Guinea - Power Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY te.rt No. P-2895-GUI REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REVOLUTIONARY PEOPLE'S REPUBLIC OF GUINEA FOR A FIRST POWER PROJECT December 1, 1980 This document bus a retricted dibution and may be used by recipients only in the perfornace of their dllcial duties. Its contents may not otherwise be disclosed without World Bank autboriatlon.  CURRENCY AND EQUIVALENTS The official monetary unit is the Syli. Syli 1 - US$0.053 US$1 - Syli 19.00 MEASURE AND EQUIVALENTS gram (g) = 0.0022 pounds kilometer (km) = 0.62 miles meter (m) = 39.37 inches kilovolt (kV) = 1,000 volts kilowatt (kW) = 1,000 watts kilovolt-amperes (kVA) = 1,000 volt amperes Megawatt (MW) = 1,000 kilowatts (kW) Gigawatt hour (GWh) = 1 million kilowatt hours (kWh) ABBREVIATIONS AND ACRONYMS BGCE - Banque Guineenne du Commerce Exterieur CCCE - Caisse Centrale de Cooperation Economique DEG - Direction des Eaux de Guinee KfW - Kreditanstalt fuer Wiederaufbau MINEK - Ministere de l'Energie et du Konkoure MIP - Management Improvement Program OCOFI - Office de Coordination Financiere de l'Industrie SNE - Societe National d'Electricite FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY THE REVOLUTIONARY PEOPLE'S REPUBLIC OF GUINEA FIRST POWER PROJECT CREDIT AND PROJECT SUMMARY Borrower: Revolutionary People's Republic of Guinea Beneficiary: Societe Nationale d'Electricite (SNE). The proceeds of the Credit would be transferred as a grant from Government. While the state holding company (OCOFI) would be the owner of the assets created under the project, SNE would operat the assets. Amount: SDR 22.1 million (US$28.5 million equivalent). Terms: Standard. Project Description: The project would be part of the Government's 1980-84 Re- inforcement Rehabilitation, and Expansion Program for the power facilities serving the capital, Conakry, and the surrounding areas. The objectives of the project would be: (i) to rehabilitate, reinforce and expand power distribu- tion in Conakry; (ii) to strengthen the Societe Nationale d'Electricite (SNE), the power sector entity. The project would include: (i) the rehabilitation of part of the Conakry distribution network; (ii) a training program implemented through constructing, equipping and operating a new training center and through scholarships abroad; (iii) technical assistance to improve the management, organization and finance of SNE; (iv) constructing and equipping a repair shop and a laboratory for SNE and houses for key personnel; (v) consulting services for the feasibility study of the rehabilitation works, for a sector organization study and for preparation of a follow-up project to include identification of hydro-sites and feasibility studies for those sites that could be developed to meet an increase in demand; and (vi) the carrying out of an action program designed to improve SNE's management and opera- tions. Benefits and Risks: The principal benefit would be the increase in power consumption from the 1980 level of about 100 GWh to about 260 GWh in 1985, a growth of about 13 percent per annum. This increase would serve the needs of the industrial and newer residential areas of Conakry. The Government is keenly interested in this project and there are no special technical risks. The longer- term success of the project depends on achieving the institu- tion-building objectives, notably, the improvement of SNE's operations. The provisions in the project for technical assistance and training would reduce such a risk. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenst may not otherwise be disclosed without World Bank authorization  - ii - Estimated Project Cost: The cost of the proposed project (net of taxes), including refinancing Cr. S-22-GUI and advances under the Project Preparation Facility, is estimated at US$32.5 million equivalent. Foreign costs are estimated at US$28.5 million (about 88 percent). A summary table of cost estimates is shown below: Local Foreign Total ---------US$ million-------- Rehabilitation of Conakry II distribution network 1.2 8.2 9.3 Scholarships - 1.0 1.0 Technical Assistance 1.0 4.8 5.8 Civil Works and Equipment for training center, repair shop, laboratory and housing 0.6 3.3 3.9 Consulting services 0.2 1.8 2.1 Base Cost 3.0 19.1 22.1 Contingencies: Physical 0.3 1.9 2.2 Price 0.8 6.3 7.1 Total Cost 1/ 4.0 27.4 31.4 Refinancing Cr. S-22-GUI - 1.1 1.1 Total Project Cost 4.0 28.5 32.5 Financing Plan: Local Foreign Total ------------US$ million------------ IDA Credit - 28.5 28.5 Government 4.0 __ 4.0 Total 4.0 28.5 32.5 NB. Totals may not add due to rounding. 1/ Including items financed under Project Preparation Facility advances.  - iii - Estimated Disbursement: FY81 FY82 FY83 FY84 FY85 Annual 2.6 4.4 9.5 9.2 2.8 Cumulative 2.6 7.0 16.5 25.7 28.5 Rate of Return: The economic rate of return on the entire Program is estimated at 6.7 percent at current tariff levels and about 23 percent at the tariff levels to be introduced during project implementation. Staff Appraisal Report: Report No. 3055-GUI dated November 25, 1980. Maps: IBRD Nos. 14974R and 14975 Charts: IBRD No. 21517   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REVOLUTIONARY PEOPLE'S REPUBLIC OF GUINEA FOR A FIRST POWER PROJECT 1. I submit the following report and recommendation on a proposed Development Credit to the Revolutionary People's Republic of Guinea for SDR 22.1 million (US$28.5 million equivalent) on standard IDA terms to help finance a First Power Project. PART I - THE ECONOMY 1/ 2. Since 1976 Guinea has been reexamining its development policies, institutions and relations with the outside world, while making an effort to adjust to rapidly changing economic conditions. This process has broadened the opportunities for Bank involvement in Guinean development efforts and has permitted a more fruitful dialogue on some development policy issues. Economic missions have identified the major structural constraints to the growth of output and income and have provided a basis for planning an ex- panded Bank group involvement in key sectors. The latest mission took place in February 1980 and its findings and those of earlier missions are re- flected in the following assessment of the state of the economy and its prospects. An Economic Memorandum is now being prepared and is.expected to be discussed with Government in early 1981. Background 3. Guinea is well endowed with arable land, water, and mineral re- sources. Its broad range of eco-climatic zones allows diversified crop production in addition to cattle raising, forestry and fishing. Before Independence, the country was a major exporter of bananas, coffee, pineapple and palm oil, and was practically self-reliant in basic foodstuffs. With respect to mineral resources, bauxite reserves are estimated at 6.5 billion tons, or 29 percent of the world's known reserves in 1979. Considerable high-grade iron ore deposits have been identified and there are good geological prospects for uranium and offshore oil. Numerous rivers provide significant potential for hydroelectric power. Past Performance (1958-73) 4. Notwithstanding Guinea's resource endowment, economic performance from the time of Independence until 1973 was disappointing. Real growth of GNP during this period was estimated at less than 2.5 percent annually, lower than the rate of population growth. Agricultural exports practically vanished 1/ The text of this section is largely unchanged from that in the Pre- sident's Report for the Livestock Project, which was distributed to the Executive Directors on August 20, 1980.  - 2 - and Guinea became a net food importer of even its staple food, rice. The years following independence were characterized by a comprehensive reorganiza- tion of all economic and social activities in Guinea with a view to building a socialist economy. This entailed a sharp curtailment of the private sector and the establishment of Government trading companies operating at controlled prices, the creation of numerous other public enterprises in manufacturing, transport and other sectors, and extensive State investment in industrial transport and social infrastructure. The success of many projects was limited by managerial inexperience and planning inadequacies, and public enterprises absorbed high and rising amounts of Government resources. The capital costs and recurrent expenditure of the public sector exceeded budgetary savings and the Government resorted to heavy foreign borrowing and Central Bank advances to finance them. Foreign borrowing from Western and centrally planned economies was carried out on an ad hoc basis and soon resulted in unmanageable debt obligations that could not be met by the declining export earnings. At the same time the liberal policies of the Central Bank led to a rapid increase in money supply, high inflation and an overvalued exchange rate for the Syli. Consequently the public trading enterprises could neither obtain adequate supplies of local goods at official prices nor distribute them widely enough, and an active parallel market developed with prices substan- tially higher than official levels. The lack of foreign exchange also caused sharp reductions in imports of raw materials and intermediate inputs, which constrained production in manufacturing, agriculture and consumer goods. The economy thus stagnated in a mutually reinforcing cycle of foreign exchange shortages, poor incentives, and declining investments, output and exports. 5. While the lack of foreign exchange sharply limited the supply of imported goods, and indirectly of local products as well, excess money supply strongly stimulated local demand. As a result of 15 years of deficit financing, money supply reached a high level of 44 percent of GDP in 1973, or about twice the level attained in most other West African countries. Most of this money overhang was concentrated in the urban areas where it reinforced excess demand and absorbed much of the limited supply of goods that would otherwise have been available to the rural areas. Meanwhile, official prices were substantially below adequate levels and the result was widespread parallel transactions in the markets for goods, labor and foreign exchange. 6. These trends created considerable difficulties for the population. The rural population, about 80 percent of the total, operated principally at a subsistence level, selling as little as possible on the official market, and was largely excluded from the official distribution of imported consumer goods. On the other hand, the urban population had to compete for the limited supply of goods it could buy through official channels with rationing cards, and was forced to supplement its needs in the unofficial market at high prices. 7. Foreign debt reached 75 percent of GDP in 1973, and public debt service approached 72 percent of export earnings. Arrears on debt service accumulated rapidly and foreign reserves dwindled. In 1972/73 the current account deficit exceeded US$170 million or 18 percent of the GDP.  -3- Recent Trends (1973-79) 8. The productive and financial bases for a more dynamic economy have been strengthened since 1974, although the country's economic development is still hampered by structural problems. This improvement in underlying conditions, brought about initially by new bauxite mining operations, was further encouraged by the gradual adoption since 1978 of more outward-looking policies towards Western nations and neighboring countries, notably the Ivory Coast and Senegal. 9. Development of two large bauxite mines raised GDP growth to an average of 3.2 percent per annum between 1973 and 1979 in real terms, while GNP increased at 3.4 percent per annum. By 1979 per capita GDP of Guinea's 5.3 million inhabitants reached US$292 and per capita GNP US$274. The rural sector has continued to dominate the economy, its share in GDP in 1979 re- presenting 41 percent compared to 58 percent in 1973, while the mining sector's contribution more than quadrupled, from 4 percent to 18 percent over the last 6 years. 10. Increased gross domestic output, especially for exports, and a stricter control of aggregate demand allowed Guinea to record a balance- of-trade surplus of about US$25 million per annum on average between 1976-78. However, the current account recorded a deficit of US$61 million per annum on the average during this period or about 4 percent of the GDP. The overall balance of payments remained in deficit at about US$94 million per annum. This deficit was due to increasing factor service payments mainly related to the mining operations, and to relatively low capital inflows. The balance of payments deficit has been financed in about equal proportions through an accumulation of debt arrears and by a decrease in gross foreign exchange reserves. At the end of 1978 foreign reserves covered only one month of imports compared to almost three months at the end of 1975. 11. About 60 percent of gross export earnings has been used to pay for both direct foreign exchange costs of mining operations and mining related debt service, leaving only 40 percent to pay for increased imports of essential raw materials, foodstuffs and consumer goods, hardly enough to provide necessary current inputs for manufacturing and agriculture, and adequate incentives to producers. In the agricultural sector, Government has attempted to stimulate production through an increase in public invest- ment and efforts to improve distribution of consumer goods in the hinter- land. Investment, however, has been concentrated on mechanized collective farms whose output has been disappointing. Furthermore, inadequate producer prices and poor supply and distribution of goods to rural producers through official trade channels remain serious obstacles to sectoral development. Private trade has been tolerated since 1977. Its legalization in 1979, a step towards lessening restrictions on the circulation of goods and people internally and across national borders, has led to improved supply of consumer goods and foodstuffs through imports by private traders using their own foreign exchange.  12. Higher bauxite exports and favorable world market conditions have greatly increased Government revenue through taxation and sharing of profits. Since 1973 Government current revenues and, in particular, tax revenues have thus increased markedly faster (19 percent p.a.) than GDP (7.2 percent p.a.), while public recurrent expenditures have increased at a moderate 11.5 percent per year. Part of this additional revenue has been turned over to the Central Bank for amortization of accumulated Government debt. Though Government domestic borrowing declined from US$189 million in 1973 to US$62 million in 1979, this reduction was more than compensated by an increase in credit extension to public enterprises, from US$359 million in 1973 to US$990 million in 1979 required in part by the transfer of their profits to Government as discussed in para 13. Total credit to the public sector thus expanded from US$548 million in 1973 to US$1,052 million in 1979. At the same time, the Government reduced the amount of currency in circulation, while the deposits of the private sector decreased, and those of public enterprises increased at a much slower pace than their sales. The money supply has thus been kept relatively stable in absolute terms and has declined in relative terms to 33 percent of the GDP at mid-1979. These deflationary measures, together with trade liberalization and the influx of private foreign exchange assets converted into import goods, led to a fall in prices and exchange rates on the parallel market, and probably to some improvement in the real purchasing power of most of Guinea-s poorest popula- tion. 13. Net transfers from public enterprises to the Government have increased substantially in recent years, due mainly to a growth in commer- cial profits of trading enterprises having access to undervalued foreign exchange (provided by the mining and agricultural sectors), and insufficient expenditure by public enterprises for both replacement investment and current maintenance. However, Government has demonstrated a desire to better maintain and fully exploit existing capital assets and has begun to allocate a larger proportion of its recurrent budget for much needed mainte- nance expenses and spare parts. Importantly, it is also undertaking serious examination of the viability of public enterprises; a few of the least successful ones have been closed down, while others have embarked on rehabi- litation programs, some with external assistance. The Government's objec- tive is to make these enterprises self-sufficient and it has therefore recognized the need to revise pricing policies to enhance cash flows, to ensure adequate credit to maintain working capital and stocks, and to call upon foreign technical assistance (including post-rehabilitation management assistance) to strengthen operational efficiency. 14. Most investment in Guinea is of a public or parapublic nature. The third and most recent development plan covered the period October 1973 to December 1978. Its original forecasts called for public and parapublic investment outlay of US$2.9 billion or about 45 percent of the GDP, of which US$1.8 billion, or 65 percent of total investment, was to be in semipublic joint ventures with foreign investors (mainly in the mining sector). The plan was later scaled down to US$1.7 billion (of which US$870 million for Central Government investment per se) to take into account delays in the implementa- tion of iron ore projects at Mount Nimba and Simandou, and of bauxite mines  at Dabola and Tougue. Actual investment by the central Government (including that for public enterprises) is estimated at US$478 million during the plan period, or 55 percent of planned expenditure. Two-thirds of central Government investment was financed by foreign assistance. Foreign borrowing was particu- larly heavy between 1973-76, when it covered over 70 percent of financing requirements. Large outlays in connection with mining operations, purchase of equipment for rural production brigades, as well as for the transport sector, were the main components in the high investment levels in the 1973-76 period, which were over US$100 million per annum. In 1977-78, partly because of reduced availability of foreign financing, investment outlays of the central Government fell to less than US$74 million per annum. In addition to this, the central Government disbursed about Sylis 9.7 billion (almost US$500 million) in financial assistance to public enterprises over the 1976-79 period. Prospects 15. Guinea's long-term development prospects are good on the basis of its mineral resources and agricultural potential. However, the Government has not yet defined its development priorities for the next Plan period, other than the customary major projects in need of foreign financing. Based on Bank analysis and projections, it appears that Guinea's short- and medium-term economic development prospects will hinge mainly on the rate of growth in the mining sector, while long-term prospects will also be affected by rural development. Mining exports increased from US$61 million in 1973 to over US$360 million in 1979 and are likely to reach US$400 million in 1980. 16. Despite this favorable farecast, the foreign exchange situation will remain critical unless new major sources of foreign exchange are identified in the near future. This is because of: (a) the high foreign exchange element in the operating costs in mining projects; (b) increasingly high debt service obligations, including substantial arrears; and (c) import requirements for the manufacturing, transport and other sectors as well as for minimum needs for foodstuff, consumer goods, and services. Guinea will therefore need large amounts of external assistance to support its balance of payments until at least 1985. Foreign Assistance and External Debt 17. Over the past few years, Guinea has been diversifying its sources of foreign assistance through renewed ties with the Western industrialized countries, expanded relations with such OPEC countries as Algeria, Iraq, Libya, Kuwait, Saudi Arabia and with multilateral sources. During this process, Guinea faced a rather difficult transition period between 1975-78. at which time increased reliance on private financing (particularly suppliers credits) hardened external borrowing terms and put additional pressure on the balance of payments. More recently, there is evidence that public assistance is gradually replacing private financing, and the average terms of external borrowing in 1979 were softer than those recorded in the previous two years. Both the Bank Group and IMF have maintained a dialogue with the Government on a wide range of policy matters, and Guinea has qualified for drawings under the IMF first credit tranche and trust fund facilities.  - 6 - 18. The accumulation of foreign debt to finance investments in public infrastructure and public enterprises as well as public consumption, has resulted in a burden of foreign obligations which is, and will remain for years, a major problem. Guinea's external outstanding public debt reached US$1.3 billion as of December 31, 1979, of which US$1 billion (66 percent of GDP) was disbursed. Loans denominated in convertible currency amount to 53 percent of the total public debt disbursed as of the end of 1979 and to 83 percent of the 1979 disbursements. Limited foreign exchange earnings have hindered the payment of debt service, and despite the negotiation of several rescheduling agreements, outstanding arrears on loans due in convertible currency totalled US$114 million at the end of 1979. During 1979 debt service was projected to be US$143 million of which only U$82 million was actually paid. In 1978 and 1979 the ratio of debt service obligations to gross export earnings was about 50 percent if debt service on private borrowings, i.e., debt owed by the two mixed bauxite companies, be included. Actual service payments amounted to about 35 percent of export receipts. 19. Service for public debt outstanding at December 31, 1979 should exceed US$140 million per annum over the 1980-82 period. Even if foreign capital inflows cover the entire foreign exchange costs of new investments, arrears are likely to rise further, at a pace provisionally estimated at US$60 million per annum, of which two thirds in convertible currency. Service on new commitments would of course further increase this amount. With limited scope to maneuver, the Government has addressed the problem through debt rescheduling negotiated bilaterally with some creditors, and measures to improve debt management through the newly established External Debt Department in the Central Bank, to which the Bank has provided techni- cal advice as part of its economic work. The Government has also undertaken a stricter control of investments financed by external credits, and a more judicious official import program. Some relief was provided in this area by the opening of trade. However successful these efforts may be, during the next few years Guinea will have to rely on substantial amounts of foreign assistance on concessionary terms. This will be needed not only for invest- ment purposes but also to provide foreign exchange for intermediate and consumer good imports which are vital to stimulate economic activity and relieve supply constraints, particularly in the rural sector. Furthermore, despite the Government-s achievements in keeping the growth of its current consumption expenditures below the growth of revenue, net public savings after debt service will be negligible until the mid-1980s, and local cost financing by external sources will be needed. PART II - BANK GROUP OPERATIONS IN GUINEA 20. To date, the Bank Group has financed ten operations in Guinea Two loans totalling US$73.5 million in FY68 and FY71 financed infrastructure for the Boke Bauxite Mining Project. IDA credits of US$7 million and US$14 million respectively were granted in FY75 for the Daboya Pineapple Development Project and in FY76 for a Road Maintenance Project. In FY79, three credits  were signed, one of US$8 million for an Education Project, the second of US$12.5 million for a Water Supply and Sanitation Project and the third of US$1.13 million for a Power Engineering and Repair Project. Two addi- tional credits were signed in 1979, one of US$10.4 million for a Rice Develop- ment Project, the second of US$13 million for a Second Highway Project. A credit of US$17.5 million for a Livestock Development Project was signed in November 1980. Annex II contains a summary of Bank loans and IDA credits and notes on the execution of ongoing projects as of September 30, 1980. 21. The Bank Group's share in Guinea's external public debt outstanding and disbursed as of December 31, 1979, and of total public debt service in 1979 amounted to 8.1 percent and 11.4 percent respectively. IDA credits represent 5.3 percent of Bank Group outstanding commitments and a negligible proportion (0.2 percent) of Guinea's public debt service payments. By 1985 the Bank Group's share in Guinea's public debt outstanding will reach 16.5 percent of total commitments, 63.8 percent of which would be IDA credits. IBRD's share of debt service will drop to 6.3 percent, while that of IDA will remain insignificant at 0.5 percent of total public debt service payments. 22. In view of the general shortage of foreign exchange and the poor state of infrastructure in Guinea, the Bank Group's first projects were aimed at promoting mining and agricultural exports and at beginning to rehabilitate road infrastructure. The Boke Project was completed satisfactorily and bauxite output has increased steadily. The Daboya Project experienced early implementation delays but the agricultural production components are now being developed at an acceptable pace. However, pineapple exports remain well below the expected level. The Association is making intensive efforts to assist the Government in improving internal transport and export marketing, which are the main impediments to increased exports. Provided these problems can be over- come, Daboya could become a model for other small-holder development schemes. The first Highway Project has been largely successful in rehabilitating and maintaining a major part of the transport network vital for agricultural development. 23. Encouraged by the experience in execution of these first proj- ects, the Bank group has begun to expand and diversify its lending program. This has been facilitated by agreement reached with Government on four basic priorities: (i) rehabilitating and maintaining basic infrastructure; (ii) improving human resources; (iii) expansion of mining; and (iv) developing the rural sector. The first three would gradually remove constraints on the development of economic activities, including lack of foreign exchange, and would increase absorptive capacity, while the benefits of the fourth would be distributed among the largest segment of the population. Thus Bank Group operations in each of these four areas have been approved or are under preparation, with particular emphasis on sectoral planning, institution building and training. The Water Supply and Power Engineering Projects, the latter initially concentrating on the deteriorated system in Conakry, and the more comprehensive First Power Project which is proposed in this report, concentrate on the first objective of improving infrastructure. The Second Highway Project supports this strategy and would expand the road rehabilita- tion and maintenance work begun under the First Highway Project. It would  - 8 - also strengthen certain sector institutions to help Guineans acquire and successfully apply the engineering and technical skills necessary to plan, design and implement road transport projects. The first Education Project arose out of the clear need for more trained technical manpower, and aims to assist the Government in improving and expanding training programs for industrial technicians and skilled workers with emphasis on strengthening sector institutions. Because of the vital importance of mining in helping alleviate the country's foreign exchange shortage, the Bank Group is also considering further intervention in this sector. Feasibility studies are being reviewed for the Nimba Iron Ore Mining project and for the Konkoure Hydroelectric Power/Aluminum Smelter project (para. 26). 24. One of the Government-s main priorities is to increase the ex- ploitation of agricultural and livestock resources. It is in the rural sector, however, that the country has experienced the greatest difficulty in harnessing its development potential. The Bank Group has found it difficult to find nonenclave projects suitable for financing. Basic institutional support for the rural sector, financial incentives to farmers, accessibility to modern technology, as well as applied agricultural research activity have been virtually non-existent. These factors affect the willingness and ability of Guinean farmers to respond to production expectations. To come to grips with these fundamental issues, the Bank Group has been working with Govern- ment to prepare a series of projects which entail direct intervention in the rural sector in activities chosen for their growth potential. The Rice Development Project approved in FY80 stresses institution-building at the national level and is introducing low-cost improved rice production methods on a pilot basis in a potentially highly productive part of the country to test farmer response. The project also includes consultant services to carry out a study of agricultural prices and rural incentives. The Livestock Development Project approved in September 1980 aims at strengthening the institutions responsible for day-to-day field operations and sectoral planning and analysis, improving animal health and productivity, and training livestock sector staff. 25. The Bank Group will continue to assist the Government in developing its policies toward newer sectors of activity and is beginning to prepare an industrial rehabilitation project to help improve the efficiency and productivity of the country-s public enterprises and to foster further growth of the private sector. A port project, also under consideration, would aim at rehabilitating the port facilities, fulfilling cargo handling require- ments and improving port administration and operations. At the same time, an urban project is being prepared which would be designed to upgrade several low income settlements and develop sites and services in Conakry. The Bank Group is executing agency for a UNDP financed Water Resource Master Plan which will start shortly, and which is aimed at helping the Government to formulate a program for rational use of water resources.  - 9 - PART III - THE POWER AND ENERGY SECTOR Energy and Power Resources 26. Although data for the energy sector are incomplete, it is esti- mated that firewood and charcoal provide 65 percent of the approximately one million tons of crude oil equivalent (TOE) energy consumed by house- holds, transport and industry (other than mixed enterprises) as primary energy in 1978. For cooking and other domestic use, firewood remains the most important fuel source for most of the Guinean population, including urban households. The intensive use of firewood is leading to a significant depletion of forests surrounding the towns, particularly in the savannah region of the north. Total power generation in Guinea in 1978 was about 150 GWh, of which about 88 percent was hydro generation and 12 percent diesel generation. In 1979 Guinea imported US$71 million of petroleum products (40 percent of total imports from all sectors), of which US$35 million were used by FRIGUIA and CBG, large bauxite and alumina companies which import directly for their own use. Prospects for oil discovery off-shore are reasonable and government has recently entered into an explo- ration contract with a foreign oil company. Prospects of oil discovery on-shore are considered small. Guinea's most abundant energy resource with potential for substituting for imported fuels is hydro electric power. Only about 40 MW of hydro potential has so far been developed, with annual average energy production of about 245 GWh (21,000 TOE). The power poten- tial of these resources is estimated to amount to at least 6,000 MW with an annual average output of about 35,000 GWh (3.0 million TOE). Not all of this potential may be economic to realize, however, since much of the rainfall is seasonal and heavy capital investments would be required to construct dams with reservoirs of volume sufficient to provide firm power. A Water Resource Master Plan which would set priorities for hydropower devel- opment is under preparation (para. 25). The Government has also approached the Bank for technical advice in preparing the 750 MW Konkoure hydro-electric project. This proposed project, which has already been the object of substan- tial studies, would supply electricity to an aluminum smelter of about 155,000 tons capacity and to the "Basse Guinee" Region, where the existing bauxite mines and the Conakry interconnected system are located. Government has proposed to revise and complete the feasibility studies in line with recommen- dations agreed at a meeting of potential colenders held in April 1980. The Bank has agreed to be executing agency for a proposed UNDP financed study of the aluminum smelter component. Existing Power Facilities 27. The Guinean power sector consists, on the one hand, of the public power supply sub-sector with hydro and thermal generating stations totalling about 65 MW, about 170 km of related transmission lines and, on the other hand, of an autonomous industrial sub-sector generating electricity for bauxite mining with three isolated thermal generating stations totalling about 70 MW. Annual energy supplied from the Samou river (Grandes Chutes and Donkea) could be increased by about 120 GWh per annum, or 50% from current levels, through reducing leakage at Grandes Chutes dam, improving operating procedures and upgrading power installations. In the public sub-sector, the  - 10 - Conakry system accounts for 45 MW of installed capacity and 85 percent of total electricity sales in Guinea. This system consists of: (i) two hydroelectric stations, i.e., the Grandes Chutes station (20 MW installed with 4 units of 5 MW each) and the Donkea station (15 MW installed with 2 units of 7., MW each); (ii) the Tombo thermal station (10 MW installed with 7 units); (iii) transmission lines with related power line carrier telecom- munication systems for coordinating operation of the above-mentioned generating stations; and (iv) distribution grids in Conakry and nearby townships such as Klndia. The Government owned Societe Nationale d'Electricite (SNE), which serves the public network (para. 30) has about 23,000 customers nation- wide of which 12,000 are in Conakry. Although these 12,000 connections theoretically serve about 20 percent of Conakry's 600,000 population, the existence of many illegal connections increases at least lighting coverage to perhaps 60 percent of the city's population. About 3 to 4 percent of the rural population is served by electricity. 28. The Guinean economy has been adversely affected by a scarcity of local expertise and a lack of foreign exchange to import equipment and pay for foreign technical assistance. These constraints have seriously affected the power sector and have resulted in the current precarious state of the Conakry/Kindia inter-connected power system, which has been suffering from low maintenance standards, frequent outages, excessive voltage drops and high losses. To prevent a possible breakdown which would have had serious economic consequences, a Power Engineering and Repair Credit (para. 20) was made to the Government to help SNE finance the most urgent rehabilitation requirements of the Conakry power system, to which the Government was giving high priority. The Credit financed, inter alia: (i) a feasibility study for the rehabilita- tion alternatives for the Grandes Chutes dam; (ii) the repair of two hydro units, two diesel units and the telecommunications network required for operating the transmission grid; (iii) urgently needed repair tools and equipment; and (iv) technical assistance for auditing of SNE accounts. The related repairs are proceeding well and will be completed by end 1980. SNE's Organization, Management and Finance 29. The Ministry of Energy and Konkoure (MINEK) is presently res- ponsible for planning and executing power investment programs and for the overall technical supervision of the power sector. Operation of the power system is the responsibility of SNE. Like all state enterprises in the industrial and energy sectors, SNE is a wholly owned subsidiary of the Office de Coordination Financiere de l'Industrie (OCOFI), which is a state owned holding company. OCOFI owns SNE's assets and manages SNE's financial operations even though SNE reports to MINEK on technical matters. SNE is run by a Director General appointed by decree. As SNE's financial manage- ment capability improves, it is expected that OCOFI's role would diminish. Other ministries which have direct involvement with the power sector and, therefore, SNE are: the Ministry of Planning (coordination and financing of capital expenditures); the Ministry of Internal Trade (review of tariff proposals); the Ministry of Labor (review of wages and control of SNE's personnel); and the Ministry of Finance (disbursement of funds and review of wages). The substantial involvement of the other ministries means that SNE  - 11 - does not have the autonomy normally present in power sector utilities. This is a result of the country's chosen managerial system and cannot be expected to change rapidly, even though the fragmentation complicates sector management. Evolution to a more consolidated sector is desirable, however, and would be initiated in the proposed project through SNE's role as executing agency and the establishment of consolidated public power sector pro-forma accounts (paras. 35 and 49). 30. SNE was established in 1961, following nationalization of the private company that operated the Conakry power system, and is now responsible for nationwide operation of such systems. The performance of SNE has been generally less than satisfactory, as evidenced by the deteriorating condition of the network it operates. 31. SNE's poor performance is due to a combination of staffing, organi- zational and financial problems. The operation of the Conakry system is carried out haphazardly by personnel with poor training. SNE has no training facilities nor does it have any training program. Moreover, management is not familiar with elementary operating and planning procedures. No preventive maintenance exists and, since there are no meter calibration facilities, metering at generation sources as well as at distribution and consumer points is unreliable. With assistance from consultants to be provided under the project, SNE would prepare a manpower plan involving detailed projections of manpower requirements at each skill level and proposals for related training activities. At the same time it would analyze maintenance needs and propose maintenance programs. To alleviate the operating problems of SNE the project would include a substantial technical assistance and training program designed to help SNE improve its present operations and meet the requirements of its expanding activities. The project would also finance the construction and equipping of a training center, a meter repair/calibration laboratory and an electrical/mechanical maintenance shop. 32. At present, SNE-s organization is largely informal and is charac- terized by fragmented responsibilities and inadequate communication between services. Management is made more difficult by the absence of a sound internal information system regarding operating and financial performances. In a recent audit of SNE's financial statements financed under a 1978 PPF advance, the agency's financial functions showed many serious deficiencies and a need for extensive improvements in its accounting system and procedures. During negotiations assurances were obtained that appropriate audits would be provided to the Association starting with that for FY 1982 (Section 4.02 of the Development Credit Agreement). However, the effectiveness of the reorga- nization of SNE's structure and operations largely hinges on the success of the technical assistance and training programs included in the proposed project. The Management Improvement Program (MIP) described in paragraph 46 would coordinate components of the proposed project and would include a timetable to improve SNE's staffing, training, technical and financial manage- ment, planning and operations.  - 12 - 33. SNE has also suffered over a period of years from a scarcity of foreign exchange. This, combined with complicated administrative proce- dures, has resulted in an insufficient supply of spare parts and has contri- buted significantly to poor maintenance of power installations. In order to remedy this situation, the Government agreed, under Cr. S-22 GUI, to: (i) grant to SNE, at the beginning of each year from 1979 through 1981, global licenses for importing equipment and spare parts amounting to a minimum of US$400,000 for 1979, US$600,000 for 1980 and US$700,000 for 1981; (ii) open at the Banque Guineenne du Commerce Exterieur (BGCE), the Central Bank's branch for external trade, a special foreign currency account in the name of SNE to avoid time-consuming approval procedures; and (iii) deposit in the special account amounts required to permit SNE to make payments within the framework of each annual global license. These changes, which have worked reasonably well, represent a significant improvement from Government's normal procedures. In line with these measures, Government has agreed that it will maintain this system and has confirmed that it will continue to make available sufficient foreign exchange to pay for the import of goods and services necessary for the repair and maintenance of SNE's equipment and facilities (Section 4.05(b) of the Development Credit Agreement). Tariffs 34. Since 1976, the average tariff has been about 2.11 Sylis/kWh (or USJ11.1/kWh) on high and low voltage electricity. In 1978, the estimated rate of return on historically valued assets was about 6 percent. This rate of return does not represent a sound financial position for SNE because overvaluation of the Syli implies an understatement of operating costs and assets are considerably undervalued. In addition, past expenditures on maintenance have been insufficient. Tariffs need to be increased substan- tially to cover the increased costs of adequately maintaining existing facili- ties and providing a return on properly valued assets. An increase is all the more necessary in view of the fact that the long run marginal cost of elec- tricity will be much higher than the average historical cost because a greater proportion of thermal, or equally high cost hydro-energy, will be needed to meet increased demand. Government has recognized the need for tariff increases and has indicated its intention to raise tariffs by an average 40% through selective increases, to meet the 1981 rate of return covenant (para. 35 (iii)). 35. Assurances were also received that the following steps would be undertaken to improve SNE's financial position: (i) SNE would from 1981 keep pro-forma accounts for the sector, to be based on annually revalued assets and to include new long term debt and related debt service (Section 4.06 of the Development Credit Agreement); (ii) a comprehensive tariff study, using terms of reference satis- factory to IDA, would be completed by June 30, 1983 and submitted to IDA for discussion (Section 4.08 (a) of the Development Credit Agreement);  - 13 - (iii) as from FY81, tariffs for the sector would be adequate to provide revenues which would cover operating expenses, maintenance costs, depreciation based on revalued assets and meet repayments on long term sector debt, to the extent these repayments were greater than depreciation provisions (Section 4.08 (b) of Development Credit Agreement); (iv) in case there were delays in reaching agreement on tariff levels, sector tariff levels would be set to provide an annual rate of return on revalued net fixed assets of not less than 2 percent in 1983 and not less than 3 percent thereafter (Section 4.08(c) of the Development Credit Agreement); (v) the "household appliance" tariff would be eliminated by mid-1981 (Section 4.08 (d) of the Development Credit Agreement); (vi) SNE's uncollectible debts would be written off (Sections 4.07(a) and (b) of the Development Credit Agreement); (vii) the sector's annual capital expenditure and financing plans would be reviewed annually with the Association (Section 4.09(a) of the Development Credit Agreement); and (viii) Government would ensure that adequate funds were available to meet operational, debt service, working capital and investment requirements of the sector (Section 4.09(b) of the Development Credit Agreement). Bank Group Role 36. The Bank Group objectives in the power and energy sector are to contribute to the Government's efforts to define coordinated and coherent policies aimed at exploiting the country's energy resources in the most efficient way. In the power sector, the long-term objectives are to help the Government establish a strong institution by reinforcing SNE's techni- cal, organizational and financial management. In the short run, *the objec- tives are to help the Government rehabilitate the badly deteriorated power network, in particular that of the capital city, Conakry. PART IV - THE PROJECT Background 37. In 1977 the Guinean Government requested IDA's assistance in the power sector. It sought aid for the Conakry interconnected system and specifically for: (i) the rehabilitation and reinforcement of existing hydro power and diesel generating facilities, transmission lines and related high to medium voltage substations; and (ii) the rehabilitation, reinforcement and extension of the medium and low voltage distribution grid. Following  - 14 - identification and preparation missions in May, July and August 1977, a Canadian consulting firm, Tecsult International, was selected to prepare the feasibility study, detailed engineering and bidding documents for such a project. In February 1978, the Government received an IDA advance of US$220,000 under the Project Preparation Facility (PPF) to finance certain foreign exchange expenditures required for project preparation. In the course of these preparatory studies, it became obvious that the options for repair of the Grandes Chutes Dam had to be examined and that urgent repairs of some generating facilities had to be undertaken immediately. Following discussions with the Guinean authorities in May 1978, it was decided to cover these repairs through an engineering credit (Power Engineering and Repair Project--Cr. S-22-GUI of January 12, 1979), while continuing project preparation. 38. During preparation in 1979, it became evident that the project submitted to IDA by the Guinean authorities would be extensive, given the poor condition of the various generating, transmission and distribution facilities. As a result, IDA recommended to the authorities to separate the works into parts and to seek additional lenders. With agreement from the Government, IDA approached Kreditanstalt fuer Wiederaufbau (KfW) and Caisse Centrale de Cooperation Economique (CCCE) for additional financing. The overall Rehabili- tation Program was subsequently divided into three parts: (i) the rehabilita- tion of Conakry's Tombo diesel power plant and related facilities (to be financed by KfW); (ii) the complete overhaul of the Grandes Chutes hydro plant and dam, consulting services for studies of the hydro potential of the Samou and Diani Rivers and the proposed Fomi dam, and a preliminary study of the tariff structure (to be financed by CCCE); and (iii) the rehabilitation and extension of the Conakry II 1/ distribution system, new operating facilities for SNE, as well as technical assistance and consulting services to improve performance of the power sector in general through institution building (to be financed by IDA). There has been close coordination and interchange of information with CCCE and KfW during prepar.ation and the early stages of implementation of the overall Program and of the IDA financed Project. 39. The project was appraised by IDA in November/December 1979, with the presence of KfW and CCCE representatives. An additional advance of US$300,000 under the PPF was approved in March 1980 to finance the studies necessary to analyze the organization of the power sector and thus prepare the institution- building component of the project. Negotiations were held in Washington in November 1980; the Guinean delegation was led by H.E. Mohamed Lamine Toure, Vice Governor of the Central Bank. A report entitled "People's Revolutionary Republic of Guinea--Staff Appraisal Report--First Power Project" No. 3055-GUI, dated November 25, 1980, is being distributed separately. Maps IBRD 14974R and 14975 show the facilities of the power sector in Guinea. Chart 1 (IBRD 21517) shows the elements of SNE's Rehabilitation Program. Annex III provides the timetable of key events in project preparation and processing. 1/ The city of Conakry comprises: Conakry I - the administrative and business center and original residential area; and, Conakry II - the industrial and new residential area.  - 15 - Project Objectives and Description 40. The principal objectives of the project would be: (i) to improve the reliability of service to about 360,000 residential users and 2,000 industrial SNE accounts through the rehabilitation, reinforcement and expansion of the power distribution system of Conakry II; and (ii) to strengthen the institutions of the power sector by upgrading SNE's managerial, technical and financial capabilities through technical assistance and training. The project, which has already commenced would continue until mid-1985. The new components would be part of the Government's 1980-84 overall rehabilitation program for the power facilities serving the city and its surrounding areas. The project would comprise: (a) the rehabilitation of the Conakry II distribution network, in- cluding procurement of equipment and supplies for: (i) line reinforcement works; (ii) extension works to bring service to new customers; and (iii) a substantial rehabilitation program of customers' connections; (b) a training program for all levels of SNE staff; (c) a three-year technical assistance program to start and manage a training center in Conakry and to improve SNE's planning, maintenance, operational and commercial capabilities, and to carry out studies of SNE's finances and accounting procedures; (d) the construction of, and procurement of equipment for, a training center, a repair shop and a laboratory in Conakry as well as the construction of, and procurement of furniture for, 17 houses for expatriate and Guinean staff; and (e) consulting services for: (i) the project's feasibility study and detailed engineering and preparation of bidding documents for the rehabilitation and construction works (financed principally through the PPF advances and now largely complete); (ii) an organization study of the sector; (iii) a review of the results of ongoing and proposed studies, and the preparation of a feasibility study for a possible second project. The proposed Credit would also refinance the Power Engineering Credit (Cr. S-22-GUI). 41. Rehabilitation of Conakry II Distribution Network. The rehabili- tation works are designed to reinforce and extend the existing distribution network of Conakry II and to complete the change-over to 20 KV (standard voltage) of all primary distribution lines which are still at 15 kV or 6.3 kV. This would also include an extensive rehabilitation program of customers' connections designed to eliminate the existing widespread prac- tice of low voltage illegal connections. The program would make a census of all low voltage customers of the area (residential and others) and install standard customer connection facilities with adequate protection and meters. Assurances were obtained that a study of the Conakry System load forecast  - 16 - and its diesel generation expansion requirements (to be financed by KfW) would be carried out and discussed with the Association (Section 4.11 of the Development Credit Agreement). To improve supply to the Conakry system assurances were also obtained that the results of the studies to be financed by CCCE would be discussed with the Association, particularly those relating to optimising use of the Samou river (Section 4.12 (a) and (b) of the Develop- ment Credit Agreement). 42. Training Program. The training program financed under the project would consist of two basic components. First, it would provide for about 64 man-years equivalent of scholarships and overseas training for financial and adminstrative managers, engineers and high level technicians of SNE as well as for Guinean instructors for SNE's training center to be built under the project (para. 40). Second, SNE's medium and low level personnel (technical, accounting, administrative and commercial staff) would be trained in SNE's new training center, initially under the direction of two senior expatriate experts, to be replaced ultimately by Guinean counterparts. The final training program would be based on an analysis of SNE's manpower, training, and mainte- nance requirements to be carried out by consultants financed under the project (para. 43). 43. Technical Assistance to SNE. The project would provide for recruit- ment, for a period of 3 years, of 10 senior expatriate experts with experience in operations and overall management of electricity corporations: to improve planning, one expert would assist in reorganizing SNE's "Bureau d'Etudes" and would prepare by December 31, 1982 a comprehensive three-year development plan for SNE and the Guinean power sector in general; to improve maintenance, four experts would be assigned to help organize and operate the electro- mechanical repair shop and the laboratory mentioned above; to improve opera- tions, three experts would be responsible for reorganizing SNE's hydrogenera- tion, diesel generation and transmission activities; and to improve accounting, two experts would assist SNE in reorganizing and streamlining financial and accounting procedures and commercial and procurement activities. In addition, some 4 man-years of consulting services would be provided to carry out studies on SNE's finances and make recommendations on the establishment of adequate accounting procecures as to make SNE's accounts auditable starting with FY82 accounts. The 10 technical specialists and 2 training specialists (para. 42) would be recruited from a single responsible entity. 44. Improvement of SNE's Operating Facilities. The proposed project would provide for the construction of various facilities needed for im- proving and streamlining SNE's technical operations. The project would construct, equip and initially operate a training center in Conakry to cover SNE's training requirements (para. 42). The new facilities would also include an electro-mechanical repair shop providing maintenance services to SNE's operating departments and an electrical protection and meter calibra- tion laboratory which would help SNE to set up more rational maintenance and to improve verification of protection systems and meters. Because of the extreme shortage of adequate housing in Conakry, the project would finance the construction and furnishing of 17 houses for the twelve senior expatriate experts financed under the project (para. 43) and five Guinean on-call operating personnel. To ensure that the hydrosites on which power generation  - 17 - depends are properly maintained, and to prevent a repetition of the previous problems at Grandes Chutes, assurances were obtained that the dams at Grandes Chutes, Banea and Donkea would be inspected annually by qualified engineers (Section 3.07 of the draft Development Credit Agreement). 45. Consulting Services. The project would finance about 15 man-years of consulting services. Some studies, financed under the February 1978 and March 1980 PPF advances, and proposed for refinancing in this project are already completed or under way: the feasibility study which helped prepare the proposed project, and the detailed engineering and the preparation of bidding documents for the rehabilitation works of the Conakry II distribution system. Consultants have been selected for a study of the power sector organization, notably SNE's own organization, including its structure, staffing and training requirements, and of SNE's relations with the Government. Consulting services would also be provided for the supervision of construction and erection. Approximately 6 of the 15 man-years of consulting services would be used to review the results of ongoing studies and prepare a feasibi- lity study of a possible follow-up project. These consultants would also help the Government and MINEK formulate a comprehensive power sector plan for the post-1985 period, to be essentially based on hydro-power generation. 46. Management Improvement Program (MIP). In order to support and coordinate the project components described above and to ensure their effec- tive implementation, according to a timetable which will be agreed from time to time with the Association, the Government and SNE would take complementary measures designed to improve SNE's management and operations. This program, which was discussed during appraisal, was finalized during negotiations and includes targets to be attained by the end of 1982 in the areas of investment planning, staffing, training and operational, organizational, commercial and financial management (Section 3.08 of the Development Credit Agreement). Project Cost 47. The total cost of the project, including refinancing of Cr. S-22- GUI and of advances under the Project Preparation Facility, and net of identifiable taxes and duties, is estimated at US$32.5 million equivalent, of which US$28.5 million equivalent, or 88 percent, in foreign exchange. The cost estimate is based on mid 1980 prices and includes 10 percent physical contingencies and a total of 34 percent price contingencies based on expected international and national price trends over the life of the project. Bids have been received for about 40 percent of items to be fi- nanced under the project and are in line with cost estimates. For con- sulting services and technical assistance, estimates are based on contracts recently offered in Guinea and other West African countries. Housing costs are based on those experienced in the ongoing Guinea Education Project (Cr. 849-GUI). For scholarships, estimates are based on experience in education projects in West Africa. Man-month costs for consulting services and technical assistance average US$12,000 including about US$2,000 for reimburs- able expenses; scholarships are estimated on the basis of US$15,000 per year in foreign currency. Total consulting services under the project amount to about 9 man-years, technical assistance to about 40 man-years, and training (scholarships) to about 64 man-years.  - 18 - Project Financing 48. The proposed credit of US$28.5 million equivalent would cover the entire foreign exchange cost of the project, including the refinancing of the two advances under the PPF (US$520,000 in total) and of US$1.13 million equivalent under the Power Engineering and Repair Project (Credit S-22-GUI). The local costs, US$4.0 million equivalent, would be financed by the Govern- ment and SNE's cash generation. Government has agreed that contributions would be made available to the project entity in quarterly advances in an account with the "Credit National" bank (Section 3.01(b) of the Development Credit Agreement) and that sufficient petty cash would be made available (Section 3.06 of the Development Credit Agreement). Government has also agreed that it would implement the entire 1980-84 Rehabilitation Program, including those parts being financed by KfW and CCCE, in accordance with a timetable acceptable to the Association (Section 4.10 of the Development Credit Agreement). The project would be exempt from taxes and duties. Project Implementation 49. Assurances were obtained that the project would be executed by SNE. To assist SNE's management in project execution a project unit, headed by a qualified project manager (already in post), would be set up within SNE's Bureau d'Etudes (Section 3.01 of the Development Credit Agreement). SNE will continue to have to seek approval from other ministries for actions within their areas of responsibility. A similar system has worked satisfactorily in the Water Supply Project and is acceptable for the proposed project. The proceeds of the Credit would be transferred as a grant from the Government. The state holding company (OCOFI - para. 29) would be the owner of the assets created under the project, and SNE would operate the assets. The evaluation of bids for the rehabilitation of the Conakry II distribution system is underway and is expected to be completed by end December 1980. All other bids and contract awards, following studies prepared under the March 1980 PPF advance, would be completed by February 1981 so as to enable effective start of the project by mid-1981. Technical assistance not already financed under Cr S-22-GUI and the PPF advances would be provided for three years starting in mid-1981 and training would start by September 1981. The project is expected to be completed by June 30, 1985. Procurement 50. Equipment and supplies would be procured on the basis of interna- tional competitive bidding (ICB) following Bank Group guidelines. Low voltage consumer's connections would be installed by contractors, selected under ICB, with the participation of SNE's personnel. Contracts for civil works would also be awarded on the basis of ICB following Bank Group guidelines. Consult- ants and experts would be appointed with qualifications, on terms and condi- tions and with terms of reference satisfactory to the Government and the Association (Section 3.02(a) of the Development Credit Agreement). Disbursements 51. The proposed IDA Credit would be disbursed on the following basis:  - 19 - (a) 100 percent of the foreign exchange cost or 95 percent of local expenditures for equipment and material (US$7.20 million); (b) 90 percent of the costs of line erection and equipment installation and of civil works (US$6.65 million); (c) 100 percent of foreign expenditures for consulting services, technical assistance, training and scholarships (US$8.0 million); and (d) refinancing of Cr. S-22-GUI and PPF advances (US$1.65 million). US$5.0 million would remain unallocated. Disbursements would be fully documented and are expected to begin during the third quarter of FY 81 and be completed during the fourth quarter of FY85. Project Benefits and Risks 52. The 1980-1984 rehabilitation program for the Conakry power system would benefit the 610,000 population of Conakry and also the 40,000 popula- tion in other centers served by the Conakry/Kindia transmission network. Such benefits would accrue from improved system reliability and increased generating capacity due to the rehabilitation of the Grandes Chutes hydro plant and the Tombo diesel plant. Consumption by existing consumers is expected to rise by 20 percent by end 1981 solely as a result of the rehabi- litation of the production and transmission facilities. Annual total consumption is expected to rise from about 100 GWh in 1980 to 260 GWh by 1985. The rehabilitation program would also lead to a reduction in losses and unaccounted for electricity from the present level of 20 percent of production to 15 percent in 1983. Taken together, the increase in new customers, satisfaction of previously unmet demand of existing customers and reduction in losses are expected to lead to an average growth rate in electricity generation of 12.6 percent per annum from 1979 to 1985. This is reasonable, based on already identified new industrial consumers, substan- tial suppressed demand and experience in other countries which have started from a similar base with comparable growth potential. 53. Even though the IDA project is largely separable from the KfW and CCCE financed components of the 1980-84 Rehabilitation Program, the nature of the joint costs incurred means that the economic rate of return of the IDA financed project cannot be estimated in isolation from the overall Rehabi- litation and Expansion Program. Accordingly, the IERR of the entire program has been calculated on the basis of all the incremental rehabilitation and expansion works, technical assistance costs, and operations and main- tenance costs compared with the revenues to be derived from the sale of all incremental electricity distribution to final consumers served by the Conakry/Kindia network at the present and proposed tariffs. Without the full Rehabilitation Program, it is likely that the remaining generators at Grandes Chutes and Tombo would fail completely, leaving the 15 MW diesel plant at Donkea to carry the 1980 29 MW peak load. The transmission system is equally precarious. Thus a total disruption of Conakry's power service within five years is likely without the Rehabilitation Program. Accordingly, electricity  - 20 - sales made possible by the rehabilitation and expansion works have been attributed as benefits of the Program. On that basis the IERR would be 6.7 percent at current tariffs and 23 percent at the tariffs to be implemented during the project, using a Standard Conversion Factor (SCF) of 0.5. Although the degree of overvaluation of the Syli is not precisely known, an IERR of 10 percent would be achieved at proposed tariffs if the SCF were 0.3, which would probably overstate the overvaluation. The IERR is not significantly sensitive, at proposed tariffs, to increases in capital or operating and maintenance costs. Recently, SNE's revenues have covered operating expenses, including depreciation on assets valued historically, and have provided a return varying from 1 percent to 6 percent on assets. Under the proposed changes in SNE's financial structure (para 35), the return on currently valued assets should increase from about 2 percent in 1983 to 3 percent in 1985. This is considered a satisfactory start to placing SNE on a sound financial footing. 54. There are no special technical risks associated with the project because the physical components consist mainly of repair works. The success of the project, however, depends on SNE's ability to initiate steps necessary for the long term attainment of its institutional and manpower improvement objectives. The probability of achieving these is enhanced by the major role to be played by the technical assistance and training components. Similarly, the acute shortage of foreign exchange in Guinea always presents some risks. However, the availability of foreign exchange necessary for SNE's day-to-day operations and maintenance would be assured through the establishment of a special account for the purchase of spare parts (para 33). PART V - LEGAL INSTRUMENTS AND AUTHORITY 55. The draft Development Credit Agreement between the Revolutionary People's Republic of Guinea and the Association, and the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association, are being distributed to the Executive Direc- tors separately. 56. Special features of the draft Development Credit Agreement are referred to in the text and listed in Section III of Annex III. 57. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association.  - 21 - PART VI - RECOMMENDATION 58. I recommend that the Executive Directors approve the proposed Development Credit. Robert S. McNamara President By Washington D.C. December 1, 1980 Moeen A. Qureshi  - 22- Annex- PaRe I TABLE 3A GUINEA - SOCIAL INDICATORS DATA SHEET GUINEA REFERENCE GROUPS (WEIGHTED AVEAGES LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE) TOTAL 245.9 AGRICULTURAL 71.7 MOST RECENT L0W INCOME MIDDLE INCOME 1960 7b 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA GNP PER CAPITA (US$) 80.0 110.0 210.0oL 228.9 726.2 ENERGY CONSUMPTION PER CAPITA (KTLOGRAM4S OF COAL EQUIVALENT) 65.0 98.0 91.0 80.0 699.4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 3.1 4.1 5.1/4 f URBAN POPULATION (PERCENT OF TOTAL) 9.9 13.8 18.0 17.3 28.9 POPULATION PROJECTIONS PoPULATION IN YEAR 2000 (MILLIONS) 9.0 STATIONARY POPULATION (MILLIONS) 23.0 YEAR STATIONARY POPULATION IS REACHED 2170 PO PULATION DENS ITY PER SQ. KM. 13.0 17.0 21.0 27.4 61.7 PER SQ. EM. AGRICULTURAL LAND 45.0 58.0 71.0 82.6 126.0 POPULATICN AGE STRUCTURE (PERCENT) 0-14 YRS. 42.1 42.5 43.5 44.9 45.5 15-64 YRS. 55.1 54.7 53.6 52.2 51.6 65 YRS. AND ABOVE 2.8 2.8 2.9 2.8 2.8 POPULATICN GROWTH RATE (PERCENT) TOTAL 2.2 2.8 2.9/s 2.7 2.7 URBAN 9.0 6.1 6.4 6.8 4.9 CRUDE BIRTH RATE (PER THOUSAND) 47.0 47.0 46.0 47.4 46.8 CRUDE DEATH RATE (PER THOUSAND) 30.0 24.0 21.0 19.6 16.4 GROSS REFRODUCTION RATE 3.5Le 3.1 3.1 3.2 3.2 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. USERS (PERCENT OF MARRIED WOMEN) .. .. FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 97.0 100.0 86.0 91.8 94.0 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 86.D 90.0 84.0 90.2 92.7 PROTEINS (GRAMS PER DAY) 43.0 44.0 42.7 53.0 53.0 OF WHICH ANIMAL AND FULSE 8.0 7.0 8.0 18.4 15.6 CHILD (AGES 1-4) MORTALITY RATE 45.0 36.0 30.0 27.7 21.3 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 35.0 40.0 43.0 45.3 50.1 INFANT MORTALITY RATE (PER THOUSAND) 141.0Lf .. ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. .. 10.0 23.2 31.0 URBAN .. .. 27.0 58.0 66.8 RURAL .. .. 3.0 16.8 ACCESS TO EXCRETA DISPOSAL (PERCENT OF PO PULATION) TOTAL .. 13.0 .. 28.9 URBAN .. 70.0 .. 67.0 RURAL 2.0 POPULATION PER PHYSICIAN 48000.0 32519.0 16629.0/d 30910.4 14508.2 POPULATION PER NURSING PERSON 3890.0 5231.0 2449.0/d 5793.2 3279.5 POPULATION PER HOSPITAL BED TOTAL 1122.0 612.0/R 616.0 1198.9 1141.5 URBAN 207.0 146.0 RURAL 2199.0 1271.0 ADMISSIONS PER HOSPITAL BED .. 16.0 HOUS1ING AVERAGE SIZE OF HOUSENOLD TOTAL .. .. URBAN .. .. RURAL .. .. AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. .. URBAN .. .. RURAL .. .. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL .. .. URBAN .. .. RURAL .. ..  - 23 - Annex 1 P&xe 2 TAB0LE 3A GUINEA - SOCIAL INDICATORS DATA SHEZT GUINEA REFERENCE GROUPS (WEIGHTIID AvI S - HOST RICENT ESTIMATE)A }tST RECENT LOW INCOME MIDDLE INCOME 1960 lb 1970 /b ESTIMATE /b AFRICA SOUTH OF SAHARA AFRICA SOUTH OF SAHARA EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 30.0 33.0 .. 57.7 61.7 MALE 44.0 45.0 .. 74.2 69.2 FEMALE 16.0 21.0 .. 54.1 51.4 SECONDARY: TOTAL 2.0 13.0 .. 10.0 20.6 MALE 3.0 21.0 .. 13.7 29.2 FENALE 0.4 5.0 .. 7.1 14.7 VOCATIONAL ENROL. (X OF SECONDARY) .. 3.2 .. 6.8 7.0 PUPIL-TEACHER RATIO PRIMARY 66.0 36.0 .. 45.0 36.6 SECONDARY 26.0 23.0 .. 25.2 24.3 ADULT LITERACY RATE (PERCENT) 7.0 9.O/ .. 25.5 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 2.0 2.0 2.0 3.6 38.8 RADIO RECEIVERS PER THOUSAND POPULATION 12.0 23.0 27.0 31.5 83.5 TV RECEIVERS PER THOUSAND POPULATION .. .. .. 1.8 NEWSPAPER ('DAILY GENERAL INTEREST") CIRCULATIOS PER THOUSAND POPULATION 0.2 1.0 1.0 4.6 24.2 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. .. .. 0.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 1521.6 1939.6 2308.4 FEMALE (PERCENT) 40.3 40.3 39.0 33.5 38.1 AGRICULTURE (PERCENT) 88.2 84.7 82.0 80.7 54.3 INDUSTRY (PERCENT) 6.1 8.5 11.0 8.1 17.8 PARTICIPATION RATE (PERCENT) TOTAL 49.6 47.7 46.1 42.2 38.8 MALE 59.5 57.4 55.8 55.1 48.4 FEMALE 39.9 38.1 36.6 29.5 29.4 ECONOMIC DEPENDE,NCY RATIO 0.9 1.0 1.0 1.2 1.3 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS .. HIGHEST 20 PERCENT OF HOUSEHOLDS .. LOWEST 20 PERCENT OF HOUSEHOLDS LOWEST 40 PERCENT OF HOUSEHOLDS .. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOHE LEVEL (US$ PER CAPITA) URBAN .. .. .. 138.2 RURAL .. .. .. 86.1 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 70.0 107.0 RURAL .. .. .. 65.0 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. RURAL .. .. .. 66.9. Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators dependa on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970 between 1969 and 1971; and for Moat Recent Eatimate, between 1974 and 1978. Lc Recent Government estimates from Administrative Census indicate a resident population (excluding non- Guineans) of 4.53 mill. in 1977 and population growth rate of 2.7X p.a.; /d WNO preliminary estimated data; /e African population; /f 1955-60 average; /j Government hospitals only; /h 1965. April, 1980 /i New national accounts estimates were produced as a result of the February/March 1980 economic mission and indicate a GNP per capita of US$274 in 1979. These estimates will be discussed and finalized with Government in late 1980 within the contest of a forthcoming Economic Memorandum. /1 Updated Bank estimates indicate total population of 5.3 million in 1979.  - 24 - Annex 1 ?'oee3 DEFINITIONS OF SOCIAL INDICATORS Notes: Although tha date are drove fro sources geS..aly judged the most authtitatie eat reliable, it should als he outed that they .y sot ha iboar- eatio...lly oompsrsbleb he..ue of the lee ofatadotis't teiottioo out concepts seat by differet osetre o llettio, cho. ata. Te tat. sn oe chaIses,. us.fol to de-tiho orders of sagntode. inL4tiot trends, out throeteertete m-Jor differeousa hones. ronetris.. Thetrsfereaoe1 grop ere. (I) the o- ooenY group of the sabjeot ousory -d(0) a momy grop -Ith .webat highat averag Inter ths the c.oatry group of rho eojt coustry Pae.pt for "Capttel Surplus Oil Reporters" gromp wham "ittla mesa. North Afrira sotd Piddle toot' is oheson botess of ote...sr aeoolraeffinities). 1e ths esfer..t. Sg...p tote the --egS. of pepsatin weigbtsd arits-tLr mea for nob id.ttota out ehee only when at leas MIlf of the boo.tniea in a group baa dens for thee isdiototr. Nines tha eroog.S. of t triso .-S the iwdi.totot depends on the -ilobility of dtot and is not enifom, -stion must he oaeriaod to toletin avtaa of ow gettootor to soother. The.. so . erages ore only ..sefut in cosprieg the robs of one ististor en a rime omoe the coun..try out rofoosne goupo. LAZED AREA (theusot sq.km.) toRebotio o yheciiso lopuietie dividee by e-oe or prac.ticing pry- Toto1 - Total ourfon are, comprising loot st. sat inland water.. siLe.2 qualif'ied rm a actirsl sc.~hool et unive...ity Isv-l. Aarcu.lItutol1 fttooie.o of oroluo re, used teaPot-ily or permeastly Popoo.iaiossr cNtaesPeso1 P.peins -divided hy nuberiof pr-ctoing for crops. pseturee, aerhet end hithohe gardens or to lie fallow; 197y dtens male end Penle greduats oes prsotira1 oura..e, out..ei-en tote.... Pes!lation ocr HiusitolNo - total urban. .- rural - Popolation (toto.1 GN? PER CAPITA_PUSS) - GNP Per copit. esiatsa current erhat prise.. l- urban, ea rural) tinted by thei.rotopetit somber of hospital hots coloetd by sm covriemchot no Wocld Nook Aties (197b-78 basis); l%O, evilobla in public and printe ganrol ant Aperiolinsd heapita1 end re- 19)0, ant 197N dtot. hahilitatioo esorsr. N lptal. are astabliehasato penmocerly stoOPfd by On leat a. Physicioo. RsebhlbNo.sta prevLdieg prisripolly custodiol ENONRIT CONSUSEPTIWI Pit CAPITA - A-..I coneuption of aosrial enrgy feol car am see Ila dtd. Rural hospitals, bh-n.r include health out matInee sod lignite, petroleum, sonura1 gas out hytro-.,.. nerea oat Sethasml nIce- centers met poeseasutly stoffed by a physicios P bet by a etloel assisoten, etriity) io kilrgaS- of tool oquiolent Pen capita; 1960, 1970. sad 1979 mar50, midwife, etc.) bhich offer tn-patient -coo dttibo sot provide dote. limited ronee ofmeio fecilitiso. For stotisticl perp..os urben hespi- POPUIATION AIID VITAL STATISTICS t.~~~~~cle include WM).5 prinripo1 general end epecioltet hospleols. end total POPULATION AXED VITA]. NTATISTICS ~~heopitla 101 or tote1 hospitals sod medical end maternity center.- Toed Porulotios. Nit-Year Paillioss) -A. of July 1; 1960, 1970, aad 1978 Admiesoss0 sr- psoitl Nod - TIdol nomr of adissions to or diechergee dota,. fretisitlediided by the timber of hat.. Urb-mPolco (prcan of enrol) R gots of orban te ttne1 paolanieM; different tefenitiona of echo. ar.o. may affont raability of dote BOgeec amog oonetee 190,1970, set 1978 date. AeasEs fNsoedPeenstbqabl)-ttl ra.oterl Poeslatios Proj -Cutstttiooab .d ino A hosehold ootsfa grenp of indviuas b shalolre living lqattet PPoplotioo in 7res 200I uret Poplto ojenoaebsodn18 e their main seals. A hoarder or lddgec may or may eon he incodd is tote peplotion by ssots" oat their mortality eat fertility rtate. the house hold for statiotino1 purposee. P'rojeotion perimters for moreolity fetes "Weries of thin level, se- Atemobrof reearem oo totl, urban, end rural - A-rstg na- ing rife snpsetocy at birth ioesn itb costry's poe rapine incom baropron erro Ia oil urbn, set rural ..ccopind co= tnionI 1-v1, end f-1ol life meps~oesoy stehiltino at 77.5 yeare. The porn- twelliogs.! rspcioy elneecae o-emnn tnnre merer for f-teility cots also bane three level needing telin. in -.aeplat port..t ifertility -oodping to inome lavsl ant post family plooing perform c." Al=so to Elen,ctiyPaon of tdelling)-crl rbn n oa Each coutryi hou essigoet o ftbhae aloe embineties of mortality L.vnimldelns ihentiiyi livin qorswa enoeg sod fetilt iFtroasfr prjoiaPrOsof totol, urban, and rotsI dwellings spectiv-ly. Stationary Pneolotion _ Is. a statibonry populotion there is so growoeb sisc the birth rags is eqoal to the death rats, oa alma the age strmtnr es- DUCALTIO main con... tr. Thio is achieved osly after fertility rotas deelisa to Adjusted Enrollmet Patios tin reploscat level of ants net raproductio rots, when -ob genertion Frimar school - total, male end feno1 - Gr.es tete1, male ed femal of :nmo cePIl...e itesif enotly. Th. statibonry popultiew see se erellasn of ol ages sotth primary level oa p-ototage of renpectirn etinatd os the baeis of tha projected oherceatristice of the population pimr cho-og ouais;somlytcue cide gt0 inche yoo r 2000, and ths tote of decline of fortillty rate to repl.co- years hut adJusted for ditfforet length. of primary ede.cetO;.fr man leel cctiws with universal d...tion sorol11-t may sceed 150 peccant Ti.rtataionae cenlation Is reached - ma. y-t who stationery popoluetie since com pupils ace bel.ow cc hov the official echeol ue siehs enraee.ssydr enhool oa. male ,act fs.l - Cmpted as obev; .onodntey Population Densit-yoo 9lto .rq1 m-. 10 .tr. fd-taie requioso or leas fot yeats! of approvd primary iatrootion; Per o. e. -Nityea poplaton sr suar hiomatr P190hecerse ofpcovidmeS.. geerl, -octien, nr teacher training instructions for pupib corl 55.ucal of 12t-7yaso f;crc-sp-ndooecucs ore gener11l Per s. k. asieerlolad - Cesund as obey for agriculnera1 loot soogledoad. 7y.r o . oly. Voctina enlcdlmee Pprcen of anodary - SVocetioolointituebous PonuaronAg Stutr praIl - Chtldran (0-16 yearo), erhieg-ags P 13- include1tethoia, industrial,or ote. roorse thich opaeta itepopo- 64 eas) end reTird( Footear eat evr) as parromeoges of mit-year popo' dentlyota departments of aecontary boetitutions lai;1960 197, ad 1970 date.Puotabraio-rir, and secntar - Tote stdutsn enrolled to to. uLoto iruws Sat inrot oa e lgot ae f total mId- prmay adesenar lsvsls. divd by embers of teachbc..i the yearIpopLaioso for 1950-60, 1960-70, aSd 1970- 79. corrsepoodlng levl.. Pouana Orot goes (percent) - .orbs - A--Ia growth reese of urban pepo- Adul, ierc ee(ecn)-Iiecr dlo(bet atadwie ltosfr19510-60. 19 -70 dn 1970-78. osepretg ftoa adult -pLpulotio agedt 15bl yeroasd er.d-i. Crud othbgt er hua - Annual line births per th-.sad of mid-yeart Popultto;19h0 1970. so 1979 .t.t. CONSUMPTION CeoDahN te fee thoassed - Annul deathe pee thoasesd of mid-your Po..oa.'ac Care (pec tbaooan rulotiten - P.....g.r care comprise macor populotbon; 1960. 1970, and 1979 dtat. ' esstn osta ight pores secludes mbole-es. heacsee ant irsoRproducetne Nte - Average number of deaghtocs a oa ill beer in miiery tends. heri-rooml .-rapretuiv- period if she enpriouree present as.-ep-ifto Pfor- Rai aevr otthouoo.nd popeleti-r - All typo. of rciesPo oo t .it :ats;uual fiveyea oveneeding in 1960, 1970, and 1977. brnotcesta tc general1 public per thousan d of population; secludeou- Fselly PPaen -Acroc. :Anu1 Ptho...ando) -Annual nuber of ..c. ptOr roused re-iver in countries sod to yors when regiotrotion ot raioa of birth-cotrol derics enter supiosa of -aicl aIyplosing program. -a in effect; dora for .ricen;yar ma nt be comprable sinc most Family Ploooin - tests (carcout of _apri-dwma)- -tscag of wattld c.."ciss bhlished licesig wenof child-bearing age (15-4t yost.) who.s birth-control devit to TV Rocvar -(set thousand pocultien - TV feceivers for brodoset all macrind woman in same age group.genere1 public pet thoneand pepoloten; encludo unlicensed Ty rcivers FOOD AND NUTRITION ~~~~~~~~~~~~~it ceotrtice and in eo Y., whent regiatraio of TV sets was In ffoce. PldOD N otfflTdI Prnosporer1 1d. fP .pi. C..r.ulotio poor thesead poculeeee) -iShows the avrag crcis tntoo f PoetProtooios pr Capita (196-1-100) tine tprcoisem on of "doilygera ireoeunP.pr,dfnd a peiodical pub- Prouro falfo omdte.!1 Peuoie nldes soot out fosod out licetin devoted primacrily to rncordlg g...r-1 non." Iti. .s.c.nadtred iso ondryou haste. Cusdotinios cove primary guudo (e... toarae e ho "daily" if it appears on leas.t four tisose weak. aesof auger) which err edible end cotai otcirtnt (e.g. toffee end liesAnulAtndneptCo ect otDsd o the nambar of traseeldd). Aggrogote Prndtocro of each c...stry is hoe on. icosod drngin er icudnttoeioec trv-ocin ntionl. avrag producer price nights; 1961-65, 1970, end 1970 dote. and mobile union onry qiveet of ne foot spplies avilable in country per ' tapi. usro tar toy. Av-ilobls supplies comprise tomeenic Production, inporco lan TAOta FORCErFcetheod)-comclyueiepcns tcuig neports, end canges is stoc. Net auppliss docut animal ced, costs. rerd forces and aneepityot but ocluding h...eoiva.. students.ec qUencitt.e.e usdis fod proco...ing, sod lessee ini distrihutien. Naq Ive- 7 mets were eatimate by PAO besot on phyoielogica1 ante for bo-I -ote: Dofiniti... to carton cotetit Ore tot co.eporblo; 1960, 197 da viry ant haslth conidering -nirnomoolt teeporotcua body weightn,eg female (prero-) - Fenal lubor for-o so porc-erg of total lbhoc forc.. utsndistribution of population, dataloig11 porcie for costa or Agrio lur (prcent -O ao oc nfrlg oety ot n h..eehnd ..vol; 1961-5,1970 sot 1977 dote. hsio o percentage of totu1 1nOOr force;: 160, 1970 oct 1976 date for capita surly of proteIn gros cot ty) - S'rneeloooneane of per c,Pico Industry (cercenO) - Labor force to misig, crtrr t,snfactoriog net opply of food pec day. lice supplydofYfood ia deflect a Ihov.Rit- and o1eorriitey, tott sot g.o so per-ccrge of total lobocCco;190 quicemeni for oh1 couccrine sealihto by IDA provide for ninino 91st17 aa u tovoc f.AS gr-on f total prortoi pr day out 20 grea of seolso -atictaicoNtpcrer - crl. sole, aed fomee -Paticipeito o pue pori,o whihi0grm oheld be uncoo protnic. Th-svetao- aciiydoo ec sucde tota, ol, en esl lhr f-reu artsuo oe tfhan thono 75 gren of coe proteint urt 23 grat of Ircrse f otul oi o froloPoplto falae opeiey ocleal proesto ou ec average 5 cc the oct11, ~proposed by 0A05 to tic Third 19A0, 1970, end 1975 done. Thoc ore ILl's participoties rtacor tnlciog Wrid F.od Survoy;'1961-65, 1907 sod 1977 data.. u It~t fa et rrt coy reaIa_n 00 -Poenspl ffn to- ae-en strcture of the Pplotico, and long tine trend. A too reti- rivet from aionalt n pussi rrm o dey; 190-65,1970 act 1977 dote, tEcton.ic Depodroc.y Ratio - tort of populacioc ender 15 and 61 ond -vo fIeld Pooce 1-4) Ocroullcy Osro Proc ibreourt) ~~~~~~~~~- Aretol douche per thboe..odot to c tic ctutl lobor forc.. ego grou.P I-A yearn, cc ohildtro in chic age grou P; f. or. moo dvelopiogcon ertee dora derived c- lift tables; 1961, 197 act 1977 dtac.. 15100 1 DISTRISUTION Pcoasof yrcvae I--n (both to c..b _onkind) - tece.ti-d by richeoc HELifTH eccoo ic vor)-Aoooea f er flf oaco I poccor ittheet 20 yororot, pcvrrnt 20 p-rceo, ond po.crnt 40 y-rc.nt arbth 90 97 0 and 1978 dtac. Iofoot Morcalitt Rate Pcro thousan.d) - A...el td-ho of irfarco order ore Y... s~e urT100 of age prr choonuod lion hircho. TotInured ibacluto Poverty Icocor Prod (lOt pot ro situ) - arbor urd., rural) - cb- _crer nupply (-lootr retod nuf ac crer or -orreetc bet e_..c.a.i.a.. afot-dhl.. outruchan the Iron protcte beorela, ePricgco,dco eoeitory cr110) a f_ucrair or tcandpcr 1ootetd ccc srn thur 2100 jrtrof -cabo nuy hr yroul -on of the .c...try. Ico lord tui doricod fcm th ro...l vorderoda heo otehir ceecrbI acoo o t~_ hotboe..S rura eoa lce ct ajuco-fo go oo f cto oote1ocr crocraie ccor ouldinyy cat ho ourolf orneoeroof ie ocuhol loioccodPorlocon rlc Abolur Pvery lrco Icn (eccott- ebo do rotbev to epeddaiup,prooti...tc~ pert of tho toy to fettohlg tho c.ua - Podcre ofppltico feber ed rura) obo r , anlcpo" fontly'r c-rtro-d-e-.t-pP1 octal boebr of roclo(cora, arbo, artocoot orovtEby ocroc lioorl 0 prcorooc f hriocy P riopplroo. fooedi-tccl art doial uta..lo tri .. .f huc. -crcad o brc-etchyut--boroyo- r rhoe f A,ci1. i980 ,it -dcIt t u.iolet ic-cc. 11tiOr  - 25 - ANNEX I Page 4 REVOLUTIONARY PEOPLE'S REPUBLIC OF GUINEA ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1978 ANNUAL RATE OF GROWTli (%, constant prices) US$ Mln. X 1973-79 1976-79 1979 1/ 1979-85 Projected GNP at Market Prices 1,372.7 100.0 3.4 0.6 0.4 3.8 Gross Domestic Investment 190.2 13.9 0.9 -0.7 8.4 6.6 Gross National Savings 114.3 8.3 5.4 2/ 3.5 14.7 Current Account Balance -76.0 -5.5 19.8 10.2 7.0 Export of Goods, NFS 327.9 23.9 15.6 -1.0 -7.1 2.7 Import of Goods, NFS -350.1 -25.5 -0.3 -8.1 -8.0 1.9 OUTPUT, LABOR FORCE AND PRODUCTIVITY, 1976-79 Value Added Constant 1973 Prices US$ Million Percentages 1976 1977 1978 1979 1976 1977 1978 1979 Agriculture 588.9 556.1 558.5 523.9 53.2 51.7 49.2 46.2 Industry and Mining 180.7 180.8 192.8 198.0 16.3 16.8 17.0 17.4 Services 336.9 337.7 383.9 413.4 30.4 31.4 33.8 36.4 CDP at Market Prices 1,106.5 1,074.6 1,135.2 1,135.1 100.0 100.0 100.0 100.0 GOVERNMENT FINANCE General Government 3/ _ of GDP 1977 1978 1979 1977 1978 1979 Current Receipts 8.20 8.85 9.73 30.8 30.8 33.1 Current Expenditures 4.31 5.16 5.55 16.2 18.0 18.9 Current Surplus 3.89 3.69 4.18 14.6 12.8 14.2 Capital Expenditures 2.34 1.77 8.43 e 8.8 6.2 28.7 e External Assistance (net) 7/ 0.09 1.38 1.38 0.3 4.8 4.7 Central Government % of GDP 1977 1978 1979 1977 1978 1979 Current Receipts 7.65 8.23 9.16 28.7 28.6 i1.1 Current Expenditures 4/ 3.87 4.72 5.18 14.5 16.4 17.6 Current Surplus 3.78 3.51 3.99 14.2 12.2 13.5 Capital Expenditures 5/ 2.23 1.66 8.32 e 6/ 8.4 5.8 28.3 e External Assistance (net) 7/ 0.09 1.38 1.38 8/ 0.3 4.8 4.7 MONEY, CREDIT and PRICES Billion Sylis Dec. Dec. Dec. June 1976 1977 1978 1979 Money 8.22 8.34 6.88 6.61 Quasi-Money 2.25 1.43 2.21 3.00 Overall Money Supply 10.47 9.79 9.10 10.49 Bank Credit to Public Sector 14.89 16.29 18.81 20.11 Bank Credit to Private Sector 0.95 1.08 1.08 0.76 (Percentages) 1976 1977 1978 1979 Money and Quasi-Money as % of GDP 39.4 36.7 31.6 33.0 9/ General Price Index (1973= 100) 10/ 115.8 119.9 122.4 125.2 Annual % changes in: Bank Credit to Public Sector 4.7 9.4 15.5 7.3 Bank Credit to Private Sector -11.6 14.0 -0.1 1.0  - 26 - ANNEX I Page 5 REVOLUTIONARY PEOPLE'S REPlBLIC OF fUINEA TRADE PAYMENTS AND CAPITAL FLOWS BALANCE OF PAYMENTS MERChBNDISE EXPORTS (Average 1976-78) (Preliminary Estimates) 1976 1977 1978 US$ Mln . (US$ Million) 11 lbauxite 204.3 70.2 REport of Goods, NFS 252.6 293.2 327.9 Alumina 77.5 26.6 Import of Goods, NFS -287.3 -261.9 -350.1 Otber Comodities 9.4 3.2 Resource Gap (deficit * -) -34.7 31.3 -22.2 Total 291.2 100.0 Interest Payments -40.C -38.0 43.8 Workers' Remittances -5.6 -5.6 -6.4 Other Factor Payments (net) -7.5 -28.8 -36.4 EXTERNAL DEBT, December 31, 1979 Net Transfers 7.9 15.7 32.8 Balance on Current Account -79.9 -26.3 -76.L US$ Mln Direct Foreign Investment Public Debt. Including Undisb. 1,342.0 Net MLT Borrowing Total Outstanding & Disbursed 990.4 8/ Disbursements, Public Borrowing 7Q0,O 5a.7 111.7 Amortization, Public Debt -65,7 -97.8 -94,6 15/ Subtotal, Public Borrowing 4,3 -47.1 17,0 DEBT SERVICE RATIOS FOR 1978 1 Private Sector (net) -25.3 -19.1 -16.7 Scheduled Service Payments Total Borrowing -21,Q -66.2 a.3 - public debt 35.7 Capital Grants 12 12/ --J private debt of Other Capital (net) -0.1 1.7 -3.8 mixed enterprises].6/ 14.6 Other Item (increase in arrears) 44,2 51.5 52.8 - total debt outstanding Increase in Reserves -i5.6 _17.7 -51.9 and disbursed 50.3 Actual Service Payments Gross Reserves (end year) 53,2 50.5 21.2 - public debt 20.5 Net Reserves (end year) 13/ -110.0 -133.5 -205.6 - private debt of mixed enterprises 16; 14.6 Fuel and Related Materials _ total debt outstanding Imports 16/ 13,1 17.9. 26.0 4 disbursed 35.1 of which: Petroleum 13.1 17.9 26.a B Uxports - - - IBRD/IDA LENDING (rch 31, 1980) (Mllion US) IBRD TDA Outstandine an Diahurned S,1.3 24.1 RATES OF EXCHANGE T Undisbursed - 41.7 Through Outstanding including undisbursed 58.3 66.0 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 Sylia/US$ 24.7 24.6 22.7 20.7 20.5 20.3 21.4 21.1 19.7 19.1 1I/ Preliminary estimates for all 1979 aggregates. 2/ 1974-79. 3/ Local administration not included. 4/ Including debt service on external borrowing on behalf of public enterprises. 5/ Including investment on behalf of public enterprises, and capital transfers to these enterprises as follows (Sylis million): 1977 - 1,404 1978 - 95 1979 - 6,200 6/ Budgeted investment Sylis 2,500 million and financial assistance to public enterprises Sylis 6,200 million. 7/ Disbursements less scheduled amortizations plus increase in arrears. 8/ Subject to revision by Government. 9/ June 30, 1979. 1O/ GDP implicit deflator. 11/ Converted from data in Sylis, using period geometric averages exchange rates (IFS, February 1980). 12/ Tncluded in net official transfers (current account). 13/ Differences between change in net reserves during the period, and the increase in net foreign reserves (see above) are due to che exchange rates used, i.e USS/SDR at end of the period for the former, and geometric averages for the latter. 14/ Excluding imports bv mining companies. Total imports of petroleum products are estimated at 396,500 tons in '978, and tentatively valued at about US$42 million. 15/ Service payments reported to exports of goods and services. 16/ CBG and FRTCUTA. 17/ Annual georetric averages. 18/ Savings and exports adjusted for change in the terms of trade.  - 27 - ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN GUINEA A. Statement of Bank Loans and IDA Credits (as of October 31, 1980) Amount (less Cancellations) Credit Number Year Borrower Purpose Bank IDA Undisbursed ------- (US$ million)------ Two loans and one Credit have been fully disbursed 73.5 14.0 569-GUI 1976 Republic of Pineapple Guinea Development 7.0 0.1 849-GUI 1979 Republic of First Education 8.0 4.3 Guinea 870-GUI 1979 People's Re- First Water 12.5 10.3 volutionary Supply and Republic of Sanitation Guinea S-22-GUI 1979 People's Re- Power Engineer- 1.1 0.1 volutionary ing and Repair Republic of Project Guinea 952-GUI 1980 People's Re- Rice 10.4 9.8 volutionary Development Republic of Guinea 953-GUI 1980 People's Re- Second Highway 13.0 11.5 volutionary Republic of Guinea 1063-GUI 1981 People's Re- Livestock Develop- volutionary ment 1/ 17.5 17.5 Republic of Guinea TOTAL 73.5 83.5 of which has been repaid 18.1 0.0 Total now outstanding including undisbursed 55.4 83.5 Total undisbursed 0.0 53.6 53.6 1/ Signed on November 21, 1980.  - 28 - ANNEX II Page 2 C. Proj ects in Execution I/ Cr. 569-GUI Pineapple Development Project: US$7.0 million Credit of July 2, 1975; Effectiveness Date: October 22, 1975; Closing Date: June 30, 1981. The project consists of establishing an irrigated pineapple estate and of providing pineapple growers in its vicinity with supporting services. Despite initial delays, the project's irrigation works are now substantially completed and per-hectare yields have been approximately as forecast at appraisal. A recent setback has been encountered due to poor performance by the fruit exporting agency and to failure of Government's importing agency to provide fertilizer and chemicals on schedule. Strong recommendations to resolve these problems were made during a recent mission and have been favorably received by Government which has also made available the funds for immediate purchase of fertilizer and for 1981 operating costs. Disbursements are expected to be completed by early 1981. Cr. 849-GUI First Education Project; US$8.0 million Credit of September 28, 1978; Effectiveness Date: January 16, 1979; Closing Date: June 30, 1983. The project aims at (i) helping alleviate the country's shortage of skilled workers by improving and expanding technical training programs, and (ii) strengthening the Government's educational planning and project implementation capacity. Though civil works are about three months behind appraisal schedule, courses are expected to start in December 1980. Key technical assistance personnel have arrived and an upgrading program for Guinean personnel has been successfully completed. The Government delayed implementation of the education and manpower planning components of the project until an education sector study prepared by Unesco was completed. The sector study was issued and reviewed with the Government in October 1980, and implementation of the above component is expected to get underway in the first half of 1981. Project management is satisfactory. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 29 - ANNEX II Page 3 Cr. 870-GUI First Water Supply and Sanitation Project; US$12.5 million Credit of January 12, 1979; Effectiveness Date. April 13, 1979; Closing Date: March 31, 1983. The project's objectives are to fullfill the immediate water supply and drainage needs of Conakry, provide satisfactory sanitation to most of its population, and strengthen institutions operating in the sector. Project implementation has been slow due to unsatisfactory preparation of detailed design and bidding documents. Most works, and procurement of supplies and equipment, are now underway. Some project components had to be reduced due to price increases. While the action program for improvement in water supply operations has progressed slowly, Government has recently appointed a dynamic management team who are attempting to redress the situation. Cr. S-22-GUI Power Engineering and Repair Project; US$1.1 million Credit of January 12, 1979; Effectiveness Date: April 6, 1979; Closing Date: December 31, 1980. The project is intended to complete preparatory work on a large rehabilitation program for the Conakry power system, part of which will be financed under the First Power Project proposed in this report. Thus far, the feasibility study to repair the Grandes Chutes dam is completed. Urgent rehabilitation work on the power system has begun and is expected to end by mid 1981. The last technical assistance visit to the power company for audits will be completed end 1980. Cr. 952-GUI Rice Development Project; US$10.4 million Credit of November 2, 1979; Effectiveness Date: April 14, 1980; Closing Date: June 30, 1985. The project consists of creating a specialized planning and coordination unit for rice development within the Ministry of Agriculture, upgrading the country's rice research capacity, undertaking a study of agricultural prices and rural incentives, and carrying out a pilot project to test and develop technical improvements to rice cultivation practices. The technical assistance team and the pricing study experts began work in mid-1980, tendering is underway for agricultural equipment, and field work is expected to commence in early 1981. Initial project progress is satisfactory, although delays are anticipated in construction of project buildings. Cr. 953-GUI Second Highway Project; US$13 million Credit of November 2, 1979; Effectiveness Date: January 31, 1980; Closing Date: December 31, 1983. The project is progressing smoothly. It will complete the program begun under the First Project, upgrade an additional 1,500 kms of priority roads, provide further institutional support to the Ministry of Public Works, and help renovate the National Soils Laboratory. Most contracts have been signed with suppliers, and maintenance brigades should be in full operation towards end-1980.  - 30 - ANNEX II Page 4 Cr. 1063-GUI Livestock Development Project: US$17.5 million Credit of November 21, 1980: Proposed Effectiveness Date: February 23, 1981; Closing Date: June 30, 1985. The project's objective is to increase the productivity of the Guinean cattle herd, thereby augmenting national meat and milk production, improving nutrition, and raising the standard of living of cattle-herding families. The project consists of a nationwide vaccination program, pro- vision of drugs1medicines and mineral licks, and upgrading of the live- stock,husbandry and veterinary support service. Signature took place end- November 1980. A contract for design work and bidding documents has been concluded, and invitations to consulting firms for provision of technical assistance staff have recently been issued.  - 31 - ANNEX III Page 1 SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Engineering Credit Signed: January 1978 (b) 1st Project Preparation Facility Advance: February 1978 (c) Preappraisal: May 1979 (d) Appraisal: December 1979 (e) 2nd Project Preparation Facility Advance: March 1980 (f) Negotiations Completed: November 21, 1980 (g) Planned date of Credit Effectiveness: January 1981 Section II: Special IDA Implementation Action None Section III: Special Conditions During Credit Negotiations, the Government would be asked to provide assurances on the following principal issues: (a) to improve the financial status of the sector, and of SNE in particular: (i) auditing of SNE's accounts would start in FY 1982 (para. 32); (ii) foreign exchange would be made available for adequate maintenance and the arrangements for funding and licensing imports instituted under S-22-GUI would be continued (para. 33); (iii) SNE would keep proforma accounts for the sector, based on annually revalued assets and including new long term debt and debt service (para. 35); (iv) a comprehensive tariff study would be carried out by end 1982 (para. 35); (v) from FY81, tariffs would be adequate to cover operating expenses, maintenance costs, depreciation based on revalued assets and repayments on long term sector debt (to the extent they were greater than depreciation provisions) (para. 35);  - 32 - ANNEX III Page 2 (vi) Pending agreement on tariffs to be implemented resulting from the study in (iv), tariffs would be set to yield an annual rate of return of not less than 2% in 1983 and of not less than 3% thereafter (para. 35); (vii) SNE's uncollectible debts would be written off and the "household tariff" abolished (para. 35); and (viii) the Association would review annual investment plans and the Borrower would ensure adequate funds to meet all capital, operating and financial costs of the investment and operating program (para. 35). (b) studies to be financed by KfW and CCCE would be discussed with the Association (para. 41); (c) a Management Improvement Program would be agreed with the Association and implemented by SNE (para. 46); (d) that the Government would implement the entire 1980-84 Rehabili- tation Program, including those parts being financed by KfW and CCCE for a timetable acceptable to the Association (para. 48); and (e) the dams at Grandes Chutes, Banea and Donkea would be inspected annually by qualified engineers (para. 48).  IBRD 14975 JUNE 1980 GUINEA / GU I NEE FIRST POWER PROJECT/ PREMIER PROJET D',EECTR/C/TE , toma REHABILITATION OF CONAKRY DISTRIBUTION SYSTEM ,- K"kimbon RENOVATION OU RESEAU DE D/STRIBUT/ON DE CONA KR Y ; - e Comoyienne ~ oyehiu POSTE Sd du 28 ' --TOMBO A 'j,rr~etiere ~ 1ytechn,q- -Bb-- I t ID-,\ 4osr .1G , " am e ' bos, Ie MA;T = T\ TOb Nov 'Spembre9s' ii S' 'r,-'--- -'-_,- r_ *'' -- Zon Indusrrielle CreorGes f 2~~~~~~~ ~~~~~ of ot]0i, - -y- 6bto+t Vr]t NEW BEHABILITATED E ISTING_ rBon .( L . .--pTeAirnM l t e A CONSTRS//RE A RENOVFE FX/STANPT Lm knKi6n,en __ _ .__ MV OVERHEAEY[NES uRbasr-e < j0 GescPri ;; -<<TT4311ue;tnfF Xd 11 _ _ MV UNDERGROUND CAELES (Bureau BE ResidenIce) 9 CABl ES SOUSTEkRA/AJS MT _ r 9 (* * V P OST S E D1STR IB UTO N htBA SFE ME S S 1< 5E N E G A ( C > SUBOSTATOS HAT/MV T 0I/ LN SSA t' f - nS <r ROAOS! /eOES : erG UINEA RAILROADS/ CHErVlN5 DE iFEE r;ff;Q Xj t:.1 - .'i tNA'' D#TRBIUi ON THANSFOrNERs AND LOW VOL.TAGE LNES