! .~ ~ ~~~~~. BREPUBICT OF GUINE& * ~~ WAlNL EOEY NG _~~~~~~~~~~~~ - * I -, : ' - 1 -e( . ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I. .~~~~~~~~~ . iauu. C9.7. _ - * ~ ~ ~ ~ 0 0 ' N - - 5 _- = *. 0 ORDER OF ASSEMBLY 1. Cover - Light blue 2. Abbreviations 3. Table of Contents 4. Fpreword 5. T3xt (2 pagess 1-2) 6. First Insert (use light blue paper): 'Chapter It The Financial and Economic Recovery Programt 1985-1987 7. Text (6 pagesi 3-8) 8. Second Insert (use light-blue paper): "Chapter II: Medium Term t-Development Strategy: 1987-1991." 9. Text (8 pagess 9-16) 10. Thlrd insert (use light blue paper): "Chapter IUlt Medium Term Projection for the Guinean Economy."- 11. Text (8 pages: 17-24). 12. Fourth insert (use light blue paper): "Chapter IV: Sector Strategies."* 13. Text (21 pagesi25-45) 14. Fifth insort (use light blue paper): "Annexes." 15. Annexes* 12 pages --ABB3 VIATONS CIDA Canadian International Developmeni Agency BCRG Banque Centrale de la Republique de Guinee (Central Batk of the Republic of Guinea)) BND Budget National de Developpement (National Development Budget) CCCE CaSsse Centrals de Cooperation Economique (a French aid agency) CCEP Comita de Coordination Econemique et Financi;re (Economic and Financial Coordination Comiittee) CNPG Centre Nat,onal de Perfectiounement a la Gestion (National Center for Management Training)- - DEG Distribution d'Eau de Guin4e (Water Distribution of Guinea) FT Irench franca GINFi Guinean francs Fii i Financement Exterieur (External iinancing) IDA International Development Association ONCFG Office National de& Chemins de For de Guinee (National Railroads Company of Guinea) I PIP Public tavestment Program PME Petites et Moyennes Entreprises (Small and Medium Enterprises PREP Programmede, Redressement Economique et Financier (Economic and Fiamncial Recovery Program) 1985-87 54Es Small and Medium-scale Enterprises SNE Sociit; National1 d'Electricite (National Electricity Corpora- tion) I,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ S~~~~~~~~~~~ I. TAB. OF CONmTNTS - ~Foreword Page Introductio*4 Chapter Is The Economic and Financial Recovery Program 19854?7 - Overall objectives ........................ 3 - teonomic and financial measures .... ... 3 - Introduction of radical structural reform s.............. 5 - Reforms to the legislative and regulatory framework...... 7 Chapter IIs Medlum-Teim Development Strategy 1987-91 - Strategic parame9era.............................. ..- 9 - Objectiveg ..... ....... .... . 10 = - - Instrinents ............ ,. 9999999999999999999999999~~~ 12 \ - Netbods ..... ~9999~99*~9~99 999999999.999999999...... . 13 Chapter III% diSaur-Tez,n Economic Projections 1987-91 - The Guinean economy in 198i .. .........* *. 17 - Foreseeable growth............................... 20 - Budgetary proj¶ctions............................... 21 - Balance of payments projections......................... 22 - - Finacing requirements............. ............ 23 Chapter IVs Sector Strategies - Trasportation and related infrastructure .... 25 - Energy and communications ....................-.. 27 - ~~~~~- Rural seo ..... 31 - - mRalng ..ct............................. 34 - Mnufacturing .......... ...... ...... 36 - Education and training ........ ............. .... 37 - Health and social welfare ............................... 39 - Water supply, housing, urban development ................ 42 Anuexez A. Public Investment Program, 1987-89 B., Economic Projections -I -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' FOREWORD This document, which has been prepared to facilitate the work of the Consultative Group, is principally designed to show how, in light of our still delicate economic situation, we are plannings - on the one hand, to mobilize our own resources and those of our international partners, enablitg us to earry out operations that are of top priority and essential to the kaplem_ntation of a cohesive and determined economic policy; - on the other band, to pursue and broaden the scope of the management and rationalization efforts already under way, with a view to restricting public expenditures to the bare essentials, so as to restore the country's major financial equilibria with the least possible delay. Wo are aware that the success of such an undertaking is closely linked to developments in the international enviroument and also to the correct utitlization of the assistance furnished to us. rn the final analysis, however, our results will depend on the efforts made by the Guinean people themselves. To this end, our country's authorities have decided to mobilize all of the nation's energies in support of the development strategy set forth below. Edouard Benjamin M?4Listre Dal1guo 8 la Prosidence de la Ripublique, Charga du Plan et de la Cooperation Internationsle INTROUWCTION 0.01 With the advent of the Second Republic, the Guinean authorities and people started to take a hard look at their situation and to wake up to reality. 5aeazlunn¢d 0.02 Despite its considerable and varied assets (vast expanses of cultiv- 'able and fertile land, abundant fish stocks in its territorial waters, excep- tional subsoil potential), Guinea is one of the world's least advanced coun- tries (LACs), with a per capita GDP of less than $300. The life expectancy of a Guinean citizen is 39 years, one of the world's lowest, and in 1984 his food ration provided only 80S of his calorie requirements. 0.03 This paradoxical situation is largely explained by the structures set up and the economic and social policy implemented for a quarter 'of a century by the leaders of the First Republic. The seizure by the State of virtually the entire system of production and its repeated and disorganized Interventions, had ruinous effects. Practically all of the country's savings went into public investments of often questionable usefulness and mediocre economic return. 0.04 The public enterprises were run according to unorthodox rules by a lrge influx of civil servants without any real responsibilities. Through these, the State exercised cumbersome and ineffective control over all key sectors. Production, trade, transportation and the financial system were subject to direct, day-to-day government control, while the structure of the Guinean economy was, and still is, based essentially on the small individual business, particula*ly In the areas of agriculture and commerce. Lastly, exchange rates, prices and wages were fixed by the government authorities, more often than not on the basis of uneconomic criteria. 0.05 Since this policy was incapable of maintaining the level of economic activity, let alone stimulating growth, it had disastrous consequences on the country's economic and financial equilibria, on the system of production, and on Guineans themselves. 0.06 The official rate of exchange, bearing no relation to the real valpe of the currency, encouraged a large influx of imports and a flight of foreign exchange, both phenomena harmful to the economy. Domestic savings and inflows of foreign capital very soon proved inadequate to cover the operating losses of the enterprises and to finance ill-conceived public investment programs. Consequently, the State was unable to honor its commitments, in particular to foreign lenders, and the banking system practically collapsed. 0.07 Agricultural production, the keystone of the economy, suffered serious deterioration over the years as a result of low producer prices, inefficient distr$bution circuits controlled by the government, and the highly unusual characteristics of the tax system. The purchasing power of the farmers naturally dropped to intolerable levels, and the rural dwellers turned more and more to subsistence farming and the unofficial market. 0.08 The State manufacturing sector gradually deteriorated for lack of regular supplies of raw materials and spare parts, on both the local and the International market. Production representet only 151 to 202 of the nominal capacity of the enterprises. The awakenint 0.09 Fully aware of the gravity of the situation and of the structural nature of the deficiencies, the leaders of the Second Republic reacted on two fronts. First of all, it was necessary to stop the h.emorrhage of the coun- try's financial resources and to honor the State's unavoidable obligations. Secondly, a process of reactivating the economic machinery had to be set In motion. 0.10 In September 1985, the Government launched its PREF (Economic and Financial Recovery Program). The aim of this approximately 30-month program was twofolds to bring the fInancial situation under control, and to lay the foundation for a radical change In the operating rules of the economy. The PREP progress report contained in Chapter I of the present document reveals that, encouraging results bave been obtained .despite the obstacles encountered, reinforcing the Government's determination to continue with the program. 0.11 In parallel with the launching of the PREP, and in the same spirit, the Government has prepared the elements of a medium-term development strategy, whose objectives and practical conditions of application are developed in Chapter II, snd whose twofold guiding principle may be summarized as follows: (a) encourage the development of pYrivate enterprises (individual and collective), in Line with the government's general policy to stimia- late private initiative; X (b) pursue State disengagement from the productive system, but strengthen its essential responsibilities as pilot, arbitrator, and promoter of the inLestmsents necessary to the emrgence and 4evelopment of productive activities. 0.12 Within five years, lf pursued with determination, this strategy will lay the solid foundations that are essential to the establishment of a real and continuing development process. By 1991, Guinea will be proud of having made considerable, progress toward achieving its basic goals: food security, liberalization of economic activities, reduced dependence on bauxite, establishment of minimum basic Lnfrastructure, development of the necessary social and educational services to mee't the essential needs of the population, and, lastly, creation of an effective government. ( , 0X -=* C', j lUg ICONMhlC'AU FIkWIC?AL OVR' PROGRM 'Para. Ovra Obj ectiv - 1 .01 zcon~mA aind iFinancial teawsres 1.*04 - Currency adjustment and convertibility 1.05 Price adjustm -A"'efosm of custains tariffs - - 13 Credi policy 1.15 - - - #itzrnal ;bt 117 -_Reform of the banking jector ~ ~> estrictuni qf_rgaCe,transpoitttion and services 1*2 Restructuring at tihe iaJ"trial, tsector 1.25 Admiaist~raive reform 1 -27 Reforms to the Legislative,end.Regulatory Fwamewrk 1.32 Concluslons13 'V i l * ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I ,~1 - ~ - ' Faa .~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~' .1 . 3- Overall Obiectives 1.01 The analysis made by the new leaders soon pointed to the need to proceed quickly with a number of priority operations to reactivate production, particularly in the agricultural sector, and to redress the country's economic and financial situation. 1.02 Overall objectives set by the authorities naturally focused on several e*ential points: (a) laying the groundwork for gradual development of private and trouble-free Initiatives in all aspects of production and trade; (b) restoring to the rural sector its role as driving force, by freeing the fanrer from the many constraints that have deprived him of the fruits of his labor- and discouraged hfim from producing beyond his own on-farm consumption needs; (c) attracting the necessary aid and external capital to restore and develop the production capacity, and the infrastructure essential to the sound operation of the economy. 1.03 The Govermnent's initiative encountered numerous economic and finan- cial obstacles calling for rapid action. Moreover, Guinea's situation at the outset of the Second Republic called for radical sttuctural and lUgislative reforms, which needed to be addressed by the PREP. Economic and Financial Neasutes 1.04 The non-convertibility of Guinea's currency, the distortions created by the artificial pricing structure, and the intolerable external debt burden were major obstacles that needed to be removed as soon as possible to re- establish a minfmum of activit- and restore confidence within the international economic and financial community. 1.05 Currenc' adiustment and convertibilitys Following devaluation and the renaming of the currency on January 6, 1986, with the Guinean franc (GNF) replacing the syli, a system of foreign exchange purchases with weekly auctions was instituted. After a rather slow start, the volume of foreign exchange traded rapidly picked up in the second and third quarters of 1986, due mainly to the replenishment of liquidities as a result of repayient of the deposits of the former banks. The monthly volume of transactions fluctuated at around US$7 million in the last quarter of 1986. US dollars were purchased at the official rate of exchange of GNP 360 in June 1986 and at ONF 400 in December 1986. 1.06 Despite this slippage, the Guinean franc fell by almost 202 against the US dollar on the unofficial market last December. Recognizing the dangers of exchange rate slippage, the Government took measures designed both to increase the supply of foreign exchange (liberalization of transactions and intervention by the comercial banks were d.cided on in the case of gold, with actual Implementation under study), and to expand the range of operations (in particular to include invisible transactions) accepted for financing through *uctions organized by BCRG. Alongside this action on the exchange rate, the monetary discipline that is part of government policy should limit trends toward further depreciation of the currency. .1.07 After one year, we note that the adjustment and controlled converti- bility of the Guinean franc has produced Ismediate and lasting positive results, as has the simplification of Import procedures. In particular, monetary reform has made it possible for capital good" and current consumer goods to be Imported without major difficulty at domestic prices reflecting their true value. 1.08 Prlice adlustment: The measures taken in this area were applied to a selected and lImited number of strategic products. They were designed to establish a gradual proce"s of real cost pricing and to introduce the first elements of *normal taxation with respect to products and serviwes furnished by public agencies. 1.09 The price of imported rice, which was 20 sylis per kg in 1985, was set at GNP 80 for Conakry on January 4, 1986, then at ON? 100 per kg on June 1 of that year. In the provinces, the price of imported rice was set at GNP 1201130 per kg, a range equivalent to that of local rice in the ares of production (i.e. a five-fold increase in current prices since 1984). Today, the Comite de Coordination Economique et ?inanci;re (CCEF) recommneds the setting of a floor producer price. 1.10 The price per liter of gasoline went up in a similar manner, rising from 30 sylis in 1985 to GNO 115 in January 1986, and to ONF 140 in June. A new adjustment will be made in a few months time, since the tax on gasoline, the price of which in Gulnes is still far below that charged in neighboring countries, could represent a major source of revenue for. the State. 1.11 At the same time, water and electricity charges went up considerably. Differentiated pricing is now being prepared, both by type of customer and by taking account of precise commercial objectives. Other prices were adjusted upward during 1986: those of Air GuinSe0s dosestic flightsp urban t'-nsporta- tion, postal services and telecommunications. 1.12 Despite an inflation rate on the order of 252 to 352 in 1986 (after deducting the Impact of catch-up" price adjustments), which should slow down considerably In 1987, this pricing policy should contribute significantly to a return to equilibrium for the public enterprises, to the diversification of State tax revenuis, and to the reduction of imports, in particular of basic food products. Nevertheless, a number of problems remain to be solved. Not least of these are the recovery of unpaid debts and the systematic organization of recovery operations within the water and electricity corporations. 1.13 Reform of customs tariffs: The new customs tariff, which came into force on January 15 and was amended on July 1, 1986, is considerably simpler than the preceding ars. It includes a 102 tax applicable to nearly all imports (e$ceptionss rice, various basic food products, pharmaceuticals). This significant increase in the customs duty base, despite a reduction in nominal- rates, should provide the State with a more lucrative and reliable source of revenue. 1.14 The results obtained to date have not, however, reached the targets set, and a major effort of rationalization of procedures and reorganization -5- needs to be made within the Customs Department If the reform is to be completely successful. This effort will be undertaken this year within the framework of the teebnical assistance operations at the Ministry of the Economy and Finance. 1.1 CEedit policy: With a view to fostering the development of savings by assuring appropriate rates to savers aind a better use of credit resources, the monetary authorities have decided to apply a credit policy which takes Inflation and the exchange rate slippage into account. 1.16 Depositor interest rates (term deposits: 15% p.a. minimusm) have been raised and fixed according to the amount and term of the deposit. The banks' lending rates (rediscount rate plus 5X) have been established on the basis of BCRG's rediscount rates (normal rediscount rates 152, preferential rate: 101). Also, three lines of credit (IDA, EEC, and CCCE) have been opened on preferen- tial terms (varying from 8-132) for the SHEs and for agricultural enterprises. These provisions will take effect during the next few weeks. 1.17 External debt: Following an inventory and systematic analysis of Guinea's debts, that part of the total debt owed to Paris Club members (appro- Xsmately 402 of the total) was renegotiated in April 1986. Guinea obtained the .consolidation and rescheduling of arrears as of December 31, 1985, and of maturities due or falling due between January 1, 1986 and February 28, 1987. By December 31, 1986, the status of Guinea's agreements with the 11 countries involved was as follows: two had been signed (with France and Switzerland), six initialed (with Austria, Belgium, Spain, Great Britain, Norway, and PRG), and three were still in process of negotiation (with Italy, Japan, and the United States). A total of $168 million has bean renegotiated to date. 1.18. For the balance of Guinea's debt, ossentially composed of obligations toward the Eastern bloc, the Arab countries, and unsecured lenders, the nego- tiations started during the last quarter of 1986 and will continue during the first half of 1987. These negotiations, which are not following any standar- dized procedure and are not being conducted through official institutional channels, are obviously more complex and will take longer to conclude. Lntroduction of Radical Strtural Reforms 1.19 The Government believes that the way to unleash the country's dynamism is to provide for prompt State disengagement from most of the country's productive activities, as well as for radical restructuring of all key sectors. 1.20 Reform of the bankint sector: Since there was no likelihood of engineering the recovery of the State banks, they were liquidated on December 23, 1985. As a parallel measure, three new banking establisbments set up with the participation of qualified foreign partners have started business activities, operating alongside the one small, completely private bank that came into being in 1983. 1.21 As things now stand, we may say that this reform has taken place satisfactorily since, despite the laborious process of liquidating the former banks - not yet fully completed - the new banking system i3 working and expanding. A dozen branches will be established in various provincial cities over the neat two years. -6- 1.22 Restructuring of trade. transportation and services. This luvolved liquidating all non-viable State enterprises and rehabilitating those enterprises deemed viable, either through privatization or through conversion Into mixed-capital companies. 1.23 This particularly ambitious component of the program is taking longer to execute than originally hoped, since many technical and institutional difficulties still remain to be overcome, in particular the lack of human resources and the absence of any services to manage the personnel laid off. gowever, some encouraging results have already been obtaineds most of the Inventories and evaluations of assets have been completed, many stocks have been liquidated, and the list of enterprises to be converted into mixed-capital companies (5 companies) or simply liquidated (12 companies), has been finalized. The Govarmuent boleives that privatization should take the form of the creation of new ptivate companies to replace public enterprises, and not of the private seetor taking over existing public enterprises. 1.24 The-foundations have therefore been laid to ensure that these sectors (which, to provide the services expected of them, must charge market prices) operate satisfactorily and are instrumental In eliminatIng many of the irregular and even Illegal practices that became current as a result of almost constant shortages. 1.25 Restructuring of the industrial sectort Many of the public enter- prises in the industrial sector are outdated, another situation that calls for .radical reforms. In the spirit of disengagement, the government decided to liquidate those that mere non viable and to privatise wmost of the others. Only a small number of Institutions providing public services will remain under State controls tie railroads (ONCFG), electricity (SNE), water distribution (DEG), and the National Bureau of Printing (Imprimerie Nationale). 1.26 The decisions taken have been partially implemented (two agreements have been signed, one of which, with BONAGU1, has been ratified, vhil several other important ones are now being finalized), but this substantial and complex process of restructuring will take longer than initially planned. On our side, it has taken longer than expected to set up precise procedures (this problem has been solved by the creation of a privatization commission). With the changes in governments the authorities have sometimes been led to tMink twice about certain agreements, while they are sometimes reluctant to even partially relinquish direct State control over the system of production. Furthermore, the proposals emanating from the private sector are sometimes inappropriate: documentation offering little basis for comparison, excessive demands, such as the suggestion of replacing public monopolies by de facto private monopolies, Inadequate offers for the takeover of assets, and demands regarding staff dismissals, while the problem of evaluating the references of potential partners Is also extremely serious. Because of the mediocre quality of the documentation, certain submission procedures have had to be started over again. Lastly, In the case of those agreements that have been concluded, a certain wait-and-see attitude has been noted on the part of the new owners (due to a shortage of financing or a lack of confidence?), which has also been one of the factors delaying completion of the industrial privatisati9n program. 1.27 Administrative Reform: The administration inherited from the First Republic was overstaffed, interfering and often of limited competence. It represented a considerable drag on the growth and development of a -7- free-enterprise economy.. Prunaing and reorganization have thus been the order of the day in this area, but it has also been necessary to ensure that those civil servants who are to constituto the new administration can earn a decent living and receive high-quality vocational training. 1.28 In view of the large number of positions (around 30,000) slated for abolition and the social and psychological consequences of such a move, it was necessary (1) to set up a complex, attractive and even-handed scheme for trimming the stafft special arrangements for assignment to non-active status, automatic retirement, early retirement, financial Incentives for voluntary departure, and (Ui) to devise a differentiated and Indisputable selection and training process for workers continuing their career in the new civil service. 1.29 The results obtained to date bear witness to the complexity of the exercise. The census was completed in May 1986. Out of a total of approxi- mately 88,000 civil servants or State enterprise employees, 10,000 left the civil service In 1986. However, the process of selecting managers and other staff to be retained in the civil service got off to a slow start. Progress is being made despite obstacles in terms of attitudes inherited from the past (reluctance to take eompetency tests, reluctance on the part of the government departments to see their staffs reduced), actual opportunities for reinsertion Into the private sector, and the magnitude of the task itself, which was certainly incorrectly assessed at the tine the operation was launched. 1.30 Vocational training has not been neglected. Specialized upgrading programs have been drawn up, while the institutions responsible for conducting these programs have been designated and are preparing to get the training cycles under way. This applies in particular to CNPG, which is responsible for training economic and financial managors, and also to the Office National de Formation Professionnelle et do Perfectionnement (ONFPP), which offers techni- cal trAining. 1.31 However, much remains to be done to complete the process of staff reduction within the civil service. It will be pursued with determination, and also with extreme care, since, in this area perhaps more than In any other, undue haste might produce effects quite the opposite of those intended. Reforms to the Lreislative and Readlatorv Framework 1.32 The Government is working on a large number of legislative and regulatory texts designed to restore a state of law through codes and laws governing economic activity. 1.33 The Petroleum Code and the Mining Code were enacted in 1986. With the promulgation of the Investment Code on January 3, 1987, one of the princi- pal obstacles to the take-off of the private sector has now been eliminated. The drafting of the Fisheries Code and the Code of Government Contracting has been completed; these documents will be issued in the near future. A draft commercial law, nearing completion, will be submitted to the authorities for approval in the coming weeks. A new Accounting Plan, setting forth the rules of management for the enterprises, is under preparation. 1.34 A considerable and possibly unprecedented effort has thus been made over a very short period. However, it will still be necessary to get people used to this new legislative approach and to publicize the methods and techniques of its application. A major effort of persuasion, trainipg and organization will be needed, in particular for those civil servants who will be responsible for interpretation and implementation of the new texts. 1.35 Conclusions. In view of their magnitude and structural implications, the effectiveness and repercussions of the decisions taken and the actions initiated since the advent of our young Second Republic cannot be definitively assessed after so short a time. 1.36 The program is encountering a number of obstacles as it progresses, mainly due to the Inertia inherited from the former system, the reluctance of certain government officials to implement the reforms, and above all to the considerable dearth of adequate material and human resources. We shall not deny that, in some areas, our work has hardly begun. The problems mentioned above, namely those connected with the restructuring of public sector enter- prises and the cutbacks in the civil service, are revealing in this respect. 1.37 Nevertheless, the results so far have been encouraging and have confirmed the merit of the reforms undertaken, since (i) the rural sector very quickly responded by Increasing production and quality and by retoring livestock holdings; (i1) imported coumodities and equipment are now readily available at correct prices; and (III) inflation, though relatively high, is not exceeding acceptable and predictable levels. 1.38 This interim program is, however, only the first phase in a longer process that will still require much effort, determination and patience. Over the next five years there will be a need for the closest possible management, organization of governmont departments, training of staff, and selective Investment in the State's new areas of responsibility, leaving it to private enterprise to develop a productive, prosperous and competitive sector. The medium-term development strategy, of which the main directions have now been developed, is the expression of that determination. NWIM14 CEN tE $7AIC 11UM.TSDN DVEmIOPHEUT STRATEGY 1987-91 Pars. Strategic Paramters 2.02 - The demographic context 2.02 - Operational constraints 2.04 - Prerequisites for development 2.05 Objectives 2.09 - Providing for the population's basic needs 2.11 - Reestablishment of the major economic and financial equilibria 2.13 I Instruments 2.15 - Family farms 2.16 - Promotion of the private sector 2.17 = Education and vocational training 2.18 - The new role for the state 2.19 Methods 2.23 Priclng policy 2.24 Public investment policy 2.26 Technical assistance 2.34 -9 2.01 Coming between a break with the previous system and a period of sustained and coordlnated development, the next four or five years will mark a turning point for Guinea. The PREF now being implemented Is, in fact, no more than a preliminary phase that must be followed by coordinated efforts to achieve clearly defined development objectives. These longer term objectives have been decided in light of three sets of strategic parameters. Stratemlc Parameters 2.02 The demographic context: The most recent complete population census was made in 1983. The official total at that time wam 5,781,014 inhabitants. The urban population was calculated to be 302 of the total, and the number of Guinean nationals resident abroad as about one million. The average growth rate (about 2.82 per year) ranged from 4.82 for the urban population to 1.82 for the rural population. According to these figures, the total population is likely to rise from 6.1 million in 1985 (with 1.8 million in urban areas and 4.3 million in rural areas) to 7 million In 1990 (with 2.3 million in urban areas and 4.7 million in rural areas). 2.03 These demographic trends will have two effects on economic policy over the next five years. First, in spite of the currently low standard of living and the expected economic recovery, population growth will prevent any large increase in per capita GDP, which Is projected to increase moderately from about US$266 in 1986 to about US$310 in 1991 (para. 3.15). In addition, high growth in the urban population will make the need to create paid employ- ment in urban areas more acute. In fact, if the optimistic v$ew is taken that economic activity will recover at the end of 1987 and that the informal sector will rapidly develop, unemployment in urban areas will, nevertheless, increase from about 200,000 in 1985 to about 500,000 in 1990. 2.04 Operational constraintss Any realistic medium-term strategy must take account of the fmportance of several constraints that have been inherited from the previous government and still exert a considerable influence. The following tre some of these predominantly financial and organizational con- straintst (a) a production system in need of recovery, and a private sector still lacking in boldness because of long years of being held in check; (b) human resources that have remained untapped because of an ineffective educational and vocational training system; (c) very inefficient government services; (d) medium-term debts that cannot be sustained by the Guinean economy's own resources; (e) infrastructures that are either nonexistent or in very poor condi- tion; (f) institutions geared to operating a socialist system and quite unsuit- able for the free-enterprise economy to which Guinea aspires. - 10 - 2.05 Prereautaites for develoyment: The success of any economic policy in the Republic of Gulnea depends on the establishment of a suitable legislative and regulatory framework and the provision of at least a minimm of infrastruc- ture Investment; these are the loglcal prerequisites for successful develop- ment. i.06 The necessary legislation will be finalized over the next 18 months. In order to supplement and fine tune the legislative and regulatory measures already adopted as part of the PREP, before the end of June 1988 the Government ltends to provide Guinea vith the legal framework necessary for promoting the full development of agricultural, Industrial and comsercial activities. In addition to a body of commercial law, legislation will be issued governing property and commercial disputes, together with regulations on fiscal matters, customs, prices, weights and measures, and the accounting system to be used by public and private enterprises. 2.07 This legal framework is essential if the private sector is to take over the vast majority of economic activities, and it will be planned in such a way as to facilitate Guinea's integration into the subregional economy, since regional cooperation is a major element in government policy. As a result, Guinean economic agents will easily be able to escape from the comparative Isolation to which the former government's policies confined them. 2.08 Infrastructure is another prerequisite calling for sustained efforts, and the present 6ondition of infrastructure relating to transportation, telecommunications and electric power constitutes a major obstacle to Guinea's economic development. Improving the road system (through construction, repairs and maintenance) and establishing satisfactory telecommunications (i.e.-telex and telephone systems) are indispensable for the harmonious development of both internal and external trade. In addition, industry and services require an electric power supply that Is reliable (as regards both voltage and schedul- Ing), and Guinea does not yet possess this. 2.09 In line with the overall decision to liberalize the economy, the purpose of the medium-term development strategy presented here is to achieve sustained growth in the 1990s, so that, by the year 2000, Guineans will be fully enjoying the benefits of their country's natural resources. 2.10 Tn light of these constraints and prerequisites for development, and in accordance with the guidelines indicated in the Read of State's speech of December 22, 1985 presenting the program, the Government has chosen objectives for the period 1987-91 that center on the following two major goals: Mi) providing for the population's basic needs, which continue to be quite considerable because of population pressure and the current level of food intake; and (ii) achieving the gradual and structural reestablishment of the major macroeconomic and financial equilibria affecting the.State and the nation. 2.11 Providint for the yonulation's basic needs: Quantitatively, this objective calls for an increase in consumption of about 31 per year in real i ~~~~~~~~~~~- 11 - teras. *However, achieving this modest Increase in consumption will require that a careful watch be kept on the scale of the Import component of consump- tion. 2.12 The following qualitative goals will have to be achieved in order to provide for the population's basic need.s (a) achieving food securityt this objective is realistic, particularly in view of the rural sector's potential and the farmers' capacity for reacting positively when pemiited to act freely and obtain a just reward for their efforts. Increases in food crops and mest output, together with the exploitation of fish stocks, will each contribute to a qualitative and quantitative improvement in the diet of Guineans; (b) providing the population with reorganized and more efficient public services in the following main areast public health, education and vocational training, sanitation, water supply and electric power; .(c) job creation, particularly in urban aFeas: This essential step, in the demographic context described above, will involve speeding up the recovery of the manufacturing sector and prooting the development of commerce, services and crafts; and (d) Improving housing: The current volume of construction activities is negligible, even though the needs of individuals are enormous. The expansion of construction, supported by appropriate economic and financial measures, will Improve the standard of living of Guineans, and will also create a considerable number of jobs. 2.13 Protressive and structural reestablishment of the maior macroeconomic and-finanial ecuilibria affectint the State and the nati: The set of structural disequilibria currently affecting public finance and the balance of payments is one of the main factors limiting development. In spite of all the efforts Guinea plans to make, it will still need external assistance in the coming years to enable it to cover public expenditure, honor its external commitments and Implement the investment policy necessary for achieving economic recovery. 2.14 The following secondary objectives are an inevitable consequence of the attempt to achieve macroeconomic and finacial equilibrium: (a) reducing the relative importance of bauxite and alumina in government revenue and exports and diversifying sources of export revenue, particularly by relying to a greater degree on agricultural products and minerals other than bauxite; (b) introducing a tax reform in order to diversify and broaden the tax base and ensure that all categories of taxes are regularly collected; (c) controlling the level of indebtedness during this difficult period by applying mainly for concessional financing (i.e. on a grant and quasi-grant basis); - 12 - (d) continuing efforts to improve the management of public funds, parti- .cularly by defining and enforcing rigorous procedures for managing current and capital budgets, and strengthening activities relating to project appraisal and monitoring; (e) other complementary approaches will also be examined, such as the study and establishment of mechanisms for providing local authori- ties, particularly municipalities, with significant amounts of resources. Insttuments 2.15 The Goverment has identified a number of instruments and methods for overcoming constraints and achieving its objectives. Government policy will be consistent with the measures adopted under the PREP, providing unswerving support for family farms, the promotion of the private sector, the development of an education system adapted to economic conditions in Guinea, and the establisbment of efficient government services. 2.16 EMi_lv format The revised legislative framework, gradually improved infrastructure and tncreased electric power output can be effective only if the structures of production are efficient. Since experience with collectivization has definitely shown it to be inappropriate for Guinea, family farms will serve as the Instrument for developing agriculture and livestock. In the next five years, the essential element In government promotion of agriculture will be the individual unit, integrated into the social structure of the village community. 2.17 Promotion of the private sector: Based on the new legislative and regulatory framework referred to above (para. 1.32 to 1.34), the medium-term strategy objectives cali for a policy oa actively promoting the private sector, whether Guinean or non-Guinean. As regards the larger enterprises (i.e. in mining and agroindustry) the Government will seek to attract qualified foreign investors, since advantageous conditions for all parties concerned are guaranteed by the Investment Code. As regards small and medium-sized enter- prises, Guinean entrepreneurs will be given priority (through the revitaliza- tion of Chambers of C4mmerce and Industry, and the provision of assistance to SHEs in the identification, preparation and launching of investment projects). 2.18 Education and vocational trainina: The process of enabling Guinea to manage its own development by the year 2000 will require an immediate reorganization of the education system and the retraining of many of the personnel concerned. Training will therefore be a major component in all development projects so that in-service training and retraining can be strengthened. In addition, the reforms already initiated in Primary and Secondary Education will be continued and extended to include Higher Education, the purpose being to revitalize Primary Education and to expand Technical Education and the training of teachers and instructors. 2.19 The new role for the States Although the principle behind Guinea's development strategy is that the private sector should take over the vast majority of economic activities, it also, requires the State to assume major responsibilities As a consequence of its new role of promoting, organizing, regulating and supporting those activities essential to efficient public _ 13 - services. The State$ therefore, relieved of the direct managemeat of many enterprises, will serve as a fundamental instrument for attaining the country's objectives. It will be responsible for defining economic policies and priori- ties, mobilizing resources for infrastructure investment, deciding on and applying incentives to trade and production, and maintaining the major economic and financial equilibria. 2.20 To enable the State to fulfill its new responsibilities, the Govern- ment will complete the reforms that already have been undertaken In two areas. First, the administrative reform launched as part of the PREF will be continued and completed. By the end of 1987, the reduction in the goveriment work force vwill be concluded, opening the *ay for the training and advanced training of the remaining personnel. 2.21 The second area in which decisive reforms will be made is economic maagement methods. From 1987, a nomenclature and procedures conforming to International practice will be applied to the preparation, execution and monitoring of the budget. In the coming montha, the techniques for medium-term planning and project identification, appraisal and monitoring will also be refined. 2.22 1n this respect, the PIP (Public Investment Program) presented in this report (and constituting a complete innovation In Guinea) is a clear illustration of current changes In the management methods applied to the national economy. 2.23 In addition to a series of economic, financial, legal and organiza- tional measures, the most important of which have been referred to above, there are three methods that the State can use for implementing its economic policy: Mi) a pricing policy favorable to the development of economic activities; (ii) the planaing and implementation of a public Investment policy organized into projects grouped according to a three-year rolling investment program; (iii) selective use of first-class external technical assistance. 2.24 Pricing oligc:s The 1986 price adjustments undoubtedly affected economically and socially important goods, buit did not, In themselves, con- stitute a real pricing policy. The Government considers that pricing policy will, from now on, be a particularly useful means of rapidly increasing the economic efficiency of the private sector and government activities. 2.25 Currently, the Government is preparing a bill to institute the pricing system applicable in the Republic of Guinea. It expects to promulgate this law in June 1987. By solemnly affirming the principle of unregulated prices, this bill reflects the Government's desire for,,a system capable of." (i) providing producers (especially fanmers) with sufficiently attractive profits to produce the necessary Lri'rease in output; (ii) eliminating any distortions likely to render resource allocation ineffieient. 2.26 Public investment policy: As a particularly Important instrument of medium-term development strategy, a policy of sustained public investment will be essential over the next five years in order to provide for the development -14- of the private sector investment necessary foa growth. The 1987-89 Public Investment Program presented in Annex A has been planned on the assumption that nacroeconomic conditions will be Ln equilibrium, and in light of the gavern- ment's objectives and the constraints identified above. 2.27 However, the Government has anherited from the First Republie a number of operations of doubtful profitability, and one of,the first tasks facing the Second Republic has therefore been to consider ihether such projects launched before 1985 should be continued. Although most have been cancelled or reorganiaed, a few have been continued, mainly for technical and financial reasoas. 2.28 The polity behind new operations is much clearer. The Government will take action essentially to provide or improve the environment for the development of productive activities. In addition, the emphasis now placed on the identification of economically viable projects and their efficient execu- tion will rapidly increase the effectiveness of public investment policy. 2.29 Naturally, the State's role with respect to social welfare has not been neglected. However. present circumstances preclude any short-term alloca- tion of resources proportionate to needsa Current and projected financial constraints, together with the still low absorptive capacity of the Guinean economy, require such Investments to be limited to essentials. 2.30 Current projections indicate that, overall, the three-year Public Investmeat Program will consist of the following elementis (a) Econmic Expenditure over the three years will total about US$670 million (US$175 million in 1987, US$234 million in 1988, and US$261 million In 1989), an average of 122 of GDP. This Is relatively modest In light of the needs identified, and in comparison with the level of resourcess-allocated to public investment In many similar countries. (b) Financial: About 90S of the financing will be provided in the form of external assistance at very favorable conditions, commercial borrowings now being very exceptional. 2.31 Guinea intends to mobilize grants and concessional credit to the mazimum degree possible, these being the only forms ofUfinancing with interest rates and repayment conditions that can be met on schedule using the country's resources. From 1987 to 1989, the breakdown of financing will be as follow: concessional lending will amount to 572 of the PIP; IDA-type quasi-grants, 16%; grants, 262; and conventional comezcial loans, 0.62. These figures illustrate the -considerable efforts made by Guines to limit the repsyment burden to an- absolute mini;mu. The-impact, therefore, of PIP financing on debt servicing will be small and, -over this period, will iUpose no extra charge on the Govern- ment's efforts to meet its commitments, particularly as regards paying off the arrears of debts incurred by the prev-ous goverqment. 2.32 Close study confirms that the 1987-89 PIP is in line with the Govern- ment's development strategy, since the authorities have emphasized that priority should be given to rural development in order to improve food intake - 15 - and restore equillbrium in "port resources. In addition, the total lack, or very poor condition, of surfaced or earth roads providing access to production areas have been shosw to be the main bottlenecks to development. About 242 of the PIP La allocated to rural development as such, and 252 to infrastructure rehabilitation or construction. 2.33 As further priorities, energy and telecommunications are each allo- cated 82 of the PIP. Action on social problems absorbs 142 and mining 62, a major share of which is allocated to bauxite mining (OBK). The rest of the PIP is divided among industry, water supply, urban development and general govern- ment services. 2.34 Tecbhnial assistances It must be acknowledged that the First Repub- lic's policy on education and vocational training, like its economic activi- ties, has had particularly harmful effects on the level of expertise shown by much of the work force, especially in government employees. Because of their long isolation from the scientific and technical progress made in other coun- tries, Guinean managerial staff need operational support and the provision of advanced courses to enable them to participate effectively in the iMplementa- tion of projects and reforms. 2.35 To this end, the Goverament wishes to mobilize first-class external technical assistance under precisely defiu.d conditions that will ensure success. The aim will be to upgrade the kruroledge and skills of certain managerial staff and also train them in modern techniques and methods in all fields affected by the development program. 2.36 So that application of this technical assistance will be as efficient as possible, the Government has liAd down the following principles: (a) the assistance must serve to mitigate the effects of operational inadequacies at sector level and in overall economic and financial management; and (b) it must contribute to institution building and rapidly enable Guinean nationals to take over even the most Intricate and complicated operations. 2.37 All forms of assistance, provided that they comply with the above criteria, will- be used. However, too little use has so far been made of twinning arrangements, and also of volunteers, even though the latter have made notable contributions at a perfectly acceptable level of competence and at an average cost significantly lower than that of other experts. It is therefore intended to increase the use of these two forms of technical assistance, both as a result of bilateral agreements and through international organizations. The technical assistance component of all investment projects will, of course, be directly determined in light of the potential for training the Guinean nationals involved and the national priorittes with respect to human resource development. 2.38 Direct technical assistance and miscellaneous studips constitute about 202 of the Investment Program. These relate to the-pribrities iden- tified; i.e. management of the national economy, development of the- rural I- 16 _ - sector, trean±ng and educatlou, and the energy sector. Opt~imwi effecttveness bsptobably not yet been aGhtev.d. As soon as the new structures have been esteb1Ushad and personnel has been reduced In tho uatan mlMstries, the govern- ment wi11 coudn@t an i*i-d.pth atudy of teh sultabL1±ty of current technical assistance for thE real nsieds of the administration and the econosy.- .~~~~~~~~~~~~~~~~~~~x -~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ I -~~~~~~~~~~~~~~-- C'~ ~~~~ - CBAPTE II Kn-?M ECOIC PROJEC f Ofl 1987-91 Par&. Tho Guiean 5cocomy in 1986 3.02 - Breakdon of D ' 3.02 - Foreign trade flows - 3.04 - _ Centrol government finances in 1986 3.05 - The debt situation 3.06 'oreseeable groath 3.08 - EDcoomic trends: 1987-91M 3.08 - Externai trade 3 '.11 Budgetary Project«ona 3.17 * - Income and ezplsndi1ure 3.18 - rOverall balance 3.21 Bal1ne of Payments ProjectiAm s- - ; 3.23 Current account 3.24 - Capital transaction - 3.25 - The balance of payments position 3.28 3.29 - Financing tbe 1986 deficit 3.30 - Financing the 1987 deficit 3.32 - Fincing requirement8 from 1988 to 1991 - 3.33 -. U~~~~~~~~~~~~~~~~. A. .. . s ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ - . . -17-,. 3.01 Based on the state of the Guinean eqonomy In 1986, this chapter exaines the prospects for growth In output and presents budgetary and balance of payments projections for the next five years. These projections, which illustrate quantitatively the results of the development strategy outlined above, inticatep among other things, the financing needs of the economy up to 1991. She Guinean Economy in 1986 3.02 Breakd_wn of GDPs The following description is based on national accounts figures. The provisional accounts for 1985, drawn up in &Ylis, have been projected (in USS at 1986 prices) to show estimated trends for 1986. 'SUN GOP IN 18 (ESMnATED TR9"0 USS *t IhOI US el IIlose Soua-M i(t 18 PrIsm) U gm (At 1986 PrIce*) I Agricultre. 745 451 C"s..tioe Mining 876 as Pubilc in as PrIVAt 1,265 75 Pretry 1,111 S11 GFCF 217 181 UsNuesterl 21 1X Eleatric Pow s IS IMPrto -472 -281 Ceastriaclon & Publ laWerk. 61 31 ! . Trrp.taot o U 2S Other 8e6Ice. 42 aS oe_ree 819 181 Genmeat 77 tertIary 486 QW I'S" im~138 MP I,=686 Fator lborm-142 Got 1,S28 S1X 3.03 The foregoing figures reveal not only the preponderance of the rural sector and the importance of mining, but also the extreme underdevelopment of the manufacturing sector. Per capita GDP is about US$270. Consumption ac- counts for 831 of GDP and gross fixed capital formation for 131. The savings rate Is 9.61 of gross disposable income. 3.04 Foreign trade flows: The 1986 current a4count, which clearly re- flects Guinea's dependence on bauxite, is as follows (in US$ millions)s k .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - ~- 18 m impoat. (Cw) 472 E!Pors (P) (Indst 69 Ariuliture EIWg 52t 8uxi4 873 Iadntrlel peoducts Alumina e - Final ca_osuptlos GodI, dielatdm 41 - Intaimilate coneumton 146 £"1 a Seivioss 54 IlIsso I gae d end ,~~~~~~~~~~~~owc .40 latfa t lono" -142 Creui so C_reen Snesam -42 3.05 rnal aovement finances in 1986 Sotal resources are 16.5Z of GNP, 712 of which consists of minRg revenue. The following aspects Of the ,5 govent's financial situation should be highlighteds (a) the breakdown of expenditures into three mMn categories- current expezditures accounting for 502 of the budget, lnterest payable on loans accounting for 11 and the Investment program account for 39Z; (b) the isze of the cutrent budget proper (i.e. excludtg Interest), which totals US$155 million and accounts for 92 of GDP; (c) :the budget deficit of US$35.S mlllion\ which is covere,4 almoat totally by external borrowing. :,~~~~~~~~~~~~~~~~~~~~~~, (IE - ,- '- ' 19 - Central Governmeant Finances (in US$ uillions) Wagas and eatelrie 47 MIalni ue 194 5quiPnt 7 Or Income tax a Verious tem Subeld}e end transfers 2 Other (Indtirect) tax" 22 ,. terest 84 Non-f io I revenue 7 us~~Fli s . .~~~~~~~~~~~~~iacn ne. .85 . 1el apaIetie. 880 Tota 18 Financing needs 88.5 :Ret domestic FlnFncin n AIt,$ : teng -i Flsnaning surplus 22.5 t exte1 rl fineocig 69 New Ioa 215.0 Amrtiatlen -146.6 TO"l 3 TXotl Pinsetg so * Includln ne dratinge, the oftect of resheduling, wa blance of payment support oprain (1Wl, ID, eta). 3.06 The debt situationt As of December 31, 1985, Guinea's foreign debt was Oloseto US$1,300 million, including US$300 million in payment arrears of both principal and interest. In other words, its debt wa equivalent to almost tbree fourths of Guinea's GDP and two and a half year?' worth of gross export earnings, with the following breaktdown I I otfubid I I ITotal I Category I Total principal I iaterest ITl I loutstang *rrenre I arre"r I debt I ^ ~~~I I . I I I ISuppil' credit. 170.8 194.7 1 34.8 1 265.1 t jinsuia7 institutions 45.1 27.7 8.1 I 65.2 I IMUltiletel organiatlon. 282.8 7.1 2.9 0 284.0 1a lateral credits ? 818? 12 1 22.8 I W.0 I * ~~I I I I I TAL . 1292.2 242.7 1 60.71 1858.9 1. (in U M I I l (in US8 million.) 20 - 3.07 As a result of the reschedulings already negotiated or shortly to be negotiated, debt service on medlum and long-term commitments will total US$77 million in 1986. Foreseeable Growth 3.08 Economic trends: 1987-91: The projections for 1987-91 were based on an analysis of trends in each sector and of the probable Impact of the PIP and the reforms aow planned or already in progress. A new dynamism Is therefore assumed, characterized by the revitalization of the private sector. The resultant licrease ti GDP is expected to average 4.6Z per year over the period, with cyclical variations for the mdning sector in 1987 and 1988 (see Annex B). 3.09 The most dyasaic sectors will be fishing (with now equipment and support infrastructure), Industry (recovering after an almot complete stand- still), construetion and puble works. Agriculture is expected to show a 3.6% average anual Increase iA response to the population increase, and will benefit from Improvements in capital goods, transportation and marketing. The output of certain products--such as rice (+62), cotton (+141) and coffee. (+102)--wI11 inrease much more rapidly. In contrast, uining as a whole and forestry are expected to show a decline or remain at their present levels. 3.10 By the end of the period economic activities are expected to start coming into balance t the share of manufacturing in GDP (including energy, construction and public works) Is expected to rise from 5.1Z to about 7.92. Domestic final demand will increase by slightly more than 51 per year. House- hold consumption will rise by 3.32 per year, projected demographic trends making this a per capita growth rate of 0.51 per year. By the end of the period, investment will be equivalent to 172 of GDP and total consumption will be 852 of GDP. 3.11 External trades The development strategy drawn up by the Government will affect exports. The total volume of exports is expected to increase by 5.32--despite declines in alumina and bauxite--thanks to increased exports of other products (261 per year). The structure of Guinea's sales to other countries will therefore change significantly because bauxite and alumina will account for only 632 of the total, compared to 872 at the start of the period. 3.12 At current prices, bouxite and alumina exports will decline by about US$100 million in 1988, rising again slightly in 1991. However, considerable increases in gold and diamond exports are projected. All these trends combined will result in a total volume of mining exports of US$565 million in 1991, compared to US$496 million in 1986. 3.13 Coffee exports, which will increase from 6,000 tons to 12,000 tons, together with improved international trade in various products, such as mangoes, grapefruit and cocoa, should result in signifieant growth in agricul- tural exports. This income, together with revenue from fishing, will total about US$99 million in 1991. 3.14 Imports are expected to show an average annual increase of 6.31 in volume and 8.52 in value. Significant differences are expected from year to year. At the start of the period the increase in value will be 10.71, result- ing from increased investment and demand for consumer goods not yet produced / -21- locally. By the end of the pe:iod, however, iltermediate goods for industry will exceed Utnal coisumption goods and investment. Since by then agriculture and livestock will be more capable of satisfying the needs of the population, particularly as regards rice and meat, public investment is expected to stabilize at about US$300 million,per year. 3.15 Analysis of the Guinean economy underscores the need for sustained lnvestment in an economic system that remains fragile and dependent on foreign exchsige earnings from mining. This being so, 1986 definitely marks the beginning of asnew era of moderate but ls"ting growth, the results of which will not become apparent uqtil the end of the period. Growth In the next two or three years will be slower, and the nation's resources will be called upon to provide considerable amounts of investment financing. Final consumption in 1988-91 will increase only moderately; i.e. by 222 In real terms, compared to the 632 Inagease inL Investments. mports will thus be maintained at the level of increase in GOP. Per capita GDP will remain low; i.e. about US$310 in 1991. 3.16 Guinea will, nevertheless, enter the nineties with a growth rate for output of more than 42. The export trade will be more firmly based because of greater diversification, and the country will possess the larga volume of capital accumulated during the period 1987-91. Budftetarv urolections 3.17 The following table summarizes projected government budget trends, (detailed in Annex B): (tn USS Sill n.) 1i36 1991 Annual R.t. NCE 274.5 4.2 9.71 of whIch dslngn 194.5 715 229.2 WaxI +8.3X other Indirect tesm 34.3 12X 121.2 26.09 *26.7X unt 386.0 1n 608.0 1W.as *18.68 EXPUNDITURE aSa.. 6.n .2 +11.21 of which operating cost 189.0 f1t 222.2 42.0X *8.a1 Investment 121.0 sox 365.0 68.01 *20.21 AGUiEGATE SALANCE -85.6 -92.0 expenditures not covered 11s 17.0X NET FINANCING 58.0 33.L of which external. 89.0 18.8 intornal -11.0 12.4 FDNANCINC NEEDED -22.5 61.8 O External financing *llow. for the Impact throughout the period of the 198 rescheduling, together with net drawings an the IF of USSU millon In 1986, and blance of payments asistnce totaling.US$32 mlllion provided In 1986 by IDA end various cofInancing agencies. - 22 - 3.18 Income and expenditure: The trends aumarized above clearly reflect the Government's options. In terms of income, balance is restored among the various sources, with a shift toward indirect taxation, necessitated by trends In bauxite prices and logical changes in the tax structure. In terms of expenditure a slowdown will be evident In the level of operating expenses, together with sustained investment efforts to rehabilitate as quickly as possible the Infrastructure supporting economic activities. 3.19 Government revenue lncreases by an average of 9.71 during the period. However, the breakdown changes considerably. Mining revenue falls from 712 to 532 of the total because of the combined effects of a significant increase in revenue from gold and diamonds and a sharp drop in revenue from bauxite and alumina. Rowever, thanks to the recovery efforts undertaken and the new regulations, the contribution of indirect tax eceipts (including imports) will tinrease from 122 to 281 of the total. In addition, the share of grants is expected to increase from 132 to 151 of the total. 3.20 Expenditures increase at a slightly higher average rate than income, i.e. 11.22 per year. Here too one can see a structural change, with the share of operating expenses declining (from 612 in 1986 to 422 in 1991), with a shift toswrds the investment budget, the annual amount of which is 392 of the total in 1986 and 581 in 1991. 3.21 Overall balances The Government's overall financial balance con- tinues to be negative, increasing from US$35.5 million in 1986 (i.e. 11 of expenditures not covered) to US$92 million In 1991 (i.e. 172 of expenditures not covered). 1988 and 1989 will be particularly critical, with an annual deficit of about US$130 million, i.e.-more than 301 of expenditures not covered. -This is the result of the dramatic fall in bauxite revenue following the renegotiation of contracts expiring at the end of 1987. 3.22 Net financing, estimated for the period at US$300 million, will, however, leave a total financing requirement still to be met of US$Z73 million, Including US$85.9 million in 1988 alone. Drawings on external financing will rise from US$97.6 million in 1986 to US$199.8 million in 1991, i.e. an average annual increase of 15.42. In addition, loans already negotiated will provide balance of payments assistance over the period 1986-88 amounting to US$134 million. Debt amortization, Including rescheduling, is expected to increase from US$77 million in 1986 to US$170 million in 1991. Balance of Paaments Projections 3.23 The balance of payments projections show a net surplus in mining, accompanied by a much higher net deficit for the public sector. The overall balanee shows a clear improvement during the period 1986-91. 3.24 Current accounts In 1988, the decline in the net surplus of the mining sector attributable to falling bauxite exports will result in a deterio- ration in the trade balance, which will take some time to recover. 1988 and 1989 will be the most difficult years because import volume will be large and exports will not yet have sufficiently increased. The balance of goods and services for these two years is expected to amount to -US$40 million and -US$51 million, respectively. These results should not, however, be allowed to - 23 - conceal the positive trends, since projections indicate that the trade balance will Improve somewhat toward the end of the period. However, the current account deficit will probably worsen, going from US$42.5 million in 1986 to US$124 million in 1991, following a parallel path to the balance in goods and nonfactor service. 3.25 Capital transactionst The balance of capital movements is expected to improve considerably during the period, rising from -US$48 zillion in 1986 to +US$108 million. The size of these movements is primarily due to public borrowings in connection with the Implementation of the PIP. 3.26 The explanation for this improvement definitely lies in the public sector because, althouh mortisations eceeded borrowing at the beginning of the period, debt service on principal gccounts for half the drawings by the end of the period, the difference amounting to US100 million. An increase of US$120 million is thus expected in the difference between borrowings and amortizations between the start and the eand of the period, resulting in a substautial i"crease in outstanding debt, but without signlficantly worsening the debt servicing position. 3.27 The mining sector is responsible for regular withdrawals of capital for debt amortization. In contrast, 'other private sectors' receive net capital inflows that finance new investment. The call on the private sector and the [mediate rosults of the PREP will probably bring this inflow of private capital up to US$36 million by 1991, i.e. triple the initial amount. 3.28 The balance of payments Position: The balance of payments will be in need of considerable amounts of financing at the start of the period, but by 1991 it should show a clear improvement because of the increase in export. resources. The overall balance (--US$90 million in 1986) will be only slightly negative by the end of the period, i.e. -US$16 million, if the effects of the 1986 rescheduling are excluded. 3.29 Examination of the balance of payments structure resulting from implementation of the Government's development strategy confirms that Guinea will, in the coming years, need substantial amounts of external financial assistance. This assistance will be vital not only for implementing the PIP but also for maintaining the overall balance in Guinea's financial relation- ohips with other countries. 3.30 Financing the 1986 deficits Cumulative arrears at the end of 1985 amounted to about USS300 million, i.e. 232 of total outstanding public debt. As indicated above, the Government was unable at that time to make its scheduled amortization payments (including US$119 million in principal) and undertook two initiatives with the aim of absorbing the deficit. The first consisted of rescheduling the debt (para. 1.17), although this would inevitably Increase the need for financing for the rest of the period by US$200 million in interest and principal. The second consisted of applying for.balance of payments assistance (from the IHF, IDA and cofinancing agencies), these draw- ings totaling about US$43 million in 1986. - 24 - 3.31 In all, about US$118 million in additional financing was provided in 1986, helping absorb the deficit for the year. This short-term solution must not be allowed to conceal the stru¢tural problem posed by the debt inherited from the First Republic or the problem of finding an amortization scheme compatible with the projected resources of the Guinean economy. 3.32 Financina the 1987 deficits Projections for 1987 indicate relatively small financing needs, i.e. US$18 million, despite the deficit of the overall balance, which amounts to US$80 million, and the effects of the 1986 reschedul- lngs (US$26 million). This results from the intensive use (about US$80 mil- lion) of the balance of payments assistance provided in 1986, drawings on which have not yet exceeded 252 of the amounts authorized during the commitment year. 3.33 ? inan reouirements fr 9 to 1591's The divargent trends In the position of the overall balance and fuaencing requirstunts in 1988-91 clearly show the long-tern repercussions of the 1986 rescheduling. Regardless of the impact of the rescheduling, the reduction of the deficit to the overall balance from US$80 million in 1988 to US$1 million in 1991, reflects definite progress toward establishing a balanced relationship with other countries. During the same period, financing needs will, allowing for the effects of the 1986 rescheduling, increase frch US$89 million to US$100 million. 3.34 In 1988 and 1989 the Government will give priority to mobilizing additional balance of payments assistance of about US$100 million per year. Obtained on concessional terms, this assistance should go a long way toward lmproving the financial position over the period. Guinea will also probably have to take advantage of any opportunities it may have for rescheduling, but. in proportions that will not jeopardize its capacity for servicing its debts in the 1990s. 3.35 In conclusion, the success of the current recovery program and of the reform policies underlying the Government's development strategy will require substantial external financial assistance. Guines will invest approximately US$1.2 billion during the five years from 1987 to 1991, and 902 of this will be financed from external sources on essentially concessional terms. Investments during the first three years will total US$670 million, 782 of which was already committed as of December 31, 1986, leaving 222 of the financing still to be obtained. The second major category of external financial assistance, without which the country's efforts would be severely undermined, is direct transfers of balance of payments and government budget assistance (more than US$300 million between 1987 and 1991). 3.36 The attendance of representatives of many friendly governments and international organizations at this Consultative Group meeting is an invaluable demonstration of encouragement for the reform policy undertaken by the govetn- ment. We feel confident, as a result, that ve will be able to mobilize the assistance needed to assure the Guinean economy of sustained growth during the coming decade. *CuAPTm iv SECTOR STR&TEGBS - ~~~~~~~Para. TransportAtion and Related Infrastructure 4.01 - Roads 4.01 - Port and Airport facilities 4.07 -~ .Rail services a particular problem 4.11 Energy and Ca=micatloa 4.13 ;~~~ : .e .. - ........._..:..-4.44 . - . - CCDSae.abtions . .- 4.21 , sl .e-tor.4.26 . . - . * Background . , ; 4.26 o*V*er=n=t strategy 4.28 - Public investments 4.37 M1ning 4.30 - vBackground 4.38 Government strategy 4.42 - Public investments 4.43 l Maxufacturins 4.45 - Background 4.45 Government strategy 4.47 - Public investments 4.50 Education and Traalng 1 4.51 - Background 4.51 - Government strategy 4.53 - Public investments 14.9 !Health and Soial Welfare 4.60 - Background 4.60 " - Government strategy 4.63 - Public investments 4.65 Water Supply, Housing, Urban Delopment *.68 - Rural water supply 4.68 - Urban water supply 4.73 - Urban development 4.77 . , ' ' l~~~~~~~~~~~~~~~~~~~~~~~~ - .1 1~~~~~~~~~~~~~~~~~~~~~~~~~ 'l~~~~~~~~~~~~~~~~~I -25- I. TRANSPORTATION AND REIATED IFASTRUCTrRKS A. Roads 4.01 Guinea's road network consists of 14,000 km of classified roads, 1,145 km of them paved and approximately 9,000 km unpaved. It is used by some 25,000 vehicles, most of them light and in poor condition. Except for a very few stretches of main highway, the network has not been properly maintained, so that most roads are In a deplorable state, making access to centers of activity, particularly farming and forestry areas, very difficult and therefore expensive. Accordingly, rehabilitation ard construction of both main and access ;*&ds should be regarded as prer*quisftes for the 4wevlopmeut of most economic activitiese, but pasticularly thos* whioh are predominantly rural. 4.02 The Government has in faot asslgned top priority to road building and reconditioning, and the resources earmaekd for these purposes for the period 1987-1989, altbough inadequate when comavred to actual needs, will absorb a major share of public investment funds. Donors taking an interest in the transportation sector will be invited to attend a conference in the next few months to discuss the coordination of their contributions and operations. GovrnDrnent strateRv 4.03 With the excption of urban mass transit services, to be provid*d mainly by parapublic companies, road transportation will be in private hands. The authorities will introduce legislation regulating vehicle weights and sizes and provide lines of credit through the commercial banks to enable transport companies to purchase vehicles and spare parts. 4.04 The necessary infrastructure must be provided and kept in good condition by the Government. To that end, a transportation plan has been developed which assigns priorities in respect of both uajor and secondary roads and prescribes what feasibility studies are to be undertaken without delay as the first step toward actual programs. 4.05 Currently, the main concern is the 126 km Gu kadou-Sfredou road, designed to provide access to Guinea's Forest Region. In 1987, the problems assbclated with the Conakry-Mamou road and the need to reinforce the country's paved roads will be tackled. OPR (Office des Projets Routiers) is pushing ahead with an unpaved roads rehabilitation program, which also calls for routine maintenance arrangements to be made with local government bodies, and SETP (Secr;tariat d'Etat aux Travaux Publics/Hinistry of Civil Works) is drawing up a complementary program for the repair of timber bridges and fer- ries. In addition, the streets of Conakry, now in a lamentable state of repair, are to be reconditioned urgently. Finally, studies are to be either undertaken or updated on certain priority road projects: the Dubreka-Boke, Mamou-Kaakan, and Seredou-Naerekore highways. 4.06 The most important projects included in the Public Investment Program (PIP) are: -26- I g ~~~~~~- ;.(fIN billion,) Piejet E Year Olrenou Sftat" of O-atleon Lrauched 1937-69 fleln Third Hilghway ProjOct 4 yeaw 19N 2.326 17.1*5 Cant Irood loc. Conakry/memo Rds R.srta..Maintenance Ovdk.dou/S6rddov Road 4 yeare loss 0.793 19.68 CentI rmd o nab/Bk4 Rowa 4 yr" 196" 1.25 5.46 Centlrued Feries a"d WWII - Wp. S e 193 4.ffi7 G4nt1ed - Massa/Kank. Road (popemetatle) 4 poet 199 1.1652 4i.65 OUldo4lfled Rehabilitation of - Cenabry Street 5 yers 1987 6.769 Cao tIrFod - Ree (s"ies) 1 years 1989 9.160 0.740 Unidantlf lod Mameg/Iaskan Road (ots-dlm 1 year 1987 800 2 Ceo I r -. Port and Airport railieties Prest sitatioc 4.07 In Conaky, Guinea has a full-scale port consisting o an ore loading dock, five cargo wharves, and areas for mooring of small vessels. Nowever, from the sedium-term standpoint the capacity of the port i inadequate. In addition, its present structure and organization leve room for improvement. The country's second deepwater port, Kaesar, Is used exclusively by minig companies.. Finally, there are a number of small ports scattered the length of the coast line. As far as civil aviation is concerned, the ongoing development works at Conakry international airport need to be finished. Government sttate-v---- - 4.08 tn this sphere, erganization and restructuring are at least as Important as physical investments. As far as port facilities are concerned, transfer of many aperat ionsat the port of Conakr-y in o private hands will begin in 1987; Proposals for extensions to the port will be be formulated during the preparation of the proposed Trassport Sector Project to be cofinanced by AfDB, KfW, and IDA. 4.09 As far as civil aviation is concerneds t ( - tbe operation financed by CIDA for Air Guinei, which has now stopped its international flights and sold two of its larger passenger - 27? airvraft, will be coantined In 1987. The restructuring of the domestie company and the establishment of clear contractual 1 lations between Air Guinie and the government, is' under study; - CConakry airport management will be reorganized in early 1987, and urgent investments to improve air traffic safety will be executed following discussions between Guinea, IDA, CCCE; and ~~- a program for the upgrading of regional airfields will be drawn up in 1987 (funding of the necessary study) and carried out subsequently within the framework of the IDA sector project. 4.0- The mvst important project in the PIP is the expansion of the port of Co* kery, expected to begia In 1988, take four years, and cost US$60 million. 1iuacing, wll come from IDA AiDB, mad MW. The thore operations prograomed are essentially organizational and restructri.measures. C. sail BtzvI%e: A PWMticular Problem - 4.11 Guinea's rail network, apart from providing a means of moving bauxite and aluminum ores, plays no more than a marginal role In passenger and freight transportation. Moreover, existing rollIng stock, workshops, and equipment are In poor condition, and, like the track network itself, could be rehabilitated early at considerable cost. Given the road building investments being made in the Conakry-Namou-Kankan corridor, it would seen hardly logical to assign pri-ority to reconditioning the rail line. 4.12 Nevertheless, the Conakry transportation study now under way will e establish whether serious consideration should be given to passenger transporta- tion over the first 37 km of this line (Conakry-Dubreka). II. * U ? IAND * MKNCTINS -4.13 As is the case -with roads, reliable energy supplies and a m4inmal 1 telecommunications network are two prerequisites for the overall development of - the economy that will also make a major contribution to the well-being of the population. Since creation of the corresponding infrastructure is so clearly necesary- if manufacturing, commerce and services are to be-revitalized, it Vill be accorded priority over the medium term. A. Energy Background C 4.14 The-overall energy-pActure today in Guinea is-as-followss total consumption in 1984 amounted to 2.43 million tons of oil equivalent (toe), or 0.41 toe per capita. Fuelvood and charcoal account for approximately 87S of all energy consumed, hydropower for 1.52, and'petroleum products for 11.72; the two latter sources represent 0.32 million toe or 0.054' toe per capita. The import- ance of the traditional kinds of energy reflects the low level of development of modern systems, itself --reflection of the obsolescence and high breakd w rates of existing installations. . t .~~~~~~~~~~~~~~~~' -28- 4.15 Item-by-item analysis reveals the part played by the country's mining concerns in the consumption of energy for comercial purposes and at the same time the degree of under-consumption in other sectors. TO"al ery Co_¢1al E.rgy C.t6g.rlts Cneoumption Coa.spolon S S DAM-Wat 72,707 MI.. 7,5 67,6 ; tA T,_ a, n, Trar4p*Mw 3,0 27,6 1ndae.trI.a 0,6 4,1 Administration I, , 0 th,r ,,.,, 144 Ttal 1,E lap 4.16 There are three major electric power networks in Guinea: - the network supplying the country's =inlng operations and the alumi- num plant at ftiat the former consume approximately 230'GWh per annumj; - a Government-owned enterprise, Societ; Nationale d'Electricite (SNE), which operates the network supplying Conakrj from the hydroelectric stations on the Grand.s Chutes and at Donkia, or the fuel-powered station at Tombo, and also manages the local networks.supplied from the hydro stations at Tinkisso or from generating plants; in 1985, SNE production appears to have been 190 GlIh, of which 136 GWh of hydroelectricity. FueI generated power is -mportant but at a con- sidlrably bigher cost than the hydroelectricidty; and - numerous privately-owned generating plants account for the rest of the electric power produced. 4.17= SNE-supplies only 6S of the population. Supply cannot match demand. In 1984, for instance, estimated supply in the Conakry-Kindis zone was 200 GWh, although there was demand for 341 GWh. In addition to the physical limitations under which it works (inadequacy and obsolescence of facilities), SNE is affected by serious management problems, caused mainly by overstaffing and a recovery rate of less than 701. Government stratery 4.18 Over the next four years, SNE will be put on a new footing. A program contract Is to be negotiated with it before the end of 1987. The priority works program approved at the June 1986 donors' conference and which is to be completed by mid-1988, will enble SNE to meet the full demand for electric power from the Conakry urban area. In addition, it calls for a series of supplementary studies in 1987 to fill the present Information gap and provide the basis for proposals to the Goverument and donors on an investment, program designed mainly with the long; term in mind but including such medium-term compononts as'construction of a hydropower station and electric power transmission and distribution facilities'. -29- 4.19 With grant financing, the Goverrment would also be prepared to laiunch a further supplementary studies program in 1987, designed to examine the posaibility of utilixing some of the new smal-dam technologies1 provided their cost effectivenes can be demonstrated. Public investments 4.20 Out of a total of US$58 million, energy sector investments represent 72 of the PIP. Over ant above electric power production, they',include measures in support of oil search, promotion of solar energy, and research to improve household cooking stoves. The major projects (requiring over GNF 1 billion each) are as follows: .~~~~~~~~~~~~e Cihrue~. . bt ToWb Station 2 are 1987 0.040 2.880 ConfIraed 2S Power Project CT*aohnlcal Asistancoe 5 yer* 166 2.379 Confl red SHE off ic butldidn 2 yer. 137 0.360 1.80 Unidentified Ia. ProJsot 6 year 1S89 O.lO0 1.76 Unidnt;fled OK U1 aN ?Iz, 1ok Kindl, network 2 year 107 - . 1.1t2 Unoidntled Rleabi I Itation/Etentalo. of is preeor ea - tatone. 2 Y"ee la? .1S 1.134 Unitdentdfied Petroleu oxplorFaton otlon __ ___4 unr 10S6 08.06 1.231 Confirmed 4 30 - B. Cmmaunicatlono Present situation 4.21 Postal services in Guinea fall far short of satisfying the needs of the population end the economy. There is a full-service post office for every 100,000 inhabitants and a postal agency for every 10,000 inhabitants. The larger urban areas are attended to at the expense of the already poorly served rural zones. International service Is nevertheless of an acceptable level. 4.22 Telephone and telex services, concentrated for the most part in Con.kry, are very inadequate. Demand far exceeds the level of service provided, whether oan the domestic plan. (a few reliable lines) or at the international level (some manual lines). Government atratesw 4.23 The initial actions undertaken will be organizational in character: the telecommunication service is to be restructured and made autonomous, while postal services in Conakry are to be the focus of technical assistance arrange- ments and a general reorganization. The kind of reorganization contemplated is needed to ensure satisfactory distribution of mail within the country and to points abroad. 4.24 Needs for the future will be identified through the results of the studies now being carried out. Additional studies plasned for 1987 are designed to provide a basis on which to program the 1988-91 investments but will require concessional financing. 4.25 The major investments contemplated are as follows: (OWP bi I lwos) War vie lr_mwt GStas o.1 ProJect DOuation Launeod _ Finanilag Satellito earth station standard A 8 years 19I8 8.752 8.70 ConftImd Microve lInks 2nd phas 8 years 19S .160 8.Q Cn f imed. Telex exchange and Conakry locn network 4 years 1ow 6.09? 2..m Conf Ied Telephooe exchangs In Conekry years 16 .2sa 1.60 Unidetified Telephone exchsngs In 14 provincial towns 8 yars 1989 0.490 1.259 Unidentifted Extaenon wonkitfon sttion 8 yes 1986 0.657 1.259 Confiirm lICen telephone exehance 2 v"es 19Me 0.22t 0.9C Unidentified )31 IKI. X1IAL SECTOR *bsektru 4.26 Food and export crops and livestock, fishery and forest products are of primary importance in Guinea's medium-term development strategy by teason of their expected contribution to the goals of bringing the trade balance back into equilibrium and improving diet and nutrition for the Guinean population. 4.27 Once mans of access to the country's farming areas are available, the considerable agricultural potential present in most regions can be taken advant- aGp of. In the first place, Guina4's peasant farmerst who make up about 801 of the population, have already demonstrated their ready adaptability by reacting very positively to the measures introduced recently, namely the right of free enterprise and the return to normal marketing conditions. As examples of thf .it may be noted that the national Uvestock population Is now beL Aning to build up again, and coffee sales have tncreased significantly, totaling 6,000 tons in 1986, up from 450 tons in 1985. Crop productiont considering the yields being obtained today and the areas of arable land not being worked, Is still very much below what it could be. Throughout the cuntry, significantly less land is kept under crops than the actual arable lands a 301 less in Coastal Guinea, 561 in Middle Guinea, 151 in Upper Guinea and 291 in the Forest Regio. On average, therefore, 27S less than the total of 6 mdllion hectsres of arable land available throughout the country is not cultivated. - Existing plantations, often very run down, could be rehabilitated with relatively modest but carefully tailored measures, especially coffep plantations. - Guinea's continental shelf, extending over an area of 56,000'km2, affogds the possibility of an annal deep-sea catch of 220,000 tons, consisting of a range of types of fish with very high commercial values. Today, these resources are exploited mainly by foreign enterprises, since Guinea's own very small-scale fishing activity produces an annual catch of no more than about 26,000 tons. - According to FAO, Guinea's forests appear to cover an area in excess of 148,000 km2, including 3 million hectares of dense forest. Government stratemw 4.28 The Government's first concern will be to provide farmers with advice and support. Extension services will become available progressively throughout the country, with responsibility for carrying out programs in each Prefecture. I ,There will be three main components to this extension program: ; ~ ~ ~ ~ ~ ~ ~ ~ ~ ' - 32 - (a) advisory services, seed supply, and applied research, all to be organized by the offices of the Ministry of Rural Development In each ZPrefecturea (b) advisory services for farmers and groups of farmersllivestock breeders, the intention being to assist them to organize themselves into cooperatives, livestock groups, or other types of association; (c) the private sector will be encouraged to take over Inputs supply (fertilizer, plant health products, farm mplements); at the same time credit policies will be formulated for implementation through the developing multi-purpose banks. 4.29 Projects in the regions will be carried out by a Ministry of Rural Development reorganized to carry out its support functions more effectively. This implies a net reduction In staffing. Staff who are let go will be able to apply for severance allowances to enable them to take up agricultural production activities again. 4.30 A donors' conference on development of the rural sector will be held before the end of 1987. The Government will be seeking two kinds of support: for the establisbment of an extonsion system and its associated services (seed, applied research), together with the necessary support arrangements; and for programs to be started in the regions through the newly organized Ministry of Rural Development (MDR) and its branch offices. 4.31 The Development Strategy and Support Bureau (BSD) of the MDR will play a central role in the prepaxation, appraisal and follow-up of Government action in the sector. Each donor will be asked to work closely with BSD on the execu- tion of its own projects. Being very much aware of the recurrent expenses associated with the administration of rural development, the Government insists that all activities in the sector be carefully appraised so that the most effective and economical formulas can be found. 4.32 As far as livestock is concerned, the program set up in late 1986 with support from IDA, France and BADEA consists of a full range of veterinary health activities plus measures designed to encourage the privatization of production and better supplies of inputs. All other programs set up by the Department of Livestock will be integrated within this overall operation. 4.33 Where fisheries activity is concerned, the artisanal fisheries project will be redesigned, with part of the financing reallocated to providing in- stallations in the port of Conakry that will facilitate the activities of independent fishermen. The Government intends to improve its policing of Guinean waters (and, as part of this move, to set about training Guinean nationals for the job), its aim being to ensure that these waters are fished by Guinea itself and the appropriate revenues collected. The taxation provisions applicable to industrial-scale fisheries activity will be amended in the course of 1987, and current agreements -with foreign interests will be renegotiated. 4.34 Hand in hand with expansion of the private sector role in supplying inputs and banking system expansion in the regions, farm credit arrangements will be introduced in 1987 following a study on producer prices. Between now and April 1987, BSD is to make an urgent examination of the policies and - 33 - procedures required to enable Guinea's private sector to take over the distribution of inputs financed by USAIP and IDA. 4.35 Alive to the pressing evivrormental problems thore, the Government! will complete the studies on the Fouta-Djallon before mid-1988. In addition, it will launch studies on rural development projects to be undertaken in the 90s Ln zones whebe river blindness Is still rife and the campaign to eradicate it is going ahead. 4.36 The next few years will also provide an opportunity to set up a system for gathering reliable statistics on activities on which the authorifties today possess only sketchy, mainly qualitative infogmation. A \ 'I / I~~~~~~~~~~~~~~~~ .. / ! 34 - PbUc be e 4.37 The main investment projects In this sphere are as follows (UW bi l lons) Prject ODration Year Disbr_eeats Status of Launied 1867-- Financing _ JND I10 FTNEX Ariculturs Yees Rubber 0 lIpel Project (Firt p_se) a yoers 17 1.22 S.805 Con Irme Gueckedou Dvlopment Project 6 year loW 0.90 5.O9n Coal roed Micro project. I year 1917 1.156 4."4 Confirmed Forecartab tntegrted De"lopmet Projct 5 years 188 0.632 3.1" Unidentifled Sipairl RIcO Operation Progrm 8 years l86 o.275 2.730 Confirud Special Progrm of Rural Work In Hti 5 year* 1887 0.232 2.790 Conti rood Agricultural Dovelopment In Upper Guine (ex cotton) S yXrs 1882 09.89 2.2B4 Ctonfr Agricultural DeOlopmet In Maritime ines S yeero 1967 0 2. 0 Confirmed Technical Assistanc (835) 6 years 1to 09.49 1.749 Coatirmed Llvestck Livestock Development 8 years 1886 0.425 a.m8 Confirmed Forestry and Environment Finew stag Of lan devlopmnt in Fote S y"er 1887 0.1#8 2.836 Unidetified Reforesation 5 y"ea 188s 0.220 954 Unidentif led Rural Water Sucel, Wells In Maritime uinea 4 yero 1086 0.094 3.9 Conlfrood Villae rural water supply years 1167 0.041 2.206 Confirmed SJUP pilot projet 9 years 1979 0.5o 2.1C6 ConfIrmad Flsery SOCIPECHE a yrs 187 0 0.400 Confirmed Traditional flshind 5 Yers 19866 0.6J0 3.9 ConfIrfed Backtrotmd 4.38 Although mining, particularly of alu and bauxite, is currently the source of 801 of governmeat revenue and 831 of export earnings, the present situation is an unfavorable one, with production figures and prices both - 35 - Iepected to dop appreciably over the medium term. The following table provides a set of realistic projections for the period 1986-91l ~~~~~~~~~3uIt and Alumina - Proset 1988-91 Produs 188 2987 1988 1989 19 191 CBa prodnt