greatest concern for businesses 38.5 3.4 (39%) even before the 2021 coup d'état, and the political situation remains unstable with the current transition arrangements foreseen for 2023 and 2024. 2. General law-and-order: crime and disorder, corruption and informal sector 9.7 practices were selected by 18% of business leaders as their single greatest concerns. 3. Taxation and regulation: trade regulations, tax rates and tax administration were 10.4 chosen by 24% of business leaders as their single greatest concern. This is noteworthy because few companies trade directly, and trade regulations may thus 3 9.7 be a considerable barrier. 5.7 4. Essential enablers/inputs: transport, access to finance and electricity were Political Instability (38.5%) Crime and disorder (9.7%) selected by 18% of business leaders as their single greatest concern. Corruption (5.7%) Informal sector (3.0%) It should be noted that surveyed businesses are either based or headquartered in Trade regulations (10.4%) Tax rates (9.7%) Conakry, which hosts the great majority of Guinea’s formal businesses, but small Tax administration (3.4%) Transportation (6.9%) enterprises may nevertheless have somewhat different priorities in rural areas. Access to finance (6.5%) Electricity (4.4%) Source: www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 43 Political instability is identified as the single biggest challenge to businesses. General lawlessness— crime, disorder and corruption—is another critical governance failure and the causality runs in both directions between them. 1: Political instability Political instability gives rise to uncertainty and has a strong adverse effect on the ability of businesses to make positive investment and hiring decisions. It erodes investor confidence and deters FDI especially for efficiency-seeking and market-seeking FDI, but also natural resource-seeking FDI of high-quality enterprises. There is a significant literature on the topic, which goes beyond the scope of this study. Guinea has seen plenty of political and social unrest, including coups d'états in 1984, 2008 and 2021, and there is currently a Transition Government, which means that this concern will remain high in the foreseeable future. 2.1: Crime and disorder A bit more than one-third of firms in Guinea identified ‘crime, theft and disorder’ as a major constraint and one-in- ten identified it as their single greatest obstacle. This was significantly higher than the SSA average where one-in-five businesses identified it as a major constraint. SMEs were by far the worst affected and medium-sized businesses (20- 99 employees) made the greatest relative losses and were also the most likely to pay for security. Overall, roughly half of surveyed businesses paid for security and paid on average 5% of annual sales; numbers that were close to the SSA average. A lower share of Guinean companies experienced losses than the SSA average, but those that did made relatively higher losses. 2.2: Corruption Slightly less than one-third of firms identified ‘corruption’ as a major constraint, which was lower than the two-in-five in the SSA average. On nearly every question, Guinean businesses reported significantly lower bribery incidents and bribery depths, including for public procurement, utility services and bureaucratic administration, than the SSA average. Yet half of the respondents still reported that they were expected to give gifts to public officials “to get things done”, which could be seen as contradictory. Medium-sized enterprises were most affected by corruption and complained the most. Small enterprises were mostly exposed to petty corruption. Source: www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 44 In 2022, Guinea ranked 147th out of 180 countries in Transparency International’s Corruption Perception Index. ❑ …ahead of Guinea-Bissau (164th) but behind Liberia (142nd), Mali (137th), Sierra Leone (110th), Cote d’Ivoire (99th) and Senegal and Ghana (joint 72nd). ❑ In 2010, Guinea ranked 164th out of 178 countries, which indicate a slow improvement in relative terms. ❑ Enterprise survey results find that Guinean businesses on many indices are less exposed to corruption/bribery by the public administration than in the SSA average (and global average) on issues such as obtaining permits, licenses, utility connections, paying taxes and competing for public contracts. ❑ In 2022, 62% of respondents thought corruption increased in the previous 12 months; and 42% of public service users paid a bribe in the previous 12 months. Source: www.transparency.org/en/countries/guinea 45 45 www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#corruption Source: www.transparency.org/en/cpi/2022 Informality is widespread in Guinea—as in most SSA countries—and informal businesses that operate below the radar of tax authorities and public regulators often compete heads on with formal businesses. 2.3: Informality Informality is widespread in Guinea (see slides #19 and #35). Three-quarters of formal businesses report that they compete against unregistered or informal businesses. Two-in-five of the formal businesses identified practices of competitors in the informal sector as a major constraint. Both indicators were somewhat higher than the SSA averages. ▪ SMEs are much more exposed to competition from informal firms than large enterprises: ✓ Small-sized enterprises (5-19 employees): 81% ✓ Medium-sized enterprises (20-99): 63% ✓ Large enterprises (100<): 18% ▪ SMEs are also much more likely to report it as a major constraint and especially the medium-sized segment where a lot of business growth (more and better jobs) potential is found: ✓ Small-sized enterprises: 37% ✓ Medium-sized enterprises: 57% ✓ Large-sized enterprises: 20% ▪ Overall, businesses in the services sector are more likely than in manufacturing to face competition from informal business, but manufacturing businesses are more likely to identify competition from informal businesses as a “major constraint”. Source: www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 46 Political instability and law-and-order issues are closely linked to Guinea’s weak institutions. In 2022, the Fund for Peace ranked Guinea as the 12th most fragile country out of 179 countries. The concerns raised by businesses about political instability, crime, theft, disorder, corruption and informality are well documented in measures such as the Fund for Peace’s annual Fragile States Index. Guinea ranks at the very bottom on: (i) the Factionalized Elites indicator, which considers the fragmentation of state institutions along ethnic, class, clan, racial or religious lines, as well as brinksmanship and gridlock between ruling elites; and (ii) the State Legitimacy Indicator, which considers the representativeness and openness of government and its relationship with its citizenry. Guinea also ranks very near the bottom on: (iii) the Group Grievance indicator, which focuses on divisions and schisms between different groups in society and their role in access to services or resources, and inclusion in the political process; and (iv) the Public Services indicator, which refers to the presence of basic state functions that serve the people, which may include the provision of essential services, such as health, education, water, transport infrastructure, electricity, and ICT. Thus, while Guinea ranks poorly on political and cohesion indicators, it does better on economic, social and cross-cutting indicators. Fragile States Index 2022 (lower ranking) Sub-indicators of the Fragile States Index: Guinea in 2022 Burundi (161) X1: External Intervention Eritrea (162) Cameroon (163) S2: Refugees and IDPs Nigeria (164) S1: Demographic Pressures Zimbabwe (165) Mali (166) P3: Human Rights Ethiopia (167) P2: Public Services Guinea (168) Haiti (169) P1: State Legitimacy Myanmar (170) Chad (171) E3: Human Flight & Brain Drain Afghanistan (172) E2: Economic Inequality Sudan (173) Congo Dem.Rep. (174) E1: Economy C.A.R. (175) South Sudan (176) C3: Group Grievance Syria (177) C2: Factionalized Elites Somalia (178) Yemen (179) C1: Security Apparatus 0 10 20 30 40 50 60 70 80 90 100 110 120 0 1 2 3 4 5 6 7 8 9 10 More fragile More fragile 47 Trade regulations impede the development of Guinea’s manufacturing sector and export diversification efforts. They also add unnecessary costs to imported products on which all Guineans depend. 3.1: Trade regulations Few businesses export in Guinea and large businesses are much more likely to export than smaller ones (WBG-ES). ✓ 1.7% of respondents directly export 10% or more of their sales, which was one-fifth the ratio of the SSA average. ✓ 6.3% of respondents indirectly export 10% or more of their sales, which was roughly the same as the SSA average. ✓ Manufacturers were five times as likely as services firms to directly export 10% or more of their sales. Among manufacturers: ✓ 77% use foreign material inputs and/or supplies (=imported inputs) compared to 58% in SSA; and ✓ The average proportion of total inputs that are of foreign origin is 68% compared to 35% in SSA. => The development of the Guinean manufacturing sector – irrespectively of domestic or foreign market focus – is extremely sensitive to tariffs and the efficiency (time, cost and predictability) of border procedures. 42% of all firms identified customs and trade regulations as a major constraint. => Any government policy objective aimed at manufacturing-led growth or export promotion will likely be ineffectual unless it seriously tackles customs and trade regulations in parallel. Source: www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 48 It is very time consuming and costly to comply with documentary and border requirements: or 5-20 times the average time and cost in high-income countries. Border performance: time and cost to import and export Guinea’s border performance* measured by the time and cost of border and documentary compliance is very weak. ▪ The cost to export is roughly US$900, or x5 the high-income country average. ▪ The time to comply with export procedures is estimated at 211h, or x15 the high-income country average. ▪ The cost to import is roughly US$1,000, or x8 the high-income country average. ▪ The time to comply with import procedures is estimated at 235h, or x20 the high-income country average. In the WBG-ES, Guinean businesses reported that it took them on average 28 days to clear imports at customs. For a low-income country that is entirely dependent on imports for most products, this adds a lot of unnecessary costs to most goods and services. * Guinea is not too bad compared to the SSA average, but it compares performance in landlocked countries with sea facing Conakry. Source: https://archive.doingbusiness.org/content/dam/doingBusiness/country/g/guinea/GIN.pdf and www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 49 Guinea performs very poorly in international benchmarks that compare its customs performance to regulatory best practices. There is a lot of scope for improvement if policy makers want to promote manufacturing-led growth and export diversification and reduce the cost of goods and services in the domestic market. Guinea is very far from the frontier with regards to measures of regulatory best practices at the border. Some of this discrepancy is linked to the overall level of economic and institutional development, but many countries with similar institutional capacity contexts perform considerably better. Guinea’s trade regulations and customs performance come at a very high price to exporters who can’t compete and consumers who pay inflated prices for imported products. Source: https://archive.doingbusiness.org/content/dam/doingBusiness/country/g/guinea/GIN.pdf. 50 Accelerating progress in the implementation of the WTO Trade Facilitation Agreement (TFA) would strengthen competitiveness and support export diversification, with a potential reduction in trade costs of 15%. TFA groups of measures Cat A Cat B Cat C ▪ Trade costs in Guinea are estimated to be the equivalent of an Publication and Availability of Information 2 2 ad-valorem tariff of 214-298%. Opportunity to Comment, Information Before Entry Into Force and ▪ TFA-related trade costs reductions could boost exports by an 2 Consultations estimated 9-13%, particularly benefiting agricultural products. Advance Rulings 1 ▪ Guinea lags the region in the implementation of trade Appeal or Review Procedures 1 facilitation measures, having fulfilled 40% of commitments. Other Measures to Enhance Impartiality, Non-Discrimination, and ▪ Most pending measures (52% of total) benefit from donor- 1 2 funded technical assistance. Transparency Disciplines on Fees and Charges Imposed on or in Connection With 2 1 Importation and Exportation Release and Clearance of Goods 1 1 7 Border Agency Cooperation 1 Movement of Goods Under Customs Control Intended for Import 1 Formalities Connected With Importation, Exportation and Transit 3 3 3 Freedom of Transit 1 Customs Cooperation 1 CATEGORY A = developing Members will implement the measure by 22/02/2017 and LDCs by 22/02/2018 CATEGORY B = Members will need additional time to implement the measure CATEGORY C = Members will need additional time and capacity building support to implement the measure Source: WTO (2015) World Trade Report – Section D. Estimating the benefits of the Trade Facilitation Agreement; and TFA Database, Guinea Country Profile. 51 Besides high combined tax rates on businesses and on labor, the tax administration itself leaves a lot of room for improvement. ✓ 3.2: Tax rates and 3.3: tax administration have for long been an area where Guinea has compared unfavorably against other countries both in Africa and the rest of the world. ✓ It is beyond the scope of this study to comment on the effectiveness of the tax rate policy, but tax administration could be rendered much more effective. ✓ In 2020, businesses made on average 33 payments, and spent 400 hours to pay taxes. Guinea also had one of the worst postfiling index performances, covering the time to comply with and obtain VAT refunds; and time to comply and complete corporate income tax corrections. ✓ Businesses tend to complain about taxes in most countries, but they do so much more in Guinea: 37% of firms identified tax administration as a major constraint compared in 29% in SSA and 22% globally. Source: https://archive.doingbusiness.org/content/dam/doingBusiness/country/g/guinea/GIN.pdf and www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 52 Trade and tax administration were the two areas where Guinea did worst in relative terms in the last Ease of Doing Business report (2020) and the country has a long way to go to streamline, professionalize and digitalize its public interface to businesses. Guinea’s public interface vis-à-vis anything from young, budding The Government of Guinea has shown in the past that it can implement entrepreneurs to foreign multinationals leave a lot of scope for an ambitious reform program with success if there is political ownership improvement. The bureaucracy discourages formalization, adds and commitment. 15-20 years ago, Guinea used to rank near the bottom unnecessary transactions costs to businesses, and deters investment. on many administrative indices, but it implemented numerous reforms Continuous reforms and improvements to the public administration over the years, which improved its relative performance, and started to should be a priority in any long-term, JET-oriented strategy. build new institutions (more below). Source: https://archive.doingbusiness.org/content/dam/doingBusiness/country/g/guinea/GIN.pdf 53 Business Ready (B-READY) is a new, international benchmarking tool that will provide a quantitative assessment of the business environment for private sector development across the world. It will advocate for policy reform and inform specific policy advice to help catalyze reform momentum. Topic areas in the forthcoming annual B-READY Balanced approach to assess the business environment ▪ B-READY focuses on ten topics that are organized following the life cycle of the firm and its participation in the market while opening, operating, and closing a business. ▪ B-READY collects both de jure information and de facto measures. While de jure data are collected from expert consultations, de facto data are collected from both expert consultations and firm surveys. ▪ B-READY offers a practical set of variables on which the Government of Guinea could structure a comprehensive legal and regulatory reform program to render the investment climate and business environment more favorable to job creation and economic transformation. Source: https://www.worldbank.org/en/businessready/b-ready and WBG (2023) Business Ready: Methodology Handbook (May 2023). 54 Women face discriminatory laws and regulations that impede their ability to thrive in the workplace whether as employer or employee. Guinea could look to Cote d’Ivoire for inspiration on gender equality. Gender equality: Women, Business and the Law index in 2023 Guinea ranks around the regional neighborhood average in the WBG’s Women, 40 45 50 55 60 65 70 75 80 85 90 95 100 Business and the Law Index for 2023. This index is a comprehensive composite measure of gender equality when 100 is full equality. Cote d'Ivoire Liberia ▪ Guinea scored 74 out of 100, which placed it well ahead of Guinea-Bissau, ahead Ghana of Mali, around the same place as Sierra Leone, Senegal and Ghana, behind Liberia Guinea and well behind Cote d’Ivoire (95 out of 100). Senegal ▪ Guinea scored full equality on all sub-indicators under (a) entrepreneurship, (b) Sierra Leone mobility, (c) workplace and (d) pension rights. Mali Guinea-Bissau ✓ On assets: (i) female and male surviving spouses do not have equal rights to inherit assets, and (ii) the law does not provide for the valuation of Guinea vs. Cote d’Ivoire: gender equality sub-indicators in 2023 nonmonetary contributions. 0 10 20 30 40 50 60 70 80 90 100 ✓ On pay, there are restrictions for women in: (i) industrial jobs in mining, Mobility construction and factories; (ii) jobs deemed hazardous. Workplace ✓ On parenthood: (i) there is no paid parental leave; (ii) there is no parental Entrepreneurship leave for fathers; (iii) the government does not administer 100% of maternity Pension leave benefits; and (iv) the dismissal of pregnant workers is not prohibited. Assets ✓ On marriage: (i) there is no legislation specifically addressing domestic Marriage violence; and (ii) women do not have the same rights to remarry as a man. Pay With a fertility rate of 4.5 (in 2020), the discrimination with regards to parenthood is a Parenthood significant barrier, and women have fewer opportunities in several sectors. Ghana Cote d'Ivoire 55 Source: World Bank. 2023. Women, Business and the Law 2023. © Washington, DC: World Bank. http://hdl.handle.net/10986/39462 License: CC BY 3.0 IGO. The fourth and final group of major business constraints refer to ‘essential enablers’ such as transport, access to finance, and electricity that are essential inputs to nearly all growth-oriented businesses. Besides concerns about political instability, general law-and-order issues, and taxation and regulation were issues related to the “essential enablers/inputs” of transportation, access to finance and electricity. Among these essential enablers or inputs to businesses: 4.1: Transport Transport infrastructure and logistics remains a serious constraint—from urban congestion to the lack of rural road connectivity—due to the deterioration of road infrastructure, but new investments in railways driven by the extractive industry offer opportunities to create and strengthen transport corridors, and by extension connect secondary and tertiary towns to the capital and main port. 4:2: Access to finance MSME finance remains another constraint despite some recent progress. Guinea lags peers on most major performance indicators. The growth in mobile internet access and mobile money accounts could catalyze growth in digital financial services for years to come, and there is much that could be done to accelerate this process. 4:3 Electricity Energy may be the area where Guinea has made most progress since the last WBG-ES. Businesses and households have benefited from rapid electrification and large investments in hydroelectric capacity in recent years are reducing power outages and turning Guinea into an exporter of electricity. This sector also holds the key to export diversification as elaborated below. Each enabler is covered next. Readers are encouraged to access the WBG’s Guinea CPSD (2020) that covers some of these sectors but also provides analysis of the housing sector, agribusiness and the telecom sector. 56 Road network Guinea’s transport infrastructure gap hinders and private sector growth: poor road conditions, limited infrastructure sharing, and congested ports are key challenges. ▪ Challenges in the transport sector include a poor road network, weak regional and international connections, inadequate mobility for the population, institutional and financing shortcomings, and urban mobility issues in Conakry. ▪ Transport infrastructure is severely underdeveloped. The road network (30,000 km) has few high- capacity roads and large areas of the country have average to poor connectivity (17% paved roads). ▪ Rail and water transport accounting for a small share, primarily for mining products. The 383 km of operational railroad is focused on handling freight for the extractive industry (14mn tons per year). ▪ The port of Conakry handles most external trade, and traffic has been growing due to bauxite exports, but the bad condition of the Conakry urban roads limit its competitiveness. The Railroads and ports government is proposing a new dry port in the Kagbelen district 15km into the hinterland, that could ease traffic pressures. ▪ In the WBG’s Container Port Performance Index 2021, the Port of Conakry did well in a Sub - Saharan Africa perspective (3rd out of 35 ports) but relatively poorly in a global perspective (242 and 239 out of 360 ports, depending on the measure). ▪ Mining-associated infrastructure development in Guinea has progressed, with updated laws, a model agreement, and a master plan to enable multiuser transport and expand port and rail facilities. However, challenges remain in requiring vertically integrated rail operators to make infrastructure available for other users, e.g. by means of regulated public service obligations. 57 Source: WBG (2022) The Container Port Performance Index 2021; U.S. Department of Defense (2023) Open Street Map and National Geospatial-Intelligence Agency; IMF (2018) Public Investment Management Assessment. Access to urban areas As a result, larges swathes of the Guinean territory do not benefit from all- season accessibility, hindering the competitiveness of hinterland areas. ▪ The lack of transport connectivity, low road maintenance and annual rainfall of 1,600-5,000 mm drastically reduce land-based market access. Most of Guinea’s territory lies within over two hours of the nearest large urban settlement. ▪ Inadequate maintenance of infrastructure assets contributes to accelerated deterioration, decreased performance, and increased vulnerability to extreme weather events, which tend to increase in frequency as a result of climate change. ▪ A possible solution for improving the condition and performance of the road network involves adopting an asset management approach, in addition to ensuring sustainable financing by means of a maintenance fund. Both instances require a clear definition of responsibilities and significant capacity building of public sector agencies involved. Access to markets index ▪ Inadequate sharing arrangements for railways leave sectors such as agriculture underserved. Both the capital and the Port of Conakry are heavily congested partly due to their unique geography. ▪ Policy options include operationalizing the road management agency (AGEROUTE), optimizing road maintenance management and financing, strengthening assets protection, and implementing an Urban Transport Authority. ▪ The legal framework governing land, forestland, water, and minerals is fragmented and incomplete, with a shortage of implementing regulations and programs. The Land Code was not designed with rural land in mind, and the Rural Land Policy remains largely unimplemented. Note: Climate adaptation concerns will be further addressed in the forthcoming Guinea Country Climate and Development Report (CCDR). Source: Malaria Atlas Project and globe.umbc.edu/; https://climateknowledgeportal.worldbank.org/country/guinea/climate-data-historical; www.land-links.org/country-profile/guinea/#1529114425359-87b213d1-e275 58 Besides transport infrastructure, Guinea’s lags regional peers in terms of logistics performance. Following years of slow deterioration, it recently reversed and improved. International shipments are particularly poorly rated, and customs and infrastructure are also very low, with logistics competence and timeliness somewhat better. 2023 LPI Scores 3.3 The long-term decline across most dimensions of the LPI was likely driven by: 3.1 93rd 67th 1. The lack of an enabling environment for competitive logistics services. 2.9 105th 103rd 2. Deteriorating infrastructure due to lack of systematic management of 2.7 public assets, including maintenance. 2.5 3. Fast-growing demand due to mining boom, worsening congestion. 2.3 Recent recovery in the LPI was mainly due to increases in timeliness and 2.1 infrastructure scores, which may be associated to the recent implementation of 1.9 the Single Trade Window. Guinea Ghana Mali Benin Evolution of LPI in Guinea in 2007-23 3.5 Logistics performance (LPI) - six key dimensions: 3.3 3.1 1) Customs. Efficiency of the clearance process (i.e., speed, simplicity, and 2.9 predictability of formalities) by border control agencies, including customs; 2.7 2) Infrastructure. Quality of trade and transport-related infrastructure (ports, 2.5 railroads, roads, information technology); 2.3 2.1 3) International shipments. Ease of organizing shipments at competitive prices; 1.9 4) Logistics competence. Competence and quality of logistics services (transport 1.7 1.5 operators, customs brokers); 2007 2010 2012 2014 2016 2018 2023 5) Tracking and tracing. Ability to track and trace shipments; Customs Infrastructure International shipments Logistics competence Tracking & tracing Timeliness 6) Timeliness. The speed with which shipments arrive at their destination on time. LPI Score 59 Source: World Bank, Logistics Performance Index (2023). There are significant opportunities for infrastructure-driven regional development associated with the upgrading of old and especially the building of new transport corridors—driven by mining mega investments—that can be realized with the help of social and urban planning, infrastructure sharing arrangements, and development of SME linkages. The extractive industry is dependent on efficient transport and logistics corridors to be competitive. Areas around major mining corridors will benefit from improved access to markets, especially export-oriented agribusiness, and facilitate local economic development. Without adequate infrastructure sharing arrangements with mining-linked operators there is modest scope to leverage the infrastructure investments. There is an urgent need to adopt a revised Railway Law to facilitate shared infrastructure arrangements. It is equally important that the government adopts complementary policies and programs around entrepreneurship, agriculture extension, skills development and expansion of public services for the wider benefits of economic corridors to materialize. Source: Malaria Atlas Project and globe.umbc.edu/. 60 Public Private Partnerships (PPP) could catalyze infrastructure development and improve service delivery. Guinea has little experience with PPPs, but a new legal framework has been enacted to support the practice. Legal compliance and serious capacity building are basic requirements to make progress on PPPs. ❖ PPPs could become an important tool to leverage private participation 2023 PPP pipeline in infrastructure development, while ensuring long-term maintenance Energy Amaria Hydroelectric Dam operation and management and enabling more efficient service performance. 2x2 Motorway on the route Conakry-Kindia ❖ Thus far mining-related infrastructure has been developed without competitive tendering and relied on bilateral negotiations. 2x2 Motorway on the route Kagbélen-Tanèrè ❖ Opportunities exist in the transport sector, including making better Transport BRT in the Leprince corridor, Conakry use of existing infrastructure through sharing arrangements and Railway project connecting the Kouria Dry Port reconditioning; and in the energy sector, including for independent renewable energy power producers and mini-grid operators. Regional airports rehabilitation ❖ Guinea adopted a new PPP Law in 2017, but implementation of the Irrigation and drainage on 1,000 ha of the Koundian plain law is incomplete. Guinea scores below income and regional peers in Agriculture Construction and operation of two cold chambers in Matoto metrics of PPP framework maturity. and Ratoma ❖ A new PPP unit is presently benefiting from comprehensive, donor- Water supply project for cities of Siguiri and Kouroussa funded capacity-building and is expected to develop PPPs as per the prospective pipeline in the table. Water supply project for seven capitals (Boké, Kindia, Water supply Mamou, Labé, Faranah, N’zérékoré, Kankan) and sanitation Greater Conakry water supply reinforcement project (base on Banéah reservoir) Greater Conakry sanitation project Civil service biometric identification Public administration Construction and operation of two convention centers in Ratoma and Matoto 61 Source: Governemtn of Guinea (2023) and WBG (2020) Guinea CPSD. Benchmarking Infrastructure Development (2020); IMF (2018), Public Investment Management Assessment. Access to finance is a major constraint for the growth and investment of many SMEs. It is a predominant barrier especially to the growth-oriented middle-sized enterprise segment. In 2020, Guinea had one of the world’s lowest shares of domestic credit to the private sector at 10% of GDP. In 1990-2010, this rate fluctuated around 4% before it tripled from 4% to 12% between 2010 and 2015. Since the peak in 2015, it has fluctuated around 10% ± 1%. Some 30% of formal businesses identified access to finance as a major constraint whereas 6.5% identified it as their single biggest constraint (WBG-ES). Medium-sized enterprises (45%) found it more of a major constraint than small enterprises (28%) and large enterprises (19%). Domestic credit to private sector by country (% of GDP) in 2020 Share of businesses identifying access to finance as their biggest obstacle Gambia, The 8 Ghana Guinea 10 Sierra Leone Chad 10 Niger 12 Senegal Central African Republic 12 Mauritania Nigeria 12 Ghana 13 Liberia Congo, Rep. (2019) 13 Côte d'Ivoire Gabon (2019) 13 Benin 16 SSA average Liberia (2018) 17 Mali Cote d'Ivoire 21 Nigeria Mauritania (2019) 22 Mali 26 Senegal Togo 27 Lesotho Burkina Faso 28 Senegal 29 Guinea 0 5 10 15 20 25 30 0 5 10 15 20 25 30 35 40 45 50 Source: Word Bank Development Indicators (2023) and www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 62 The financial sector is shallow, dominated by banks, and relatively stable. The government’s share of commercial bank lending has increased from 25% to 40% since 2016. Asset quality Market share by commercial banks (balance sheet) 16 80 The financial Provisions to NPLs (%) Non-performing loans NPLs to total gross loans (%) 14 70 (NPLs) at <10% may Big banks (ECOBANK, sector is small and SGBG et BICIGUI) dominated by 12 60 be underestimated 19.6 and the asset quality banks. In 2022, 10 50 is lower in commerce banks held 55% of 8 40 Middle-size banks assets, 58% of and transport. 48.9 (Orabank, Vista Bank, 6 30 Provisions to NPLs are deposits and 56% BPMG, Afriland & UBA) 4 20 >60%, which is good of loans. Eight 2 10 for sector stability but banks have 80% of Small Banks (Skye Bank, 0 0 limiting the credit 31.5 BCI, BNG, NSIA Banque, the market share. 2013 2014 2015 2016 2017 2018 2019 2020 2021 offer. An FSAP is BSIC, FBN Bank, BIG & NPLs to Total Gross Loans (%) Provisions to NPLs (%) planned for 2024. BDG) Lending by commercial banks Private sector credit and deposit growth 100% Banks are 20 50% Deposit growth % of GDP 90% expanding their 18 45% has exceeded 80% exposures to the 16 40% 15% in recent 70% government, which 14 35% years. Credit 60% limits the financing 12 30% growth has been 50% of the private 10 25% much more 40% sector ("eviction 8 20% muted in recent 30% effect"). 6 15% years with an 20% 4 10% exception in 10% 2 5% 2019. 0% 0 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2014 2015 2016 2017 2018 2019 2020 2021 Credit to the government Claims on the private sector Domestic private credit Credit growth (right) Deposit growth (right) Source: Word Bank Development Indicators (2023), World Bank (2023) FINDEX. 63 At the firm level, few companies have a bank loan/line of credit, and Guinea is near the bottom in global benchmarks. At the household level, there is relatively more progress in terms of financial inclusion, but Guinea still lags most peers. At the firm level, external financial sources are scare. At the household level, digital financial services could grow rapidly in the coming years due to rising use of mobile banking and electronic money Limited access to finance constitutes one of the binding constraints to services. In 2021, 22% of adults had a mobile money account. Mobile MSME development and growth in Guinea. In the WBS-ES: cellular subscriptions exceed the population (104%) and mobile internet ▪ Nearly all businesses had a checking or savings account (98%)… subscriptions of 49% indicate the growth potential. In addition, demand is strong due to high transport costs and a recent cut in telecom fees. …but only 4% of businesses had a bank loan or line of credit. This was well below Sierra Leone (9%), Liberia (13%), SSA average (20%), Share of adults with a financial institution or mobile money account Cote d’Ivoire (21%), Senegal and Ghana (23%) and Mali (26%). Sierra Leone 29% Guinea 30% …and in a breakdown in terms of size represented: small enterprises: Burkina Faso 36% 2.5%, medium-sized enterprises: 8.0%, and large enterprises 19.3%. Mali 44% ▪ Private investments in Guinea are primarily financed internally (92%) Nigeria 45% rather than by banks (2.8%) compared with SSA averages of 76% and Congo, Rep. 47% 9%, respectively. Benin 49% Togo 50% ▪ 100% of bank loans require collateral and the requirements exceed Cote d'Ivoire 51% 150% of loan amounts. Cameroon 52% Liberia 52% ▪ 55% of the businesses responded that they did not need a loan, but Senegal 56% 15% had had a recent loan application rejected. Gabon 66% Ghana 68% Source: Word Bank Development Indicators (2023), ARTP (2020) and www.enterprisesurveys.org/en/data/exploreeconomies/2016/guinea#trade. 64 The constraints to the development of the digital financial services market are well known. ACCESS: 22% of Guinean adults have a mobile money account, but women are 13 percentage points less likely to have an account compared to men, and adults from the poorest 40% of households are 11 percentage points less likely to have an account compared to adults from the richest 60% of households. Major constraints to mobile money account access are: ▪ Distance: 35% of unbanked adults cite distance and lack of documentation as a barrier to ownership. ▪ Cellphone access: 31% of adults cite the lack of a cellphone as a barrier to ownership. ▪ Lack of appropriate documentation: a national ID is a requirement. ▪ Lack of resources (high poverty rate) and poor financial literacy (modest overall literacy) are other issues. USAGE: more than 9-in-10 adults with accounts use them to make or receive payments. However, more than three-quarters of adults receive agricultural payments in cash only. Similarly, two-thirds of adults paying utility bills do so in cash only. The percent of adults who save is slowly increasing (45% of adults in 2021) but those who save using a formal account is only 13% of adults of which 9% of adults save using a mobile money account. Major constraints to usage are: ▪ Relatively high cost of financial services despite a recent decrease. ▪ Payment infrastructure: lack of interoperability, but a National Switch due for launch in 2023. ▪ Lack of a developed payment acceptance ecosystem. Source: World Bank (2023) FINDEX. 65 Basic credit infrastructure and financial product markets are missing. The government could play a more active role in promoting MSME finance and financial inclusion. ❑ There are other issues such as an underdeveloped credit infrastructure. Despite the development of a legal and regulatory framework for a private credit bureau in 2021, none has been established. ❑ There are ongoing efforts to: (a) modernize the public credit registry at the Central Bank, (b) promote secure transactions and develop a new electronic collateral registry, and (c) strengthen the insolvency regime. ❑ There is a lack of development of SME products such as e-lending platforms as well as use of alternative data for credit decisions, e- invoicing, e-factoring and supply chain financing. The legal and regulatory framework on leasing has not helped create a leasing market. ❑ On early-stage SME finance and long-term finance, there are no long-term equity products with maturities of more than one year. ❑ There are emerging risk-sharing SME programs supported by the government. Due to the COVID-19 pandemic, two subsidized credit lines were established and in 2023, the national public-private guarantee scheme was operationalized with the setup of a portfolio guarantee scheme. ❑ Trade finance is mostly provided by multilateral or bilateral donor organizations. 66 The performance of the energy sector has improved a lot in recent decades, but access is scarce outside urban centers both for businesses and households. Access to electricity (% of population) Firms experiencing electrical outages ❖ Progress in the past 15 years has been driven in part by the (% of firms) improvement in governance and management at the national 100 100 93 electrical utility Electricité De Guinée (EDG): 84.2 80 80 ▪ Expanding the paying customer base and increasing 60 60 collection rates helped to mitigate EDG’s dire financial 40 situation, allowing more investment in expanding access 40 20 and reducing operating losses. 20 0 ▪ The process was aided by the delegation of EDG’s 2000 2004 2008 2012 2016 2020 0 management to a consortium led by Veolia Group. 2006 2016 Guinea Sub-Saharan Africa ▪ Operational subsidies worth 1.4% of GDP remain a sensitive Lower middle income Low income political issue that compromises cost-recovery and long- Value lost due to electrical outages term commercial stability. Power outages in firms in a typical month (number) (% of sales for affected firms) ❖ Progress was aided by substantial investment in new low-cost 15 13.9 generation capacity leveraging Guinea’s hydroelectric potential. 35 31.5 30 25 ❖ As a result, metrics of the quality of electricity supply for firms 10 20 have improved across the board, although much work remains 15 4.7 to be done to achieve competitive levels of efficiency and 5 10 4.5 reliability. 5 0 0 2006 2016 2006 2016 Source: data.worldbank.org/ and IMF (2023) Guinea Country Report, No. 23/43, January 2023. and World Bank (2023) MPO. 67 The promise of abundant, low-cost, and renewable energy represents an extraordinary opportunity for driving economic transformation in Guinea, but it depends critically on ensuring adequate transmission and distribution connectivity. ❖ Abundant rainfall and a favorable geography offer advantageous conditions for hydroelectric energy generation in Guinea. ▪ The 240MW Kaletá dam started operating a first hydro turbine in May 2015. ▪ The 450MW Souapiti dam project started operating in 2021, according to the Souapiti Management and Operating Company (SOGES), and the China International Water and Electric Corporation officially handed over the dam to the Government of Guinea on June 24, 2022. ▪ The 300MW Amaria dam is under construction since January 2019 and may be operational in 2027 or 2028. ▪ The three dams were financed and built by Chinese companies for roughly US$4 billion. New transmission lines must connect the dams to population centers and neighboring countries. Kaletá Hydroelectric Power Plant (240 MW) ❖ The new hydropower capacity gives Guinea’s a power mix that is 57% renewable and low -cost. ▪ Risks associated to less favorable hydrological patterns as a result of climate change remain a concern for the long-term evolution and competitiveness of Guinea’s power sector. ❖ The expansion of hydropower may enable downstream linkages to the bauxite industry through alumina refining and aluminum smelting, which depend on reliable, low-cost supply of electricity. ▪ There is an economic case for bauxite processing in Guinea to reduce the need for large-scale, imported transport services to ship raw ores overseas, in addition to substantially mitigating the value chains’ carbon footprint. ▪ Adequate grid connections between hydropower plants and processing plants are critical, but regulations impede private participation in transmission lines. Souapiti Hydroelectric Power Plant (450 MW) Note: Climate adaptation concerns will be further addressed in the forthcoming Guinea Country Climate and Development Report (CCDR). Source: World Bank Open Data and IMF (2023) Guinea Country Report, No. 23/43, January 2023. and World Bank (2023) MPO. 68 There is considerable potential for downstream value addition in the bauxite sector and a non-negligible contribution to decarbonizing the aluminum sector at the global level. A simple back-of-the-envelope calculation illustrates how. The calculation below illustrates the potential upside of introducing and/or expanding alumina refining and aluminum smelting in Guinea: ❖ Guinea exported 85 million tons of bauxite in 2021 at roughly $37/ton, earning $3.2 billion in revenue for producers. ❖ The volume rate of conversion of bauxite into alumina can be roughly 2.3 to 1 (Bayer refining process). The import price of metallurgical-grade alumina in the United States (2021) was $450/ton. Guinea has a small capacity installed, having exported $92.5 million in 2021. ❖ The volume rate of conversion of alumina into aluminum is roughly 2 to 1 (smelting process). The 2018-2022 average international price of aluminum was $2,067/ton. ❖ If refining facilities were available with capacity to process half of Guinea’s production, i.e. 42m ton of bauxite into 18m ton of alumina, export value could increase threefold to $9.7 billon. ❖ Global aluminum demand is approximately 75 million tons/year and growing ❖ Alternatively, if smelting facilities were available with capacity to process 5.5%/year. It is an indispensable input in solar panels and electrical cars. all refined alumina as per above, i.e. 18m ton of alumina into 9m ton of ❖ Additional benefits accrue if GHG emissions are considered: aluminum metal, export revenues could increase more than six-fold to $20 billion, or equivalent to 125% of Guinea’s GDP in 2021. ▪ Displacing expansion elsewhere of energy-intensive industrial processes in favor of Guinea-based plants running on clean hydroelectricity would entail ❖ The price differential between products is significantly due to energy- substantial emissions reductions. intensive industrial processes, strengthening Guinea’s competitive position due to availability of cheap hydroelectricity ▪ Downstream processing in Guinea would also entail a reduction in volumes of raw ore that are internationally shipped, reducing emissions further. 69 Source: Competitiveness of Global Aluminum Supply Chains under Carbon Pricing Scenarios for Solar PV. Electricity exports is another important source of income as generation capacity is set to expand well in excess of domestic demand and regional interconnection projects are completed. Capacity (MW) Demand (MW) ❖ Guinea has expansion plans for its generating park with a concentration of renewables – hydro, solar and wind. ❖ With several transmission line projects under development, Guinea ▪ To attract substantial volumes of private investment to renewables, is creating the conditions to improve the domestic grid’s resilience Guinea needs to strengthen the regulatory framework for independent and reliability, in addition to improving EDG’s financial standing from power producers, for instance through PPPs external electricity sales. ❖ As generating capacity grows faster than domestic demand, there is ▪ The WBG supports regional electric integration by contributing potential to substantially increase electricity exports to countries in the West finance and technical assistance to the institutional set up of African Power Pool (WAPP) WAPP’s single market (see Section 4 – Portfolio Analysis) Source: data.worldbank.org/ and IMF (2023) Guinea Country Report, No. 23/43, January 2023. and World Bank (2023) MPO. 70 EXTRACTIVES CREATING BUSINESS LINKAGES, INVESTING IN SKILLS, BUILDING SHARED INFRASTRUCTURE 71 The extractive sector is Guinea’s principal growth engine. It maintains relatively few direct jobs and offers modest opportunities for value addition beyond smelting. Large inflows of natural resource-seeking FDI and growth in related exports would maintain this low equilibrium without improvements in fiscal management and better integration of the sector in the local economy, possibly through an economic corridor approach. The extractives sector is central to a discussion about Guinea’s future development trajectory and realization of its JET potential. Mining does not generate a lot of direct jobs and will Recapitulation of Guinea’s main extractive assets probably never do so in Guinea. But it has the potential to still be transformative if the Government manages the sector well and reinvests the revenue it generates wisely. ❖ The world’s largest bauxite exporter (87 million tons in 2021) with 23 percent of the world’s reserves of Consultations with officials and business leaders in 2023 indicate that there is a near consensus aluminum ore (7.4bn tonnes). that extractives will remain the engine of growth in the foreseeable future. Economic ❖ Large gold and diamond deposits. In 2021, Guinea forecasters agree! High expectations are especially linked to the decision by a Sino-Anglo- exported 61 tonnes of gold. IMF reports 83 tons of Australian consortium to develop the iron ore area of Simandou. artisanal gold exports in 2021 but assesses that 40 percent of the artisanal gold exports was smuggled Much of Guinea’s private sector wants to get involved in the development of mining-related for reexport from neighboring countries due to tax infrastructure and provide support services. The integration of mining-related mega projects in arbitrage between countries. the local economy is critical for inclusive economic development as well as for the long-term ❖ An estimated 4 billion tons of high-grade iron ore. The viability of new mines. world’s largest untapped iron ore deposit (in It will require the upgrading of firm capabilities and new technology adoption; the compliance Simandou, >2 billion tonnes) could become the largest greenfield project in Africa. and use of international standards and certifications for goods providers and service suppliers; skills formation and accreditation of local professionals; improved access to financial services for MSMEs in addition to a more capable government interface for investors and entrepreneurs. Attracting credible investors to a low-income country with turbulent politics is one thing; Natural resource endowments are estimated at retaining them is another. The government faces a considerable challenge in turning Simandou US$7,300 per citizen (or >US$100 billion in total). into a success story of inclusive growth. Source: World Bank (2020) CPSD for Guinea, World Gold Council (https://www.gold.org/goldhub/data/gold-production-by-country), US Department of Commerce (2023) International Trade 72 Administration on Guinea, Mijiyawa, A.G. and L. Conde (2020), “Structural Change and Productivity Growth in Guinea”, Policy Research Working Paper, No.9341. Guinea’s policymakers cannot rest on their laurels: Fraser Institute surveyed nearly 2,000 exploration, development, and other mining-related companies around the world in late 2022. It found Guinea to have one of the world’s most attractive mineral potentials but least attractive policy environment for exploration and extractive sectors. ❖ Guinea (Conakry) ranked 61st out of 62 jurisdictions in the Policy Guinea’s score in terms of the so called ‘Best Practices Mineral Potential Perception Index* (PPI), which is a composite index that measures Index’— i.e. “the mineral potential of jurisdictions, assuming their policies overall policy attractiveness. It was ahead only of Zimbabwe (62nd) and were based on best practices”—put Guinea as 5th out of 62 jurisdictions. far behind African countries such as Botswana (2nd), Morocco (17th) This was by far the highest in Africa. and Namibia (26th). ❖ Guinea’s PPI ranking has jumped up and down in recent years. In terms of percentiles, where 1% is top and 100% bottom, Guinea went from 89th in 2019, to 57% in 2020, to 61% in 2021, to 98th in 2022. This is far from ideal since investors in capital-intensive sectors with lengthy The perception among international miners is thus that Guinea is near the bottom payback periods tend to reward stability. in terms of its policy environment but near the top in terms of mineral potential. ❖ All the survey respondents indicated that: (a) the legal system, (b) the quality of infrastructure, and (c) the availability of labor/skills are major deterrents to investment in Guinea. ❖ The great majority (>67%) of respondents also indicated that: (a) * The index is composed of survey responses to policy factors that affect investment decisions. uncertainty concerning the administration, interpretation and Policy factors examined include uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system and taxation regime, enforcement of existing regulations, (b) socioeconomic uncertainty concerning protected areas and disputed land claims, infrastructure, socioeconomic agreements/community development conditions, (c) trade barriers, (d) and community development conditions, trade barriers, political stability, labor regulations, political stability, (e) the geological database, and (f) security are major quality of the geological database, security, and labor and skills availability. deterrents to investment. Source: Fraser Institute (2023), Fraser Institute Annual Survey of Mining Companies 2022, Julio Mejia and Elmira Aliakbari. 73 How could Guinea’s policy makers leverage the extractive sector to strengthen JET outcomes? Guinea needs to break out of the low-level equilibrium that has produced poor social outcomes and cycles of political unrest. The private sector is the solution when it comes to job creation and economic transformation, but it will only deliver if the government creates conditions for private investment and entrepreneurship. The extractive sector holds the key on many aspects in this process. The first priority is to strengthen sector governance and fiscal management, including environmental management. This includes the collection, management and reinvestment of royalties and other fees generated by the sector at the central and local levels. In 2003-18, the total natural resource rents was at or above 14% of GDP whereas in 2019-21, it was 4.5-4.8% of GDP. This was partly due to the drop in mineral rents that went from 8-10% of GDP in 2017-18 to 0% of GDP in 2019-21. Fiscal management goes beyond the scope of this presentation, but IMF has reported extensively on the issue of bauxite transfer pricing, profit shifting from bauxite mispricing, generous tax holidays, and the fact that tax revenues to GDP went from 14% to 11% between 2016 and 2022 (projected) at the same time as mining production and exports increased multifold (see IMF sources, below). The Mining Code is often undermined by mining contracts that violate its articles and by poor implementation and enforcement. A decree signed in July 2022 was an important step to clean up the situation, but much more needs to be done to ensure that mining companies pay their share in taxes that is then reinvested in public goods and services. See the forthcoming WBG (2023) Country Economic Memorandum for related concerns. The WBG is financing technical assistance to improve environmental management and sector coordination as well as to enhance local linkages. In the past (see section 4) it also supported implementation of Guinea’s commitments to the Extractive Industries Transparency Initiative (EITI) to improve transparency and accountability in the sector. In 2022, Guinea achieved a high overall score (88 points) comprising dimensions of “outcomes and impact”, “stakeholder engagement” and “transparency”. 74 Sources: IMF (2023), Guinea, IMF Country Report No.23/43, and IMF (2021), Guinea: Selected Issues, IMF Country Report No. 21/147. Guinea 2019-2020 EITI Report (April 2022). How could Guinea’s policy makers leverage the extractive sector to strengthen JET outcomes? …cont. There are numerous other public initiatives that could be pursued to create stronger backward and forwards business linkages, increase positive economic spillovers, and produce better jobs outcomes. The following initiatives would strengthen long-term growth prospects and JET-related outcomes: 1. Adopt a Local Content (LC) policy based on good international practices and with a long-term vision to build and integrate Guinean businesses in the extractive value chains. 2. Adopt a labor migration policy based on good international practices that ensures that FDIs invest and integrate Guinean workers of all skillsets—from manual work to senior management—in their operations. 3. Build strong capacity for PPPs, investment promotion, investment facilitation, and investment retention/aftercare with the view to crowd in more private capital and expertise around shared infrastructure, services and facilities. 4. Assess and facilitate linkages between the rapidly emerging hydropower industry and the extractive sector, to strengthen potential downstream linkages such as aluminum refining and smelting (but only if proven feasible). 5. Plan for and invest in turning new transport (rail, road) corridors into economic corridors with the help of urban planning, expanded networks of utility services, local administrative capacity building, new facilities for technical and vocational education and services, etc. 6. Facilitate participation of local businesses in public and private procurement, including through procurement rules, but also by addressing information asymmetries, and programs that promote the use of quality standards and accreditations. 7. Launch a public program that facilitates and promotes technology adoption in the MSME segment, with particular focus on the use of digital technologies and services. 75 Guinea recently introduced a LC framework to promote the upgrading and integration of Guinean businesses in extractive value chains. This initiative requires an update since it is opaque with unrealistic requirements that could deter rather than attract investment and impede competitiveness. An effective LC policy can help create jobs, strengthen economic linkages Brief assessment of the 2022 Local Content Law with the extractive industry, and contribute to economic diversification over time. To be effective, a LC policy needs to: ▪ Definition of LC. Based solely on controlling ownership of suppliers; subject to ▪ Present clear definitions, avoid unnecessary administrative burdens, breaches but simpler to enforce. and avoid ambiguity and scope for attempts to game the system. ▪ Complex LC requirements. Range from a list of locally-restricted goods and ▪ Find an appropriate balance—based on local conditions—between services to subcontracting in public projects. Include requirements on hiring multiple objectives: (i) promoting local sourcing of inputs, (ii) Guinean workforce, local capacity building, and technology transfer. employing local workers, (iii) generating horizontal spillovers, (iv) ▪ Discretionary enforcement. The LC certificate, obtained upon approval of yearly promoting downstream value addition, and (v) building local capacity. submitted LC plans and reports, becomes a requirement for any issue or renewal of permits, licenses and authorizations in all sectors. Violations are subject to ▪ Avoid the creation of disincentives for business innovation, financial penalties and sanctions. operational efficiency and overall sector competitiveness. ▪ Heavy administrative burden. A new agency (Agence de régulation et de contrôle ▪ Mind the extent to which LC requirements could conflict with du contenu local – ARCCL) was created to oversee the implementation of the LC international trade and investment law. Law, tasked with approving LC plans, issuing LC certificates, and imposing A new LC law was enacted in 2022 with unclear inputs from the private sanctions. Compliance procedures and documentation remain untested and will sector despite existing dialogue channels. Its complex requirements, pose a challenge for operators and ARCCL alike. burdensome compliance, and discretionary enforcement add cost and ▪ Ambiguous funding provisions. Resources for LC policies shall come from a 0.5% uncertainty that may impair productivity and deter investors. The fee levied on all firms’ revenues, in addition to public contributions and other implementation timeframe (1 year) does not seem compatible with the sources. The law does not specify how the resources are to be applied. time needed to issue infra-legal regulations, let alone set up the responsible agency with adequate staff and training to oversee Positive LC policies. With support from the WBG, Guinea has created a new online compliance of firms in the formal economy. platform for matching mining firms with local suppliers (BSTP), implemented capacity building programs for local businesses, and promoted local development hubs (see Section IV – Portfolio Review). 76 Source: Business roundtable discussions in Conakry in April 2023, WBG (2020) Guinea CPSD and IGF Guidance on Local Content Policies (2018). The case of Botswana holds important lessons in terms of implementing local content policies and harnessing the long-term benefits of mineral wealth in a sustainable manner Key data: Key policies that support positive spillovers from the mining sector: Population: 2.6 million (2021) Upstream linkages. Provision that local goods and services will be GDP/capita PPP: $16,304 (2021) given preferential treatment or purchased to the extent feasible, combined with supplier development programs. Local procurement Mineral exports: 93% of total | $7.1 defined based on vendors’ national ownership, without specifying billion (2021) value-added requirements. Main products: diamonds, copper, nickel Downstream linkages. Introduction of diamond beneficiation activities after direct negotiation with the main mining company in Mineral rents/GDP: 0.1-2.7% the country. Vision for further ventures into more sophisticated activities, such as jewelry design and manufacturing; but adversely Lessons: exposed to competition from Asia. 1. Clearly articulated vision for mining linkages and carefully crafted Stabilization fund. The Pula Fund was established in 1994 to implementation strategy, including dedicated institutions, an industrial park preserve part of the income created by diamond exports for the with the necessary infrastructure, and a specific arrangement to make the benefit of future generations. It serves for short-term stabilization downstream activity viable (secured raw material supply). when the economy or mineral prices face downturns. It is jointly 2. Strong record of implementing supplier development programs encompassing managed by the Central Bank and the Ministry of Finance, to capacity building, MSME support and access to finance, under a quality maintain the target level of international reserves (and thus monitoring framework. Non-mandatory nature of demand-side policies neutralizes excessive currency appreciation) and to finance budget diminish their effectiveness. deficits or productive investments in accordance with national 3. Success of downstream linkages came at expense of wider economic development objectives. There is no numerical trigger for fund diversification if they divert policy efforts and attention. withdrawals. Source: International Monetary Fund (IMF). (2017). Botswana - 2017 Article IV consultation. IGF (2018) Guidance for Governments: leveraging local content decisions for sustainable development – 77 Case Study: Botswana downstream and upstream linkages. World Bank (2018) Note on stabilization / wealth funds: a case study analysis. The case of Mongolia represents another relevant experience in terms of converting mining revenues into sustainable local development with the adoption of stabilization and wealth funds Key policies that support positive spillovers from the mining sector: Key data: Mining and development. Mongolia benefited greatly from the Population: 3.3 million (2021) 2000-16 mining boom, though its mining sector has been GDP/capita PPP: $12,819 (2021) dominated by state participation in ownership and operations. Mineral exports: 92% of total | 9.6 Public revenue linked to mining enabled an expansion of public billion (2021) services and, consequently, living conditions. Economic performance has remained volatile given the failure to diversify Main products: copper, coal, gold, exports and FDI, and governance issues remain. iron ore Mineral rents/GDP: 3-26% Stabilization fund. The Fiscal Stability Fund was established in 2011 to support the fiscal framework by smoothing public spending in Lessons: response to mineral price and production fluctuations. Assets are ❖ Channeling mining revenues to the public budget can be accomplished by managed by the Central Bank, but withdrawal decisions are made other means than direct state ownership, such as using royalties, corporate by the Treasury. Deposits are based on excessive mining revenues income taxes, and resource rent taxes. (from taxes and SOE dividends) compared to a benchmark, while ❖ Strategic investment funds can serve the purpose of smoothing expenditures, withdrawals follow the same, inverted rule. Another fund was neutralizing capital inflows, ring-fencing natural resource revenues and established in 2017, the Future Heritage Fund, to ensure a fair earmarking funds for public investments. Governance risks can be mitigated distribution of mineral wealth across generations. by adopting a sound management structure and oversight, having clear rules for deposits/withdrawals, and in addition to sensible and transparent investment rules. Source: International Monetary Fund (IMF). (2021). ) Mongolia - 2021 Article IV consultation. World Bank (2018) Note on stabilization / wealth funds: a case study analysis. World Bank (2022) The 78 role of the State in Mongolia’s mining sector. World Bank (2021) Mongolia’s Proposed Sovereign Wealth Fund in the Broader Fiscal Framework. The case of Madagascar also offers lessons for Guinea when it comes to leveraging mining mega investments to support local governance, expand basic services, and strengthen local economic spillover effects. Key policies that support positive spillovers from the mining sector: Key data: QIT Madagascar Minerals (QMM) is a joint venture between Rio Tinto (80%) and the Government of Madagascar (20%) that produces ilmenite Population: 29 million (2021) near Fort Dauphin in the southeastern region of Anosy. The GDP/capita PPP: $1,608 (2021) Government’s partnership with Rio Tinto was supported by the World Bank through a multiphase IDA project, which led to a productive Mineral exports: 34% of total | 1.1 collaboration on numerous activities: billion (2021) 1. The construction of the deep-water Port d’Ehoala became a Main products: Nickel, Gold, Titanium multiuse rather than mining port to support local development. Ore, Cobalt 2. The Government expanded distribution networks of potable water Mineral rents/GDP: < 0.5% and electricity to households and businesses whereas Rio Tinto provided electricity to the local grid through captive generation. 3. Fort Dauphin’s solid waste management system was updated with Lessons: Rio Tinto building the solid waste station to international standards, ❖ The collaboration between a large mining company and the Government can while the government organized pre-collection, collection, recycling have strong positive effects on local economic development. and storage management for civilian and commercial use. ❖ The focus on improving local governance and expanding access to basic 4. The Governments strengthened local governance and decentralized services such as water, electricity and waste collection raised local living business facing public administration to allow for improved land standards in an inclusive manner, which made QMM a respected partner in a registration, business registration, tax administration, etc. particularly poor and disconnected area of Madagascar. 5. Local MSME development programs supported entrepreneurs and ❖ The early engagement of the World Bank and joint Government-Rio Tinto- local businesses in anything from agribusiness and tourism to WBG planning of the pillars of the PPP allowed for appropriate planning and various services sectors. structuring of social interventions. Source: World Bank (2016) Madagascar - Integrated Growth Poles Project (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/587341473931807877/Madagascar-Integrated-Growth-Poles- 79 Project and www.riotinto.com/en/operations/madagascar/qit-madagascar-minerals. THE ROLE OF COMMERCIAL AGRICULTURE COFFEE & COCOA: COMMODITIES WITH OPPOSITE GROWTH STORIES 80 Commercial agriculture is a primary source of employment and livelihoods, and it has the potential to contribute to economic diversification given the country’s abundance of arable land and water. The right policies could return Guinea to be the “orchard of West Africa”, but there is no evidence that Guinea is about to realize this potential. An abundance of water and arable land: (*) ✓ Fertile alluvial soil + ideal agro-climatic conditions. ✓ An est. 25% of arable land potential is exploited. ✓ Reliable rainfall with less than 10% of land with irrigation potential developed. ✓ Abundant hydro-power resources with an est. potential of 6 GW and 27,000 m3 water per capita. With this backdrop it is remarkable that Guinea’s exports of agricultural products have been static or declined while imports of food is projected to shortly reach US$1 billion despite numerous donor- funded agriculture sector projects. The cocoa (+) and coffee (-) sectors offer some insights and lessons. Note (*): Favorable natural conditions for the development of a competitive agribusiness sector remain nonetheless vulnerable to long-term trends of changing rainfall patterns, desertification and extreme events such as floods and drought. Climate adaptation concerns for relevant value chains will be further addressed in the forthcoming Guinea Country Climate and Development Report (CCDR). Source: World Bank (2018) “ Guinea Agribusiness Deep Dive” CPSD background study. 81 Coffee used to be an important source of jobs and export revenue. Over time, a lack of sector coordination, value chain organization, replanting, and ability to absorb price fluctuations and adjust to demand trends led to its demise. Guinea Coffee Exports and Production, 2012-21 Coffee is an example of a once significant cash crop that has slowly lost ground in 25000 50 Guinea and today almost disappeared in formal trade. 45 20000 40 ▪ In 1995, Guinea exported US$62mn of coffee (mostly beans, some of it 35 decaffeinated, a small proportion roasted). 15000 30 ▪ In the early 2000s, coffee exports started to decline, and by 2021, it reached 25 US$3mn (caffeinated beans, husks, skins). 10000 20 15 ▪ Rumors about informal, cross-border trade in coffee for re-exports are not 5000 10 backed up by data evidence in any neighboring country. 5 0 0 ▪ Guinea produces the Robusta coffee variety and Ziama-Macenta coffee has a 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 geographic indication recognized by the Organisation Africaine de la Propriété Coffee Production (MT) Coffee Exports ( million USD) Intellectuelle (2013) and a green coffee label. ▪ There is one major specialty coffee importer (Germany) that buys Ziama coffee Consultations with coffee producers and exporters in Guinea highlight from Guinea directly from farmers associations and sells it online. that there is not a single incident or constraint that led to the demise of the sector. Besides price and variety issues, they point to local issues: ▪ A consulting report noted in 2020 that farm-gate prices of US$1,400 per metric ton provided a small margin on FOB prices of between US$1,750 per metric 1. Production: the sector is characterized by unstable supply, low volumes, low yields, high unit cost, and a lack of investment in ton for export of lower quality beans to Europe for production of instant coffee replantation and renewed genetic stock. and US$1,900 for Grade 2 Robusta to Morocco. 2. Sector organization: the sector is disorganized and lack ▪ Over the last decade, the average price for Robusta has swung between coordination across the value chain with a lack of anchor investors US$1.4/kg and US$2.7/kg on markets in New York and Le Havre/Marseilles. and aggregators. Recent support by bilateral donors has focused on ▪ Guinea’s inability to adjust to international demand has left the country strengthening sector organization/coordination. producing very little Arabica coffee, which fetches a price around 50% to 150% 3. Transport and logistics: the largest producing area is the Nzérékoré higher than Robusta coffee. Region, and it is also the most remote area of the country and furthest from the Port of Conakry. 82 Source: The International Coffee Organization (2023), The Observatory of Economic Complexity (2023) and the Netherlands Ministry of Foreign Affairs (2020), “EU Market Research - Guinea Coffee”, June 2020. Cocoa is becoming a useful source of jobs and export revenue. Improvements in plant variety, sector coordination, favorable prices and a focus on quality standards are paying off. Guinea Cocoa Production and Exports, 2012-21 25000 70 Guinea’s cocoa sector has grown slowly but continuously over the years. 60 ▪ Cocoa bean exports rose from US$3mn in 2000 to US$9mn in 2010 to 20000 US$40mn in 2020. In 2021, Guinea exported US$64mn of cocoa beans. 50 15000 ▪ The EU (mainly Holland) absorbs 2/3 and Asia (Malaysia, Indonesia) 1/3 of 40 cocoa bean exports. 30 10000 ▪ In 2021, Guinea produced cocoa of the highest grade for the first time. At 20 least one Conakry-based producer of chocolate, Zeïna Cacao, sells abroad. 5000 10 ▪ The price of cocoa has fluctuated between US$1,800-3,400/tonne over 0 0 the last decade. This can be compared to lows of US$700/tonne in 2000. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 ▪ The sector is mostly made up of small-scale producers, local aggregators, Production (MT) Exports (value million USD) and foreign niche buyers. Consultations with cocoa producers and exporters in Guinea highlight: ▪ A public agricultural research institute has distributed plantings of the Ivoirian stock ‘Mercedes’, which is a faster growing hybrid, over the years Production: is still relatively low in terms of volumes and yields with high unit through two nurseries. costs. The cocoa needs to be fermented properly to be stored, and very little is fermented in Guinea, but the practice is growing. Distribution of improved ▪ Private buyers are also bringing seedlings from Cote d’Ivoire to renew plantings have made a big impact. community-owned cocoa farms. Sector organization: the sector would benefit from better organization and ▪ Almost all cocoa falls short of international standards, but the National coordination across the value chain, but recent efforts to establish Cocoa Quality Standard was recently established. cooperatives showing some results. • A Government decree issued in 2017 requiring all cocoa exports (and Smuggling: there is anecdotal evidence of Guinean cocoa at times being re- coffee) to leave Guinea through the Port of Conakry has not been exported from Liberia, Sierra Leone and Cote d’Ivoire and Ghanaian and implemented. Ivorian cocoa at times re-exported from Guinea as a result of changes in national export tariffs and exchange rate policies. 83 Source: FAOSTAT (2023) and Observatory of Economic Complexity (2023). How could Guinea’s policy makers leverage commercial agriculture to strengthen JET outcomes? The preceding analysis of agribusiness—cocoa and coffee—and export performance in the sector indicate that there are entrenched, or binding, constraints that impede sector development. The lack of sector development is striking given the seeming consensus that Guinea has the natural attributes and conditions in place to not only feed its own population but develop export-oriented value chains. Previous sector-oriented projects have not succeeded in turning around the negative trend (see more in the portfolio overview). 1. The examples of cocoa and coffee highlighted the challenges of international commodity price fluctuations. Part 1 also showed how the Guinean Franc has appreciated by 100% (REER) since 2010. The COVID-19 and Ebola outbreaks were other shocks that disrupted value chains by reducing access to inputs, labor and product markets. The way to deal with such shocks include initiatives to increase the ability to store output, the development of insurance products, and price smoothing mechanisms. 2. Small publicly funded projects can still have an impact on sector development, including the use of better hybrids offered at nurseries that encouraged communities to buy improved stock, European coffee and cocoa buyers that began to buy directly from producers and wholesalers in fair trade schemes, skills building and advocacy improvement of associations, etc. Sustainable sector development is built around businesses and entrepreneurs first, with social safety net or subsistence as secondary objectives. Commercial agriculture is a disappointment in Guinea and there is not a clear solution that would lift the sector and more work is needed to identify mistakes of the past and opportunities in the future. 84 The economic policy objectives of the Transition Government are not notably different than from other recent administrations when it comes to job creation and economic transformation: the issue is less “what” needs to be done than “how” to do it. The Transition Government has thus far adopted a program and a plan for its economic development objectives: 1. The Interim Reference Program (PRI, Programme de Référence Intérimaire de la Transition) for 2022-25 covers five pillars to respond to various challenges, including the establishment and focus on: (a) the institutions needed to return to constitutional order; (b) the necessary macroeconomic and financial framework; (c) the legal and governance framework; (d) social action for employment; and (e) infrastructure and sanitation. 2. The Economic Recovery Plan (PRE, Plan de Relance Économique) from October 2022, serves as the action plan for the PRI. The principal objectives are to improve productivity, diversify exports, and improve living standards. The main interventions are to improve the productivity of the primary sector by investing in infrastructure that link rural and urban areas; improving agricultural, livestock, fishing, and forestry practices; establishing special economic zones; and promoting agribusiness as well as SME development. In short, these broad objectives are worthy for sensible policy making, but they are short on detail. The Transition Government maintains Guinea’s commitment to the 2040 Vision, the Sustainable Development Goals, ECOWAS’ Vision 2050, and the African Union’s Agenda 2063. 85 Legal and regulatory reform and institutional capacity building: ten years of landmark initiatives 2011 Adoption of the Mining Code (Law L/2011/006/CNT) and its 2013 amendments bring a series of reforms to the mining sector, to ensure that the country’s natural mining resources contribute sustainably and effectively to the country's economic and social growth. Among the main reforms undertaken in this area is the reform of the legal, administrative and institutional framework. The aim of these reforms is to promote investment and research, and to encourage the exploitation of resources based on a mutually beneficial, transparent and equitable partnership. 2012 Adoption of the Leasing Law (Loi L/2012/05/CNT), which includes measures such as (i) flexible conditions for the approval of leasing companies (minimum capital level of GNF7.5 billion); (ii) the lessee benefits from the deductibility of VAT, in derogation of the General Tax Code; (iii) the transfer to the lessor of the tax advantages granted to the lessee; (iv) physical depreciation for the lessee and financial depreciation for the lessor; (v) eligibility of leasing companies to the Central Bank's money market; (vi) the granting of loans in foreign currencies and their amortization in foreign currencies for certain companies, in derogation to the foreign exchange regulations; and (vii) the setting up of a credit information system. 2013 Adoption of the Bank Regulation Law (Loi L/2013/060/CNT) which lays down the rules governing the operation and supervision of credit institutions in the Republic of Guinea, irrespective of their legal status or the nationality of the owners of their capital or their directors. 2015 Adoption of the Investment Code (Loi/2015/008/AN) integrated the national policy for the promotion of investments and the improvement of the business climate. It covers all investment projects and enterprises that are in good standing with respect to domestic taxation and that creates at least five permanent Guinean jobs for a minimum investment of GNF200 million. It grants customs and tax advantages to eligible projects according to project phase and location. However, the implementing decree was not enforced until 2022. 2016 Launch of a website to increase transparency and streamline investment procedures for new investors since investors would wait months or even years to receive final approval from a line ministry or the Presidency. 86 Legal and regulatory reform and institutional capacity building: ten years of landmark initiatives, cont. 2017 Adoption of the Public-Private Partnerships (PPP) Law (Loi L/2017/032/AN) which replaced the Build-Operate-Transfer Law of 1998 (that was never implemented) offered a more secure legal, regulatory, and institutional framework for PPP projects, including with regards to partnership agreements, BOT schemes, concessions, public leasing, delegated public service, and PPP procurement tender processes. Under the law, the Parliament does no longer need to approve government contracts with private companies apart from mining contracts. Obligations to conduct feasibility studies and to precisely define public needs were strengthened. However, the implementing regulations were only issued in 2021. 2017 Adoption of the Law on Inclusive Financial Institutions (Loi L/2017/031/AN) and its regulations, which modernized the preceding law from 2005, strengthened the regulatory tools, and extended the scope of supervision of the Central Bank to institutions of electronic money and postal finance. It also gave legal basis to electronic money institutions and broadly to all financial payment institutions. Finally, it integrated the postal financial services in a legal regulatory framework allowing the BCRG to assume the responsibilities that will be entrusted to it. 2017 Issuance of a Presidential Decree (D/2017/089/PRG/SGG) established a Special Economic Zone in the Administrative Region of Boké. This decree provided for a Law that would determine the rules for the organization and operation of Special Economic Zones in Guinea. In accordance with the Law, an implementing decree was meant to specify the rules for the administration and management of the ‘ Boké SEZ’. However, since 2017, there has been no development in the enactment of an SEZ Law. 2018 Creation of the autonomous Authority for the Development and Administration of Special Economic Zones (ADAZZ) to manage the institutional and legal framework of SEZs under the authority of the Presidency of the Republic. 2018 Inauguration of the Commercial Court of Guinea, which is a court of first instance specialized in the judgment of disputes between traders as defined by the OHADA uniform acts. Exceptionally, it is competent to hear disputes between traders and non-traders in restrictive cases. The operationalization of this jurisdiction constitutes a guarantee of confidence for local and foreign investors wishing to invest in Guinea because it allows the reduction of costs and delays in the settlement of commercial disputes, the agility of the judicial system, and the settlement of commercial disputes by professionals. 87 Legal and regulatory reform and institutional capacity building: ten years of landmark initiatives, cont. 2019 Adoption of the Credit Bureau Law (L/2019/0056/AN), which established the terms and conditions for the creation, approval and organization of the activities of the Credit Information Bureaus in Guinea. It also defined the legal framework for the control and supervision of their activities as well as the participation and obligations of the Users and Suppliers of the data. 2021 Launch the annual Guinea Investment Forum (GUIF) in Conakry in February was followed by the second GUIF in Dubai in February 2022. It’s an anticipated event by local economic actors and the third edition (in 2024) will host high-level panels presenting investment opportunities in Guinea, the incentives offered by the government, and networking sessions and deal-rooms dedicated to investment projects. 2021 Legal establishment of the SME Guarantee Fund (FGPE), which became operational in the first half of 2023 and is a public limited company with the goal to share risk with financial sector participants to facilitate access to finance for SMEs. 2021 Adoption of the Anti-Money Laundering and Counter-Terrorist Financing Law, which aims to prevent the misuse of the financial system by financial criminals, and to ensure economic and financial security. It established the legal framework for the fight against money laundering and terrorist financing, created the National Financial Information Processing Unit (CENTIF) and facilitated the investigation and prosecution of financial offenses. 2022 Implementation of the Investment Code, which was promulgated in 2015 but never enforced, through three ministerial decrees: (i) a decree appointing the members of the technical committee for monitoring investments (ARRETE A/2021/2668/MCIPME/SGG); (ii) a joint order fixing the fees for processing applications for the incentives of the investment code (ARRETE CONJOINT A/2022/033/MCIPME/MEFP/SGG); and (iii) an order on the organization of the functioning of the Technical Committee for Investment Monitoring (ARRETE A/2021/2668/MCIPME/MEFP/SGG). 2022 Adoption of the Local Content Law (Loi L/2022/010/CNT) which generalized local content obligations and harmonized the legal framework for both public and private projects regardless of sector. Some of the obligations were previously presented in the Petroleum Code, the Mining Code and a 2019 decree on local content for public and private projects (see slide #73 for an overview). 88 Legal and regulatory reform and institutional capacity building: ten years of landmark initiatives, cont. 2023 Launch of the Guinea Business Forum—a public private dialogue mechanism—under the Prime Minister to offer a framework for consultations between the government and the private sector, and reform of the business environment. It is tasked to and responsible for: (i) leading the dialogue between the government and the private sector; (ii) participate in the elaboration of the Government's policies and strategies towards the private sector; (iii) submitting to the Government the assessment of the reforms carried out, the constraints in the process of their adoption, their implementation and the prospects for the creation of a favorable climate for business; (iv) propose any reform to improve the business climate; (v) ensure the publication and popularization of all adopted reforms through the establishment and implementation of a communication plan; and (vi) ensure the monitoring and evaluation of the implementation of the adopted measures. 2023 Legal establishment of the SME Support Center (CAPME) as a public institution with the mission to assist and support the creation, installation, development and transformation of MSMEs as part of the implementation of the national private sector development policy. Besides sector-specific line ministries, key champions for private and financial sector development include: ❑ The Ministry of Trade, Industry and SMEs | Ministère du Commerce, de l’Industrie et des Petites et Moyennes Entreprises ➢ The Private Investment Promotion Agency | Agence de Promotion des Investissements Privés (APIP) ➢ The Guinean Export Promotion Agency | Agence Guinéenne de Promotion des Exportations (AGUIPEX) ➢ The Industrial and SME Development Fund | Fonds de Développement Industriel et des Petites et Moyennes Entreprises (FODIP) ❑ The Central Bank of the Republic of Guinea | Banque Centrale de la République de Guinée (BCRG) ❑ The Chamber of Commerce, Industry, and Handicrafts of Guinea | Chambre de Commerce, d'Industrie et d'Artisanat de Guinée (CCIAG) ❑ The General Confederation of Guinean Enterprises | La Confédération Générale des Entreprises de Guinée (CGE-GUI) 89 Summary and conclusions – section 3 ❑ The predominant concerns for most businesses are linked to ‘political instability’ and ‘general law-and-order’ issues such as crime, disorder, corruption and informal sector practices. These concerns are to quite some extent interrelated and connected, and lead to high transaction costs and great uncertainty with huge downside risk to investors and employers. They reflect the fragility of Guinean institutions. ❑ Trade and tax administration are two other areas where Guinea does particularly poorly in relative terms in international benchmarks and the country has a long way to go to streamline, professionalize and digitalize its public interface to businesses to bring it closer to good international practices. Guinea also taxes labor higher than nearly all other low-income countries. ❑ Trade regulations impede the development of Guinea’s manufacturing sector and export diversification efforts. Any policy aime d to support manufacturing-led growth or export promotion will likely be ineffectual unless it seriously reforms customs and trade regulations in parallel. It is time consuming and costly to comply with documentary and border requirements: or 5-20 times the average time and cost in high-income countries; and it is striking that a large share of businesses—most who do not trade directly—identify trade regulations as a serious business constraint. ❑ Guinean women have few opportunities in the formal private sector and only 1 in 100 is engaged in wage employment. Women face discriminatory laws and regulations that impede their ability to thrive in the workplace whether as employer or employee. Guinea could look to neighboring Cote d’Ivoire for inspiration on gender equality in the workplace to reverse the flight of women from the workforce. ❑ Transport infrastructure and logistics represent another pain point—from urban congestion to the lack of rural road connectivity—but new investments in railways driven by the extractive industry offer opportunities to create and strengthen transport corridors, and by extension connect secondary and tertiary towns to the capital and main port. Guinea could strengthen related development outcomes if it is serious about implementing the PPP Law in an open and transparent manner. 90 Summary and conclusions – section 3, cont. ❑ Access to finance is a major constraint for growth-oriented businesses and private investment. At the firm level, few companies have a bank loan/line of credit, and Guinea is near the bottom in global benchmarks. At the household level, there is relatively more progress in terms of financial inclusion, but Guinea still lags most peers. It is a predominant barrier especially to the growth-oriented middle-sized enterprise segment. The growth in mobile internet access and mobile money accounts could catalyze growth in digital financial services for years to come, and there is much that could be done to accelerate this process. ❑ Energy is one of the areas where Guinea has made most progress in the last decade. Businesses and households have benefited from rapid electrification and large investments in hydroelectric capacity are reducing power outages and turning Guinea into an exporter of electricity. The expansion of hydropower capacity holds the key to export diversification given growing regional connectivity and the possibility to turn bauxite into aluminum. ❑ The extractive sector has been Guinea’s principal growth engine over the last decade, and it will likely remain so for the fo reseeable future. The construction of the Simandou iron ore project over the next 5 years will likely be Africa’s largest greenfield investment. Th e sector creates relatively few direct jobs and offers modest opportunities for value addition beyond smelting. However, if managed well, it offers a tremendous opportunity to create a lot of indirect jobs in supporting and enabling sectors. And it tends to turbo-charge urbanization in affected areas. Guinea must leverage the large investments in extractives and transport corridors to reinvest resource rents in education and infrastructure, facilitate backward and forward business linkages, and turn transport corridors into economic corridors. ❑ PPPs could help catalyze infrastructure development and improve service delivery. Guinea has little experience of the concept, however. The new legal framework enacted to support the practice is not implemented, and serious capacity building is a basic requirement to make progress on competitive and transparent private participation. 91 Summary and conclusions – section 3, cont. ❑ An overview of the last twelve years of landmark public initiatives to strengthen the legal and regulatory environment, sharpen policies and strengthen institutions for private and financial sector development—complemented with feedback obtained in business roundtables in Conakry and consultations with WBG task team leaders focused on Guinea—highlight the following: 1. Guinea has demonstrated quite some success in reforming and adjusting the public administration —especially in the early 2010’s—including the adoption of the Mining and Investment Codes, and the establishment and strengthening of APIP. It also attracted substantial FDI in the extractive and hydropower sectors in the last decade. 2. Guinean policy makers have been active in drafting supportive legislation and enacting it in Parliament. However, the issuing of regulations/decrees for their implementation have sometimes not materialized or been done with considerable delay, including the SEZ Law and the BOT Law. 3. The enforcement of some laws have been incomplete or ignored partly because of missing or confusing implementing guidelines or because of the lack of institutional capacity notwithstanding external financial support and technical assistance opportunities. 4. Guinea has established several new institutions and mechanisms to promote private and financial sector development that are sound on paper but that lack the autonomy, budget security and human resources to do an adequate job. 5. Some critical pieces of legislation or decrees that affect the investment climate have been issued with little or unclear consultations with the private sector that is being regulated, including the recent Local Content Law. 6. Following the considerable inflows of FDI, and the advanced negotiations to develop the Simandou iron ore complex, Guinea’s p olicy makers now need to accelerate the reforms, empower and strengthen the capacity of core public institutions to turn its finite subsoil assets into longer-term ones, specifically human capital, shared infrastructure and a more competitive private sector. 92 SECTION 4: WBG PORTFOLIO AND World Bank lending operations PIPELINE REVIEW IFC technical assistance 93 At 10,000m: the JET Framework in IDA-19/20 as applied in the review of WBG engagements This part reviews the WBG portfolio and pipeline of JET-related engagements to assess recently closed, ongoing and planned projects. The objective is to identify potential gaps and priorities for future WBG engagements and to synthetize lessons to be incorporated in future project design. Besides project documents (PADs, ICRs, ICRRs, IFC advisory), this assessment also draws on selective IEG thematic reports on SMEs and FCV as well as structured interviews with WBG staff. The JET framework as of the IDA-19 policy commitments was somewhat different in terms of thematic organization, but virtually the same in essence to the one presented in IDA-20. The JET commitments confirm the role of the private sector to drive investment and employment towards more productive resource allocations in IDA countries and emphasized the role of digital transformation as a key area of intervention. SECTOR DIVERSIFICATION & COMPETITIVENESS CONNECTIVITY AND INTEGRATION UPGRADING AND TECHNOLOGY Expand into new sectors with potential for jobs Increase scale and access to larger Raise quality and efficiency with better and higher value-added activities, move into markets through trade and FDI, skills, technology adoption, innovation, more sustainable production urbanization, firm linkages entrepreneurship ENABLING FOUNDATIONS TO EXPAND PRIVATE INVESTMENT Ensure incentives to invest are sound: macro-financial stability, strong governance, enabling business environment with open and contestable markets, access to infrastructure and financial services. Boost institutional capacity to improve data for policy decision-making and to monitor impacts of crisis, and crisis response measures. Source: IDA20 Special Theme : Jobs and Economic Transformation (English). IDA20 Washington, D.C. : World Bank Group. 94 At 1,000m: the JET Framework in IDA-19/20 as applied in the review of WBG engagements The review covers relevant lending and technical assistance projects in Guinea to assess gaps in the JET areas of intervention that could form the basis for future engagements. Projects were selected according to their components’ extent of coverage of priority areas listed below. Annex 1 presents an overview of each project. Agribusiness IDA20 aims out to remove constraints to sectors with high potential for growth and job creation SECTOR by addressing regulatory barriers, tackling restrictions on competition, encouraging greater DIVERSIFICATION AND Power generation innovation and expanding participation in trade and global value chains. Agribusiness, power COMPETITIVENESS generation and extractives were the main sectors identified in the Guinea CPSD to have high Mining and natural resources potential to drive private sector investment and employment. Trade and investment facilitation These three areas can help create more economic opportunities in an inclusive manner. The first such area is the digital economy, including broadband access and coverage. Infrastructure more CONNECTIVITY AND Regional connectivity and integration broadly provides critical enabling services for enterprises to produce and move products to INTEGRATION markets, and for workers to access jobs. Another area is integration into international and Urbanization and firm linkages regional trade, deepened spatial linkages, and to support inclusive, productive urbanization. Skills development, including TVET IDA 20 will support inclusive private sector recovery, ensuring quality of programs' design, UPGRADING AND targeting and inclusiveness of the most disadvantaged (smaller, informal, women-owned), and Technology adoption, including digital TECHNOLOGY focused on constraints to adopting new technologies. Improving workers’ skills is also critical to Entrepreneurship and support to MSMEs ensure that the benefits of economic transformation are more widely spread. Macro stability Strong institutions and governance IDA 20 commitments to enabling foundations of JET include strengthening the resilience, inclusion ENABLING and depth of the financial system. Also includes removing constraints to economic transformation Business environment FOUNDATIONS TO by promoting a sound business enabling environment and a level playing field for the private EXPAND PRIVATE sector to flourish. Macro-fiscal stability and overall quality of governance, as well as overall Competition policy INVESTMENT infrastructure development remain highly relevant especially in high-debt and fragile Infrastructure development, including utilities environments, but those areas were not prioritized in the present assessment. Financial services 95 Overview of the WBG JET-Portfolio: closed and ongoing projects ID PRODUCT GPS (*ADM) PROJECT NAME US$’mn PERIOD P077317 IPF EEX Electricity Sector Efficiency Improvement 28 Jun 2006 — Jun 2016 P122065 IPF AGR* West Africa Agricultural Productivity Program 23 Mar 2011 — Dec 2019 593707 IFC AS IFC Investment climate: business regulation 2 Mar 2012 — Jun 2016 P128443 IPF FCI* MSME Development Project 10 Jun 2013 — Dec 2017 P146474 IPF EDU* Stepping Up Skills Project 20 Sep 2014 — Dec 2022 601367 IFC AS IFC Investment climate: mining 2 May 2016 — Mar 2020 594887 IFC AS IFC Investment climate: investment policy and tax 2 Dec 2012 — Oct 2015 602004 IFC AS IFC Local economic development 4 Jun 2018 — Jun 2023 P164326 IPF AGR*, FCI Integrated Agricultural Development Project 40 Jul 2018 — Jun 2023 P166042 IPF EEX* Guinea Mali Interconnection Project 42 Jul 2018 — Jun 2024 602283 IFC AS IFC Investment climate: agribusiness 2 Nov 2018 — Jun 2022 P164543 IPF TRA*, AGR Rural Mobility and Connectivity Project 40 Dec 2018 — Jun 2024 P164283 IPF FCI* Support to MSME Growth, Development and Access to Finance 30 Jun 2019 — May 2024 P166322 DPF MTI*, AGR, EEX, GOV, TRA Fiscal Management, Competitiveness, and Energy Reform DPF I 90 Nov 2019 — Dec 2020 P171225 DPF EEX*, MTI, POV West Africa Regional Energy Trade DPF 30 Jul 2020 — Jun 2021 Note: See the Annex for more details of each operation and the respective JET areas assessed to covered. 96 Overview of the WBG JET-Portfolio: closed and ongoing projects (continued) ID PRODUCT GPS (*ADM) PROJECT NAME US$’mn PERIOD P174063 DPF MTI*, EEX, FCI, GOV, HNP COVID-19 Crisis Response DPF 80 Jul 2020 — Jan 2022 P164184 IPF AGR*, ENV, FCI, TRA Commercial Agricultural Development Project 100 Sep 2020 — Jan 2026 P168613 IPF ENV*, EEX Nat. Resources, Mining, and Environmental Management Project 65 May 2021 — Sep 2027 605707 IFC AS IFC SME Linkages 2 1 Nov 2021 – Dec 2024 P172407 DPF MTI*, AGR, EEX, FCI, IPG Fiscal Management, Competitiveness, and Energy Reform DPF II 20 (cancelled) Mar 2022 — Mar 2023 Overview of the WBG JET-Portfolio: pipeline projects ID PRODUCT GPS (*ADM) PROJECT NAME US$’mn Expected Approval P177214 IPF SPJ*, EEX, HNP, Gender Emergency Response and Nafa Program Support Project AF 80 Apr 2023 — Jun 2026 P176932 IPF DD*, FCI Western Africa Regional Digital Integration Program - SOP1 60 Oct 2023 — Dec 2028 P180906 IPF ENV*, AGR Guinea - Climate resilience, food security and fisheries 100 Oct 2024 — Oct 2030 Note: See the Annex for more details of each operation and the respective JET areas assessed to covered, except for projects for which there are no details to date. 97 Portfolio analysis methodology The methodology calculates “coverage scores” to each of the fifteen JET focus areas, in order to assess the extent of attention and funding allocated by the WBG recent, ongoing and planned engagements in Guinea. ▪ Each project is assigned a score in each JET area depending on the proportion (percentage) of the project that directly addresses each area’s description. ▪ For DPFs, if one prior action is considered pertinent to a JET area, the percentage equals to one over total number of prior actions. ▪ For IPFs, if one component/subcomponent is addressing a JET area, the percentage equals the cost of that component over total project cost. ▪ One component/PA can be considered as addressing more than one JET area (hence total project percentages need not add to unity). ▪ Percentages are summed across all projects; scores are classified according to "extent of coverage" on a four-point scale (below). ▪ Total allocated financial resources are obtained from summing component values and PA values (1/n) across one given JET area. 0-1 Low Less than one project-equivalent covering the JET area; gap area 1-2 Moderate One to two project-equivalents covering the JET area; attention area 2-3 Substantial Two to three project-equivalents covering the JET area; well-covered area 3+ High Over three project-equivalents covering the JET area; saturated area 98 Sector diversification and Connectivity and Portfolio coverage of JET areas competitiveness integration Upgrading and technology Enabling foundations Entrepreneur development development , incl. utilities environment Urbanization Infrastructur Agribusiness Competition connectivity governance Technology Mining and investment institutions integration generation incl. digital facilitation Trade and support to , including Resources adoption, Close Financial Regional Business and firm ship and linkages stability services ID Project Name MSMEs Strong Macro Power FY policy Skills TVET Nat. and and e 594887 Investment climate: investment policy and tax FY16 50% 50% P077317 Electricity Sector Efficiency Improvement FY16 84% 17% 593707 Investment climate: business regulation FY16 100% P128443 MSME Development Project FY18 19% 25% P122065 West Africa Agricultural Productivity Program FY20 86% 35% 52% 601367 Investment climate: mining FY20 50.00% 50% Fiscal Management, Competitiveness, and Energy Reform P166322 FY21 10% 30% 10% 30% 50% 10% 10% DPF I P171225 West Africa Regional Energy Trade DPF FY21 100% 20% 40% P174063 COVID-19 Crisis Response DPF FY22 14% 29% 29% 29% 602283 Investment climate: agribusiness FY22 50% 50% P146474 Stepping Up Skills Project FY23 88% Fiscal Management, Competitiveness, and Energy Reform P172407 FY23 8.3% 25% 8.3% 36% 25% 8.3% 17% 8.3% 8.3% DPF II P164326 Integrated Agricultural Development Project FY23 90% 9.4% 9.4% 12% 16% 602004 Local economic development FY23 50.00% 50% Support to MSME Growth, Development and Access to P164283 FY24 60% 60% Finance P164543 Rural Mobility and Connectivity Project FY24 17% 92% P166042 Guinea Mali Interconnection Project FY24 82% 3.6% 41% 605717 SME Linkages 2 FY25 50% 50% P164184 Commercial Agricultural Development Project FY26 93% 2.8% 11% 53% 25% P177214 Em. Response and Nafa Program Support Project AF FY26 5.3% 9.4% P168613 Nat. Resources, Mining, and Env. Management Project FY28 52.31% 9.2% 35% P176932 Western Africa Regional Digital Integration SOP1 FY29 12% 42% 4.5% 45% 2.3% Score 3.4 3.2 1.5 1.0 0.9 1.6 1.2 1.3 2.0 0.6 1.8 2.3 - 2.1 1.7 Resource allocation (USD million) 159.9 119.9 37.0 19.3 36.5 9.5 25.5 58.3 62.6 32.0 122.4 16.0 - 127.3 78.3 99 JET gap assessment in Guinea engagement Assessed extent Allocation Score of coverage (USD million) Competition policy - Low - Some observations: Macro stability 0.55 Low 32.0 ▪ Macroeconomic issues and competition policy remain important areas of engagement but were not prioritized in the context of the Regional connectivity and integration 0.93 Low 36.5 present study. Trade and investment facilitation 1.03 Low 19.3 ▪ Agribusiness and power sector are extensively covered by the existing portfolio, though implementation issues are common, Skills development, including TVET 1.22 Moderate 25.5 especially in agribusiness. Technology adoption, incl. digital 1.31 Moderate 58.3 ▪ Mining-related interventions with firm linkages are modestly covered and a high priority engagement. Mining and Nat. Resources 1.52 Moderate 37.0 ▪ Trade and investment facilitation is only modestly covered and is Urbanization and firm linkages 1.59 Moderate 9.5 also a high priority engagement. Financial services 1.66 Moderate 78.3 ▪ Regional integration is covered from the perspective of power grid and (soon) digital networks integration, whereas gaps remain in Strong institutions and governance 1.83 Moderate 122.4 strengthening Guinea’s regional economic ties (transport, trade). Entrepreneurship and support to MSMEs 1.96 Substantial 62.6 ▪ Skills development remains a significant gap going forward, since engagements were modest and recently closed. Infrastructure development, incl. utilities 2.08 Substantial 127.3 ▪ Transport infrastructure and connectivity are reasonably well Business environment 2.27 Substantial 16.0 covered by existing operations, but opportunities remain linked to the development of economic corridors. Power sector 3.21 High 119.9 ▪ Support to entrepreneurship and MSMEs and, to some extent, Agribusiness 3.37 High 159.9 financial sector and A2F, are substantially covered by the portfolio. 100 Remarks on priority JET areas in the Guinea WBG portfolio SECTOR DIVERSIFICATION & COMPETITIVENESS AGRIBUSINESS MINING & NATURAL RESOURCES The WBG has provided comprehensive support to the The main highlight from the Bank side has been support to agriculture sector, from regional engagements targeting improved mining governance, with adoption of the EITI productivity to a more recent operation specifically promoting framework, and a joint-environmental project with a modest commercial agriculture. The operations’ design comprehensively component to support local suppliers to mining companies. targeted several constraints to agribusiness development and From the IFC side the engagement has been substantial, though featured expressive volumes (three $100 million serial projects), restricted to technical assistance activities: support to local but implementation lagged mainly due to low capacity on the content policies, including the creation of the successful BSTP client’s side and lack of high-level support to address the platform, and support to overall investment climate in the situation. extractive industries. POWER SECTOR The power sector is comprehensively covered by the recent and ongoing Guinea portfolio. Several operations supported improved sector management, including the national utility EDG’s performance, and expanding rural access, while regional engagements supported cross- border grid interconnection by means of the WAPP development program. There are still gaps to be addressed, but the sector is not regarded as a major contributor to JET unless combined to downstream mining linkages (e.g. hydropower for bauxite processing). 101 Remarks on priority JET areas in the Guinea WBG portfolio CONNECTIVITY AND INTEGRATION TRADE AND INVESTMENT FACILITATION URBANIZATION | FIRM LINKAGES The Guinea portfolio features little emphasis on the trade Urban development is another gap in the Guinea portfolio. facilitation agenda. There was DPO support to a single Specifically, urban transport investments and urban window for trade and specific support to regional electricity rehabilitation geared towards efficiency are needed given trade, but it remains an important gap. Possible synergies increased congestion. Fostering linkages to local firms is the with regional integration – e.g. border crossing modernization subject of a number of low-scale interventions, e.g. in a linked to enhanced logistics. Investment policy, however, subcomponent of the Natural Resources project and in a appears well covered by IFC activities and under the MSME number of recently concluded and ongoing IFC technical Project’s support to APIP. advisory projects. REGIONAL CONNECTIVITY AND INTEGRATION There are some high-profile projects supporting the regional integration of energy and telecom infrastructure. In the past, Guinea was an important supplier of agricultural products to the region (‘Orchard of West Africa’), and while informal cross-border trade goes on, fostering formal ties in trade and investment with regional partners is an area of opportunity. Full implementation of the protocols of ECOWAS and AfCFTA would strengthen synergies and facilitate regional trade and investment. 102 Remarks on priority JET areas in the Guinea WBG portfolio UPGRADING AND TECHNOLOGY SKILLS DEVELOPMENT | TVET TECH ADOPTION | DIGITAL A recently closed skills operation enhanced the capacity of A few recent operations target technology adoption to a local institutions to equip youth with market-relevant skills modest degree and specifically agricultural productivity. The and enhanced job-readiness. The project faced digital agenda was unaddressed until recently except for implementation difficulties and its relevance for the Guinean support to regional integration in telecom infrastructure (not context merits re-engagement. The focus on digital skills is included in the review). Given the strong focus of IDA-20 strongly supported by the IDA-20 policy commitments and commitments on digital transformation, there is a $60m has synergies with the technology adoption and digital regional operation expected for FY24. transformation agendas. ENTREPRENEURSHIP | MSMEs Support to MSMEs as well as the formation of entrepreneurial skills and business development services were the subject of a series of operations targeting the Conakry metropolitan region. This engagement has been reasonably successful, exploiting synergies with improvements in financial infrastructure in support of MSME access to finance, but the latest project is about to close. The entrepreneurship and access to finance agendas merit continuation as MSMEs represent a major driver of formal job creation and improved productivity in services sectors. 103 Remarks on priority JET areas in the Guinea WBG portfolio ENABLING FOUNDATIONS TO EXPAND PRIVATE INVESTMENT INSTITUTIONS | GOVERNANCE BUSINESS ENVIRONMENT Support to build institutional capacity is included in most Aside from a limited set of activities under IFC’s investment operations in the Guinea portfolio, including specific sectors climate project and one pillar of a cancelled DPO series, relevant to project interventions. A more comprehensive business enabling environment reforms receive scant attention approach to reforming institutions relevant for the business in the Guinea portfolio. Yet it represents one of the main environment would go a long way in improving private sector challenges for private sector development in Guinea. An confidence and strengthening competitiveness over time. ambitious future engagement that tackles several business Institutions from public procurement to policy formulation, to environment constraints in a coordinated manner could be public staffing policies, would benefit from the adoption of effective to achieve more favorable JET outcomes. international good practices. FINANCIAL SERVICES | ACCESS TO FINANCE (A2F) Activities focusing on the financial sector featured under the MSME A2F project, including support to financial infrastructure (collateral registry, credit reporting); as well as a policy theme under the Covid-19 response DPF. Nonetheless, access to finance on competitive terms remains a massive obstacle for private sector development in Guinea, and further engagements addressing financial sector development are of high relevance for JET outcomes. 104 Summary and conclusions – section 4 What WBG engagements would likely be most effective from a JET-centric perspective in Guinea? Section 4 and Annex 1 applied the JET framework outlined in IDA-19 and IDA-20 policy commitments to review and assess former, ongoing and forthcoming WBG engagements in Guinea. The findings do not indicate that the WBG should engage across all areas but that some critical issues are missing or little covered by WBG engagements in JET-related projects. ❑ The business enabling environment (BEE) used to be extensively covered in the WBG country engagement, but this agenda has received scant attention in recent years. Trade and investment facilitation have very limited coverage despite being a key priority to promote positive JET outcomes. A comprehensive BEE reform program could have strong positive effects in the short-, medium- and long-term perspectives and the imminent launch of the global B-READY benchmarking initiative provides baseline data and policy guidance for a new project. It should be of high priority in any JET program even if the level of ambition is entirely dependent on the motivation of the government. ❑ ‘Financial services’ / access to finance is a major obstacle and an existing WB operation that supports MSME finance is scheduled to close in the coming year. This is an area where Guinea is at, or close, to the bottom in regional benchmarks. There are well defined solutions to Guinea’s sector issues, and this is an area that warrants further support to boost JET outcomes. It should be of high priority in a JET program. ❑ The agribusiness and energy sectors are extensively covered in the WBG country engagement, but they face considerable implementation challenges. Regional integration aspects are also well covered with focus on power grid expansion and digital networks integration. While both sectors are critical to the JET agenda, they are well covered for years to come. Guinea could export much more electricity but is unlikely to develop a more prominent, export-oriented agribusiness sector. 105 Summary and conclusions – section 4, cont. ❑ There is a large skills mismatch with a considerable shortage of skilled technicians with formal credentials, and a relative abundance of graduates with skillsets for which there is limited demand. This issue warrants more data collection, deeper analysis, and future World Bank engagement from a JET perspective. ❑ Guinean women are increasingly opting to not participate in the labor force and any JET-centric engagement would need to develop a clear theory of change to seek to arrest and possibly reverse this negative trend. However, an increasing number of women entrepreneurs operate in the formal economy and this trend may offer lessons more broadly of how more women can be attracted to join the labor force. ❑ The WBG’s mining-related interventions focus mainly on sector governance and environmental management. No sector will have a stronger influence on Guinea’s growth trajectory and JET outcomes in the coming decade than extractives. There is both a large upside and downside in extractives depending on the way the government deals with the industry and integrates it in the local economy. Guinea’s policymakers must improve sector governance, raise more public revenues for investments in public goods such as health, education and infrastructure, and accelerate the integration of the mines and new transport infrastructure in the local economy to turn natural resource endowments into improved livelihoods and living standards. => The WBG’s convening power, technical expertise, IDA & IFC financing, and ability to commit to and support a long-term vision offer a unique value proposition to the Government of Guinea and its private partners who need to tackle a complex set of challenges. The timing to scale up our engagement is opportune given the recent announcements that the construction of the Simandou greenfield projects are moving forward with first-tier investors. 106 Summary and conclusions – section 4, cont. ❑ A JET-centric WBG engagement would help design an integrated economic corridor project along a priority transport corridor. It would require a longer than usual implementation horizon and could be covered by a multi-phased approach over ten years. Such a project would: a) Strengthen urban planning and land registration; b) Build municipal capacity to provide basic services (electricity, potable water, solid waste management) in select emerging population centers in mining areas and along the railway line; c) Help establish local institutions that would facilitate the emergence of a formal economy with decentralized administrative capacity to handle business registration, tax administration, construction permits, trade licenses, etc.; d) Support productive public private partnerships with select private investors who are planning to sink billions of dollars into infrastructure, logistics, mines, and compliance with local content provisions. The PPPs should focus on sub-projects of public interest with high social returns and the government could learn from experiences in for example Madagascar. e) Support local MSMEs by improving access to information, training, business development services, finance and sector coordination. ❑ The Simandou iron ore corridor is seemingly the best suited but not only entry point given its greenfield nature and scope for advanced planning, size of private investments (>US$15bn), the international reputation and track record of social investments (Rio Tinto) of key partners, and the expected economic impact. This mega project is too big to fail from a social and economic perspective. ❑ The growing number of bauxite projects in and around Boké could also be considered for an integrated economic corridor approach, but the coordination challenges are considerably higher given the large number of investors and smaller sub-projects, and the risks involved are therefore higher. 107 SECTION 5: RECOMMENDED PRIORITIES FOR MORE FAVORABLE JET OUTCOMES 108 Recommended priorities for more favorable JET outcomes Identify, empower and provide long-term funding for a few champions—like APIP—to develop and implement phased, strategic JET-related initiatives based on private sector interest and investment. Priority initiatives could be to turn an emerging transport corridor into an economic corridor (such as the Simandou corridor) over a 10-year horizon; structure a series of PPP pilot transactions of increasing complexity and impact; and pilot and scale up linkages programs to mining as part of a revised Local Content Law based on international good practices. Support a new effort to improve the investment climate through a reform program partly guided by the new B-READY to streamline, professionalize and digitalize key government functions facing the private sector; and complement this program with efforts to issue pending regulations to constructive laws, and build human resources in key authorities overseeing and enforcing laws covering the private sector. Launch a trade facilitation program aimed at modernizing and professionalizing the Customs Authority to streamline customs procedures, reduce unnecessary trade barriers, and implement commitments made at the AfCFTA and the WTO. This measure is essential to improve competitiveness, attract private investment beyond extractives, and to reduce the cost of imported inputs, given Guinea’s poor performance in global benchmarks on trade transaction costs. 109 Recommended priorities for more favorable JET outcomes Study and learn from failures in developing export-oriented agribusiness value chains in Guinea’s agriculture, forestry and fisheries sector; and take the necessary action to change course and strategy if realistic, viable and more sustainable business cases are found. Seek to address genuine market and government failures and reduce reliance on small grant programs and other forms of business charity programs. Strengthen technical and vocational education and training programs to equip the workforce with market-relevant technical skills. The ambitious goal should be to address the skills mismatch, improve employability, and support productive sectors that are growing. The reforms would focus on select industry collaborations, investment in training infrastructure and curricula, and focus on quality assured and accredited programs. Adopt a national gender strategy with clear policies and programs to: (a) promote women's economic empowerment, including business development services support, and skills training and access to finance; and (b) reverse the declining labor force participation rate and almost complete lack of wage employment for women—possibly by studying and replicating successful policies in Cote d’Ivoire that has enjoyed the opposite trend growth. 110 Recommended priorities for more favorable JET outcomes Work closely with the private partners of the Simandou iron ore project to plan for turning an emerging transport corridor into an economic corridor. Focus on developing shared infrastructure and utility services, provide integrated urban planning (given emerging migration pressures), establishment of TVET facilities for workers and enabling services sectors, and providing facilities and business development support for growth-oriented local businesses that will need to adopt new technologies and comply with quality standards to take part in procurement procedures and allow compliance with Local Content regulations. Adopt a balanced expatriate policy that allows for rapid construction while ensuring that the local labor force is integrated across all skill categories. Explore the feasibility of using hydropower to develop a green aluminum industry if, first, domestic power supply can be guaranteed for domestic electrification of households and businesses, second, if it would avoid subsidization of power producers or miners; and third, if extractive companies are contributing a fair/agreed share in terms of mining royalties to the public treasury. Consider turning the PPP unit into a more transparent, autonomous and technically sound institution with a clear task to leverage private sector resources and expertise for infrastructure development and service delivery. This measure is relevant to improve efficiency and service delivery, safeguard public interests in inclusion, and it would require a long-term view and significant resources. It’s a high-risk intervention that could pay off if properly implemented. 111 Summary of recommendations Key Policy Reforms ▪ Prioritize strategic JET initiatives by setting out a clear roadmap for the next 10 years with broad support from the public administration, complemented by a national jobs strategy. ▪ Adopt and implement a new generation of investment climate and business environment reforms, streamlining government functions, issuing pending regulations, and building capacity in key authorities. ▪ Launch a trade facilitation program to modernize the Customs Authority, streamline procedures, reduce trade barriers, and align with international commitments. ▪ Strengthen technical and vocational education and training programs to address the skills mismatch and improve employability, with a special focus on addressing barriers to women entrepreneurship and labor force participation. Key Institutional ▪ Empower and ensure adequate resourcing for public sector champions to lead JET initiatives and attract private Reforms sector investment, like the Ministry of Trade, Industry and SMEs and key agencies like APIP. ▪ Strengthen the PPP framework by ensuring all new projects follow a transparent and competitive award procedure, while improving the capacity and autonomy of the PPP unit to leverages private sector resources for infrastructure development. Public Investment ▪ Focus on turning the emerging Simandou transport corridor into an economic corridor, including shared Priorities infrastructure, urban planning, and support for local businesses. ▪ Explore the feasibility of a green aluminum industry powered by hydropower, considering domestic power supply constraints, fair contributions from extractive companies, and avoidance of subsidies. 112 ANNEX 1: COVID-19 CRISIS RESPONSE DPF – P174063 PDO “To: (i) protect lives and livelihoods in the context of the COVID-19 Results indicators Baseline Actual Target emergency; and (ii) protect the future by supporting financial inclusion and debt transparency” Percentage of eligible businesses benefiting 0.0 100 85 from short-term tax relief measures May-20 Dec-21 Dec-21 Number of simplified money accounts 0.0 2,568,005 300,000 Prior Actions (relevant) May-20 Dec-21 Dec-21 opened Prior Action 3. To relieve liquidity constraints for businesses, the Recipient has Number of simplified accounts opened that 0.0 19,092 150,000 adopted through circular n°1727/MB/DNI/DRPC/2020 dated 16 April 2020 the May-20 Dec-21 Dec-21 received cash transfers from ANIES following tax measures: (i) a three-month extension for the deadline for filing tax returns and paying taxes / duties for the tourism and hotel sector; (ii) a waiver for Number of guarantees granted by the 0 0 250 three months of VAT on water and electricity bills of companies in the tourism and Guinea PPG May-20 Dec-21 Dec-21 Tech adoption Digital hotel sector; (iii) the cancelation, for a period of three months (April to June 2020), tax charges weighing on small trade and crafts; and (iv) the postponement, for a period of three months (April to June 2020), the payment of all tax and social security Highlights: charges for the tourism and hotel sector and SMEs • The main emergency support operation of the World Bank to Guinea in response to the Covid-19 pandemic also featured a pillar dubbed “Protect Macro stability Prior Action 5. To support financial inclusion and the digitization of government the Future by Supporting Financial inclusion and Debt Transparency”, which payments including public cash transfers, the Recipient’s BCRG has issued a circular supported measures facilitating the digital transformation of finance. Institutions n°0033/DGSIF/DSIFI/2020 dated May 28, 2020 to simplify customer due diligence Governance Specifically, the government streamline procedures for opening simplified procedures for opening electronic money accounts and executing operations electronic money accounts, in parallel to rolling out e-payments linked to government emergency handouts. Prior Action 6. To enhance access to finance, the Recipient has issued a presidential decree n° D/2020/098PRG/SGG dated May 29, 2020 to establish a Partial Guarantee • The operation also supported a partial guarantee fund to support MSMEs, Fund for credits to MSMEs. but this has not become operational by project closing. Financial services A2F Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings DPF IDA Grant: 40 million Approval: Jul 2020 MTI* Ministry of Economy and No Overall: MS IDA Credit: 40 million Closing: Jan 2022 EEX, FCI, GOV, HNP Finance PA Relevance: S 113 Efficacy: MS Agribusiness ANNEX 1: FISCAL MANAGEMENT, COMPETITIVENESS, AND ENERGY REFORM DPF I (P166322) PDO “To (i) strengthen fiscal management; (ii) enhance the institutional and Results indicators Baseline Actual Target regulatory framework to promote competitiveness; and (iii) improve the Number of smallholders (less than 5 hectares) 2,900 9,000 20,000 Trade/investment financial performance of the energy sector” receiving agricultural input subsidies through Dec-18 Dec-19 Dec-21 facilitation the e-voucher system Time to settle commercial dispute (days) 311 311 180 Prior Actions (relevant) Dec-18 Dec-19 Dec-21 Prior Action 4. The Recipient’s Ministry of Agriculture (a) has launched a pilot e- Time to import – documentary compliance 156 139 90 voucher system for agricultural inputs to improve the transparency, the targeting, and Dec-18 Dec-19 Dec-21 (hours) monitoring and evaluation of the distribution of subsidized agricultural inputs and a digital platform to interact with farmers for the delivering of e-vouchers; and (b) has Time to register property (days) 44 44 22 Dec-18 Dec-19 Dec-21 delivered e-vouchers in four prefectures out of 33. Tech adoption Time to deal with construction permits (days) 151 151 90 Digital Prior Action 6. The Recipient has made operational the Commercial Court of Conakry Dec-18 Dec-19 Dec-21 (Tribunal de Commerce du Conakry) by making available to the Court the allocated budget under the 2019 Revised Budget Law, and through: (a) Presidential decree Highlights: dated August 6, 2018, appointing the judges sitting at the Commercial Court of Conakry; (b) ministerial order dated August 1, 2019, issued by the Ministry of Justice, • This was the first DPO in a series of two foreseen to, as part of a wider reform Macro stability approving the internal rules of the Commercial Court of Conakry; and (c) joint package, implement reforms to improve the business environment in Guinea. Institutions ministerial order dated April 25, 2019 and decision dated February 14, 2019 issued by • In particular, the operation supported the adoption of a single window for Governance the Ministry of Justice, staffing the Commercial Court of Conakry. trade, being the only instance of a trade facilitation activity in the Guinea portfolio except for those concerning regional electricity trade. Business Prior Action 7. To simplify business procedures, the Recipient has established and environment made operational a single window pilot project for external trade (“Guichet Unique du • However, due to Covid-19 and subsequent political upheaval the intended Commerce Extérieur”) at Conakry Port through a unique online platform that outcomes mostly fell short of targets, leading to an unsatisfactory assessment. dematerializes the management of commercial transactions and facilitates the submission of customs declarations and the management of certifications and Infrastructure authorizations for imports and exports. Utilities Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings DPF IDA Credit: 90 million Nov 2019 — Dec 2020 MTI* Ministry of Economy and No Overall: MU AGR, EEX, GOV, TRA Finance PA Relevance: S 114 Efficacy: MU Agribusiness ANNEX 1: FISCAL MANAGEMENT, COMPETITIVENESS, AND ENERGY REFORM DPF II (P172407) PDO “To (i) strengthen fiscal management; (ii) enhance the institutional and Results indicators Baseline Actual Target regulatory framework to promote competitiveness; and (iii) improve the Number of smallholders (less than 5 hectares) 2,900 - 30,000 Trade/investment financial performance of the energy sector” receiving agricultural input subsidies through Dec-18 Dec-22 facilitation the e-voucher system Time to settle commercial dispute (days) 311 - 180 Prior Actions (relevant) Dec-18 Dec-22 Prior Action 5. To improve the efficiency of agricultural extension services, the Time to import – documentary compliance 156 - 90 Dec-18 Dec-22 Recipient has: (a) launched a pilot e-extension system for delivering agricultural (hours) extension services, delivering e-extension services in three prefectures out of 33. Time to register property (days) 44 - 22 Prior Action 7. To facilitate the settlement of commercial disputes, the Recipient has Dec-18 Dec-22 Tech adoption submitted [adopted] the Commercial Court Law, which establishes a court of appeal for Number of USSD codes granted 4 - 8 Digital commercial matters and expand the geographical coverage of the Commercial Court. Dec-21 Dec-22 Prior Action 8. To simplify business procedures, the Recipient has: (a) launched the operations of single window for construction permits and (b) created the single window Highlights: for land registration. Macro stability • The operation was first postponed due to the onset of the Covid-19 pandemic, Prior Action 9. To support e-financial services, the Recipient’s Ministry of Posts, but later was cancelled after the 2021 coup and consequent suspension of Institutions Telecommunications and the Digital Economy has revised its Arrêté relations with the Bank. Governance A/2021/086/MPTEM/CAB/SGG Order A / 2021/086 that liberalized access to USSD (Unstructured Supplementary Service Data) codes to: (a) include price ceilings, • Important elements of the policy matrix would have included the continued Business mechanism for obtaining prices and (b) removed technical prerequisites improvement in commercial justice administration and simplification of environment business procedures (construction permits, land registration). • It was included in the present analysis for its relevance as part of a policy package aiming at improving the business enabling environment in Guinea, Infrastructure which could merit continuation eventually. Utilities Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings DPF Ida Credit: 20 million Mar 2022 — Mar 2023 MTI* Ministry of Economy and No Cancelled Ida Grant: 20 million AGR, EEX, FCI, IPG Finance 115 ANNEX 1: MSME DEVELOPMENT PROJECT – P128443 PDO “To support the development of MSMEs in various value chains and to Results indicators Baseline Actual Target Trade/investment improve selected processes of Guinea's investment climate” Increase in sales of MSMEs supported by the 0.0 67.3 20.0 facilitation SCs (percentage) Dec-13 Dec-17 Dec-17 Components USD million Number of investments generated above 0 20 10 $200,000 Dec-13 Dec-17 Dec-17 1. Establishment of Support Centers for SME Development 3.4 Loans awarded to firms included in the credit 0.0 57.0 15.0 reporting system as a percent of all lending Dec-13 Dec-17 Dec-17 2. Support to Investment 4.2 2.1. Facilitating Investment / support to the investment 1.8 promotion agency APIP Value of yearly transactions settled in Real 0.0 148.7 150.0 Time Gross Settlement system / Annual GDP Dec-13 Dec-17 Dec-17 2.2. Credit information system and payment systems 2.4 Entrepreneurship 3. Project Implementation and M&E 1.9 Highlights: MSMEs Total 9.5 • This was the first Bank engagement geared towards fostering entrepreneurship in Guinea in recent times, motivated by the need to diversify economic activity beyond mining. • Project activities centered around operationalizing entrepreneurship learning centers in Conakry and strengthening the Investment Promotion Agency (APIP). Also supported financial sector enhancements such as the credit reporting system and a payments-clearing system. • Project outcomes were overall satisfactory despite challenges associated with the Ebola outbreak during implementation. Financial services A2F Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Grant: 10 million Approval: Jun 2013 FCI Ministry of Industry and No PDO: MS Closing: Dec 2017 SMEs WB Perform: MS 116 M&E: Modest ANNEX 1: MSME GROWTH, COMPETITIVENESS AND ACCESS TO FINANCE – P164283 PDO “To support micro, small and medium enterprises access to markets and Results indicators Baseline Actual Target access to finance in the urban Conakry area” Value of sales contracts won by MSME 0.0 21.0 25.0 supported by the project, USD million Jun-21 Mar-22 May-24 Components USD million Number of startups and innovative companies 0 30 150 supported by the project Dec-19 Mar-22 May-24 1. Support entrepreneurship and MSME development 10.0 1.1. MSME business development services / institutional 1.0 Monthly volume of transactions processed by 0.0 0.0 10.0 support for the Conakry SME Support Center the National Switch, USD million Dec-19 Mar-22 May-24 1.2. Connect MSMEs to sales contract opportunities 4.0 Credit registry coverage (% of individuals and 0.03 3.86 5.00 1.3. Support to entrepreneurship and ecosystem providers 5.0 Dec-19 Mar-22 May-24 firms listed in a credit registry) 2. Support financial infrastructure 10.0 Loans provided to MSMEs by the participating 0 0 350 2.1. Retail payment infrastructure 5.0 Dec-19 Mar-22 May-24 Entrepreneurship financial institutions in the RSF MSMEs 2.2. Digitization of microfinance activities 2.0 2.3. Strengthening credit reporting 2.0 Highlights: 2.4. Creation of a collateral e-registry for lending and leasing 1.0 • The project was a follow-up to “MSME Development” (P128443) and 3. Develop financial services tailored toward MSMEs 8.0 expanded its scope beyond entrepreneurship development to support wider 3.1. Risk sharing facility (joint with IFC) 6.0 financial sector improvements geared to MSMEs, such as retail payments and 3.2. TA to financial institutions on serving MSMEs 1.6 an electronic collateral cadaster. 3.3. Equity investment ecosystem 0.4 • Included a Risk Sharing Facility (RSF) set up in partnership with IFC to promote 3. Project management and monitoring 2.0 direct private financing to micro and small enterprises. Total 30.0 • Approach to entrepreneurship training prioritized mindsets over hard skills, emphasizing attributes such as confidence, grit and personal initiative; shown to work better at catalyzing growth and improving access to finance, particularly for women. Financial services A2F Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Grant: 15 million Approval: Jun 2019 FCI Ministry of Industry and Yes PDO: MS IDA Credit: 15 million Closing: May 2024 SMEs IP: MU 117 Risk: High Agribusiness ANNEX 1: INTEGRATED AGRICULTURAL DEVELOPMENT PROJECT (PDAIG) – P164326 PDO “To increase agricultural productivity and market access for producers Results indicators Baseline Actual Target and agricultural SMEs in selected value chains in project areas” Percent increase in yield of targeted products 0.0 22.0 20.0 achieved by project direct beneficiaries (rice, Feb-18 Dec-22 Jun-23 Components USD million maize, potato, egg and fish) Percent increase in volume of market sales of 0.0 32.0 40.0 1. Increasing agricultural productivity 20.37 Feb-18 Dec-22 Jun-23 targeted products achieved by project direct 1.1. Improving water management 16.0 beneficiaries (rice, maize, potato, egg, fish) 1.2. Increasing access to technology, innovation, and advisory 4.0 services Farmers reached with agricultural assets or 0 132,000 150,000 services Feb-18 Dec-22 Jun-23 Tech adoption 2. Increasing market access 12.66 Digital 2.1. Strengthening producer organizations 3.0 Entrepreneurship 2.2. Promoting business development services 1.0 Highlights: MSMEs 2.3. Financing productive investment projects / matching grants 7.0 • Interventions related to technology adoption (inputs, techniques, equipment) and fostering cooperativism for increased productivity of smallholder farming, 3. Strengthening institutional capacity 5.20 focusing on specific value chains: rice, maize, potatoes, eggs and fish. 3.1. Strengthening the public agricultural statistics system 5.0 Institutions 3.2 Contingency emergency response 0.0 • Featured a matching grant funds for productive investment proposals, selected Governance competitively. 3. Project coordination and implementation 4.33 • Project design aimed to directly address the challenges identified at the Total 42.6 economic analysis, while keeping a flexible design, focusing on personalized technical assistance, training, and carefully devising eligibility criteria. • PIU was in the Ministry of Agriculture, and delegated implementation to a competitively-selected management firm (domestic, experienced in managing similar projects). Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Grant: 40 million Approval: Jul 2018 AGR* Ministry of Agriculture Yes PDO: S Government: 1.1 million Closing: Jun 2023 FCI IP: S 118 Beneficiaries: 1.5 million Risk: Substantial Agribusiness ANNEX 1: COMMERCIAL AGRICULTURE DEVELOPMENT PROJECT – P164184 PDO “To increase the number of farmers and rural households benefitting Results indicators Baseline Actual Target from commercial agriculture value-chains in Program’s areas” Number of jobs created along the agricultural 0 0 24,000 value-chains [of which, women] [0] [0] [12,000] Mar-20 Dec-22 Jan-26 Reg connectivity Integration Components USD million Number of farmers and rural households 0 0 145,000 1. Improving Market Access in Targeted Areas 57.0 provided with commercial opportunities in the [0] [0] [72,000] agricultural value-chains [of which, women] Mar-20 Dec-22 Jan-26 1.1. Rehabilitation of rural roads 37.0 1.2. Establishment of aggregation and logistics centers 13.0 1.3. Support sustainable management of market infrastructure 2.0 Highlights: • This project was the first in a programmatic series of three foreseen, aiming to 2. Supporting Private Investment 30.0 catalyze transition from subsistence to market farming and thus improve 2.1. Support to potential investors / business development 3.0 income, formality. It overlapped temporally with PDAIG (P164326) despite a Entrepreneurship services. TA to investors, dedicated finance facility similarity in scope, particularly the matching grant component. MSMEs 2.2. Private investment financing for inclusive supply chains / 27.0 matching grant fund • Integrative approach with complementary interventions in access infrastructure, productive facilities, direct grants for small farmers to kickstart commercial 3. Enabling Environment for Commercial Agriculture 12.0 operations. and soft institutional improvements as the sanitary control system; 3.1. Strengthening relevant public agencies 2.5 in addition to providing 3.2. Strengthening coordination along targeted value chains 2.5 • Regional focus on both the Boké/Kamsar and Kindia/Conakry corridors, geared 3.3. Enhancing SPS control, quality, norms, and standards 7.0 towards supplying domestic markets and export to regional and international 3. Project coordination and implementation 8.0 markets • Challenging implementation: the project is facing serious issues in terms of Total 107.0 delayed activities and low disbursement, mainly due to low capacity at the implementation unit and high turnover of key staff, in addition to a low- Infrastructure performance by the firm hired to support implementation. Utilities Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF (1st SOP) IDA Grant: 50 million Approval: Sep 2020 AGR* Ministry of Agriculture Yes PDO: MU IDA Credit: 50 million Closing: Jan 2026 ENV, FCI, TRA IP: MU 119 Counterpart: 7 million Risk: High Agribusiness ANNEX 1: WEST AFRICA AGRICULTURAL PRODUCTIVITY PROGRAM – P122065 PDO “To generate and accelerate the adoption of improved technologies in Results indicators (selected) Baseline Actual Target Trade/investment the countries’ top agricultural commodity priority areas that are aligned facilitation Direct project beneficiaries – Guinea 0 817,923 800,000 with the sub-region’s priorities as outlined in the ECOWAS” [of which female, %] [0] [42] [41] Reg connectivity Mar-11 Dec-19 Dec-19 Integration Technologies generated by the Project 0 16 15 Components USD million* with at least 15% productivity increase Mar-11 Dec-19 Dec-19 over the control technology – Guinea 1. Enabling conditions for sub-regional cooperation in the 2.7 generation, dissemination, and adoption of agricultural Area under improved technologies 0 616.4 600.0 technologies disseminated under the project – Guinea , Mar-11 Dec-19 Dec-19 Tech adoption ‘000 Ha Digital 2. Strengthening national centers of specialization / 12.2 strengthening of the research system Processors/producers who have adopted 0 515,057 500,000 at least one new technology, made Mar-11 Dec-19 Dec-19 3: Support to demand-driven technology generation, 15.6 available by the project– Guinea dissemination, and adoption Producer with knowledge of technologies 0 80 75 3.1: Demand-driven technology generation - released by the project – Guinea, % Nov-16 Dec-19 Dec-19 3.2: Support to accelerated adoption of released technologies - 3.3: Facilitating access to improved genetic material - Highlights: • The program aimed to implement ECOWAS directives on agricultural inputs and 4: Project coord., management, and monitoring and evaluation 4.8 quality control, in addition to developing local agricultural R&D capacity. Did not Total 35.3 initially include Guinea, which was later added due to a special cooperation with a Japanese trust fund on agri. technology adoption. *Estimate for Guinea on a pro-rata basis. • Though the project achieved all its target indicators for Guinea, the sector lacked a comprehensive strategy for adoption of productivity improvements at scale. Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Grant: 23 million Approval: Mar 2011 AGR WECARD/CORAF No PDO: S Trust Fund: 9 million Closing: Dec 2019 Ministry of Agriculture WB Perform: S 120 M&E: Substantial ANNEX 1: NATURAL RESOURCES, MINING, AND ENVIRONMENTAL MANAGEMENT PROJECT – P168613 Mining PDO Nat Resources “To strengthen institutional capacities for integrated management of Results indicators Baseline Actual Target mineral and natural resources in Guinea and enhanced benefits from the Forest areas brought under management plans, 0 119.2 1,191.8 mining and environment sectors” ‘000 Ha Dec-20 Sep-22 Dec-26 Annual environmental inspections of large 0 30 150 infrastructure projects undertaken Dec-20 Sep-22 Dec-26 Components USD million Annual technical monitoring and control 100 100 100 1. Improve the institutional framework for mining and environ. 5.0 completed on industrial mines,% Feb-20 Oct-22 Dec-26 1.1. Coord. of mining and environ. strategy and regulation 1.5 1.2. Tools to enhance mining and environment coordination 2.5 Value of goods and services procured by mining 9.00 9.25 60.00 1.3. Strengthening Guinea's capacity to address its global 1.0 companies through the online purchasing Dec-21 Oct-22 Dec-26 commitment on climate change platform, USD million Entrepreneurship 2. Mining policies, institutions, gov. and economic integration 29.0 MSMEs 2.1. Mining policies, institutions and access to resources 20.0 Highlights: 2.2. Economic integration of the mining sector and governance 9.0 • The Local Content subcomponent aims to create stronger linkages between mining 2.2.1. Local content and economic integration enablers 6.0 2.2.2. Transparency and citizen engagement 3.0 and other sectors of the Guinean economy. It sponsors the operationalization of the Institutions local sourcing e-platform (Bourse de Sous-Traitance et de Partenariats – BSTP) to (i) Governance 3. Environmental and natural resources management 28.0 enable increased capacity and access to business opportunities for SMEs, and (ii) to 3.1. Institutional, logistical support and ESS management 9.6 3.2. Protected area management in selected areas 18.4 promote local purchasing of goods and services by all mining companies; it also builds capacity of the Chamber of Mines to facilitate local linkages. 3. Project management 3.0 • The project also supports capacity building at local communities in the Boké region Total 65.0 to make the most of the Local Development Fund (FODEL), which is capitalized with levies on mining revenues. The project support the preparation of an overall development strategy for the region. Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Grant: 32.5 million Approval: May 2021 ENV* Ministry of Mining and No PDO: MS IDA Credit: 32.5 million Closing: Sep 2027 EEX Geology IP: MS 121 Min. of Environment Risk: Substantial ANNEX 1: WESTERN AFRICA REGIONAL DIGITAL INTEGRATION PROGRAM SOP1 – P176932 Pipeline PDO “To increase broadband access and usage in participating countries and Results indicators Baseline Actual Target to advance integration of digital markets in Western Africa” People provided with new or enhanced access to 0 - 300,000 broadband internet (CRI, Number) Oct-23 Dec-28 Used international bandwidth per mobile 4.21 - 22.62 Components USD million internet user (Kbit/s) (Number) Oct-23 Dec-28 1. Enabling environment for a continental SDM (not applicable) - Increased Volume of transactions in domestic 0 - 23 retail payment system. (Percentage) Oct-23 Dec-28 2. Connectivity Market Development and Integration 29.0 2.1 Legal, regulatory, and institutional capacity for 2.7 Users accessing e-services supported by the 0 - 2,000,000 Tech adoption telecommunications sector and digital economy Oct-23 Dec-28 Digital project (Number) 2.2 International and national backbone network infrastructure 26.8 Entrepreneurship 3. Data Market Development and Integration 4.2 MSMEs 3.1 Data safeguards: legal, regulatory, and institutional capacity 4.2 Highlights: for cybersecurity and data protection 3.2 Data enablers: data regulations for regional data flow and 0 • The project revolves around three interconnected layers: (i) single connectivity data infrastructure market, (ii) single data market, and (iii) single online market. Advancements in each Institutions layer will reinforce regional digital market integration, promote affordable internet Governance 4. Online Market Development and Integration 21.1 access, digital trade, and innovation. 4.1 Digital adoption for regional integration: e-commerce, 5.1 digital entrepreneurship, and digital skills • The project aims to empower individuals and businesses with safe broadband, 4.2 Access to and use of digital financial services 1.4 digital financial services, and necessary skills for active participation in the digital 4.3 Digital government services for regional integration 14.6 marketplace. 5. Project Management and Implementation Support 5.2 • Key activities include policy development, infrastructure investments, strengthening Total 60.0 of digital institutions, and upgrading existing digital infrastructures to support regional integration and digital transformation. Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Credit: 60 million Approval: Oct 2023 DD* MPTEN No N/A Closing: Dec 2028 FCI 122 ANNEX 1: EMERGENCY RESPONSE AND NADA PROGRAM SUPPORT PROJECT – P177214 Recently Approved PDO “To develop the building blocks of a national shock-responsive social Results indicators Baseline Actual Target protection system and increase access to shock-responsive safety nets Design, development and utilization of a No No Yes for poor and vulnerable households.” Jul-20 Aug-22 Jun-26 Management Information system (MIS) Components USD million Beneficiaries of emergency cash transfers for 0 20,000 160,000 COVID-19 and other shock response Jun-20 Aug-22 Jun-26 1. Emergency Cash Transfers 34.2 1.1. Emergency Cash Transfers 30.0 Beneficiaries of regular cash transfers under the 0 0 136,000 1.2. Communications, Sensitization, and Accompanying Nafa Program May-20 Aug-22 Jun-26 4.2 Measures (mobilie phones) Tech adoption Beneficiaries of social safety net programs (CRI) 0 120,000 960,000 Digital 2. Support to Unconditional Cash Transfers and Accompanying 89.5 Jul-20 Aug-22 Jun-26 Measures under the Nafa Program 82.0 Entrepreneurship MSMEs 2.1. Unconditional Cash Transfers and Accompanying Measures 7.5 2.2. Productive Inclusion Program Highlights: 3. Strengthening Social Protection Delivery Systems and 12.0 • The project focuses mostly on implementing a non-conditional cash transfer program Poverty Data to targeted vulnerable beneficiaries in Guinea in addition to accompanying measures, 3.1 Strengthening Social Protection Institutions and Shock- 9.0 aimed to stimulate a number of desirable outcomes in health, education and responsive delivery systems productive inclusion. 3.2 Strengthening Poverty Data 3.0 • The productive inclusion activities involve mobilizing NGOs with capillarity in targeted 5. Project Management, Monitoring and Evaluation 14.3 regions to provide capacity building and small productive grants ($200 per household), so they can better insert into market activities. Total 80.0 • The reach and scale of the project means a significant potential to contribute to JET outcomes in underserved areas, though the scope of support is not geared towards achieving competitive scale of operations (e.g. fostering export-oriented agribusiness) Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Credit: 80 million Approval: Apr 2023 SPJ* ANIES No N/A Closing: Jun 2026 EEX, HNP, Gender 123 ANNEX 1: STEPPING UP SKILLS PROJECT – P146474 PDO Indicator name Baseline Actual Target “To boost the employability and employment outcomes of Guinean Students completing professional degrees 0.0 61.0 80.0 youth in targeted skills programs.” fostering market relevant skills developed through May-14 Dec-22 Dec-22 the Competitive Fund Components USD million Programs accredited by the new National Quality 0 118 8 Assurance and Accreditation Agency May-14 Dec-22 Dec-22 1. Fund for Skills and Employability / support to 2/3-year 8.83 professional training programs adhering to international Students benefiting from direct interventions to 6,343 13,808 13,200 certifications enhance learning Dec-20 Dec-22 Dec-22 Skills development 2. Education-to-employment (E2E) Program 6.53 TVET Targeted trained youth employed in an area 0.0 45.0 70.0 relevant to training twelve months after May-14 Dec-22 Dec-22 3. Project management and monitoring 2.65 completing the training, % Total 17.50 Employers satisfied with trainees and placing 0.0 59.2 50.0 Entrepreneurship May-14 Dec-22 Dec-22 MSMEs them, % Highlights: • Project focused on indirect provision of technical training and professional skills development, via funding of local competitively-selected accredited programs, to address market failures in Guinea labor markets. • Strong gearing towards fostering entrepreneurship and employment-readiness in program participants; actual employability achieved was below target. • Engagement on skills upgrading and TVET has since been discontinued, though the agenda clearly scores high as a driver of JET in Guinea. • Project rating reflects split evaluation of before/after restructured objectives, weighted by proportional disbursement in each phase. Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Grant: 20 million Approval: Sep 2014 EDU Ministry of Higher Educ. No PDO: MU Closing: Dec 2022 Min. of Youth and Employ. IP: MU 124 Ministry of TVET Risk: Substantial Agribusiness ANNEX 1: RURAL MOBILITY AND CONNECTIVITY PROJECT – P164543 PDO “To improve and sustain the rural population's road access to markets Indicator name Baseline Actual Target and basic services” People provided with an all-season road 0 11,500 314,824 Nov-18 Oct-22 Jun-24 Reg connectivity Integration Components USD million Number of markets reached by an 0 1 65 improved road Nov-18 Oct-22 Jun-24 1. Rural Roads and small community facilities rehabilitation 30.0 1.1. Rural Roads Rehabilitation prep. and technical studies 2.5 1.2. Selected Rural Roads Rehabilitation works (800km) 25.0 Number of accessible schools and health 0 7 325 centers Nov-18 Oct-22 Jun-24 1.3. Small community facilities / storage, water 2.5 2. Capacity building for road maintenance and road safety 6.6 Proportion of project roads under 0.0 0.0 100.0 2.1. Road Asset Management 2.0 communities' routine maintenance, % Nov-18 Oct-22 Jun-24 2.2. Rural Roads Maintenance 3.0 2.3. Road Safety 1.6 Highlights: 3. Project management and monitoring 3.4 • The legacy of past transport projects in Guinea has been partly lost as road networks and facilities have been lacking appropriate maintenance and allocation Total 40.0 of resources after the project closing. • Operation designed with a narrow geographic area of intervention to maximize impacts, and a strong focus on community-based maintenance arrangements. • Results chain emphasis on market access for small producers; intervention area defined to regions with high potential in rice, maize, poultry, vegetable production in consultation with other projects supporting agriculture. Infrastructure • Difficult implementation due to lack of capacity in the implementing unit (Ministry Utilities of Agriculture) and interrupted engagement due to the 2021 coup d’état. Product Line Financing Dates Contributing GPs Implementing agencies WB-IFC Collaboration Ratings IPF IDA Grant: 40 million Approval: Dec 2018 Transport* Ministry of Agriculture No PDO: U Closing: Jun 2024 AGR IP: U 125 Risk: Substantial ANNEX 1: POWER SECTOR OPERATIONS Power generation Electricity Sector Efficiency Enhancement Project – P077317 West Africa Regional Energy Trade DPF – P0171225 PDO To improve the electricity sector’s commercial and operational PDO To increase energy security, reduce vulnerability to international oil price Trade/investment efficiency. These results will be achieved through critical investment fluctuations and reduce the fiscal burden of the electricity sector through facilitation support and capacity building, impacting the financial viability of the increased energy trade in the six participating countries Reg connectivity sector and quality of service delivery Integration Components 1. Distribution efficiency improvement 19.35 m Pillars 1. Increase confidence in the enforcement of Total financing: 2. Generation efficiency improvement 4.14 m commercial arrangements 300 m 3. TA for energy efficiency and institutional 4.68 m 2. Implement least costs investment decisions that strengthening consider regional options and regulation that enable of which, for cross border trade Guinea: Results Number of low voltage customers in Kaloum 14,963 / 13,693 3. Support transparency on financial sustainability 30 m indicators Total distribution losses in Kaloum, % 14.7 / 16.0 plans of regional market participants. Bill collection rate in Kaloum, % 81.5 / 95.0 Project Beneficiaries [of which women] 94,566 [50%] Selected Gross electricity imports, GWh 1,817 | 2,800 indicators Avg cost of electricity supply, USc/kWh 18.5 | 16.5 No. countries with less concentrated domestic 2|4 Guinea Mali Interconnection Project – 166042 Highlights: supply (HHI<1000) PDO To: (i) increase electricity supply to the Eastern part of Guinea; (ii) enable electricity trade between Guinea and Mali; and (iii) increase Highlights: Guinea’s electricity export capability towards other WAPP countries • Operations aimed to improve efficiency of the SOE-dominated domestic 343.8 m electricity sector (EDG), i.e. formalize customers, reduce losses, and improve Components 1. Power Transmission Infrastructure 2. Implementation Support and Capacity Building 37.0 m financial sustainability; as well as promote regional electric integration by … harmonizing regulations and building transmission lines within the West Africa 2.C. Trade facilitation TA 1.5 m Power Pool (WAPP). Results Energy supplied to Eastern Guinea, GWh 0 / 200 • Engagement has been relatively successful to enable Guinea to exploit its Infrastructure indicators Energy traded between Guinea/Mali, GWh 0 / 800 power generation export potential and improve electric reliability for the Utilities Guinea added export capability to WAPP, GWh 450 / 150 domestic private sector. Legend: “Actual / Target”; “Baseline | Target” Product Line Financing (combined) Dates (order of appear.) Contributing GPs Implementing agencies WB-IFC Collaboration Ratings (most recent) IPF IDA Credits: 67.5 million Jun 2006 — Jun 2016 EEX* Eletricité de Guineé (EDG) No PDO: MS DPF IDA Grants: 74.7 million Jul 2020 — Jun 2021 MTI, POV (DPF only) Ministry of Economy and IP: MS 126 Trust Funds: 4.5 million Jul 2018 — Jun 2024 Finance Risk: Substantial ANNEX 1: IFC INVESTMENT CLIMATE ADVISORY SERVICE PROJECTS IC Business regulation – AS 593707 IC Investment policy and tax – AS 594887 The project supported the Ministry of Industry and Small and Medium The project aimed to implement reforms in three key areas, to remove barriers for Enterprises in Guinea to introduce regulatory reform in the country. It is investors, simplify taxes for SMEs, and ensure a fair tax administration and appeals process. structured into two main phases: 1. Investment policy and incentives by revising investment, tax, and customs codes and 1. Diagnostic and solution design phase, which aims to identify key regulatory improving the administration of fiscal incentives. constraints to starting and operating a business for firms (primarily small and 2. Simplifying the tax system for Small and Medium Enterprises (SMEs), reducing the medium enterprises) in both the formal and informal sectors and design number of taxes and improving compliance. appropriate reform solutions to address these constraints; and 3. reforming the tax appeals system, establishing a fair and progressive mechanism for 2. Implementation phase, which expects to assist the government of Guinea in resolving tax disputes. implementing these solutions in partnership with the private sector. Project achievements: Project achievements: ▪ Establishment of a public-private dialogue (PPD) and working groups, facilitating ▪ The number of registered businesses increased from a baseline of 3,581 to coordination between the government and private sector for reform efforts. 21,196, surpassing the target of 4,655. ▪ Delivery of an Investment Policy Letter and revised Investment Code, aligning with ▪ The time to obtain a building permit in Conakry reduced from 287 to 173 days, international best practices and strengthening investor protection. according to the Doing Business 2016 report. ▪ Improvement of SME tax regime, streamlining the tax appeals system, enhancements to ▪ The time to register a business decreased by 50%, from 40 to 8 days, thanks to VAT refund system, Tax Code, Tax Administration's communication strategy, and streamlined procedures at the Guichet Unique. administrative improvements to reducing processing time. ▪ The cost of property transfer decreased from 14.4% to 8.5% of the property The project addressed development challenges and supported multiple institutions, value, exceeding the original baseline. including the Ministry of Mines, APIP, Ministry of Industry, Tax Administration, Tax Appeal ▪ The implementation of the OHADA Entreprenant legal status, aimed at Commission, Customs Administration, and Ministry of Budget. formalizing 1,000 businesses, was discontinued due to the impact of the Ebola pandemic outbreak. JET Areas: JET Areas: 127 ANNEX 1: IFC INVESTMENT CLIMATE ADVISORY SERVICE PROJECTS IC Agribusiness – AS 602283 IC Mining – AS 601367 The IC Agribusiness project aimed to attract investments and improve the The project focuses on three main areas: business climate in Guinea's agribusiness sector. It focused on implementing (i) establishing a mining licensing one-stop shop and an informational business environment reforms, strengthening investment promotion and portal to support licensing activities, providing updated information facilitation services, and developing investment-ready projects. The project and streamlining the licensing process; aimed to increase private investments, open markets, and generate inclusive growth, benefiting rural areas and farmers. It was coordinated (ii) implementing licensing reforms to improve the investment climate by between the IFC and World Bank to target specific reform areas and sub- simplifying processes and enhancing the institutional/regulatory sectors to drive economic growth and diversification. framework; and (iii) supporting the development of local content in the mining sector by Objectives: drafting and disseminating a policy, assisting key stakeholders in creating a strategic plan and implementing the policy. Its objective was to contribute to creating markets for increased private investment in the agribusiness sector by i) helping implementing of investment climate reforms using PPD and ii) reducing the time to obtain Objectives: construction permits and land titles The project aimed to improve the institutional and business environment Components: and private sector development in Guinea. In particular, it aimed to streamline licensing processes for mining activities, reduce compliance 1. Implement business environment reforms in pre-identified reforms costs, and enhance transparency. Additionally, it supported the areas and sub-sectors establishment of a policy framework for promoting local content in the 2. Strengthen the country's investment promotion and facilitation services mining sector and strengthening links between multinational enterprises for agribusiness investors and domestic firms. The project aimed to improve the business environment, increase fiscal revenues, and provide opportunities for local 3. Build a pipeline of investment ready projects in the agribusiness sector employment and procurement. JET Areas: JET Areas: 128 ANNEX 1: IFC INVESTMENT CLIMATE ADVISORY SERVICE PROJECTS Local economic development – AS 602004 SME linkages 2 – AS 602004 The project focuses on improving business practices, specifically for women and The project aims to strengthen the marketplace for buyers and suppliers, youth-owned entities, to enhance their access to market opportunities in mining enhance stakeholder capacity, and improve access to finance for small and supply chains. It consists of three components: local content development, local medium enterprises (SMEs). It consists of two parallel components: economic development, and institutional capacity building. The project aims to increasing purchases from local SMEs by improving the marketplace and improve local procurement policies, access to information and finance, and advocating for a fair playing field and supporting SMEs' access to finance promote sustainable practices. It also strengthens institutions, fosters good by addressing regulatory issues and connecting them with financial governance, and emphasizes cross-cutting themes like gender, youth inclusion, institutions. and the environment. Objective Objectives: The objective of the project is to increase large mining firms’ purchases of • Contribute to foreign and domestic investments in the agribusiness sector goods and services from domestic SMEs in Guinea, while helping domestic [USD 10 million investments facilitated three years post-completion]; banks identify opportunities to increase financing to SMEs that supply • Help improve the business climate for agribusiness [3 investment reforms larger firms. implemented by the end of project] through the establishment a public- Components private dialogue (PPD) platform focusing specifically on agribusiness and 1. Increasing purchases from local SMEs • Reduce by 10% the time required to obtain land titles and 20% the time to a) Technical assistance to the marketplace obtain construction permits through the establishment of an efficient One Stop Shop for land registration and construction permits b) Institutional capacity building Components c) Supplier development program 1. Institutional capacity building 2. Supporting access to finance for SMEs 2. Development of long term partnerships with mining companies 3. Creating opportunities for women and youth JET Areas: JET Areas: 129 ANNEX 2: SUMMARY OF LESSONS LEARNED ✓ Successful project implementation requires ownership, ✓ Value chain development, multisector approaches, access to leadership, and support from the government at all levels, along finance, and gender targeting are crucial for successful agricultural with strong institutional setup and effective communication sector projects. strategies. ✓ Integrated value chain approaches, access to finance through ✓ In fragile environments, improving the effectiveness of institutions competitive grants, and continuous capacity building are essential and instruments for MSME development is crucial, including early for commercial agricultural development. consideration of financial sustainability and a simple and relevant results framework. ✓ Upskilling and professional education programs require long-term reforms, targeted initiatives, incentive structures, involvement of ✓ Project design should focus on selectivity, spatial distribution, and private sector federations, competency-based training, and selecting clearly attributable indicators. stakeholder engagement and communication. ✓ Mindset-oriented entrepreneurship training emphasizing ✓ Public-private partnerships can bring pragmatic wins, and psychological attributes can have significant impacts on business stakeholder engagement through purpose-driven platforms is growth and access to finance, particularly for women. crucial. ✓ Support for innovative MSMEs is often missing, hindering their ability to develop and transform inventions into innovations. ✓ Financial infrastructure development requires strategic partnerships, local and global expertise, and sustainability through increased human capacity. Source: “Lessons Learned” sections incorporated into Implementation Completion and Results (ICR) reports, when available, and Project Appraisal Documents (PAD) of projects analyses in the present study. 130 ANNEX 2: SUMMARY OF LESSONS LEARNED, CONT. IEG special reports on Small and Medium Enterprises (SMEs) ❖ Consistency and clarity. Harmonize approaches and clarify objectives, justification, and evaluation of SME support to ensure a clear understanding of how it addresses constraints and contributes to employment, growth, and economic opportunity. ❖ Relevance and additionality. Shift support towards frontier states, regions, and underserved segments, particularly in low-income and fragile and conflict-affected contexts, to maximize impact. ❖ Strengthen guidance and quality control. Clearly define support mechanisms, identify beneficiary groups, and include meaningful outcome indicators in monitoring and evaluation frameworks to ensure effective implementation and assessment. ❖ Drivers of performance. Key factors include technical project design, quality supervision and implementation units, risk assessment and mitigation, prior analytic work, and client engagement. Continuous and coordinated support across the WBG and the use of multiple instruments yield superior performance. ❖ Enhancing SME capabilities. Improve mechanisms that build and strengthen SME management and entrepreneurial capabilities, focusing on productivity and employment growth through well-designed business development services and institutional reforms. ❖ Effective eligibility criteria. Establish and enforce eligibility criteria for financial intermediaries to direct resources to finance-constrained SMEs, based on a thorough understanding of participating institutions' lending portfolios. ❖ Longer-term effects and sustainability. Track and evaluate the longer-term effects of SME interventions to ensure sustainability, learn from the outcomes, and refine approaches for continuous improvement. Source: Independent Evaluation Group (2014) The big business of small enterprises: evaluation of the World Bank Group experience with targeted support to small and medium-size enterprises, 2006-12; and IEG (2019) World Bank Group support for small and medium enterprises: a synthesis of evaluative findings. 131 ANNEX 2: SUMMARY OF LESSONS LEARNED, CONT. World Bank Engagement in Situations of Conflict (2021): recommendations relevant to the Guinean context: ❖ Confidential political economy analysis. Maintain confidential political economy analysis to enhance conflict sensitivity and provide valuable insights to future staff working on specific countries. Confidentiality is necessary to address the potential risks associated with broad distribution and client-facing nature of conflict analyses within the World Bank. ❖ Risk-informed country engagement. Incorporate timely conflict analysis into country engagements, ensuring that strategies and operational decisions are informed by an understanding of conflict dynamics and risks. This includes monitoring shifts in societal perceptions, identifying peacebuilding opportunities, and promoting adaptive decision- making. ❖ Rethink what success looks like. Revise outcome-related metrics in conflict-affected countries by moving away from quantitative metrics, attribution, and short time frames. Instead, focus on higher-order outcomes that align with transition aims and develop monitoring and evaluation systems to track these outcomes effectively. ❖ Country engagement. Enhance the integration of conflict considerations into Country Partnership Frameworks by including a clear conflict and/or fragility narrative, integrating conflict-related objectives, and establishing adaptive results frameworks to capture conflict reduction aims. ❖ Learning and evaluation. Strengthen evaluation and learning systems for trust-funded activities in conflict-affected contexts. Ensure compliance with evaluation requirements for smaller projects funded by trust funds and reconsider the validation threshold for Implementation Completion and Results Reports. 132 Source: Independent Evaluation Group (2021) World Bank engagement in situations of conflict: an evaluation of FY10-20 experience. ANNEX 3: LIST OF PEOPLE CONSULTED IN GUINEA CONAKRY IN THE SPRING OF 2023 Mr. Bah Alpha Mamadou Djouldé, Deputy CEO, Amifa Guinée Mr. Gassama Ibrahima, Project Coordinator, PDAIG Mr. Bah Diawadou, CEO, ECOBANK Mr. Haba fassou, Deputy CEO, Wakili Microfinance Mr. Bah Mamadou, CEO, Banki trurks Mr. Kourouma Amara, CEO, Crédit Rural de Guinée Mr. Bah Mamadou Kadjaliou, COO, Industrial and SME Development Fund, FODIP Ms. Kouyaté Diana, CEO, Private Investment Promotion Agency, APIP Mr. Bah Oumar Sylla, IT Manager, TRANSMAR SA Mr. Kpoghomou Bernard, Deputy CEO, National Confederation of Socioprofessional Organizations of the Mr. Balde Thierno Mountaga, Logistics operator, Guinea Business Corporate Livestock Sector, CONASEG Mr. Bangoura Mohamed, Administrative Manager, Credit Kash Mr. Magassouba Diamadi, CFO, CPECD Yètè Mali Mr. Barry Mamadou, Deputy CEO, Industrial and SME Development Fund, FODIP Mr. Maher Naouvah, Sales Director, VFCI BANK Mr. Barry Souleymane Thierno, CEO, ANAVIG Mr. Mara Mamadou, Deputy CEO, Guinean Export Promotion Agency, AGUIPEX Mr. Beavogui Famoi, Entrepreneur / Former Secretary General of the Ministry of Agriculture, Mr. Mbaye Adama, General Secretary, Professional Banking Association Entrepreneur / Former Secretary General of the Ministry of Agriculture Mr. Mevi Carlos, CEO, ORABANK Ms. Bérété Fanta, National Director, National Directorate of SMEs and Local Content Mr. Mohamed Sacko, Specialist Marketing Grant, PDAIG Ms. Camara Salematou, CEO ONIG, ONIG Mr. Ousmane Bah, Project Coordinator , PDACG Ms. Condé Fatoumata, Investment Promotion Director, APIP Mr. Peter, Austin, General Manager, Regional Economic Development (Acting), Rio Tinto Guinea Ms. Coulibaly Diaka, Deputy CEO, African Lease Mr. Samoura Aboubacar Demba, National Director, National Directorate of Agriculture Mr. Diakité Sekou Oumar , CEO of COFINA Microfinance / Chairman, APIM Ms. Sanoko Diaraye, Project Manager, Guinean Export Promotion Agency, AGUIPEX Mr. Diallo Abdoulaye, CEO, Guarantee Fund for Business Loans, FGPE Ms. Soumah Kadiatou, Deputy CEO, Ministry for the Promotion of Women and Vulnerable Persons, FAAEFF Mr. Diallo Boubacar, Sales Director, SFA BANK Ms. Soumano Mariame, Sales Manager, APEX Trading Ms. Diallo Halimatou Sirandou, National Director, National Directorate of Animal Production Mr. Sow Aboubacar, General Secretary, Professional Association of Microfinance Institutions, APIM Mr. Diallo Mamadou (Bobo Deinkin), Chaiman, Bobo Deinkin Mr. Sow Ibrahima, Project Manager, Banki trurks Mr. Diallo Mamadou Dian, Monitoring and Evaluation Manager, PDAIG Mr. Tenguiano Hélène, Project Manager Private Sector Promotion, National Directorate for the Promotion Mr. Diallo Mohamed Moustapha, CEO, Saboutech of the Private Sector Mr. Diallo Thierno, CEO, Société Générale Mr. Tolno Eloi Cesar, Deputy CEO, Agro pastoral society of Guinea Mr. Diallo Thierno Safaiou, CEO, NLS SARL Mr. Touré Oumar, Human Ressources Manager, APEX Trading Mr. Doré Labila, CEO, Lanala Finance Ms. Touré Virginie, Deputy CEO, Ministry for the Promotion of Women and Vulnerable Persons, FAAEFF Mr. Doumbouya Aboubacar Sidiki, Consultant, Firm Vision Consulting International Ms. Wilhelm, Cindy, Manager - Regional Economic Development, Rio Tinto Guinea Mr. Doumbouya Alpha Bacar, Marketing Manager, Subcontracting & Partnership Marketplace, BSTP 133