Guinea. Economic analysis

The two main documents for the legal regulation of foreign investments are the Investment Code of 1987 and the Code of Economic activity of 1992.

The Investment Code of 1987 lists and defines the principles of Guinean legal approach to private enterprising of foreigners. These are the main of these principles: free transfer of profits abroad; legal equality of a foreigner and a Guinean, a legal person and a natural person; legal guarantee of expropriation and nationalization; legal equality of government-owned and private enterprises; free import of equipment and free export of finished products; free production management and free selection of a partner.

The Code also fixes a list of priority fields and guarantees that state benefits will be granted to those foreign investors who are engaged in one of the listed branches. This list was modified by the President's decree of June 30th, 1995. On the grounds of this decree the following sectors are considered privileged: agricultural sector (especially productive food crops), industrial sector, cattle breeding, fishing, fertilizers production, medicare and education, tourism, construction and banking business. This very decree also subdivided Guinea into 4 economic zones, and each of them was to have its own benefit-and-privilege system depending on its development level.

Annex I to the Investment Code deals with the limitations for legal/natural foreign person's activities. In publishing business and TV/ radio broadcast foreigners are not allowed to hold more than 40% of shares and are prohibited from directing a mass-media enterprise.

Annex II contains a list of those branches of Guinean economy where private capital - both national and foreign - is not allowed. The list includes: electric power, water supply, post service and telecommunication service, armament production and sale. In the 2nd article of the annex it is specified that in exceptional cases the National Investment Committee might allow private capital into the prohibited branches.

By now the economic liberalization in Guinea reached the point when the Investment Code of 1987 has grown completely out-of-date and calls for prompt changes. There will be no need for arguments if we take into consideration the drastic increase of the amount of foreign capital in what used to be the "prohibited" fields. There are the examples of, telecommunication service SOTELGUI, water power company SEEG - foreign capital makes up a considerable part of their finance. The managements of these companies are nominally Guinean, but in fact their steady functioning is possible only due to the help foreign experts and personnel.

6 major ways of penetration of foreign capital into the public sector can be distinguished.

Technical support. As a general rule, this type of economic activity isn't lengthy enough to have a strong influence on the policy of an enterprise.
Delegation of a representative to the general directorate of an enterprise allows a foreigner to take part in the management of a state-owned enterprise but doesn't ensure an equal free-hand in the private sector.
Lease of an enterprise allows a private person to shoulder complete responsibility for the current management of a public service. In this case the government has the exclusive right to regulate the investments and prices of the finished products (management structure of SOGEL electric company can be used as an example here).
Consession. In this case a private legal / natural person has the exclusive right to manage the enterprise and run all the financial operations. After termination of the consession term the enterprise with its entire infrastructure is passed over to the government.
Creating an open joint-stock company gives a chance to hold a controlling block of shares and thus have influence on the policy of an enterprise
Privatization. A private person takes possession of the enterprise and provides for its steady development and functioning.

All the listed ways of foreign capital penetration into the public sector of Guinea are working out quite successfully while the government continues to regulate foreign capital activity on the Guinean territory and reserves the right of the last word in all the arising questions.

The Code of Economic activity of 1992 establishes the principle of regime reciprocity: a foreign citizen may freely engage in all economic activities in Guinea provided that a Guinean citizen is granted a right to participate in identical activities in the country of the foreigner. But this principle doesn't always work in reality. The citizens of better developed countries have an opportunity to monopolize a sector on Guinean economy, and in Guinea a foreigner enjoys the save economic privileges and performs the same duties as a Guinean, but only subject to observing the provisions of the Foreigners' Entry and Stay Act of 1994.

Apart from the two main codes, foreign economic activity is touched upon in various sectoral acts, such as the Sea-Fishing Code and the Mining Code of 1995. The permission for domestic diamond and precious metals development may be granted only to natural and legal persons of Guinean nationality.