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FY 1997 Development Fund for Africa: $5,407,414
FY 1997 P.L. 480 Title II: $834,000
Introduction.
Guinea-Bissau, a small, ethnically and religiously diverse West African country, continues to strengthen its democratic processes and to grow economically. While still fragile, these gains are increasingly important as a hedge against political instability which is rising in the region. Guinea-Bissau is important to the U.S. as a model of peaceful, fundamental economic and political transformation for other countries in the region.
USAID plans to close its offices in Guinea Bissau within the next 16 months. Following FY 1997, USAID plans to continue a small, non-presence program through its nongovernmental partners.
The Development Challenge.
World Bank data for 1994 indicate that Guinea-Bissau's per capita income of $234 places it among the least developed nations of the world. An official external debt load of $813 million, more than three times its gross domestic product (GDP), makes the country one of the most heavily indebted in the world. Recent information indicates some improvement in government expenditures and borrowing and a consistent GDP growth rate of around 3%. Guinea-Bissau has recently completed a peaceful transition from a one-party Marxist system to multi-party democracy. Broader participation is also being seen in policy, legal, regulatory, and judicial reforms arising from increasing consultation with representative groups, also strengthening and empowering the private sector. The magnitude of these changes and their evolving nature make it imperative to continue assistance in order to consolidate ongoing efforts and accrue gains to economic growth and democratization. At this stage, policy, legal, regulatory and judicial reforms are not sufficiently strong to promote sustainable private sector-led economic growth.
The economy is heavily dependent on agriculture, with almost half the total land area under cultivation. Agriculture, fisheries and forestry represent almost 52% of the GDP (1994). However, with its valuable natural resources, Guinea-Bissau could provide a much higher living standard for its population if these resources, particularly fisheries and forestry resources, were managed in a more sustainable way. Both of these resources are coming under pressure from the international and domestic private sectors and subsistence farmers. The country also lacks enough people with adequate technical and professional skills and higher-level quantitative and analytical skills to undertake and sustain implementation of the necessary reforms in both the social and economic sectors. Lack of technical and professional skills constrains the private sector, and with the lack of expertise and knowledge by policy-makers, decision-making is often distorted by misleading and/or unreliable statistics.
Other Donors.
In 1994 the United States was the second largest donor (after Sweden) to Guinea-Bissau, providing 21% of bilateral donor resources. Other major donors included France, China, and Japan.
FY 1997 Program.
The focus of the FY 1997 program will be to implement ongoing activities to assure sustainability and to bring activities which require a U.S. presence to a logical termination. USAID's strategy will continue to focus on promoting private sector trade and investment in Guinea-Bissau through improved governance in order to consolidate Guinea-Bissau's broad-based economic growth. Through ongoing support to private sector associations, the USAID program will strengthen the civil society. Supportwill continue to the courts and legislature for drafting and adjudicating laws more conducive to private sector economic growth. Finally, USAID will continue working with the GOGB to support policy reform in agriculture, private sector support services to financial institutions, the tax system, forestry codes, and commerce. USAID will also assist with privatization efforts and decentralization of decision-making.
The USAID program will allocate 78% of its DFA funding in FY 1997 to stimulate broad-based economic growth; 19% of the funds will be allocated to democratic participation to address the governance component of the strategy; 2% will be allocated to protecting the environment and a very small amount will be allocated to stabilizing population growth through decreasing the spread of AIDS and supporting family planning.
Agency Goal: Encouraging Broad-based Economic Growth
USAID's goal in Guinea-Bissau is to foster market-oriented economic growth that is broad-based and sustainable. USAID's single strategic objective reflects this longer-term aspiration by focusing on the increase in private sector trade and investment in the critical growth sub-sectors through improved governance.
USAID's efforts in recent years have taken advantage of the newly created enabling environment, encouraging and supporting the emergence of organized private interest groups. These efforts have resulted in the creation of a significant number of private business associations. The combined efforts of these associations have contributed to remarkable economic growth since 1990, culminating in 1994 when Guinea-Bissau registered an estimated increase in real GDP of 7%. This growth has been due in large measure to strong improvement in net agricultural private exports and buoyant private commercial activity. Thanks in part to past USAID assistance, cashew nuts are the leading export and the key foreign exchange earner for the country. Assistance to producer and trade associations will continue in order to ensure effective transmission of needed skills and knowledge to the private sector, thereby improving its ability to influence policy-makers in the ongoing policy, legal, judicial and regulatory reforms that govern private economic activities in a free-market economy.
USAID also contributes to this Agency goal through the P.L. 480 Title II program being implemented by a U.S. private voluntary organization (PVO). This PVO, Africare, is carrying out a small, and medium-sized enterprise development program in the southern region of Guinea-Bissau. The Title II-financed program is wholly complementary to the overall USAID strategy, especially in providing direct support to the private sector, including individual entrepreneurs, microenterprises and small-scale producer associations working in USAID's six critical growth sub-sectors. The program, carried out in over 20 demonstration villages, provides training in technical and managerial skills to support the private sector. It also has established agricultural and agribusiness training centers in two rural locations to better organize and train small-scale producers and processors in production techniques, marketing, and business development. Graduates of these centers serve as resource individuals and groups for other rural entrepreneurs. The program includes an experimental, small-scale credit program to address a key constraint to private sector growth in rural areas.
USAID will provide very modest support to a U.S. private voluntary organization (PVO) to combat the spread of AIDS by financing commodities for social marketing in Guinea-Bissau. The program will also continue training in information, communication and education in AIDS prevention for the NGO community and public sector. Modest support to a national family planning non-governmental organization (NGO) for both family planning and AIDS prevention will also continue.
Agency Goal: Building Democracy
USAID will devote 19% of its DFA funding to help build democracy in Guinea-Bissau. Following three years of carefully planned and executed constitutional changes and electoral law reforms (extensively supported by USAID) Guinea-Bissau made a highly successful transition from a one-party Marxist dictatorship to a multi-party democracy in 1994. The transition was well planned and executed, with Guinea-Bissau scoring an impressive list of achievements. Two rounds of free and fair elections during July and August 1994 produced the country's first multi-party legislature and the first democratically elected president. The civic education conducted through the mass media during the pre-election process was highly effective, resulting in an orderly election. The media was also successful in disseminating the messages from the various political parties to potential voters. The political behavior of the young opposition parties was mature and constructive, facilitating peaceful transition with no irregularities or human rights abuses.
USAID has been assisting the Ministry of Justice and the Supreme Court to restructure and decentralize. One major change has been the creation of sector courts (essentially small claims courts) around the country. Restructuring of the regional courts, the next higher level for adjudicating commercial law, is now the focus of the GOGB and USAID. USAID-financed training and technical assistance to the judicial system are helping it to strengthen its independence from the executive branch and its credibility with the Guinean population.
USAID will allocate 2% of its Development Assistance resources to this Agency goal. Our focus on the sustainable management of the fisheries and forestry sectors shows strong commitment to help protect the environment, especially in the fragile conditions of the Sahelian region of Sub-Saharan Africa. To assist the GOGB, USAID has helped raise GOGB and private sector awareness about unsustainable industrial fishing activity by foreign vessels under licensing agreements. To increase indigenous participation in all aspects of the fishing industry, USAID will be assisting the GOGB to articulate and implement a management plan for the fisheries sector. USAID also will work with the GOGB, private sector, small farmers and local authorities to help them develop a forestry sector strategy which will allow Guinea-Bissau to sustainably use its forestry resources, balancing competing pressures from the timber industry, energy demand (charcoal and firewood) and itinerant agriculture.
PROGRAM: GUINEA-BISSAU
TITLE AND NUMBER: Trade and Investment Promotion Support, 657-SO01
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997 $5,407,414 DFA
$834,000 P.L. 480 Title II
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 1998
Purpose: To increase private sector trade and investment in the Guinea-Bissau critical growth sub-sectors through improved governance.
Background: For the first decade after independence, the Government of Guinea-Bissau (GOGB) followed a command-economy development model guided by a single political party. This was a major factor in leaving Guinea-Bissau as one of the poorest and least developed countries in the world. A shadow structural adjustment program, started in 1986, opened the economy to private sector activity. From 1987 to 1989, real gross domestic product (GDP) increased over 5.8% per year. By 1990, however, real growth rates dropped to about 3% per year, largely due to an inexperienced private sector and mixed Government performance. Despite steady but slow progress, the 1990-1993 period was characterized by a less aggressive economic reform program, a less than independent and poorly functioning judiciary, and a less than fully democratic and transparent government which did not attract investors. The year of 1994 registered a remarkable record of estimated real GDP growth of 7%. This was due in part to the 100% devaluation of the African Financial Community Franc (CFA) in neighboring countries, which reduced inflation and significantly reduced costs for the private sector. It was also due to other stabilization and adjustment reforms. The advent of a multi-party democracy and a new, inexperienced government has slowed Guinea-Bissau's growth once more to slightly more than 3%. Nonetheless, the GOGB met International Monetary Fund and World Bank targets for 1995.
USAID Role and Achievements to Date: USAID recognizes that sustainable development and economic growth require building lasting individual, institutional and societal capacity to identify and respond to changing circumstances, new needs and evolving opportunities. Changing policies, laws and regulations have motivated a growing private sector, fueling real economic growth and increasing broader participation of Guineans in policy decisions and lawmaking. More directly, USAID's assistance to nascent agricultural producers and women's economic activity associations has increased income to their members, doubling the farmgate price paid to cashew producers and helping family units to market processed nuts rather than raw nuts. Through support to the Association of Small Merchants and Traders, USAID has increased the number of private sector firms which are able to fully and competitively participate in and benefit from Guinea-Bissau's economic opportunities. USAID's assistance to the judiciary and Ministry of Justice has created access by rural populations to an independent, objective adjudicator of civil conflict which responds and integrates traditional law with modern law.
Through these activities USAID has helped to create the beginning of a strong civil society of private interest groups, a more independent mass media, human rights advocates, private legal practice, a bar association, and an increasingly independent judiciary including an independent organization of magistrates.
Description: Virtually all USAID-financed activities are carried out under this strategic objective (SO). Through technical assistance and training, the Trade and Investment Promotion Support activities facilitate and implement: (1) policy formulation; (2) legal and regulatory reform; (3) judicial reform; and (4) assistance to the private sector to ensure that private sector interests are known and respected in policy, legal, regulatory and judicial reforms, and to ensure that the private sector responds to new
economic opportunities in the critical growth sub-sectors. USAID has identified six critical growth subsectors: cashew nuts, fruits, vegetables, rice, forest products, and fish products.
These subsectors are those areas of the economy that are creating and will continue to create economic growth in Guinea-Bissau, improving the economic well-being of the vast majority of the country's population.
Host Country and Other Donors: Other major donors operating in Guinea-Bissau are Sweden, The European Union, France, United Nations Development Program, China, Japan, United Nations Children's Fund, World Health Organization, Portugal, Food and Agriculture Organization, The Netherlands, and Canada. These donors assist in governance, structural adjustment and stabilization programs, agriculture, health and family planning, education and infrastructure building. Guinea-Bissau is a small poor country with considerable needs, in that regard the representatives of USAID and the other donors meet or communicate with others regularly to exchange views, and to share program and project information in order to complement each others work when and wherever possible. The GOGB has consistently supported USAID-funded activities with in-kind contributions such as personnel, equipment and other materials.
Beneficiaries: Primary beneficiaries are the private sector, represented by associations (including women), other social and legal interest groups and specific ministries (Fisheries, Commerce, Agriculture, Justice and Energy, Industry and Natural Resources).
Principal Contractors, Grantees, or Agencies: USAID implements its activities through a consortium of firms, with Labat-Anderson, Inc. being the prime contractor. Other members of the consortium are: Management Systems International; New York State University at Albany; Africare; and the Land Tenure Center at the University of Wisconsin.
Major Results Indicators:
Baseline Target
No. of Commercial Firms Registered 1,919.0 (1991) 2,400.0 (1998)
Export Earnings ($million/FOB)
-- Cashews 14.1 (1991) 17.6 (1998)
-- Fish and Fish Products 2.6 (1991) 3.3 (1998)
-- Total Exports 0.4 (1991) 25.5 (1998)
No. of foreign and domestic 28.0 (1991) 36.0 (1998)
firms granted customs exemptions
under new investment code
|
Encouraging Broad-based Economic Growth |
Stabilizing Population Growth and Protecting Human Health |
Protecting the Environment |
Building |
Providing Humanitarian Assistance |
TOTALS |
|
|
USAID Strategic Objectives |
||||||
|
1. Increase Private Sector Trade and Investment Through Improved Governance - Dev. Fund for Africa - P.L. 480 Title II |
4,220,301 |
4,304 |
130,549 |
1,052,260 |
834,000 |
5,407,414 |
|
Totals - Dev. Fund for Africa - P.L. 480 Title II |
4,220,301 |
4,304
|
130,549
|
1,052,260
|
834,000 |
5,407,414 834,000 |
USAID Mission Director: Cheryl A. McCarthy