Identifier
Created
Classification
Origin
06DAKAR2459
2006-10-12 16:40:00
UNCLASSIFIED
Embassy Dakar
Cable title:  

AGOA ELIGIBILITY REVIEW - GUINEA-BISSAU

Tags:  ETRD ECON AGOA PU 
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VZCZCXRO7508
PP RUEHMA RUEHPA
DE RUEHDK #2459/01 2851640
ZNR UUUUU ZZH
P 121640Z OCT 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 6548
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY
UNCLAS SECTION 01 OF 02 DAKAR 002459

SIPDIS

SIPDIS

DEPT PLEASE PASS USTR FOR CONNIE HAMILTON
DEPT FOR AF/W AND AF/EPS - JANET POTASH

E.O. 12958: N/A
TAGS: ETRD ECON AGOA PU
SUBJECT: AGOA ELIGIBILITY REVIEW - GUINEA-BISSAU

REF: STATE 163056

Embassy Dakar is pleased to provide information for Guinea-Bissau's
AGOA eligibility review. The following information is based on the
template provided and has also been provided via e-mail to AF/EPS.


Country: GUINEA-BISSAU
Current AGOA Status: Eligible

Country Background Summary: Guinea-Bissau's population in 2005 was
1.6 million. 2005 GNI was USD 283 million and GNI/capita was USD

180. Following legislative elections in 2004, the United States
lifted FAAA Section 508 sanctions against Guinea-Bissau. Following
free and fair presidential elections in 2005, Joao Bernardo "Nino"
Vieira was inaugurated as President. That concluded Guinea-Bissau's
transition back to democratic rule. The Government is actively
pursuing austerity measures and fiscal control in hopes of
attracting donor and investor attention. However, the economy
remains very weak. Guinea-Bissau has not yet had much success
attracting foreign investment and has not yet taken advantage of its
AGOA membership to increase exports to the U.S. However, the
Government is beginning to take some positive steps. In September
2006, USAID launched an AGOA Resource Center to the Chamber of
Commerce. In the long-term, with key infrastructure and sectoral
improvements, Guinea-Bissau has the potential to export products,
including processed cashews, fish and seafood, fruits, and even
rice. AGOA eligibility remains an important symbol of U.S.
engagement with this post-conflict state and offers an incentive to
encourage the Government to enact market enhancements, continue
security sector reform, economic development in key sectors, and
institutionalize recent democratic advances.

Comments on Eligibility Requirements


I. Market-based Economy


A. Major Strengths Identified
Before the 1998-99 civil war, trade reform and price liberalization
were the most successful features of the country's structural
adjustment program under IMF sponsorship. Privatization has
nominally continued under IMF auspices since the war, but progress
remains slow due primarily to lack of private sector response.
Guinea-Bissau remains open to foreign private investment, but

minimal infrastructure remains a significant disincentive.

Under the enhanced HIPC initiative Guinea-Bissau could be eligible,
upon completion of arrears and fulfillment of other obligations, for
up to USD 790 million in debt relief. According to GOGB officials,
the country owes USD 481 million in multilateral debt and USD 511
million in bilateral debt (none owed directly to the United States).
The GOGB will need to negotiate a new PRGF program to become
eligible for further debt relief. For the moment, donor priority is
focused on assisting the GOGB to cover immediate operational
expenditures.

Guinea-Bissau joined the West African Economic and Monetary Union
(WAEMU) in 1997, and has made efforts to harmonize its policies with
the standards of the WAEMU, including a switch to a single
value-added tax (VAT) rate. As of April 2006, the World Bank had
disbursed USD 293 million of a USD 309 million program to support
sectors like transport, energy, the economic recovery plan,
agriculture, health, education, and private sector rehabilitation.


Notably, in 2006, the government initiated a privatization program
for 14 companies with an estimated total market value of
approximately USD 51 million, including two hotels.


B. Major Issues/Problems Identified
A post-conflict society, with an economy devastated by a 1998-99
civil war, Guinea-Bissau is ranked 172 out of 177 among countries on
the 2005 UNDP Human Development Index. Misappropriation of funds by
earlier regimes led the IMF to suspend its assistance and in turn
triggered a similar suspension by most bilateral donors. The
suspension of almost all aid deepened the country's economic
paralysis. By late 2006 there was some renewed interest by the
World Bank, IMF, and bilateral donors to support Guinea-Bissau's
reform efforts and development needs.

II. Political Reforms/Rule of Law/Anti-Corruption


A. Major Strengths Identified
The democratically elected government is improving the rule of law.
Evidence includes: the court system is functioning, though with
serious resource constraints; customs receipts are channeled
directly into state coffers; and the Ministry of Finance must clear
on all disbursements to ministries and public bodies.


B. Major Issues/Problems Identified

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The Government has difficulty paying civil sector and military
personnel on time. The Government must move rapidly to reform and
downsize the bloated and outdated military, including creating a
military retirement system which will be costly and difficult to
implement without significant outside assistance.

III. Poverty Reduction


A. Major Strengths Identified
The new government is expected to resubmit the National Poverty
Reduction Strategy Paper (DENARP) for further review.


B. Major Issues/Problems Identified
During 2003, the dismissal of the Assembly and the increasingly
autocratic behavior of ex-President Kumba Yala led to World Bank and
IMF rejection of Guinea-Bissau's Poverty Reduction Strategy Paper
(PRSP). The GOGB is working on a draft renewed PRSP and plans to
submit this document to the WB/IMF Executive Boards in late 2006 or
early 2007.

Of 1.6 million people, 58.9 percent of the men and 82 percent of the
women are illiterate, including a majority of members of the
National Popular Assembly (ANP).

IV. Workers' Rights/Child Labor/Human Rights


A. Major Strengths Identified
In March 2001, with U.N. support, a tri-partite National Council for
Social Consultation (CNCS) was legally established and began
functioning. The Council conducts collective consultations on
salary issues and on draft legislation related to labor issues. The
ANP ratified Convention 182 on the worst forms of child labor in
July 2002. The Constitution grants all civilian workers the right
to form and join trade unions.

The right to strike and protection against retribution is
guaranteed.

Guinea-Bissau does not engage in gross violations of internationally
recognized human rights.


B. Major Issues/Problems Identified
Female genital mutilation (FGM) is practiced widely. Child labor,
including some forced child labor, is a problem. Institutions
created to work for the elimination of the worst forms of child
labor are not effective because of a continuing severe economic
crisis.


V. International Terrorism/U.S. National Security


A. Major Strengths Identified
Guinea-Bissau has been a vocal supporter of U.S. anti-terrorist
actions, and does not engage in activities that undermine U.S.
national security or foreign policy interests.


B. Major Issues/Problems Identified
In 2006 there were credible, public reports of significant
quantities of cocaine transiting Guinea-Bissau en route to Europe.
Guinea-Bissau is a preferred transit point in West Africa for
traffickers because of the government's inability to monitor and
control its borders and the corruptibility of officials who do not
receive regular salaries.

Jackson