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1. the Economic Reforms Embarked Upon By Guinea WT/TPR/S/54 Page 49 IV. TRADE POLICY - ANALYSIS BY SECTOR (1) INTRODUCTION 1. The economic reforms embarked upon by the Republic of Guinea under the structural adjustment programmes in place since 1985 have affected the different sectors of activity to varying degrees. Thanks to the reforms, the agricultural sector is slowly recovering from the adverse effects of nearly two decades of State intervention. Two main objectives are assigned to the agricultural policy currently being implemented: food security - which in Guinea means self-sufficiency, particularly in staples (notably rice) - and winning back the international market shares for agricultural products that have been lost in the meantime because of inappropriate measures. With these aims in mind, quantitative restrictions are applied to imports of potatoes and flat-rate values are applied to others (e.g. rice). The import duties on agricultural products are relatively high (16.6 per cent on average). In addition, a framework project to promote agricultural exports has been launched with assistance from the World Bank. There is government intervention in the cotton sector, which is still not very developed, via a project structure supervised by Compagnie française pour le développement des textiles and, via a State enterprise, in promoting the cultivation of oil palms and rubber trees. 2. In terms of import duties, mining is the sector with the highest average nominal protection rate (Chart III.2). However, the liquidation and privatization of State enterprises have reduced government intervention in the activities of this sector. At present the Société des bauxites de Kindia is the only State enterprise in the sector whose privatization is not being considered; the Government holds no more than 15 per cent of the capital of the other mining companies. The main objective of the mining policy is currently to promote exports of Guinea’s vast mineral resources, after they have been processed locally. With that in mind, a system of taxation in stages (mining tax of 0 to 10 per cent) has been introduced, with the highest rates being applied to exports of unprocessed mineral products. Furthermore, export duties of 2 or 3 per cent are levied on products such as gold, diamonds and other gemstones; these duties amount to GF 25,000/tonne on ferrous scrap and US$8 to 9/tonne on bauxite, compared with US$1.75/tonne on alumina. The Centre for the Promotion and Development of Mining (CPDM), the National Agency for Mining Infrastructure Development (ANAIM) and the Geological and Mining Research Bureau (BRGM) have the task of promoting activities in this sector. Tax and customs advantages are provided for under the Mining Code in favour of investment in this sector. 3. The manufacturing sector in Guinea is not very well developed, despite the Government’s disengagement from certain activities. Private sector reluctance to take over the privatized industries can be explained by the problems experienced in manufacturing. Apart from the high costs of finance and inputs, the difficulties of obtaining access to credit, the lack of infrastructure and the power cuts, the structure of import duties is not conducive to the development of the sector either. The negative escalation of duties - from unprocessed products, through semi-manufactures, to finished goods - makes imported inputs relatively expensive (unless relief is granted): the average rate of import duties is less high in manufacturing than in other sectors. Furthermore, certain inputs and basic services generally cost more in Guinea than in other countries of the West African subregion (Table IV.1). 4. The services sector, which is dominated by informal trade, contributes more than 50 per cent to Guinea’s real GDP. Although efforts have been made to liberalize the sector, they have been followed up by little in the way of commitments at the multilateral level, which means that the irreversibility of the reforms is not guaranteed. Moreover, the monopolies enjoyed by certain private or mixed enterprises have been sanctioned in the supply of certain services, either de facto (because of WT/TPR/S/54 Trade Policy Review Page 50 the small size of the market) or as a transitional step towards future full liberalization. Thus, the Société de télécommunications de Guinée (SOTELGUI), which is currently 60 per cent-owned by Telekom Malaysia Berhard and 40 per cent-owned by the Guinean Government, has a monopoly over the supply of basic telecommunication services. The autonomous port and airport of Conakry are managed by public or semi-public enterprises, where the Government is the majority shareholder. Table IV.1 Cost of energy and telecommunications in 1995: comparison with neighbouring countries Electricity industry Diesel FF/litre Telephone FF/kWh 1 min France USA Ivory Coast 0.37 2.70 13.90 8.70 Guinea 1.17 3.53 16.50 16.50 Mali 0.55 2.75 30.60 13.60 Senegal 0.55 3.00 13.30 8.00 Source: CEFTE (1997) and Guinean authorities (National Energy Directorate and SOTELGUI). (2) AGRICULTURE, LIVESTOCK FARMING, FISHERIES, FORESTRY AND RELATED BRANCHES (i) General 5. Guinea’s geographical conditions are suitable for the expansion of agriculture: a climate ranging from tropical to subtropical and including savannah; varied relief (including mountains, watercourses and valleys); and an average annual rainfall of more than 1,300 mm. Despite these advantages, only 15 per cent of the available land is cultivated. Agriculture in Guinea is principally a subsistence activity, although a small part of production is exported. Rice is the main crop (accounting for about half of the sown areas). Fonio (hungry rice), maize, cassava, potatoes and groundnuts are the other food crops. The cash crops are cotton, coffee, rubber, palm nuts, and fruit and vegetables. Crop production is generally combined with livestock farming. Guinea possesses territorial waters teeming with fish and substantial forestry resources. However, fisheries and the industrial exploitation of the forests are underdeveloped. 6. Agriculture has not always occupied such a lowly position in Guinea’s economy. In the early 1960s, Guinea was one of the world’s leading exporters of bananas and pineapples. Agriculture met the country’s food requirements and generated 60 per cent of its export earnings. Very soon, the take- off triggered by this sector was interrupted by the implementation of policies which were ill-suited to the country’s economic and social realities - to be more specific, State involvement in the production circuits and marketing channels. The cumbersome administrative procedures associated with these policies, the taxation systems in the form of taxes in kind and the low producer prices discouraged small farmers and caused some of them to leave the countryside. The others mostly devoted themselves to subsistence food crops. 7. Under the structural adjustment programmes introduced as early as 1985, measures were taken to revive activity in the agricultural sector. They enabled the agricultural produce marketing bodies to be abolished, most of the public enterprises operating in the sector to be liquidated or privatized and the price controls which applied to the main agricultural products to be lifted. In 1991 Guinea adopted an Agricultural Development Policy Letter (LPDA), a reference document for any intervention in the sector.1 The priority objectives of this policy are to strengthen food security, preserve the productive base by means of improved management of natural resources, and to revive 1 A document taking stock of the LPDA (LPDA2) is expected to be the subject of a round-table discussion during 1998. LPDA2 is intended to strengthen the position of agriculture in the economy. Guinea WT/TPR/S/54 Page 51 export crops. Food security is to be strengthened mainly via a programme to develop rice growing (areas and yields), based on networks providing credit for producers and on the taxation of rice imports (24 per cent import duties and VAT exemption). In addition to the import duties, quantitative restrictions in the form of bans are imposed on imports with a view to developing certain food crops (Section (ii)(a) below). 8. The revival of export crops, for which Guinea possesses comparative advantages, is based on a number of measures such as price incentives for producers, technical expertise, and organizing producers and making them more professional in their approach. A Framework Project for the Promotion of Agricultural Exports (PCPEA) had also been put in place with the assistance of the World Bank (Chapter III(3)(vi)). In view of the difficulties encountered in implementing the PCPEA, the Guinean Government and the World Bank have shifted the emphasis, making the components of the project more operational than institutional. New objectives have been assigned to the project, viz.: strengthening the framework of incentives and eliminating obstacles to the development of agricultural exports; the building or strengthening of infrastructure and improvement of transport, packaging and storage facilities; support for quality and productivity; and the organization and prefinancing of agricultural exports. 9. The Government is currently creating rural infrastructure, particularly tracks, in order to open up the production areas. Extension services are also being provided for producers of export crops. Agricultural income is not taxable. The average rate of import duties in the sector is 16.6 per cent, very close to the overall average for all sectors (16.4 per cent). Inputs and equipment (fertilizer, phytosanitary products, seeds and plant, genetic and fisheries materials, products used in export activities, including wrapping and packaging materials, and fisheries equipment and inputs) enjoy full or partial relief from import duties and taxes.2 Furthermore, at the request of the ministries concerned, equipment and inputs used in livestock production may be granted full or partial relief from import duties and taxes. 10. The contribution of the agricultural sector (crop and livestock production, fisheries and forestry) to real GDP is estimated at around 20 per cent.
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