VII. INVESTMENT CLIMATE GOVERNMENT ATTITUDE EARLY IN THE PROCESS OF THE SECOND REPUBLIC'S REFORM, THE GOG PROMULGATED THE INVESTMENT CODE OF 1987. THE CODE GUARANTEES THE RIGHT OF ALL INDIVIDUALS OR PRIVATE LEGAL ENTITIES OF BOTH GUINEAN AND FOREIGN NATIONALITY TO UNDERTAKE ANY ECONOMIC ACTIVITY IN ACCORDANCE WITH CURRENT LAWS AND REGULATIONS. THUS, GUINEA IS OPEN TO DIRECT FOREIGN INVESTMENT, AND TO THIS END, AN INVESTMENT PROMOTION UNIT EXISTS WITHIN THE MINISTRY OF INDUSTRY. MAJOR LAWS THE INVESTMENT CODE OF 1987 AUTHORIZES PRIVATE INVESTMENT -- PRIVATE FOREIGN, MIXED FOREIGN AND LOCAL, OR A PUBLIC-PRIVATE MIX. THE GOVERNMENT OF GUINEA PROVIDES A GUARANTEE, IN THE 1987 INVESTMENT CODE THAT IT WILL NOT, EXCEPT FOR REASONS OF PUBLIC INTEREST, TAKE ANY STEPS TO EXPROPRIATE OR NATIONALIZE INVESTMENTS MADE BY INDIVIDUALS AND COMPANIES. MANUFACTURING OR TRADING ACTIVITIES CAN BE CARRIED OUT IN GUINEA EITHER THROUGH A BRANCH OF THE FOREIGN COMPANY OR BY FORMING A LOCAL COMPANY UNDER GUINEAN LAW. THE CODE OF ECONOMIC ACTIVITIES WHICH GOVERNS COMPANY LAWS IN GUINEA RECOGNIZES SEVERAL TYPES OF COMPANIES OUTLINED IN PARAGRAPH 98 BELOW. LAWS GOVERNING TAKEOVERS, MERGERS, ACQUISITIONS, AND CROSS- SHAREHOLDING ARE LIMITED TO DOCUMENTATION FOR FINANCIAL TRANSACTIONS, AND FILING ANY CHANGE OF STATUS DOCUMENTS WITH THE ECONOMIC REGISTER. THE CODE OF ECONOMIC ACTIVITIES LIMITS RECIPROCAL HOLDINGS TO 10 PERCENT BETWEEN TWO FIRMS. BANKRUPTCY LAW IS COVERED IN PARAGRAPH 89 BELOW. FOREIGN INVESTMENT RESTRICTIONS THE STATE RESERVES FOR ITSELF THE RIGHT TO EXPLOIT THE NATURAL RESOURCES OF THE COUNTRY SUCH AS WATER AND MINERALS, AS WELL AS TO OPERATE CERTAIN ESSENTIAL SERVICES SUCH AS ELECTRICITY, TELECOMMUNICATIONS, AND THE IMPORTATION OF PETROLEUM PRODUCTS, EITHER BY ITSELF, OR THROUGH JOINT VENTURES. AS AN EXCEPTIONAL MEASURE, THE GOVERNMENT CAN AUTHORIZE, AFTER APPROVAL BY THE NATIONAL INVESTMENT COMMISSION (CNI), NON- PUBLIC SECTOR ENTITIES FOR CARRYING OUT SUCH ACTIVITIES UNDER SPECIAL ARRANGEMENTS. WITH THE MINERAL LIBERALIZATION POLICY OF 1992, WHOLLY PRIVATE VENTURES IN THE MINING SECTOR WERE LEGALIZED. AUTHORIZATION AND LICENSING ARE ACCORDED AT THE DISCRETION OF THE MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT. TO DATE, ONE WHOLLY PRIVATE FOREIGN VENTURE EXISTS, ALONG WITH FIVE JOINT FOREIGN- GOG VENTURES, AND A HOST OF ARTISANAL OPERATORS. THE TELECOMMUNICATIONS LIBERALIZATION POLICY OF 1992 ALLOWS FOR PRIVATE ACTIVITY IN THE "VALUE ADDED" SERVICES SECTOR -- INCLUDING CELLULAR, RADIO, SATELLITE, ON-LINE DATA TRANSMISSION, AND OTHER SERVICES. LICENSING AND ADMINISTRATION, HOWEVER, IS REGULATED BY THE GOG TELECOMMUNICATIONS COMPANY, SOTELGUI, AND THE MINISTRY OF COMMUNICATIONS. PRIVATIZATION AND FOREIGN INVESTORS AT THE OUTSET OF THE SECOND REPUBLIC IN 1984, THE GOG UNDERTOOK AN EXTENSIVE PRIVATIZATION PROGRAM. THE TEN YEAR PERSPECTIVE INDICATES THAT INITIAL PROGRESS HAS BEEN ACHIEVED IN LIQUIDATION OF DEFUNCT STATE-OWNED ENTERPRISES (SOE'S), ALTHOUGH COMPLETION OF REFORMS HAS NOT YET OCCURRED. THE GOG MAINTAINS A PORTFOLIO OF FORMER SOE'S OPEN FOR FOREIGN INVESTMENT, ALTHOUGH PROSPECTUS AND VALUATION INFORMATION ON THESE ENTERPRISES IS NOT READILY AVAILABLE. NOR HAVE ALL PRIVATIZATION-RELATED TRANSACTIONS BEEN CONDUCTED THROUGH NORMAL BIDDING PROCEDURES. IN SOME CASES, FORMER SOE'S HAVE BEEN TRANSFERRED TO GUINEAN NATIONALS, THEN BACK TO THE GOG WHEN NO IMPROVEMENT WAS UNDERTAKEN. THE SITUATION IS SIMILAR FOR EXISTING, OPERATIONAL SOE'S. IN THEORY, BID PROCESSES ARE HANDLED THROUGH INTERNATIONAL COMPETITIVE FORA, BUT FINAL CONTRACT SIGNATURE ALWAYS INVOLVES SOME ON-THE-GROUND NEGOTIATION. THESE ISSUES ARE BEING ADDRESSED THROUGH THE WORLD BANK'S PRIVATE SECTOR PROMOTION ADJUSTMENT CREDIT. INVESTMENT INCENTIVES THE 1987 INVESTMENT CODE CREATED AN ADVANTAGEOUS REGIME FOR INVESTMENTS IN HIGH PRIORITY SECTORS AND INDUSTRIES, SMALL AND MEDIUM ENTERPRISES, EXPORT-ORIENTED ENTERPRISES, VALUE ADDED ACTIVITIES, OR INVESTMENTS IN LESS-DEVELOPED ZONES OF GUINEA. ACCORDING TO THE INVESTMENT CODE, ELIGIBILITY FOR THE CODE'S BENEFITS IS DETERMINED BY THE NATIONAL INVESTMENT COMMISSION (CNI), ON A CASE-BY-CASE BASIS. IN PRACTICE, THESE TYPES OF BENEFITS ARE ALSO ACCORDED BY THE MINISTERS RESPONSIBLE FOR THE CONCERNED SECTOR. HIGH PRIORITY INVESTMENTS HIGH PRIORITY SECTORS INCLUDE THE FOLLOWING: AGRONOMY AND PASTORAL RESEARCH; FARM PRODUCE, AND, IN PARTICULAR, FOOD CROPS AND ENGINEERING FIRMS IN RURAL AREAS; CASH CROPS, INCLUDING PRODUCE PROCESSING AND TRANSFORMATION PHASES; ANIMAL BREEDING, INCLUDING HEALTH PROTECTION INSTALLATIONS; FISHING, INCLUDING PRESERVATION AND TRANSFORMATION FACILITIES; MECHANICAL OR CHEMICAL TRANSFORMATION OF MINERAL, PLANT, OR ANIMAL PRODUCTS; FORESTRY, INCLUDING PROGRAMS FOR THE RENEWAL OF FOREST RESOURCES; PRODUCTION OF FERTILIZER OR OTHER PRODUCTS NECESSARY FOR AGRICULTURE, ANIMAL BREEDING, OR FISHING; CHEMICAL OR MECHANICAL PREPARATION OR PROCESSING OF PLANT OR ANIMAL PRODUCTS; TRANSPORTATION; TELECOMMUNICATIONS; HEALTH AND EDUCATION; BUILDING CONSTRUCTION; TOURISM AND RELATED ACTIVITIES; HOUSING CONSTRUCTION; DEVELOPMENT BANKS, AND FINANCIAL INSTITUTIONS SPECIALIZED IN LEASING. GENERAL ADVANTAGES OF FAVORABLE REGIMES INCLUDE AN EXEMPTION FROM CUSTOMS DUTIES INCLUDING TAXES ON IMPORTS OF PLANT AND EQUIPMENT, DURING THE "PROJECT PHASE" (WITH A MAXIMUM OF TWO YEARS) OF THE INVESTMENT. THESE BUSINESSES ARE RESPONSIBLE, HOWEVER, FOR A 5 PERCENT (FOB VALUE) REGISTRATION TAX FOR SUCH IMPORTED EQUIPMENT. FAVORABLE REGIMES ARE ALSO OFFERED INCOME TAX DISCOUNTS FOR GUINEAN EMPLOYEES DURING THE FIRST FIVE YEARS OF OPERATIONS. OBLIGATIONS FOR MAINTAINING FAVORABLE REGIME STATUS ARE COVERED IN PARAGRAPH 90 BELOW. SMALL AND MEDIUM ENTERPRISES A "SMALL OR MEDIUM SIZED ENTERPRISE" IS DEFINED AS AN ENTERPRISE IN WHICH GUINEAN NATIONALS HOLD THE MAJOR PART OF THE CAPITAL AND CONTROL THE DECISION MAKING PROCESS. THE VALUE OF ASSETS (EXCLUDING LAND AND WORKING CAPITAL) MUST BE BETWEEN 15 AND 300 MILLION GUINEAN FRANCS (USD 15,000 TO 300,000). TO BENEFIT FROM THE SME REGIME, THE INVESTMENT MUST BE IN A HIGH PRIORITY SECTOR, AT LEAST 20 PERCENT IN CASH, AND EMPLOY A MINIMUM OF FIVE GUINEAN NATIONALS. SME'S BENEFIT FROM THE FOLLOWING SPECIFIC ADVANTAGES: EXEMPTION FROM THE PAYMENT OF THE MINIMUM INCOME TAX FOR A PERIOD OF 10 FINANCIAL YEARS FROM THE DATE OF THE AUTHORIZATION; TAX ON PROFITS AT THE PREFERENTIAL RATE APPLICABLE TO SELF-EMPLOYED CRAFTSMEN, OR AT A RATE EQUAL TO TWO THIRDS OF THE NORMAL RATE IF THIS IS LOWER, FOR A PERIOD OF FIVE FINANCIAL YEARS FROM THE START DATE OF OPERATIONS. EXPORTING FIRMS AN EXPORT-ORIENTED FIRM IS DEFINED AS A MANUFACTURING OR SERVICE ENTERPRISE WHICH EXPORTS NON-TRADITIONAL PRODUCTS OF GUINEAN ORIGIN OTHER THAN MINING PRODUCTS, AND WHOSE ACTUAL SALES RECEIPTS FROM EXPORTS DURING A GIVEN FINANCIAL YEAR IS MORE THAN 22 PERCENT OF THE TOTAL TURNOVER OF THE COMPANY FOR THE SAME YEAR. QUALIFICATION FOR THE REGIME FOR EXPORTING FIRMS INCLUDES INVESTING IN A SECTOR CONSIDERED HIGH-PRIORITY, WITH 33 PERCENT OF THE INVESTMENT IN CASH. OBJECTIVES CONCERNING THE CREATION OF JOBS AND THE TRAINING OF LOCAL STAFF MUST BE SUBMITTED TO THE CNI. DURING THE FIRST FIVE YEARS OF OPERATIONS, EXPORTING FIRMS CAN EXEMPT PROFITS FROM THE CORPORATE INCOME TAX IN PROPORTION TO THE PROFITS EQUAL TO THAT OF EXPORT SALES TO TOTAL SALES, WITH A CEILING OF 60 PERCENT OF PROFITS EXEMPT FROM INCOME TAX. THE NORMAL CORPORATE TAX ON PROFITS IS 35 PERCENT. VALUE ADDING ENTERPRISES A FIRM WHICH UTILIZES MORE THAN 70 PERCENT OF GUINEAN-ORIGIN INTERMEDIARY GOODS FOR PRODUCTION IN A GUINEAN YEAR IS DEFINED AS A VALUE ADDING FIRM. THE SECTOR OF INVESTMENT MUST BE A HIGH PRIORITY ONE, WITH 33 PERCENT OF THE INVESTMENT IN CASH. A PLAN FOR THE CREATION OF GUINEAN JOBS AND THE TRAINING OF LOCAL STAFF MUST BE SUBMITTED TO THE CNI. VALUE-ADDING ENTERPRISES ARE AUTHORIZED TO DEDUCT AN AMOUNT EQUIVALENT TO 20 PERCENT OF GUINEAN-ORIGIN MATERIALS CONSUMED BY THE ENTERPRISE FROM TAXABLE INCOME DURING EACH OF THE FIRST FIVE FINANCIAL YEARS OF THE OPERATION. ENTERPRISES IN LESS DEVELOPED ZONES LESS DEVELOPED, OR ZONE TWO, AREAS INCLUDE ALL TERRITORY OUTSIDE OF CONAKRY AND ITS SUBURBS. FOR SERVICE FIRMS, QUALIFICATION FOR PRIVILEGED STATUS REQUIRES LOCATION OF THE HEAD OFFICE AND MAIN PREMISES OF THE ENTERPRISE IN ZONE TWO. FOR MANUFACTURING FIRMS, 90 PERCENT OF STAFF WORK MUST OCCUR IN ZONE TWO. ZONE TWO FIRMS ARE ELIGIBLE FOR TWO LARGE TAX BREAKS: AN EXEMPTION FROM INCOME TAX DURING THE FIRST FIVE FINANCIAL YEARS OF OPERATIONS; AND A ONE-THIRD REDUCTION OF TURNOVER TAXES (NORMALLY 13 TO 15 PERCENT) APPLIED TO THE PRODUCTION OR SERVICES PROVIDED BY THE FIRM DURING THE FIRST FIVE FINANCIAL YEARS FOLLOWING THE START OF OPERATIONS. APPLICATION OF REGIMES: ELIGIBILITY OF INVESTMENTS IS DETERMINED ON A CASE-BY-CASE BASIS. CONVERSION AND TRANSFER POLICIES PRIOR AUTHORIZATION FROM THE CENTRAL BANK MUST BE OBTAINED FOR FOREIGN CAPITAL INVESTMENTS AND FOR FOREIGN FINANCING OF INVESTMENT PROJECTS. IN ADDITION, ALL FOREIGN EXCHANGE TRANSACTIONS, CAPITAL FLOWS, ALL MEANS OF SETTLEMENT BETWEEN GUINEA AND THE REST OF THE WORLD AS WELL AS THOSE BETWEEN RESIDENTS AND NON-RESIDENTS IN GUINEA ARE SUBJECT TO PRIOR AUTHORIZATION REQUIREMENT AND CAN ONLY BE CARRIED OUT THROUGH APPROVED INSTITUTIONS UNLESS AUTHORIZED BY THE CENTRAL BANK. INDIVIDUALS OR LEGAL ENTITIES MAKING FOREIGN INVESTMENTS IN GUINEA ARE GUARANTEED, SUBJECT TO THE CENTRAL BANK'S RIGHT TO CONTROL, FREEDOM TO TRANSFER TO ANY COUNTRY OF THEIR CHOICE: THE ORIGINAL FOREIGN CAPITAL, PROFITS RESULTING FROM INVESTMENT, CAPITAL GAINS ON DISPOSAL OF INVESTMENT, AND COMPENSATION PAID IN THE CASE OF NATIONALIZATION OR EXPROPRIATION OF THE INVESTMENT. UNLESS THERE IS A FOREIGN EXCHANGE CRISIS, SUCH TRANSACTIONS CAN TAKE PLACE UPON REQUEST, ALTHOUGH DELAYS OR SHORTAGES ARE A PERIODIC COMPLAINT OF SOME EXPATRIATE BUSINESSPERSONS. THE GOVERNMENT REQUIRES IMPORTERS TO OBTAIN FORMAL IMPORT AUTHORIZATION (DEMANDE DE DROIT D'IMPORTATION - DDI) FROM THE CENTRAL BANK IF IMPORTING QUANTITIES EXCEEDING 5,000 USD IN VALUE. TO OBTAIN THE IMPORT AUTHORIZATION, 35 PERCENT OF THE TOTAL IMPORT VALUE IN GUINEAN FRANCS (6 PERCENT IF HARD CURRENCY IS UTILIZED) MUST BE DEPOSITED WITH THE CENTRAL BANK. THE OFFICIAL EXCHANGE RATE FOR THE GUINEAN FRANC HAS BEEN SET AT A WEEKLY FIXING AT THE CENTRAL BANK SINCE 1986. THIS INITIALLY PERMITTED AN ORDERLY DEPRECIATION OF THE OVERVALUED GUINEA FRANC, AND HAS GENERALLY REDUCED TO TEN PERCENT OR LESS THE DISPARITY BETWEEN THE OFFICIAL AND PARALLEL MARKET EXCHANGE RATES. THE DEVALUATION OF NEIGHBORING COUNTRIES' CURRENCY UNIT, THE CFA, IN JANUARY 1994, HAS HAD A NEGLIGIBLE IMPACT UPON THE GUINEAN ECONOMY (TO DATE, JUNE 1994). THE EMBASSY PURCHASES CURRENCY AT THE OFFICIAL RATE, WHICH ENDED 1993 AT 977 GUINEAN FRANCS TO THE DOLLAR. ANNUAL DOLLAR VALUE OF LOCAL CURRENCY TRANSACTIONS IS UNAVAILABLE. CAPITAL OUTFLOW POLICY GUINEA HAS NO POLICY ON OUTWARD DIRECT INVESTMENT. THE EXPORT OF CAPITAL IS GOVERNED BY THE RULES OF INVESTMENT, AND ALLOWS THE CONVERSION AND TRANSFER OF START-UP CAPITAL AT THE TIME OF DISINVESTMENT. CONVERSION AND TRANSFER OF PROFITS IS NEGOTIATED AT THE TIME OF INVESTMENT, TO BE HONORED ON A MONTHLY BASIS. RE-NEGOTIATION OF THE AUTHORIZED REPATRIATION CEILINGS IS POSSIBLE. EXPROPRIATION AND COMPENSATION THE GOVERNMENT OF GUINEA PROVIDES A GUARANTEE, IN THE 1987 INVESTMENT CODE THAT IT WILL NOT, EXCEPT FOR REASONS OF PUBLIC INTEREST, TAKE ANY STEPS TO EXPROPRIATE OR NATIONALIZE INVESTMENTS MADE BY INDIVIDUALS AND COMPANIES. TO POST KNOWLEDGE, THERE HAVE BEEN NO OVERT EXPROPRIATIONS OF FOREIGN PROPERTY SINCE 1984. HOWEVER, IN SOME CASES, WHEN PROPERTIES HAVE BEEN PRIVATIZED AND TRANSFERRED TO PRIVATE GUINEAN OWNERSHIP, THE GOG HAS STEPPED IN TO RECLAIM -- AND/OR EXPRESSED WILLINGNESS TO RECLAIM -- THE PROPERTY. IN SEVERAL CASES, GOG OFFICIALS HAVE STATED DISSATISFACTION WITH A PRIVATE OWNER'S UNDER-UTILIZATION OF THE PROPERTY AS SUFFICIENT CAUSE FOR THE GOG TO INTERVENE. DISPUTE SETTLEMENT THE 1987 INVESTMENT CODE STATES THAT DISPUTES RESULTING FROM INTERPRETATION OF THE CODE SHALL BE SETTLED BY COMPETENT GUINEAN JUDICIAL AUTHORITIES IN ACCORDANCE WITH LAWS AND REGULATIONS. IN PRACTICE, HOWEVER, A FAIR SETTLEMENT MAY BE DIFFICULT IN SUCH A CASE. ALTHOUGH THE GUINEAN CONSTITUTION CREATES AN INDEPENDENT JUDICIARY, BUSINESSPERSONS FREQUENTLY CLAIM THAT THE ADMINISTRATION OF JUSTICE IS PLAGUED BY POORLY TRAINED MAGISTRATES, HIGH LEVELS OF CORRUPTION, AND NEPOTISM, AND THAT PRIVATE DISPUTES DO NOT ALWAYS RECEIVE IMPARTIAL ARBITRATION. IN 1986, GUINEA RATIFIED THE MARCH 1985 CONVENTION ON THE SETTLEMENT OF INVESTMENT DISPUTES BETWEEN STATES AND NATIONALS OF OTHER STATES. THE GOG HAS ONE OUTSTANDING INVESTMENT DISPUTE, PENDING SINCE 1978, WITH A PRIVATE FOREIGN COMPANY. ALTHOUGH A CONVENTION FOR JUST COMPENSATION WAS ESTABLISHED UNDER THE FIRST REGIME, THE GOG HAS NOT YET HONORED ITS FINANCIAL COMMITMENTS. IN MANY CASES, THE GOG DOES NOT MEET PAYMENT OBLIGATIONS TO PRIVATE SUPPLIERS OF GOODS AND SERVICES -- BOTH FOREIGN AND GUINEAN -- IN A TIMELY FASHION. THERE IS NO INDEPENDENT ENFORCEMENT MECHANISM FOR COLLECTING DEBTS FROM THE GOG, ALTHOUGH SOME CONTRACTS HAVE INTERNATIONAL ARBITRATION CLAUSES. MOST LARGE FOREIGN CONTRACTORS PREFER TO WORK DIRECTLY FOR DONOR-FUNDED PROJECTS. BANKRUPTCY LAW AND RIGHTS OF CREDITORS ACCORDING TO THE CODE OF ECONOMIC ACTIVITIES, A COMPANY DECLARING BANKRUPTCY CAN BE HELD RESPONSIBLE FOR ITS DEBTS THROUGH THE GUINEAN COURT SYSTEM. MONETARY JUDGEMENTS ARE USUALLY MADE IN LOCAL CURRENCY. PERFORMANCE REQUIREMENTS/INCENTIVES IN ORDER TO RETAIN FAVORABLE INVESTMENT TREATMENT OVER THE PERIOD OF PREFERENTIAL STATUS, THE INVESTMENT CODE STIPULATES FULFILLMENT OF THE FOLLOWING PERFORMANCE REQUIREMENTS, SUBJECT TO REVIEW BY THE NATIONAL INVESTMENT COMMITTEE: --CARRY OUT THE DEFINED INVESTMENT PROJECTS; --PROVIDE THE DOCUMENTS STIPULATED IN THE DECREE; --CONFORM TO NATIONAL AND INTERNATIONAL QUALITY STANDARDS; --MAINTAIN ACCOUNTING RECORDS ACCORDING TO THE STANDARD CHART OF ACCOUNTS IN FORCE IN GUINEA; --ALLOW FOR AN ANNUAL AUDIT BY AN AUTHORIZED SPECIALIST IN GUINEA; --PRODUCE GOODS WHICH MATCH THOSE PRODUCED IN GUINEA IN REGARD TO PRICES AND QUALITY; --GIVE PRIORITY TO THE RECRUITMENT OF GUINEAN NATIONALS IN THE CASE OF EQUIVALENT QUALIFICATIONS; --TRAIN AND GIVE PROMOTIONS TO STAFF OF GUINEAN NATIONALITY; --MAINTAIN THE LEVEL AND QUALITY OF THE INVESTMENT; --SUBMIT THE AUDITED ANNUAL ACCOUNTS TO THE TAX ADMINISTRATION. --THERE ARE NO FORMAL PERFORMANCE REQUIREMENTS ATTACHED TO NON-PRIORITY INVESTMENTS. RIGHT TO PRIVATE OWNERSHIP THE INVESTMENT CODE OF 1987 GUARANTEES THE RIGHT OF FOREIGN AND DOMESTIC PRIVATE ENTITIES TO ESTABLISH AND OWN BUSINESS ENTERPRISES AND TO ENGAGE IN ALL FORMS OF RENUMERATIVE ACTIVITY, EXCEPT FOR THAT PROHIBITED FOR THE PURPOSES OF NATIONAL INTEREST. BOTH IN THEORY AND IN FACT, PRIVATE ENTITIES ARE FREE TO ACQUIRE AND DISPOSE OF INTERESTS IN BUSINESS ENTERPRISES. THERE IS VERY LITTLE REGULATORY ACTIVITY OF BUSINESS TRANSACTIONS OR INTERESTS AND NO GOVERNMENT BODY EQUIPPED TO DO SO. IT IS NOT UNCOMMON TO SEE A HEAVY CONCENTRATION OF BUSINESS INTERESTS IN THE HANDS OF A SINGLE FAMILY, AND, WITH NO CONFLICT OF INTEREST LEGISLATION, GOVERNMENT OFFICIALS ENGAGE IN PRIVATE BUSINESS INTERESTS TO THE EXTENT THAT OPPORTUNITY ALLOWS. EXCEPT IN CASES WHERE THE NATIONAL INTEREST IS AT STAKE, PRIVATE AND STATE-OWNED COMPANIES ARE GUARANTEED EQUAL TREATMENT IN ORDER TO ASSURE COMPETITIVE EQUALITY. THIS IS APPLICABLE IN THE CASE OF TAXATION AND MARKET ACCESS. CREDIT FOR BOTH PUBLIC AND PRIVATE ENTERPRISES IS EXTREMELY DIFFICULT AND EXPENSIVE. SOME SOES ARE STILL BENEFITTING FROM SUBSIDIES. PROTECTION OF PROPERTY RIGHTS THE FIRST REPUBLIC (1958-1984) LEFT AS ITS LEGACY A HOST OF ISSUES INVOLVING LAND OWNERSHIP. ALTHOUGH THE LAND TENURE CODE OF 1992 PROVIDES A LEGAL BASE FOR DOCUMENTATION OF PROPERTY OWNERSHIP, THE GOG HAS NOT YET FULLY ESTABLISHED THE ADMINISTRATIVE APPARATUS TO ADMINISTER THE LAND TENURE SYSTEM. THUS, GUINEA STILL SUFFERS THE LEGACY OF UNCLEAR OWNERSHIP TITLES, AND UN-ENFORCEABLE PROPERTY RIGHTS. AS OF YET THERE HAVE BEEN FEW CASES WHICH DEMONSTRATE THAT THE LEGAL SYSTEM PROVIDES MUCH EFFECTIVE PROTECTION TO PROPERTY RIGHTS IN CASES OF DISPUTE. INTELLECTUAL PROPERTY RIGHTS GUINEA HAS BEEN A MEMBER OF THE WORLD INTELLECTUAL PROPERTY ORGANIZATION SINCE 1981, AND A SIGNATORY OF THE PARIS CONVENTION ON INTELLECTUAL PROPERTY. GUINEA WORKS CLOSELY WITH THE AFRICAN ORGANIZATION FOR INTELLECTUAL PROPERTY BASED IN YAOUNDE, AS WELL AS WITH UNIDO, TO ENSURE COMPLIANCE WITH STANDARD PATENT LAWS. ALTHOUGH RELATIVELY RECENTLY ESTABLISHED, THE INTELLECTUAL PROPERTY OFFICE IN THE MINISTRY OF INDUSTRY IS WELL TRAINED FOR THE REGISTRATION OF COPYRIGHTS AND PATENTS. ENFORCEMENT OF PROTECTION OF INTELLECTUAL PROPERTY RIGHTS, HOWEVER, IS LEFT TO THE STILL REFORMING GUINEAN COURT SYSTEM. WE KNOW OF NO INTELLECTUAL PROPERTY CASE YET TREATED BY THE COURT SYSTEM. THERE ARE NO SPECIFIC MECHANISMS IN PLACE TO PROTECT PROPRIETARY INFORMATION OR TRADE SECRETS. REGULATORY SYSTEM ADMINISTRATIVE PROCEDURES: REGISTRY OF A BUSINESS IS RELATIVELY STRAIGHTFORWARD. LEGAL INCORPORATION FOR NEW INVESTMENTS INVOLVES SIGNING BY-LAWS, DEPOSITING THE START-UP CAPITAL IN A BLOCKED BANK ACCOUNT, REGISTERING THE COMPANY AT THE REGISTER OF ECONOMIC ACTIVITIES, AND ANNOUNCING THE INCORPORATION IN A JOURNAL FOR LEGAL NOTICES. LIMITED LIABILITY COMPANIES MUST FILE THE FOLLOWING DOCUMENTS WITH A NOTARY: AN ORIGINAL COPY OF BY-LAWS IN THE CASE OF A PRIVATE DEED; SUBSCRIPTION FORM AND A BANK CERTIFICATE FOR THE DEPOSITED CAPITAL; REPORT OF THE APPRAISAL VALUE. THE SIX CATEGORIES OF COMPANIES RECOGNIZED BY THE CODE OF ECONOMIC ACTIVITIES INCLUDE THE FOLLOWING: -- JOINT STOCK COMPANIES, EITHER S.A. (CAPITALIZATION OF 50,000,000 GUINEAN FRANCS) OR S.A.R.L. (MINIMUM CAPITALIZATION OF 5,000,000 GUINEAN FRANCS); -- PARTNERSHIPS; -- NON-TRADING REAL ESTATE COMPANIES; -- PROFESSIONAL SERVICES COMPANIES; -- COOPERATIVES; -- SPECIAL AND GROUPING COMPANIES, INCLUDING JOINT VENTURE COMPANIES, DE FACTO COMPANIES, TEMPORARY GROUPINGS. APPLICATION FOR A PRIVILEGED REGIME (THOSE OUTLINED IN PARAGRAPHS 67-71 ABOVE) IS MORE COMPLICATED, AND INVOLVES SIGNATURE OF A CONVENTION WITH THE MINISTRY OF FINANCE, APPROVAL OF THE MINISTRY WITH TECHNICAL JURISDICTION OVER PROJECT ACTIVITIES, AND APPROVAL OF THE NATIONAL INVESTMENT COMMISSION (CNI). IN PRACTICE, MINISTERS OF RESPECTIVE SECTORS ALSO SIGN CONVENTIONS FOR PRIVILEGED REGIME STATUS. POST-REGISTRATION AND LICENSING REGULATION IS VIRTUALLY NON- EXISTENT. FOR PRIVILEGED REGIMES, THE DOCUMENTS OUTLINED IN PARAGRAPH 90 MUST BE FILED WITH THE NATIONAL INVESTMENT COMMISSION (CNI), BUT THERE IS LITTLE OVERSIGHT. MOST OFTEN, THE CNI OR MINISTRY OF FINANCE IS CALLED UPON BY INVESTORS EXPERIENCING DIFFICULTIES WITH THE TAX ADMINISTRATION OR CUSTOMS OFFICIALS WHO FAIL TO RECOGNIZE THE ADVANTAGES GRANTED IN THEIR CONVENTION. THE CNI ALSO HAS THE DISCRETIONARY POWER TO RENEW AN ADVANTAGEOUS TAX REGIME AFTER THE INITIAL PERIOD EXPIRES. TRANSPARENT POLICY AND LAWS TO FOSTER COMPETITION: AS MENTIONED IN PARAGRAPH 3, SINCE 1987, GUINEA'S LAWS HAVE BEEN DESIGNED TO PROMOTE FREE ENTERPRISE AND COMPETITION. IN TERMS OF TRANSPARENCY IN APPLICATION OF THE LAW, HOWEVER, LOCAL AND EXPATRIATE BUSINESSMEN REPORT THAT THE GOG SCORES VERY LOW. THEY ASSERT THAT APPLICATION PROCEDURES ARE SUFFICIENTLY OPAQUE TO ALLOW FOR SIGNIFICANT CORRUPTION, AND REGULATORY ACTIVITY OFTEN APPLIED BASED ON PERSONAL INTEREST. TAX LAWS: TAX ADMINISTRATION IS BY NO MEANS UNIFORM, AS THE COLLECTION EFFORT TARGETS FORMAL SECTOR (OFTEN EXPATRIATE) BUSINESSES IN CONAKRY. ADDITIONALLY, GIVEN GUINEA'S DIFFICULTIES IN RAISING BUDGET REVENUES, THE TAX CODES ARE GRADUALLY CHANGING TO RAISE THE TAXES IMPOSED ON FORMAL SECTOR BUSINESSES. IN 1994, THE TAX BURDEN ON INTERNATIONAL BUSINESSES INCREASED SIGNIFICANTLY, THROUGH A VARIETY OF INCOME AND IMPORT TAX INCREASES. INTERNATIONAL FINANCIAL EXPERTS HERE HAVE NOTED THAT THE NEW CODE WILL HIT MEDIUM TO LARGE EXPATRIATE VENTURES MOST IMMEDIATELY, AND DIMINISH THE MARGIN OF BENEFITS ORIGINALLY INTENDED TO COMPENSATE INVESTORS FOR GUINEA'S POOR INFRASTRUCTURE AND DIFFICULT WORK ENVIRONMENT. LEGAL, REGULATORY, AND ACCOUNTING SYSTEMS ARE BASED UPON FRENCH LAW. LEGAL AND REGULATORY PROCEDURES, HOWEVER, ARE NOT ALWAYS APPLIED UNIFORMLY OR TRANSPARENTLY. ACCORDING TO THE INVESTMENT CODE, FOREIGN AND NATIONAL FIRMS ARE ELIGIBLE FOR EQUAL TREATMENT UNDER THE LAW. HOWEVER, THERE HAVE BEEN CASES IN THE PAST WHERE SECTOR REPRESENTATIVES HAVE EFFECTIVELY LOBBIED THE GOG TO PREVENT FOREIGN PENETRATION IN A PARTICULAR SECTOR. CURRENTLY, FOR EXAMPLE, GUINEAN ACCOUNTANTS HAVE LOBBIED THE GOG TO PREPARE A DRAFT LAW WHICH WOULD ELIMINATE FOREIGN AUDITORS AND ACCOUNTING FIRMS FROM PUBLIC OR PRIVATE WORK IN GUINEA. ALTHOUGH PASSAGE OF THE LAW LOOKS UNLIKELY, THE IMPLICATIONS OF ITS PROGRESS ARE SERIOUS. MOST LARGE MINING, CONSTRUCTION, AND OTHER COMPANIES UTILIZE INTERNATIONAL AUDITORS OR THE SERVICES OF LOCAL EXPATRIATE ACCOUNTING REPRESENTATIVES. LABOR FORCE LABOR IN GUINEA IS AMPLE BUT NOT WELL TRAINED. LITERACY LEVELS ARE UNDER 30 PERCENT, AND EDUCATIONAL STANDARDS ARE VERY LOW. WITH THE EXCEPTION OF GUINEANS INVOLVED IN DONOR TRAINING PROGRAMS AND THOSE WITH THE MEANS TO STUDY OVERSEAS, FEW HAVE EXPOSURE TO WESTERN BUSINESS AND ECONOMIC PRINCIPLES. PRODUCTIVITY LEVELS TEND TO BE VERY LOW, AND GUINEA HAS A CRITICAL SHORTAGE OF SKILLED MANAGERS AND ADMINISTRATORS WITH PRIVATE SECTOR EXPERIENCE. GUINEA HAS A STRICT LABOR CODE PROTECTING THE RIGHTS OF GUINEAN EMPLOYEES, AND A STRICT ENFORCING AGENT IN THE MINISTRY OF SOCIAL AFFAIRS. PRIOR TO THE IMPLEMENTATION OF THE CURRENT LABOR CODE IN 1988, ALL LABOR WAS LEGALLY REQUIRED TO BE CONTRACTED THROUGH THE OFFICE NATIONAL DE L'EMPLOI ET DE LA MAIN D'OEUVRE (ONEMO). THE LABOR CODE SETS FORTH GUIDELINES IN VARIOUS SECTORS, BUT MOST STRICTLY IN MINING, WHERE THE LARGEST FOREIGN COMPANIES OPERATE. GUIDES INCLUDE WAGES, HOLIDAYS AND WORK SCHEDULES, OVERTIME PAY, VACATION, AND SICK LEAVE. EMPLOYERS' RIGHTS TO HIRE AND FIRE ARE LESS CLEARLY DEFINED. MANY CASES OF TERMINATION RESULT IN ADJUDICATION IN THE GUINEAN COURT SYSTEM, GENERALLY TO THE DISADVANTAGE OF THE EMPLOYER. LABOR MANAGEMENT RELATIONS, DEFINED BY THE PROVISIONS OF THE LABOR CODE, CAN VARY FROM SMOOTH TO DIFFICULT. GIVEN THE DIFFICULTY OF TERMINATING AN EMPLOYEE, INCIDENCE OF THEFT AND LOW PRODUCTIVITY ARE FACTORS CITED AS MAJOR PROBLEMS BY MANY FOREIGN MANAGERS IN GUINEA. ON THE AVERAGE, EMPLOYERS ARE RESPONSIBLE FOR ABOUT 14 PERCENT OF THE VALUE OF THE EMPLOYEES' SALARY FOR SOCIAL SECURITY, WITH AN EMPLOYEE CONTRIBUTION OF 3.2 PERCENT. EMPLOYERS ARE ALSO RESPONSIBLE FOR WITHHOLDING BETWEEN 10 AND 30 PERCENT OF THE EMPLOYEE'S SALARY FOR INCOME TAXES. THE LABOR CODE OUTLINES GENERAL GUIDELINES RELATED TO HEALTH AND SAFETY, BUT THE GOG HAS NOT YET ARTICULATED A SET OF PRACTICAL OCCUPATIONAL STANDARDS. GOVERNMENT RESOURCES FOR THIS ACTIVITY ARE RELATIVELY WEAK. THE LABOR CODE LEGALIZES EMPLOYEE LABOR UNIONS AND THE RIGHT TO COLLECTIVE BARGAINING. MOST WORKERS BELONG TO THE FORMERLY SOLE NATIONAL LABOR CONFEDERATION (CNTG), BUT INDEPENDENT UNIONS ARE ALSO INCREASING. IN 1993 AND 1994, WORKERS DEMANDING WAGE AND BENEFIT IMPROVEMENTS ORGANIZED BRIEF STRIKES IN THE BANKING SECTOR, THE NATIONAL ELECTRICITY COMPANY, THE STATE-OWNED BAUXITE MINE, AND THE PRIVATE BOTTLING FACTORY. BILATERAL INVESTMENT AGREEMENTS COUNTRIES WITH BILATERAL INVESTMENT PROTECTION AGREEMENTS WITH THE GOG INCLUDE GERMANY, SWITZERLAND, ITALY, AND BELGIUM; GREAT BRITAIN AND TUNISIA ARE IN THE PROCESS OF NEGOTIATING INVESTMENT PROTECTION TREATIES. OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS GUINEA AND THE U.S. HAVE AN AGREEMENT ON PRIVATE INVESTMENT GUARANTEES WHICH HAS BEEN IN EFFECT SINCE 1962. THUS, INVESTORS ARE ELIGIBLE FOR OPIC INSURANCE PROGRAMS. CURRENTLY, THERE ARE TWO INVESTMENT PROJECTS INSURED BY OPIC AND NINE APPLICATIONS FOR PROJECTS IN GUINEA PENDING. IN 1989, GUINEA SIGNED THE CONVENTION FOR THE MULTILATERAL INVESTMENT GUARANTEE AGENCY (MIGA), BUT HAS NOT YET RATIFIED THE CONVENTION. FOREIGN DIRECT INVESTMENT STATISTICS INVESTMENT TRENDS: IN 1977-78, THE FIRST REPUBLIC BEGAN A PROCESS OF RE-OPENING TO THE WESTERN WORLD, AFTER THE DRAMATIC FAILURE OF SOCIALIST POLICIES. THE REAL LIBERALIZATION, HOWEVER, DID NOT OCCUR UNTIL THE OUTSET OF THE SECOND REPUBLIC, WITH THE DECLARATION OF NEW POLICIES DESIGNED TO PROMOTE A MARKET ECONOMY, IN 1984-85. THUS, GIVEN GUINEA'S ENORMOUS POTENTIAL, AND ABUNDANT UNTAPPED RESOURCES, 1986 THROUGH 1988 WITNESSED AN INITIAL INVESTMENT BOOM. ACCORDING TO A GUINEAN PLANNER, IT WAS THE PUBLIC SECTOR THAT BRAKED THIS INVESTMENT, AS ADMINISTRATIVE DIFFICULTY AND CORRUPTION BEGAN TO TAKE THEIR TOLL. 1989 MARKED THE BEGINNING OF THE STAGNATION OF THE FOREIGN BUSINESS SECTOR, AND A PERIOD OF DISINVESTMENT FOLLOWED. SINCE 1991, INVESTMENT HAS BEEN MODERATE; ACCORDING TO GOG OFFICIALS, MANY INVESTORS ARE AWAITING THE COMPLETION OF POLITICAL AND ECONOMIC REFORMS. THERE IS NO DATA AVAILABLE ON FOREIGN DIRECT INVESTMENT. A LIST OF COMPANIES OPERATING IN GUINEA IS LOCATED IN APPENDIX F.