Guinea - Country Assistance Strategy

Document of The World Bank FOR OFFICLAL USE ONLY Report No.: 17183 GUI MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ONA COUNTRY ASSISTANCE STRATEGY OF THE WORLD BANK GROUP FOR THE REPUBLIC OF GUINEA November 21, 1997 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  DATE OF LAST CAS FEBRUARY 7,1994 CURRENCY EQUIVALENTS Currency Unit = Guinea Franc (GNF) US$1.00 = GNFI130 GNFI = US$0.000885 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AfDB African Development Bank AFVP Association Fran,aise des Volontaires du Progres AGETIP Agence d'Exdcution des Travaux d'Interet Public CAS Country Assistance Strategy CCECI Centre Canadien d'Etudes et de Cooperation Intemationle CG Consultative Group - CRD Communaute Rurale de Developpement ECOWAS Economic Community of West African States EDP Environmentally Adjusted Net Domestic Product ESAF Extended Structural Adjustment Facility EU European Union FIAS Foreign Investment Advisory Services GDP Gross Domestic Product GNP Gross National Product HIPC Heavily Indebted Poor Countries IDA International Development Association IFAD International Fund for Agricultural Development IFC International Finance Corporation IMF International Monetary Fund LDPA2 Lettre de Developpement de Politique Agricole 2 MIGA Multilateral Investmnent Guarantee Agency NDP Net Domestic Product NGOs Non-Governmental Organizations OED Operations Evaluation Department PFP Policy Frarnework Paper PEMAC Public Expenditure Management Adjustment Credit QAG Quality Assurance Group SDR Special Drawing Rights UNDP United Nations Development Programme UNICEF United Nations Children's Fund WHO World Health Organization FISCAL YEAR January I - December 31 Vice President: Jean-Louis Sarbib Country Director: Mamadou Dia Sector Manager: Emmanuel Akpa Acting Resident Representative: Albert Osei  FOR OFFICLAL USE ONLY REPUBLIC OF GUINEA COUNTRY ASSISTANCE STRATEGY TABLE OF CONTENTS Page No. EXECUTIVE SUMMARY I. BACKGROUND AND PERFORMANCE ..............................................1 A. Social and Economic Developments Through Mid-1996 ..............................................1 B. Political Economy and Reasons for Past Mixed Performance ........................... ...................2 C. Performance Since July 1996 .............................................3 D. External Environment ..............................................5 II. DEVELOPMENT OBJECTIVES AND STRATEGY .............................................S5 A. Medium-Term Goals and Sectoral Strategies .........5....................................5 B. Sources of Growth and Diversification .....................................6.-.----------------------...............6 C. Service Delivery for Poverty Reduction ......................................8 D. Improved Governance and Institutional Capacity ......................................9 III. BANK GROUP SUPPORT ..................................... 10 A. Implementation of Previous CAS ..................................... 10 B. Strategy and Agenda for Bank Assistance ......1............................... 1 C. Scenarios for Bank Support ..................................... 12 D. Lending Services ..................................... 13 E. Non-Lending Services ..................................... 15 F. Size and Management of Portfolio ..................................... 16 G. Partnership and Participation ..................................... 16 H. Risks ..................................... 17 TEXT BOXES Box 1 Poverty Profile for Guinea Box 2 Guinea's Participatory Strategic Planning Process Box 3 Ranking of Strategic Priorities by Beneficiaries Box 4 Government Action Scenarios for Lending Programs ANNEXES Annex I Country at a Glance Annex 2 Strategic Framework for FY98-00 CAS Annex 3 Guinea Lending Program - FY98-FY2000 Annex 4 Selected Indicators of Bank Portfolio Performance Annex 5 Bank Group Fact Sheet: IBRD/IDA Lending Program Annex 6 IFC and MIGA Program Annex 7 Key Economic Indicators Annex 8 Social Indicators Annex 9 Key Exposure Indicators Annex 10 Status of Bank Group Operations Annex 11 Statement of IFC's Committed and Disbursed Portfolio Annex 12 CAS Summary of Development Priorities This document -has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF GUINEA EXECUTIVE SUMMARY i. Guinea is richly endowed with agricultural and mineral resources. Its rainfall regime is reliable; the climatic variety of its natural regions means that a wide range of crops and livestock can be raised; and, in addition to iron ore and bauxite, the country has gold and diamond bearing formations that have recently attracted the attention of foreign mining companies. Nevertheless, economic performance since independence in 1958 has been poor and in recent years the country has been regularly ranked at or near the bottom by the United Nations Report on Human Development. Although GNP per capita is significantly higher than the average for Sub-Saharan Africa ($560 vs. $490), social indicators are uniformly worse. ii. Guinean political economy goes a long way toward explaining Guinea's post-independence economic performance, which largely reflects how successive regimes have fared in the following four areas: (i) the extent to which policies are focused on growth and poverty reduction; (ii) the commitment of the political leadership to enforcing such policies; (iii) the quality of institutions (e.g. accountability, transparency, judicial/regulatory, incentives) and implementation capacity; and (iv) the extent to which inclusiveness and popular participation permeate policy making. The poor performance of the Sekou Toure regime (which maintained Guinea under a command economy for close to 26 years) in economic management and poverty reduction parallels its poor track record in these four key dimensions. The surge of popular support that greeted the military takeover in 1984 favored a turning of the tide. The new leaders launched a process of economic liberalization to transform Guinea into a market economy but left institutional and process issues relatively untouched. Positive results were registered, overall, (4% growth rate, single-digit inflation), although Guinea, given its abundant resources, had the potential for still higher growth levels. From 1984 - mid-96, performance tended to oscillate between vigorous progress and policy slippages, especially in 1995, which saw the IMF ESAF derailed after two months and counterpart fund and portfolio management problems surface with a vengeance. The dismal post-95 performance (coinciding with the early years of the 1994 CAS) partly reflected the combination of strong resistance from vested bureaucratic interests, a lack of broad-based popular support, and the difficulties of building consensus in a more democratic and open political environment. The abortive 1996 coup was a timely wake-up call. The regime's response, namely the appointment in July 1996 of a technocratic government headed by a reformist Prime Minister, seems, in retrospect, to have been a fitting one. iii. The new government promptly set to work to address the above 4 key factors, matching strong commitmnent with specific actions. The Fund program is on track, portfolio management has improved, and sound fiscal and expenditure policies have been instituted. Conscious efforts are also now made to involve key stakeholders in decision-making, and firm action has been taken against corruption, as demonstrated, for instance, by punitive measures against rent seekers guilty of importing petroleum products and cigarettes without paying duty. Such actions have won the Government widespread support and goodwill and increased its political leverage. The situation remains fragile, however, given the Government's as yet short track record, and the past history of policy slippages. The successes registered thus far have also increased public expectations. It is therefore important for the new team to  ii show tangible results quickly and sustain the reform effort. Failure by the Government to do this and deliver on its implicit pact with the population carries a high risk of cynicism and skepticism setting in, with increased likelihood of the country relapsing into its old inept, inefficient and corrupt ways of governance. There is thus now a window of opportunity not to be missed for Guinea to find a secure path to accelerated growth and poverty reduction, but this calls for strong and sustained performance matched by the commensurate support of its donor partners. iv. The Bank Group Assistance Strategy presented here, which has built on the results of a country-wide consultation process involving over 3000 Guineans from all sectors of society, fully supports the Government's development strategy through both lending and non-lending services directed at selective activities in rural development, governance, and improved service delivery. While acknowledging the fragility of the present situation and risk of policy reversal, it also recognizes the need to respond and capitalize on the existing window of opportunity. v. The Base Case lending program proposed (Annex 3) is for SDR 120.0 million over the 3-year period 1998-2000, and is predicated upon: (a) the IMF-supported ESAF program remaining on track, (b) strong performance in the Public Expenditure Management Adjustment Credit (PEMAC), (c) continued focus on poverty alleviation; and (d) improved portfolio management. These resources will be deployed in full partnership with other donors and will be used to leverage the effectiveness of private voluntary groups in grassroots service delivery. Provided that the recent record of sound macroeconomic and portfolio management is maintained, the additional triggers to be met for the country to move to a High Case lending level of SDR200 million are specified in Box 4 on page 12. vi. The main risks against an effective implementation of the CAS are: (i) the possibility of a policy reversal, particularly in the wake of the upcoming 1998 general elections; (ii) the weak institutional and implementation capacity of the public administration; (iii) the adverse effects of continued volatility of terms of trade and receipts from bauxite and alumina; and (iv) a sudden deterioration in the security and political situation, partly resulting from disturbances elsewhere in the sub-region, breeding political instability and potential civil unrest. The proposed Bank strategy aims to mitigate these risks through (i) its increased emphasis on building broad-based support for reforms through participation; and enhanced Bank financial support in response to improving performance, in partnership with other donors; (ii) more emphasis on improving governance and capacity building; and (iii) more emphasis on diversifying sources of growth to reduce dependence on bauxite and alumina. Moreover, the Bank will keep a close watch on the situation in Liberia and Sierra Leone, with a view to possibly assisting with post-conflict reconstruction. vii. The following are among the issues the Board may wish to consider: Are the overall size and composition of the proposed programn for IDA lending and non-lending assistance appropriate, taking into account Guinea's performance as well as the high priority of poverty reduction? * The pace of reform has accelerated, but the political and economic situation remains fragile. Do the proposed programs and indicators strike the right balance in promoting further improvement in performance while allowing enough flexibility for adjustment to change in the country's circumstances? * Does the proposed strategy adequately address the substantial policy, institutional and external risks facing Guinea?  I. BACKGROUND AND PERFORMANCE RECORD 1. Guinea has, since 1986, been engaged in undoing 20 years of centralized command-type economic management. After an impressive start with broad and rapid reform to move the economy from central management to a market system, reform implementation gradually lost its momentum in the early l990s leading to serious policy slippages during the 1994 CAS period (95-97). A. Social and Economic Developments Through Mid-1996 2. Performance under the program supported by the IMF's ESAF arrangement (1993-95) was uneven, with spells of satisfactory performance ending in sizable policy slippages, mainly in the areas of tax administration and government expenditure control. The third annual arrangement (1995-96) began to run off-track soon after approval. In early 1996, the program was jeopardized furffier by a failed military putsch in February 1996, which led to a 50% pay increase to the military and seriously sapped business confidence. As a consequence, Guinea's financial and economic situation deteriorated sharply; and a drop-off in international aid disbursements led to the accumulation of domestic and foreign arrears. 3. Public expenditure management also exhibited several weaknesses (identified in the Public Expenditure Review issued in January 1996), such as serious problems in disbursements and the severe crowding out of non-wage operation and maintenance expenditures, which severely impaired the Government's ability to deliver services to the population and reduced returns on public investments. Thus, in spite of its rich agricultural and mineral resource endowments, Guinea continues to be among the countries ranked at the bottom using the United Nations Report on Human Development's index (see Box 1). -,., .= -'.-.' . . -..- .- ..- ., ' '- .-. .......,. inea is considered one o.fthepoorest counfe i G Africa tothe e that aille:soienofiw indiors ar bwavr resor-e. base an .d what cmparable countries have been able to.. ..ie. : Jfeexectancy ises.tfimatd at4S yearsa ittft omre-th 52 r Su r Af.iia nAnt mortality iabot 1 ir , i birWhs, t amo 800 p100 de.iveri.. About 1. per-ent of children.under fivemamlnourishe. ............... inl 50perentoftherurl ppultin hvo cces t dinkble. fompri d with almot 7Sprcnt .rban The.-ltrc raeof 24pereti mngtelws ginSbsaharan Afi groass eroimentt finprima -eduain -is estimate a4 percent (3 reat:fo:rl s. : :; ::. .he: 1994 -interate hosehald. survey reveals 40 pe h p ie wtgrn povrtyl.n.o . ......pe capita per year. 4. Structural reforms that went relatively well include the privatization of key public utilities (water, telecommunications); and the divestiture of Government's majority shareholding in the largest bank (BICIGUI). A strong bid to reduce the civil service (between 1986-94) saw a 40 percent drop to about 53,500 civil servants, although the service's cost and efficiency still remain major challenges for the medium term. Over the 1994 CAS period, Guinea made significant gains in the sectors of education, health, public services, infrastructure and agriculture. 5. Good overall progress was achieved in the provision of basic services. In education, gross primary enrollment has increased from 32% in 1991 to 51% in 1996, an improvement unsurpassed in Africa. More importantly, the number of girls in school has risen by over 15% in each of the last two years.  2 Also, the school-based in-service training program and the school health and nutrition program are among the most innovative in the region. To follow up on this strong performance, the country is developing an ambitious ten year program, which aims to reach a net enrollment rate of 100% by 2005. The health sector has witnessed a general improvement in infrastructure, and the introduction of cost recovery schemes has greatly improved health services at the village level. However, low operating budgets and unstable macroeconomic conditions have constrained the performance of the sector. In agriculture, a successful national extension service has enabled small-scale farmers to increase agricultural growth rates to 4% and above, about double the typical performance in Sub-Saharan Africa. 6. In the public enterprise sector, better management of public utilities -- except in the power sector, where serious institutional and financial problems remain to be solved -- has led to significant improvements in service delivery. Clean water is now available to 60% of the population (from 15% in 1980) and there have been significant improvements in urban infrastructure and the management of solid waste in Conakry, and in the extension of the road network. After a major privatization effort in the pre- 94 period, the privatization program somewhat lost its momentum, the Government's divestment from BICIGUI (the largest commercial bank) in 19Q7 being its most notable achievement. Overall, the program still lacks a framework and, although the direct impact on the budget is limited, parastatals continue to rely heavily on the banking sector. 7. Governance has also remained a major issue affecting the economy in various ways. In the financial sector, problems relating to loan collections and non-performing loans have exposed the financial and operational weaknesses of three of the seven banks in Guinea. After having been bailed out in 1994, the partially privatized BIAG is once again bankrupt, and the other two private banks are in serious financial difficulties. The destabilizing coup attempt in February 1996 was another symptom of the culture of poor governance. Corruption, compounded by a highly centralized and bureaucratic public administration that breeds rent-seeking and an entitlement mentality, continued to undermine the quality of public service. B. Political Economy and Reasons for Past Mixed Performance 8. Guinean political economy goes a long way toward explaining its economic performance record, which largely reflects how successive regimes have fared in the following four areas: (i) the extent to which policies are focused on growth and poverty reduction; (ii) the commitment of the political leadership to enforcing such policies; (iii) the quality of institutions (e.g. accountability, transparency, judicial/regulatory, incentives) and implementation capacity; and (iv) the extent to which inclusiveness and popular participation permeate policy-making. The Toure regime's poor performance in this area reflected its poor track record in these four key dimensions. The legacy of the command economy has been, inter alia, - a highly centralized bureaucracy which breeds rent-seeking and an entitlement mentality, an overbloated and underperforming state enterprise system, unsustainable external balances and mounting external debt, and capital flight and a relentless brain drain (that considerably eroded human capacity). 9. The advent of President Conte's military regime following the 1984 coup marked a new phase of better policies but uneven political commitment. The political and social leverage resulting from the dividend of the welcome transition enabled the Government to successfully implement first-phase critical economic reforms (1985-90). However, as this dividend ebbed without changes on the institutional and process front, the second round of reforms (1991-96) became more difficult to implement leading to policy slippages, especially in 1995, which saw the IMF ESAF derailed after two months and renewed counterpart fund and portfolio management problems. At the root of the poor  3 policy performance from 1995 to mid 1996 is a combination of strong resistance from vested bureaucratic interests, a lack of broad-based popular support, and the difficulties of building consensus in a more democratic and open political environment. 10. The introduction of multi-party democracy in 1994, while improving political accountability (a more independent legislature) and permitting greater popular political voice and exit, also coincided with worsening performance. It not only raised expectations for quick improvement in the poverty profiles of the masses, especially in the rural areas, but the consensus building for the necessary politically demanding reforms proved difficult. Resistance was particularly strong from the bureaucratic elites when reforms called for greater transparency and integrity and accountability in economic and financial management, which represented a direct assault on bureaucratic rent situations and opportunities for corruption. The unchanged highly centralized planning approach to policy decision making and related neglect of community participation and empowerment also led to waning broad based support for the reform package. The failed but highly destabilizing coup attempt of February 1996 was the needed wake-up call. The abortive coup was a dramatic reminder that the transition to democracy could still be reversed. The coup plotters were allegedly motivated by a desire to correct what they perceived as inequities in wealth distribution (18% salary increase for civil servants) and pervasive corrupt practices in public administration. Lack of political inclusiveness has also been invoked as a possible explanatory factor. Observers are agreed that ethnicity had colored national politics to an extent hitherto unknown. The failed coup was a sobering experience to which the creation in July 1996 of a new position of Prime Minister and appointment of a technocratic government team with a strong political mandate and autonomy to manage the economy provided a fitting response. The new government has shown its strong commitment to tackling all the policy, institutional and process issues that are essential prerequisites for sound economic performance and poverty reduction. C. Performance since July 1996 11. Since July 1996, the new reform-minded technocratic government and Prime Minister have introduced welcome changes in economic management and inspired new-found optimism in the country's future. While our assessment must also fully recognize the fragility and riskiness of the situation, given the Government's short track record, Guinea's past history of economic management failures, and the possibility of a policy reversal, with the impending elections, the results achieved thus far are very encouraging. 12. Back on track with IMF program. Determined efforts by the Guinean authorities to implement the program paid off in the early months of 1997, when some serious start-up problems were successfully contained. As a result, the quantitative performance criteria for end-March 1997 and end-June were observed. The mid-year review of the program was successfully completed in early August, creating the conditions for the IMF to proceed with the second annual arrangement of the program. Significant measures, notably in the area of expenditure management, included the creation of an interministerial committee approving commitments on a monthly basis and guided by cash availability and established sectoral priorities. The new Government has taken several other important steps, including the enactment of a new procurement code, the "privatization" of customs administration, and measures to curb tax evasions and exemptions. Both inflation and the current account deficit have been kept at manageable levels, at 3.5% and 8% respectively, and overall growth is expected to be about 5%. Guinea's debt situation has markedly improved since the February, 1997 Paris Club rescheduling agreement and a commercial debt buyback operation is scheduled to be finalized during FY98.  4 13. An IMF mission recently visited Guinea for the first year review and eventual negotiation of a second year program. The preliminary results at end-September 1997 show that all the financial criteria and benchmarks have been met, except the ceiling on outstanding external payments arrears. On the eleven structural benchmarks, only two have not yet been implemented, namely, (i) the compilation of expenditure through the new computerized system, and (ii) the approval of credible restructuring plans for problem banks. Guinea's good overall performance has warranted the IMF to proceed with the negotiation of the second year ESAF program. The IMF intends, in close collaboration with the World Bank, to speed up the restructuring of the banking sector, with due attention to the ailing banks. 14. Effort towards prioritization of expenditures. The full inclusion of the recommendations of the poverty assessment report in the medium term strategy to be supported by the proposed CAS (FY98-00) illustrates the new government's commitment to poverty reduction. In terms of specific actions, poverty alleviation measures have chiefly taken the form of a more disciplined effort to fully fund agreed programs in basic health and education. The record since mid-1996 shows a marked improvement over what had happened before then. Tangible results are beginning to show, for example in the increase in the primary school enrollment ratio by 4 full percentage points in one year, from 47% for the 1995/96 school year to 51% for 1996/97. In health, the Bank has supported a multi-donor effort led by UNICEF and WHO to implement the Bamako Initiative and Guinea is now recognized as one of the two most advanced countries in the effort to decentralize health services, provide essential drugs, and involve local communities in managing health delivery services. In particular, expenditure is now increasingly directed to the district and to basic health care services. The results of this commitment to fnancial discipline have already begun to be seen in the performance of the public investment program (which is now more strictly determined by potential economic returns) including the portfolio of IDA-supported projects. Generic problems that affect portfolio performance, especially timely availability of counterpart funds, have found the beginnings of a solution as a result of the action plan developed as a result of a portfolio review in late 1996 and whose terms the Government has been able to keep. 15. Participatory Process and Empowerment of Beneficiaries. In a radical departure from past centralized planning practices, the new government team recently launched a highly participatory process for articulating a national strategy for sustainable development with a focus on poverty reduction (see Box 2). Enhanced empowerment through more decentralized processes being pivotal to improved service delivery, the Government aims: to stimulate synergies among the various levels of government (central, local), non-governmental entities and local communities to create an efficient service delivery system that emphasizes empowerment of beneficiaries; builds on grass roots institutions in the context of decentralized service delivery, and uses monitorable benchmarks to keep track of service delivery outcomes. 16. The merits of the above approach reside in the fact that civil society as a whole has a stake in the successful implementation of the service delivery program. This reduces to a minimum the likelihood of its being undermined by disgruntled groups and encourages institutional stability and better performance. The very act of reaching out directly to the grassroots and building a service, client and performance- oriented civil service would have the salutary effect of concomitantly weakening the influence of vested interests battening on bureaucratic rent situations in the public administration.  5 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~...^.:.::.s.. . OS ...i...M. D. External EnvironmentPi1dpfoy trteicPimig1roes Sa,17. Two extemal acor caryaea threatfor Guine in~ost the~ immediate future.Te istrlaeSth geneal2 inscuricty cIinii.Wrd akia the su-ein(railae pevtac,te iono L uiberi and ~insaiit o$in Sieffenat* Leone). his kcmuoybined wit Gunea'ios nCew-found ractiis ind -roegiona poitc (ifpoidd roporth COO force3i Libsetria tandhs ofaclh commdated othle inluxof reugeeosi from iberianut obaind S ierra Leon)comint prdceastuto where intmat difrneds cand brotes exlie.yotiefre.Ti iuto slkl per tcoound prtesrna e nonm etotiest p ef x d d oc potentia threat reltest methe peossible effects aof qonsitined volatilitya nofecitsandha poorstprie prospect o bauxivSthe apnd aluin onil extmeasu aacredtefsad.tain A rsn,abu 6/ o oemn 17. Two external factors carry a real threat for Guinea in the immediate future. The fCst relates to the general insecurity in the sub-region (fragile peace in Liberia and instability in Sierra Leone). This, combined with Guinea's new-found activism in regional politics (it provided troops for the ECOMOG force in Liberia and has accommodated the influx of refugees from Liberia and Sierra Leone) combine to produce a situation where internal differences can be exploited by outside forces. This situation is likely to compound pressure on the authorities to postpone needed defense expenditure reductions. The second potential threat relates to the possible effects of continued volatility of receipts and poor price prospect of bauxite and alumina on external balance and the fiscal situation. At present, about 26% of Government r-evenues are derived from the mining sector. Taking into account the 1997 Paris Club rescheduling agreement and the commercial debt buy back operation, simulations of debt service under various scenarios seem to indicate that even under fairly pessimistic assumptions, the debt burden would remain at below 20% of exports. Although no other debt buy-back operation is planned in the Bank's operations over the next 3-year horizon, the situation will be kept under review. II. DEVELOPMENT OBJECTIVES AND STRATEGY A. Medium-Term Goals and Sectoral Strategies 18. The Government's highly participatory and bottom-up strategic planning exercise to build a broad consensus on a national strategic vision and medium term priorities to accelerate growth and reduce poverty, involved consultation of 3380 beneficiaries/stakeholders from the civil society, village communities, and women's groups (comprising 1015 women in all) in all the four regions of the country and the capital city, Conakry. It culminated in a National Consultative Forum in Conakry at which participants ranked the following as their highest priorities: Rural development, especially the development of rural services (infrastructure, credit); Access to basic education; Access to primary health care; Development of local entrepreneurship (micro enterprises and SMEs); and Improved governance leading to a more service-oriented civil service.  6 19. The Govermment's National Development Strategy for the CAS period reflects these strategic priorities of the beneficiaries/stakeholders and the results and recommendations of the Poverty Assessment (see Box 3). Its focus is on the following three objectives: * promotion of a broad based private sector led and equitable growth with a focus on the rural sector; * enhanced service delivery for poverty reduction; * improved governance and institutional capacity. Box 3: RANKING OF STRATEGIC PRIORITIES BY BENEFICIARIES =~~~~~~~~~~~~. ....... ..... ' .'.... _ ,_ _! $ S _ MrWte iSiymu~.. . . . . ... . . . I B.h foSourcgey boad Griowty area Dieresake ificatiyteon hl eeiiaiswopriiae i ohtesasot 20.utav Theet goal ist acieve ?atini goruowthfl ra feted in th er years onve1nrrageduigy te19720 e.o n higesadr (wathe a beond tf2~haovt. scs Alrthouoh Guinea' glrowthplerformance cointce and0 hasbe rdbe iyowoaky eoiths real more traising atand avifedrage annul,mr rate of 4e prcent,rsonptas iinuedfuctionre) gwfih remphairs odaicvedsifcation adnl ehucations acoueinto endefr bast loeastioa an tehird a of ethe n ec nomry'sd grothillcantionu mntoi eplayet ancrticahols to increasingtr(2% i rcomsts an idg emlyerndt.runriang th%ooes cast), (to 7 earous,an agricultyure I h tanspgarow n wllobu acos uidgmnted for~ bareial expansion Hwvy,ma construtnad iflanorai.notse connetionue (i%atogeter)osyhmprftr gurowthepen (4 of th sc or. Schaost raiortes,( as dniidi h griculture (L%eihpatcia atninto e fo fpocin DevelopmentuPolicy pral~epareedyther GoserAnmetan oclstakeh(3%fheo4 roiters ai}s pairhnt of tho aed paricessingy pandnine gipsrocess,incud failurithoc ony sufcentro mattestion bouyingfasrctr and seln;(i)etbihathe mnealindutrisvennce ronmethrual roteto;and netork cwenakagrontomi adonrese viaer,ch lerimiting andesstoa tenergy,tolmiey.cvrg o h ntoa agricultural withensiof theyste) Priorities:jstice andscrity rexpancisaion androughrancedmcracy,g Accocuntuailt and t i B.xSourtes to Gccelerowth andut Divercet urn te A pridonacoutoffuterinesification of higher rates beyond.... that.. AlhuhGunasgowhpromac .ic 199 ha. bencrdilewih.ea GD iin ta aeaeanulrteo pret cniud uuegrwhreursdiesfcaini both the sources of growth a~~~~Xnd th-e, exor bas. Employing .... 80prcn.f.h.lbrfoc,.giulue which has accounted for at least a third of the econmy's growth will continue.to.play.a.critical.role t increasing~~~~~~~~~~_ inoe n mlyet.Drn h at6to7yas giutrehsgonwl u recovery has so far taken place with minimum~~.. tehoogclchneasiceae.routonwslagl accontedfor y ara exansin. Hweve, maor cnstrintscontnue o seiousy haper.utur grwt .o the.... sector.....Sc costaits asieniien.h.grcltr.Ltero.evlpmn.Plc prepared by the Government~~.... an local..... stkh.esaspr.fte.atcptrypann.roes.nld faiur to... paysuficen .a.enio torualinratrct. and th. antnne.fte.ua.ra.etok weak agronomic.. research liiigacs.otcnooy.o.iie ovrg ftentoa agricultural extension~~~~... system... an.xcsie.ra.xasinthog.ln.lerng.giclurlgowhi expected .. toaclrt o bu ecn during....the....AS pe.....od...on accoun offuterinesiictono  7 agriculture mostly and the drive to diversify and expand agricultural exports, undertaken by the private sector. The share of farm exports in total exports increased from 8.6 percent in 1991 to over 15 percent in more recent years. Coffee, fruits, cotton, rubber, and fish are expected to provide the bulk of the expected increase. New farm-related activities such as poultry raising have recently attracted interest both from domestic as well as foreign investors. 21. Accounting for less than 20 percent of GDP, the mining sector still made up 80 percent of total merchandise exports in 1997. With continuing weak prices forecasts for the medium term, rising production costs, and declining quality, prospects for bauxite are moderate in the short term while those for other minerals, such as gold and diamonds which are less dependent on heavy infrastructure, are better. Institutional changes such as the on-going revision of the mining code and changing regulations concerning public ownership are designed to promote new investments in the sector in the medium term. 22. Small scale services and manufacturing constitute a third source of growth. Current pilot experiments conducted in Conakry for new services such as the collection and treatment of household garbage by small-scale enterprises show the untapped potential of that sector. Also on-going efforts by the Government to help convert large microfinance schemes into self-sustaining formal financial services are expected to increase the availability of medium- and long-term credit necessary for the development of the sector. Together with the comprehensive reform of the financial sector, it is expected that trust will gradually return to help the mobilization of savings by the formal banking sector. The implementation of a flexible exchange rate policy, together with the tight financial policy stance envisaged in the ESAF is expected to enhance Guinea's external competitiveness. Preliminary estimates indicate a slight improvement in export prospects for 1997, in comparison with the initial program projections. At the same time, the dampening effect on consumption resulting from the depreciation of the currency and efforts to eradicate customs fraud should lead to lower imports than initially projected. In this context, private savings are expected to improve, aided by a tight monetary policy and positive real interest rates. The informal/microenterprise sector (62% of GDP and, at least, 66% of employment) in both rural and urban Guinea has shown a remarkable capacity for creating employment and incomes for population groups frequently excluded from the formal labor market (women; illiterate youth); promoting imaginative product innovation in response to market demand; and providing skills training at a competitive cost. Given the preponderance of women in the microenterprise and informal sector, initiatives targeting constraints in this sector will have a high potential of impacting on poverty levels of Guinean women. 23. Macroeconomic and Financial Stability. Accelerating growth and reducing poverty in Guinea would require determined and sustained action to maintain a stable macroeconomic framework consistent with resource allocations to key priority areas with the highest impact on poverty reduction and a stable financial sector. Fiscal stability has been the most difficult reform to sustain. A major reason for this is the combination of revenue shortfalls and poor public expenditure management. Revenue mobilization has been hampered by pervasive tax evasion, continued fraud in the customs area, particularly for petroleum and cigarettes, ad-hoc import duty exemptions for a number of enterprises, poor tax administration, and an expanding informal sector. This was compounded by falling prices for aluminum (and bauxite, from which it is refined), following peak prices in 1988/89. About 26% of government revenues were derived from various taxes on this sector as recently as 1996. Aluminum prices are at best projected to remain flat in real terms through 2000, underlining the need for fiscal adjustment that is more solidly based than has been the case hitherto. These issues are being addressed under the ongoing ESAF program. In addition to the 5% GDP growth rate, the Government will seek to reduce the external current account deficit to 7 percent of GDP to allow for a reconstitution of gross official reserves from a level equivalent to two months of imports at end-1996 to 3.5 months at end-  8 1999; hold inflation down to 4 percent annually; and improve non-mining revenue. On the expenditure side, the authorities will also make every effort to improve expenditure management, following the recommendations of the Public Expenditure Review (PER) completed in 1996 with World Bank assistance. 24. Environmenfal Sustainability. Guinea's long-term growth sustainability will call for addressing major environmental problems facing the country, stemming inter alia, from the insalubrity of urban areas resulting from the lack of garbage collection services or waste water treatment, shortages of drinking water in the urban and rural areas, and mining-related air pollution. The deterioration of natural resources resulting from soil erosion, deforestation, and declining fish stocks is jeopardizing levels of production, particularly agricultural production, and is likely to have a dampening effect on long-term growth prospects. Sector policies will therefore need to increasingly factor in environmental issues and incorporate actions necessary to ensure long-term sustainability. A national action plan for the environment (NEAP) approved in September has already made it possible to identify priority areas, and a line unit to be set up under the Directorate of Environment will monitor implementation of the plan across the various sectors. Benchmarks for monitoring implementation of the NEAP will include improved resources management, sector strategies that integrate environmental concerns, sound exploitation of bauxite and other minerals' and appropriate investment of revenues from mineral exploitation, and growth of environmentally-adjusted NDP. C. Service Delivery for Poverty Reduction 25. In addition to creating conditions for accelerated growth, poverty reduction, particularly if it is to be sustainable, carries specific service delivery responsibilities for the Guinean government. The public's priorities, as established through the recent consultative process, embrace health, education, public utilities, and infrastructure, among others. 26. Education. Government plans for this sector will build on the significant achievements over the past six years in enrollment levels, sector management, in-service teacher training, materials development and resource allocation. The enrollment target of 53% by 2000 set in the 1994 Statement of Sectoral Policy will be reached this year, and an ambitious ten year program targeting an enrollment rate of 100% is being prepared. In the vocational training sub-sector, the Government is developing strategies to shift to a demand-driven approach, focusing on training for active workers and training that is tightly linked to the labor market for school-leavers. In higher education, the Government is restructuring higher education establishments and reallocating resources in order to focus on quality and development needs. Increases in cost recovery, teaching loads and investment in communication and management systems all promise to increase efficiency in the sub-sector. Guinea has recently been chosen to be the pilot country for the United Nations Special Initiative for Africa, designed to support low enrollment countries. 27. Health and Population. Despite policy improvements and better performance in some areas such as immunization and prenatal care programs, the health sector is still severely underbudgeted and health status indicators still compare poorly with other sub-Saharan countries. To address the major challenges facing the health sector, the government intends to adopt measures: (a) to increase the government's non- wage expenditure allocated for health, ensure efficient utilization of such expenditure, and shift the allocation of expenditure toward districts and basic health care services; (b) to improve primary health care, including more effective action to deal with infection diseases and nutrition-related conditions, particularly in remote areas; (c) to pursue decentralization, and update and apply the personnel redeployment plan, with a view to enhancing resource management and ensuring continuity of care; (d) to promote greater community involvement in health policy development and the financing and  9 management of health care units; (e) to develop human resources; (f) to ensure complementarity between the public and private sectors as well as cross-sector cooperation; and (g) to develop health information and health research system, with a view to improving planning and management. During 1997-99, the government will also undertake a comprehensive outreach campaign to raise public awareness regarding primary health care services. With respect to the pharmaceutical subsector, the Government will take steps to improve the supply and distribution of essential generic drugs. It also plans to privatize the central pharnacy and to strengthen the legislation governing the pharmaceutical subsector. 28. Population problems in Guinea are substantial. The government recognizes the macroeconomic and social implications of population growth and is fully committed to addressing the issue. In addition to the emphasis on girls'/women's education, there is also recognition of the need to enlarge the scope of family planning services and to ensure their integration into the primary health care system. In this regard, the government has recently formulated a comprehensive national population policy aimed at curbing the rate of population growth. The program targets for 2010 are to bring down the rate of population growth to 2 percent and reduce the gross natality rate to 33 live births per thousand inhabitants. 29. Public Utilities and Urban Environment. In recent years, urban poverty has become an important problem, particularly in Conakry. Rural migrants and large numbers of refugees from neighboring countries have settled in squatter neighborhoods lacking basic services of water, electricity, solid waste collection, and sanitary disposal of human waste. The Government's policy will be aimed at ensuring broader public access to drinking water and affordable sanitation and solid waste management, building on the successful Second Water Project and the encouraging results of the pilot in solid waste management under the Second Urban Project; completing the full privatization of the assets of the power company (ENELGUI) to improve the institutional environment as well as the capacity and performance of the sector, and increasing access to electricity in the rural areas in an economically and environmentally sound manner with GEF financing. D. Improved Governance and Institutional Capacity 30. The Government strategy also recognizes the need for greatly enhanced institutional capacity and improved governance. Government financial management lacks transparency; there is widespread corruption; and administrative and legal systems are weak. Government decision-making will increasingly be anchored in processes that empower beneficiaries and build broad- based ownership and support. On the transparency front, the Ministry of Finance recently initiated a wide-ranging audit of all units under the ministry to root out staff tainted by corruption. The institutional matrix formed by governance structures and the administrative and legal framework, will drive the success and sustainability of economic reform programs and service delivery to the poor. The aim is to build a virtuous circle between good leadership, good governance and good institutions. 31. To create the conditions for sustainable economic development, the government will implement the Framework for Administrative Reform and the National Governance and Institutional Development Program and build on the results of the capacity assessment exercise carried out under the umbrella of the partnership for Capacity Building Initiative. These programs aim at improving the efficiency of the civil service, increasing institutional capacity, and enhancing the probity of public service by combating corruption. This will require that resources be allocated in accordance with clearly established national priorities, and that managers be held accountable for the funds used to achieve these priorities. The government is also determined to strengthen the control of new hiring in the civil service and establish  10 benchmarks and indicators for measuring progress in the provision of services to meet consumers' needs, both in terms of volume and quality. 32. To strengthen the government contracting system, the authorities have adopted a procurement code aimed at (i) redefining the roles of the structures involved and reducing the number of structures; (ii) radically simplifying the. procedures and channels for signing contracts and making payments to contractors; (iii) adopting standard forms to be used under national competitive bidding; and (iv) installing a unified system of computerized tracking of government contracting, managed by qualified staff trained for the task. 33. To reformn the judiciary system and strengthen its performance as a whole, Government intends, over the next three years, to: (i) adopt and implement an action plan to improve the working conditions of the members of the judicial system, through salary revisions and upgrading courtroom facilities; (ii) promote transparency in legal proceedings through, inter alia, systematic reporting of ongoing court cases, and regular publication of court decisions; (iii) strengthen capacity in the legal system through, inter alia, the provision of training to magistrates, legal professionals, and law enforcement officers; (iv) promote awareness of representatives of the executive branch (ministers, governors, prefects, mayors, police officers) on the limits of their authority; and (v) tighten the functioning of the institutional mechanisms and enforcement of compliance with all the rules of conduct by members of the judiciary. II. BANK GROUP SUPPORT A. Implementation of Previous CAS 34. The previous CAS, discussed by the Executive Directors in February 1994, was inspired by the results of the first round of reforms undertaken by the Conte regime. As Guinea had completed its most pressing tasks of stabilization and adjustment, IDA's assistance strategy focused on the following four objectives: (i) ensuring continued macroeconomic stability with a focus on domestic resource mobilization; (ii) promoting private-sector growth by redefining the role of the state and reducing regulatory and legal impediments; (iii) improving public services in the social sectors through decentralization and greater grassroots participation; (iv) and improving portfolio management. 35. Until mid-1996, poor policies, mismanagement of financial resources which led to shortfalls in counterpart funding, and an unstable macro-economic situation severely undermined portfolio management. Moreover, many donors added to the confusion by pushing their pet projects to the detriment of ownership and stakeholders' participation. This further undermined already weak absorptive and institutional capacity, and portfolio performance worsened (6 problem projects out of a total portfolio of 13 projects). The Bank reduced its lending program to the low case scenario. 36. The change in government in July 1996 (appointment of a technocratic prime minister and strong economic team) and accompanying renewal program has had a positive impact on the Bank dialogue and portfolio. Portfolio management has improved and there is currently only one problem project (Power II), which continues to be dogged by a serious institutional and financial crisis. If this situation persists, the project will be closed in December 1997, and while the main physical infrastructure (Tombo III) would have been completed, the institutional and financial objectives would be unmet. The Agricultural Export Promotion Project was restructured and reduced from seven to two components, the revised Development Credit Agreement was successfully negotiated, and the MOP has been presented to the Board on a non-objection basis. The last tranche of the Financial Sector Credit was disbursed in August to reflect compliance with all project-specific covenants, including approval of an IMF ESAF. The  11 Highways IV Project was successfully completed and rated satisfactory on both DO and IP by OED and ICR. The Second Urban Project's slow disbursement and counterpart-fund related projects were successfully addressed and the project upgraded. By project closure, its infrastructure component will have achieved its objectives, making vast improvements to the city of Conakry through sustainable institutional arrangements, and the pilot for solid waste management through NGOs and community associations is a success. The Second Water Supply Project, featured Bankwide as a success story in the privatization of public utilities, has resulted in much strengthened and improved management of the water company, a much expanded Conakry water supply system, and water rates at levels consistent with long-term marginal costs. Age-old problems of counterpart funding are being addressed with some success, and it is hoped that the MTEF approach under the PEMAC will strengthen the resolve to honor budgetary allocations to the priority sectors. 37. Five lessons can be drawn for the Bank assistance program from performance recorded since 1994: (i) leadership quality and commitment are key determinants of policy performance; (ii) effective service delivery requires well targeted programs and decentralized implementation arrangements (building on local community institutions, NGOs, and the private sector) to reduce dependency on the weak and corrupt public administration; (iii) participation and strong ownership by beneficiaries/stakeholders are crucial to enforceability and sustainability; (iv) clear perfonnance indicators and benchmarks are essential, and (v) collaboration and effective coordination among donors are crucial as they facilitate leveraging on donor complementarities and comparative advantages. These lessons have been fully incorporated into both the process and substance of the development strategy that the proposed CAS is supporting. B. Strategy and Agenda for Bank Assistance 38. The measures undertaken since July 1996 suggest, although past experience invites caution, that the Prime Minister and his new team are making a new start and have begun delivering on their promised economic renewal program. However, for their present successes to be sustained, they need to maintain and deepen their efforts. The combination of strong performance and commensurate external support will be essential to allow Guinea to take advantage of its current window of opportunity and help accelerate growth and reduce poverty. 39. The national strategy developed by the Government as a result of the participatory planning process constitutes an excellent framework for beneficiaries to identify areas of priority needs where the Bank can build on its comparative advantages and effectively deploy its lending and non-lending services to help achieve Guinea's overarching goal of poverty reduction during the CAS period (FY 98-00). To enhance the likelihood of sustainable impact, the filters to be used for designing operations will be poverty focus, institutional capacity, and relevance to stakeholders' constraints and opportunities. These factors will also guide portfolio management and the sector work underpinning Bank Group's assistance. 40. The proposed strategy envisages a mix of lending and non-lending services to support selective areas (building on the Bank's comparative advantages) of the following three broad components of the Government's medium term strategy: promoting rapid and sustainable growth with a focus on the rural sector; improving service delivery for poverty reduction; and enhancing governance and institutional capacity.  12 C. Scenarios for Bank Support 41. Guinea's performance in the last 15 months has strengthened the case for more active support by the Bank. But, in full cognizance of the country's past difficulties in sustaining its reform efforts, we propose to adopt a modulated approach whereby external support would be driven by and commensurate with performance (see Box 4). The proposed Base Cas Program includes 9 new projects (4 to support the growth objective, 3 for human development and service delivery and 2 for capacity building), for a total amount of support of US$170 million (SDR 120 million). The lending level will be predicated on: (a) the IMF-supported ESAF program remaining on track, (b) strong performance in the implementation of the PEMAC, (c) a continued focus on poverty alleviation; and (d) improved portfolio management. A further deepening and acceleration of reform efforts would provide the basis for moving to a Hgh Case lending of US$280 million (SDR 200 million). The increased lending from the High Case would help to advance the Private and Financial Sector project. Conversely, significant slippages in key reform areas would warrant a downgrade to a Low Case scenario in which new IDA lending will be sharply curtailed to one or two projects focusing on basic needs in the social and rural sectors for an amount not exceeding USD 120 million over a three-year period. Box 4: Government Action Scenarios (rriggers) For Lending Programs O. {.a<At.S,y,, 2 ................ , ,.. . .. .................... . .,,,., "'""""" ''"'' "' '' '' ' .F ~~......... ........ ..... , .,, . I.. . ilsCs | BaseCase Lolucas Satisfactory macroeconomic performance (ESAF Liquidate the largest insolvent bank (BIAG) Significant worsening in and MTEF targets on track) and agree on an overall program of actions to macroeconomic performance Meet targets in budget disbursement to priority put the financial sector on a sound basis (bank Significant delays in the areas in the context of the medium-term restructuring and reform of the regulatory implementation of PEMAC expenditure framework framework) Significant deterioration of Ensure timely and efficient budget Satisfactorily negotiate the new concession portfolio performance (number implementation to be monitored using the agreement for the full privatization of the of problem projects in excess of computer-based system Power Co. 2; a disbursement ratio of less Satisfactory implementation of actions designed Agree on the content and calendar of the PE than 20% with growing to strengthen the regulatory framework that reform strategy (as agreed in the PFP) disbursement lags) governs budget implementation and Government procurement Maintain the number of problem projects at 2 or less (disbursement ratio of 20% or more and disbursement lags less than 20%6) 1 1 1 42. The above approach gives us the flexibility to ensure the support needed by the new government to sustain its current reform program, thus taking advantage of the window of opportunity brought about by the positive changes since July 1996. A significant portion of the base case lending would be front loaded through the PEMAC (about 40 percent of the total) which encompasses actions and measures critical to improved governance and the delivery of basic social services to the population. An in-depth review of reform implementation to be carried out in the context of the second tranche supervision of PEMAC (late summer 1998), taking into consideration the triggers listed in the aforementioned table, will enable the country team to adjust the implementation of the bank's lending program for the remaining two years of the CAS.  13 D. Lending Services To foster rapid, broad-based growth with a focus on rural sector 43. In rural development, the Bank's assistance will focus on alleviating the constraints identified in the Letter of Development Policy for the agricultural sector (LDPA2). This will include helping the Govermment build capacity for: (a) planning and implementing the most urgent rural infrastructure investments; (b) generating and disseminating improved technological packages for agricultural production; and (c) improving the efficiency of public expenditures in the sector. The Bank is also assisting the Government in its efforts to deepen the institutional reforms needed to promote private sector development and export diversification. Moving from a narrow and public sector dominated focus on agriculture to a more decentralized and cross-sectoral approach to rural development, the Bank's strategy would give a strong emphasis to empowering local communities, women's groups (since women are major stakeholders in rural areas), local governments, and other key stakeholders to enable them to play an increasing role in the conception, design, and implementation of rural development projects, and in donor coordination. 44. The Government has strived to rationalize public sector investment and coordinate donor interventions in agriculture. The ongoing National Agricultural Services Project (NASP), an integrated agricultural services program (co-financed by the EC and Caisse Francaise de Developpement), which encompasses important agricultural and livestock services, harmonizes donor interventions in key areas of agricultural development. The recently restructured National Agricultural Export Promotion Project, which is co-financed by USAID (agricultural export financing mechanism) and the African Development Foundation (training of farmer organizations), will address the main impediments to investment and trade in agricultural commodities by focusing on physical infrastructure and institutional support to exporters. A new operation, the Village Support Program (APL), will aim at reducing rural poverty and promoting sustainable rural development by: (i) encouraging decentralization at the rural community (CRD) level; (ii ) strengthening capacity at the village level in managing small matching grants for development purposes; and (iii) providing basic rural infrastructure and other services that reflect the priority needs of the rural communities. The Bank and the African Development Foundation collaborated closely in the identification of this project, and extensive use is being made of NGOs (e.g. AFVP, CCECI, and Plan International) in its preparation. IFAD has expressed an interest in co-financing it. 45. With regard to mining, the Mining Sector Investment Promotion project currently under supervision is assisting the Government in promoting investment in the sector and strengthening national capacity to carry out the desired policy reforms and needed restructuring measures. 46. With regard to the development of local entrepreneurship, the Bank's support will, on a pilot scale, help to create more suited and sustainable financial intermediation institutions through the Microfinance Project, building on the ongoing experiences with credit union, rural credit, and micro credit. The aim is to facilitate the development of local entrepreneurship by assisting graduation from the micro/informal stage to formal small- and medium-scale enterprises. The new learning and innovation (LIL) approach to lending will be used. 47. To ensure Macroeconomic Stability and facilitate fiscal and financial discipline, the major new lending instrument is the Public Expenditure Management Adjustment Credit (PEMAC) which will be presented to the Board at the same time as the CAS, addressing two main problems: (i) restructuring of public expenditures toward priority areas (education, health, rural development, and road maintenance) with the implementation in 1998, of a medium-term expenditure framework and (ii) strengthening  14 budgetary execution and control through the adoption of a computer-based public sector financial information system, more rigorous implementation of the regulatory framework specially for financial control, and procurement, and the standardization and simplification of budgetary processes. Besides helping ensure financial sustainability, PEMAC will improve public service effectiveness in sectors which benefit the majority of the poor (public health, education, and infrastructure) and are pivotal to the enhancement of Guinea's growth prospects through more effective human resource development, improved physical infrastructure, and a more effective government contribution to the development of the agricultural sector. A private sector and finance project (FY2000) will address the institutional and operational issues affecting the performance of the banking and financial sectors. To improve Service Delivery for Poverty Reduction 48. Helping improve service delivery for poverty reduction is an important cornerstone of our assistance strategy, and will be pivotal to the enhancement of Guinea's growth prospects. Access to key public services and effective human resource development would, by enhancing human productivity, help reduce urban and rural poverty. 49. Assistance to human resource development will include the on-going Health/Nutrition project, which seeks to improve the quality of health care and expand the coverage of the health delivery system in Basse and Haute Guin6e (other donors are supporting similar projects in other parts of the country) through a shift of expenditure toward districts and basic health care services. Close attention will be given to the impact of the programs on the most disadvantaged social groups, such as women and children. A Population and Reproductive Health project, whose preparation was marked by extensive consultations with other donors, particularly the USAID (which is supporting a similar project), scheduled for appraisal in FY98 and board presentation in FY99 would make a significant contribution to the recently formulated national population policy aimed at curbing the rate of population growth and integrating family planning services into the primary health care system. This project will provide an excellent window for addressing gender-related concerns and would finance a population support fund specially targeted at the reproductive health of women and other vulnerable groups. The implementation of fund activities would be under the Ministry of Social and Women's Affairs. To build on the Equity and School Improvement Project, which is supporting components of the multi-donor education sector investment program (financed manly by the Bank and USAID, with co-financing by Japan, the EU, AfDB, and IDB), and raise primary enrollment levels even further (to 100% net enrollment), a new Education For All project, (most likely an APL), is scheduled for Board presentation in FY2000. The project will also address the need to increase access and quality at the secondary level, a sub-sector that has received minimal support in the past and is experiencing strong pressure due to increasing primary enrollments. 50. Assistance to improve water supply and sanitation, and reduce urban poverty will build on lessons of experience of the on-going Second Water Supply project, which has increased access to safe water in Conakry from 15 percent in 1980 to 60 percent in 1995. By increasing private sector involvement, the project has improved water supply through improved rate setting, billing and collection, and more rigorous financial management. The Third Water Supply project approved by the Board on April 15, 1997 is expected to further increase access to safe water in Conakry to 100%. It will also help to rehabilitate Conakry's sewerage facilities by expanding coverage to 80 percent of the population in areas where a sewerage system already exists. 51. The ongoing Second Urban Project will support Guinea's objectives of improving supply of urban services. This will entail, inter alia, providing and maintaining infrastructure and establishing  15 institutions in charge of the handling of urban services and solid waste management building on the success of the pilot emergency program for solid waste removal. The proposed Urban Environment project will help to mainstream the lessons of experience from the pilot program (such as the successful use of community organizations, youth and women) in order to address basic environmental and health issues in Conakry (lack of sanitation and maintenance of secondary streets and drains) and mobilize funding for municipal services. In addition to completing the high impact Power II project, the Bank inputs will also involve preparing a Rural Energy project, jointly financed by GEF, IDA and other donors, to improve access to electricity in rural areas through decentralized applications and use of renewable energy. Good Governance and Capacity BuUding 52. Support for an institutional strengthening and capacity building project -- with a focus on enhancing the government's efficiency as provider of basic social services-- will be a main priority of our future assistance in this area. A key element will be the alignment of public sector management with development objectives emerging from the nati6nal strategic planning process through which consultations with beneficiaries contributed to defining not only priorities but also minimum standards of service delivery. Measurable indicators and benchmarks will be developed and monitored by a poverty monitoring unit, first on a pilot basis, in areas which have a significant impact on poverty reduction, such as education, health, and rural infrastructure. The impact on gender-related differentials will be important yardsticks for monitoring progress in all these areas. Rules for public sector personnel management (including remuneration) will be modified accordingly. A performance-based pay system will be designed and tested in the pilot exercise, and pay and budgetary allocation will be linked to attainment by agencies of service delivery norms, rather than determined by individual contributions to these goals. These efforts will be complemented by a Judicial and Legal Project (going to the Board in FY2000) to help remove impediments to business activities and stimulate a better supply response from the private sector through reform of the legal and regulatory framework (including commercial laws and regulations, and property rights). E. Non-Lending Services 53. In addition to lending and portfolio management, IDA activities will focus on ESW and non lending non-ESW activities. ESW activities will support planned lending operations and will include: (i) a Private and Financial Sector Assessment (to be brought forward from FY00 to Y98) to provide the analytical foundations for a program of reform dealing with the current banking sector crisis; (ii) a Public Investment Review to help the Government deepen the reforms in public expenditure management started under the PEMAC; (iii) an Agriculture Sector Strategy which will define our approach to agricultural development for Guinea as a focus country; (v) a Transport Sector Strategy to support a Roads Rehabilitation and Maintenance project scheduled for FY200 1; and (vi) an Institutional Environment Assessment to help prepare a governance/capacity building approach to civil service reform. In addition to general economic work (e.g. SPA), major non-lending related ESW will deal with PFPs, background documents for a Consultative Group meeting in 1998 and a Growth and Competitiveness study requested by the Government as a major input to a national forum on private sector development (in collaboration with IFC). 54. Non-lending non-ESW activities will also play a greater role in the CAS in helping to address specific strategic and capacity building issues and ensure an active policy dialogue, consensus building, and partnership within the country and with key institutions and donors actively involved in Guinea. To achieve growth and poverty reduction in Guinea will require creating the conditions for an enabling  16 environment and a participatory process that would strengthen ownership, commitment, enforceability, and accountability. Such an agenda would necessitate an extensive program of Information, Education and Communication to be delivered with the help of EDI, given its capacity and expertise in brokering national dialogue on subjects such as corruption and the promotion of a culture of "administration for development". Such efforts will ensure that the CAS becomes a living document instead of a periodic exercise. F. Size and Management of Portfolio 55. Based on the anticipated credit closings during the CAS period (5 in FY98, I in FY99, 3 in FY00), and the decrease in FY97 (1 new credit and 2 closings), the proposed new lending programs for both the base and high case scenarios (3 to 4 projects per year) will leave the size of the portfolio practically unchanged (some 11 to 13 projects under supervision), as was recommended in the Portfolio Improvement Plan (PIP) for Guinea. The goals of the Country Team during the CAS period will be to consolidate progress in implementing the PIP in terms of addressing problem projects (see para.35 - 36) and to meet all the Region's targets/benchmarks regarding portfolio performance (effectiveness, DO, IP, disbursements and proactivity index). In this regard, the potentially "at risk" projects on the portfolio, based on QAG flag's are being addressed. The Second Urban Project's slow disbursement and counterpart-fund related projects were successfully addressed and the project upgraded. For the Water II project, an action plan was formulated to address, among others, issues of government water arrears and high water losses, and satisfactory progress on it made a condition for effectiveness for Water III (which has since become effective). The Health and Nutrition project is to be retrofitted with performance indicators to permit better monitoring of project outcomes. 56. The capacity of the Bank's Resident Mission will be enhanced to deal with procurement and financial management issues and to achieve systematically the benchmarks of the FY97 PIP. The PIP for FY98 will focus on generic issues (including procurement, financial management, counterpart funds, and recurrent expenditures), and actions on generic implementation issues will be part of the PEMAC conditionalities. That Guinea will continue to be rated as a country at risk reflects the fact that the key factor in QAG's assessment of country risk, in addition to economic management, is the percentage of projects closed with an unsatisfactory OED rating over the previous five years, as well as the recent nature of the recent turnaround in Guinea and the fragility of the present economic situation. The CPPR exercise would be used to update the PIP and monitor progress. G. Partnership and Participation 57. Partnership, participation, and strong country ownership of programs will drive the Bank's assistance to Guinea. The participatory process followed in defining the Government's development strategy will be institutionalized, providing a basis for maintaining a CAS that is always attuned with Guinea's priorities. The Bank will continue to cooperate and coordinate closely with multilateral as well as bilateral donors and NGOs. Donor assistance to Guinea is largely in the form of grants, and has concentrated on investments to reconstruct or expand economic infrastructure, including a large involvement in rural development, and assistance to improve the public administration's management capacity. France is among the largest bilateral donors. The European Union is also heavily involved in Guinea especially in the infrastructure sector. Other donors include the African Development Bank, UNDP, IDB, the United States, Canada, Germany and Japan. There has been a remarkable convergence of interest on the part of the donor community to collectively support a more participatory approach to policy making and improvements in the efficiency of management of the institutions responsible for economic management. This level of cooperation will continue at a Consultative Group Meeting  17 scheduled for the first half of 1998. In the area of policy reform, the Bank's support to the PEMAC, which will be joint-financed by the AfDB, will complement the IMF's ESAF program and a structural adjustment program supported by Caisse Francaise de Developpement. Regarding private sector development, the Bank's input will complement IFC, FIAS and MIGA's assistance. 58. IFC Activities. The IFC's assistance strategy in Guinea is currently focusing on the following areas: (i) diversification of financial services (e.g. potential for setting up a leasing house); (ii) support to private infrastructure projects (ports, power, railways), with possibility of IDA guarantees; (iii) financial assistance to small and medium enterprises through the AEF/SEF Program; (iv) support to extractive industry; and (v) revitalization of privatized enterprises, with a focus on agribusiness. FL4S is helping the Government assess Guinea's investment climate prior to undertaking specific necessary reforms designed to make the country more appealing for private (including foreign) investment. In this context a diagnostic study, incorporating an institutional review and an evaluation of Guinea's Office for Private Investmnent Promotion (OPIP), will be carried out. 59. MIGA. Guinea is included in MIGA's African Mining CD-ROM, and officials from Guinea have participated in a number of MIGA training programs, including a workshop for mining officials on Doing Business with Foreign Partners, and investment promotion workshops. A number of Guinean organizations, including the National Center for Private Investment, are utilizing MIGA's IPAnet to disseminate information about employment opportunities in the country to the international business community. MIGA has a pipeline of 6 registered projects in Guinea, representing an aggregate potential investment amount of US$96.8 million in the infrastructure, telecommunication, mining, and agri- business sectors. H. Risks 60. The main risks facing an effective implementation of the CAS are: (i) the possibility of a policy reversal, particularly in the wake of the upcoming 1998 general elections; (ii) the weak institutional and implementation capacity of the-public administration; (iii) the adverse effects of continued volatility of terms of trade and receipts from bauxite and alumina; and (iv) a sudden deterioration in the security and political situation, partly resulting from disturbances elsewhere in the sub-region, breeding political instability and potential civil unrest. The proposed Bank strategy aims to mitigate the above risks through (i) its increased emphasis on building broad-based support for reforms through participation; and enhanced Bank financial support in response to improving performance, in partnership with other donors; (ii) more emphasis on improving governance and capacity building; and (iii) more emphasis on diversifying sources of growth to reduce dependence on bauxite and alumina. Moreover, the Bank will keep a close watch on the situation in Liberia and Sierra Leone, with a view to possibly providing assistance with post-conflict reconstruction. James D. Wolfensohn President by Gautam S. Kaji Washington, DC November 21, 1997   Annex 1 Page 1 of 2 Guinea at a glance 11l19197 Sub- POVERTY and SOCIAL Saharan Low- Guinea Africa income Developmentdiamond Population mid-1996 (millions) 6.8 600 3,229 L GNP per capita 1996 (US) 560 490 500 Libexpedancy GNP 1996 (billions US$) 3.8 294 1,601 Average annual growth, 1990-96 Population (O) 2.8 2.7 1.7 Labor force (%) 2.4 2.6 1.7 GNP Gross Mostrecent estimate (latest year available since 1989) per primary Most ~~~~~~~~~~~~~~~~~~~~~~~capita enrollment Poverty: headcount index (% of population) Urban population (% oftoialpopulation) 30 31 29 Life expectancy at brth (years) 44 52 63. Infant mortality (per 1,000 live births) 130 92 69 Child malnutrition (% of children under 5) 18 .. .. I Access to safe water Access to safe water (% of population) 49 47 53 1 Illiteracy (% of population age 15+) 64 43 34 Gross primary enrollment (% of school-age population) 50 72 105 -Guinea Male 59 78 112 - Low-incomegroup Female 33 65 98 L KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1986 1995 1996 Economic ratlosJ GDP (billions US$) 1.9 3.7 3.8 Gross domestic investmentVGDP .. 14.9 14.5 13.0 | Exports of goods and servicealGDP .. 31.1 21.7 190 Openness of economy Gross domestic savings/GDP .. 17.9 10.1 10.0 Gross national savings/GDP .. 8.4 6.2 5.4 Current account balance/GDP -6.6 -8.2 -7.8 Interest paymentslGDP .. 1.0 1.9 2.2 Savings Investment Total debttGDP 76.2 87.3 85.1 a * Total debt servicelexports .. 11.9 25.8 21.5 Present value of debVGDP .. .. 56.6 Present value of debtlexports .. .. 260.1 .. Indebtedness 1975-85 1986-96 1995 1996 1997-05 (average annual growth) GDP .. 4.0 4.4 4.5 5.8 -Guinea GNP per capita .. 1.8 1.2 1.5 3.0 _ Low-income group Exportsofgoodsandservices .. 2.7 11.3 -2.5 5.5 STRUCTURE of the ECONOMY 1975 1986 1995 1996 Growth rates of output and Investment(%) (% of GOP) Agriculture .. 24.2 24.5 25.8 10 t Industry .. 35.0 31.4 35.6 Manufacturing .. 11.0 2.1 4.8 o Services 40.8 44.0 38.6 .5 91 92 93 95 -10: Private consumption .. 70.6 81.5 81.9 .15: General govemment consumpton .. 11.4 8.4 8.1 lmports of goods and services .. 28.1 28.1 22.1 Got G---GDP 1975-85 1986-96 1995 1996 Growth rates of exports and Imports (average annual growth) Agriculture .. 4.2 3.5 5.0 15- Industry .. 2.6 3.7 4.3 Manufacturing .. -3.5 1.6 3.0 Services ., 4.7 5.2 3.9 , Private consumption .. 3.9 1.6 5.11 93 General government consumption .. 4.6 3.3 2.7 - Gross domestc investment .. 2.1 7.5 -4.5 - - Imports of goods and services .. 1.6 5.3 -7.4 Gross national product .. 4.6 4.1 4.4 - Exports -I0--mpons Note: 1996 data are preliminary estmates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.  Annex 1 Page 2 of 2 Guinea PRICES and GOVERNMENT FINANCE 1975 1986 1996 1996 Inflation (%) Domestc prices Consumer prices .. .. 5.6 5,6 : 0 Implicit GDP deflator . .. 5.2 3.8 I0 Govemment finance 5 (% of GDP) 0 Currentrevenue .. 13.4 11.8 10.2 91 92 93 94 95 9s Current budget balance .. 0.1 2.6 1.3 -GOP def. C-O-CPi Overall surplus/deficit .. -7.9 -6.0 -6.0 TRADE (millions US$) 1975 1986 1995 1996 Export and Import levels (mill. US$) Total exports (fob) .. 590 747 696 ! - Bauxite .. 381 299 324 i75 Aluminum .. 73 110 104 830 Manufactures .. 0 0 0 [ _s Total imports (cit). 422 809 714 378 Food .. 7 77 76 352[ Fuel and energy .. 51 82 87 12 Capital goods .. 50 88 78 o. Export price index (1987=100) .. 99 93 86 90 91 92 93 94 95 96 Import price index (1987=100) .. 88 126 122 ! Exports a Imports Terms of trade (1987=100) .. 113 74 70 1 BALANCE of PAYMENTS (millions USS) 1975 1986 1995 1996 Current account balance to GOP ratio Exports of goods and services .. 598 798 746 0 I i 90 91 92 93 94 51 95 Importsof goodsand services .. 693 960 866 , ! 1 92 93 [ 94 9 Resource balance .. 58 -162 -120 Net income *- -154 -136 -148 i i Net current transfers .- -32 -7 -32 [ Current account balance, before official capital transfers .. -126 -305 -300 '-a _ Financing items (net) .. 148 318 273 '12 ' Changes in net reserves -3 -22 -13 27 .14 _ Memo: i_T Reserves induding gold (mill. USs) - 24 198 195 Conversion rate (locat/USS) 20.3 24.3 980.1 1,032.0 EXTERNAL DEBT and RESOURCE FLOWS 1975 1986 1995 1996 (millions US$) 1 Composition of total debt, 1996 (mIll. USS) Total debt outstanding and disbursed 774 1,764 3,242 3,257 IBRD 68 61 0 0 IDA 0 160 847 908 G: 173 F: 76 Total debt service 39 72 209 171 8: 908 IBRD 8 12 - 0 0 IDA 0 2 8 12 Composition of net resource flows Official grants 3 47 235 E 1325 C 85 Official creditors 54 48 44 44 Private creditors 4 1 -13 0 Foreign direct investment 0 1 35 Portfolio equity 0 0 0 D: 690 World Bank program Commitments 21 50 66 54 A - IBRD E - Bilateral Disbursements 0 48 68 65 B - IDA D - Other multilateral F - Private Principal repayments 2 8 2 5 c - IMF G - Short-ternm Net flows -2 40 65 60 Interest payments 6 6 6 7 Net transfers -8 34 60 53 Development Economics 11119/97  Annex 2 Page 1 of 4 GUINEA STRATEGIC FRAMEWORK FOR FY98-00 CAS Expected Outcome/Impact Strategy to Achieve Outcome Benchmarks Products(Instuments 1. STRENGTHEN MUTUAL TRUST AND A. Imrove country dialogue and relations. . Field visits by CD CULTURE OF PARTNERSH Shift from leverage and commitment culture . Quality of dialogue though Borrower . Jounees de reflexion to partahp for results/impact suveyslfeedoack . Dissemination and learming from relevant t partnership for resultstunpact surveys/feedback and replicable best practices B. Foster particinatorv Process and donors Dartnership. Stronger ownership and empoNverment of . SPA and country Briefs (ESw) i) Wider and stronger ownership and bencficiaiies/takeholders . Annual Meetings empower- ment of beneficiaries/stakeholders . Country Team monitoring of agreed CAS . Preparation and montitoring of ii) Compact/partnership with donorslNGOs to Development Indicators and triggers implernentation of Gender action plan and better leverage on respective comparative issues advantages . NGOs liaison office . Donrs coordination (CG, Roundtables, Compacts, etc.) . Participatory CASI Strategic Plannimg prcess (with EDI, ENVSD, IDF) D SUSTAINABLE GROWTH WrH A. Imp rove Flnancial Manacement and * Raising the pwimary budgetary surplus from . Implement revenue measuLes in PFP STABILITY Macroeconomic Stability 1.5 percent of GDP in 1996 to 3.5 percent . Enhanced customs productivity through i) Sound fiscal policy management of GDP in 1998. better task allocation (between customs ii) Reallocation of expenditure toward priority . Increase non mining revenues from 7.7 and SGS) and performcbase sysem sectors and within the sectors toward percent of GDP in CY96 to 9.4 percent of . Implement recommendations fiom PERs efficient programs GDP in CY98 (Capacity BuitdgDF) - ESAF program on track - Coordination with IMF on mondey and * Ensure that in FY97 at least 90 % of the fiscal poliies (PFP, ESAF) budgeted resources are made available in a . Yeady PIP reviews timely maner to proity sectors . PEMAC (LENISPN) FY98 * For fiture yeas, meet outcome indicator of . SAC (IV) F72000/FY2001 prioity sectors (to be established with the * Deb reduction(LEN) govanent in the context of the MTEF) 3 Stremthen fundamlak of rnw_ i) Improve retuns on investments * Achieve GDP grwth of 5% on average in * Portfolio Impvement Prgun (PIP) ii) Rwad Deni_uau. 1998.99 * ESW-Soue of Growth * Increase agriculture output and u * Ihcease growth of agiulture output frm . ARP and CPPR d_vdopnent 4% to at least 6%. * Complde a growth and povaty fIoused . Increas food secwity for the poor * Inase coveage of ural infrastructure ural developmnt tra to Act Guine . promote comamuity based self hbp in the * Imrease inceme emg WpOpoitics in as a foaus couma" fuAgdpalr Seelw area of social and economic infrastructure tn aas (ESW) - Prepae a community bed soci and economc infrastructure opertion (LEN) . Supervision of the agricultural services (SPN) I._ Ag_ Ex*A Promotion (SPN 1  Annex 2 Page 2 of 4 GUINEA STRATEGIC FRAMEWORK FOR FY98-00 CAS Expected Outcome/lmpact Strategy to Achieve Outcome Benchmarks Products/inslnuments iii) Eronent. Ensure environmental . Set up and start operating unit to monitor . NRM (GEF) sustainability of growth strategy the NEAP . inprovement in national resource management . Sound exploitation of nineral and energy resources . Adequate protection against major environment-related risks . An improved urban environment and living standards (housing, clean water, etc.) . Environmental concerns incorporated into sectoral development plans iv) Fisheries: Improve management and . Fiscal revenues from Fisheries * Prepare and implement relevant action plan revenues from industrial fisheries. and applied research for the sector with assistance from ORSTOM v) A1ining- Strengthen role of state as . Enforcement of decree to harmonize mining . Supervision of the mining project (SPN) regulatory facilitator code. . Reduced involvement of state in ownership and management in sector C. Private And Financial Sector Develonment . Growth of micro/informal enterprises into . Financial Sector Adjustment (SPN) * Micro credits for-development of fornal SME and large enterprises . Strategy for the development of private indigenous private sector and rural credits - More efficient and adapted financial sector (Private Sector Assessment) (ESW) . Rationalize role and participation of intermediation systems for both rural and with participation of IFC, FIAS and MIGA Government in the PE sector paying urban entrepreneurs/inves-tors . Greater investments by iFC, MGA particular attention to the . Increased private investment specially from * Coordination with FIAS privatization/liquidation of (i) PEs draining foreign investors . iMicro Finance (LEN) FY98 public resources, (ii) PEs in the commercial . Financial Private Sector (LEN) sector and of (iii) PEs that have ceased operating and have to be formally liquidated. . Better policy environment and incentives to attract private investors mII. POVERTY REDUCTION TIROUGH A. Human develonment SERVICE DELIVERY i) Health andpopudiaion: . Reduction in Infant Mortality Rate, Total * Health/Nutrition project (SPN) . improve quality of care and expand health Fertility Rate . Population and Reproductive Health project delivery system to cover the whole country . Increase in: immunization coverage, % (LEN) FY99 . Strengthen prevention, Primary Health Care deliveries conducted by trained personnel, and priority programs (imrnmunizations, contraceptive prevalence rate and access to 2  Annex 2 Page 3 of 4 GUINEA STRATEGIC FRAMEWORK FOR FY98-00 CAS Expected Outcome/limpact Strategy to Achieve Outcome Benchmarks Products/instruments MCHIP, health education) PHC. Generate greater demand for contraception and ensure adequate access to FP services strengthen/further develop decentralization of decision-making to districts. ii) Education: increase access and quality of . Increased primary school enrollnent . Equity School (SPN) basic education especially in poor areas . increased adult literacy and skills * Higher Education (SPN) Preparation of new (LEND) Education proiect (Board FY2000) B. Infrastructure and utility services. i) Water supply etd sanitation: improve . Improved access to safe and affordable . Water U Project (SPN) -access and quality of service water and sanitation especially for the poor . Water U Project (ICR) . Address urban environmental issues such as . Water m project (LEN) sanitation, wvaste water and solid waste . Water m (SPN) management in Water Supply and Urban Development operations ii) Urban development: improve the supply . Improve maintenance of secondary . Urban Environment (LEN FY99) of urban services and maintenance of infiastructure and mobilization of local . Urban II (SPN) infiastructure resources . Urban U (ICR) iii) Energyr increase reliable, economic and . Improve access to safe and affordable . Power U project (SPN) environmentally sound supply of energy energy especially to the poor . Rural Energy (GEF) across the country iv) Transport Infrastructure: Improve . Increased network and maintenance . Highways IV (SPN/I1CR)) quaity and coverage . Transport Sector Strategy (ESW) IV. ENHANCED INSTITUTIONAL A. Social Capacity And Cisil Societv . Timelines and quality of service delivery . Institutional Environment assessment ENVIRONMENT AND CAPAClTY Emnowennent by civil service (ESW) . Improve governance and client focus in . More transpaent and efficient procurement . Results and Perfonnance based civil service Public Administration system reform building on benchmarks and greater . More adapted contractual system . Better and more timely auditing and empowerment of local communities and * Greater decentralization of service delivery fnancial accountability institutions (LEND) .Reduetion of opportunities for corruption . Capacity Building for Economic managemnent and service delivery (LEND) B Lewal Capacily And Judidal * Increased citizens' participation in . Legal/Judicial sector strategy note (ESW) Environment legislativelregulatory making process - Legalinstitutions capacity building project . Improve legal processes (i.e. production/ through comments on draft legislation/ (LEND) dissemination of good laws/regulations) regulations . Consolidate rule of law * Regular publication of law/regulations to . Strengthen performance ofjudiciary publie access _Upgrade/delivery quality of legal education Increased transprency through a reporting 3  Annex 2 Page 4 of 4 GUINEA STRATEGIC FRAMEWORK FOR FY98-00 CAS Expected Outcome/Impact Strategy to Achieve Outcome Benchmarks Products/LInstnunents system to record undue interference in judicial matters I mnprovement of compensation schemes for judicial personnel V. INTERNAL EFFICIENCY . Greater country/clients focus . Speed and timeliness of response to clients . OPL and other activities AND QUALITY ASSURANCE . Greater efficiency and streamlined (intea and extemal) inquiries and bureaucracy in process management demand for advise/bwiefing *Imnprove teamwork - Improved quality of products coming out of the office . Improved Country Team interaction and Leadership I_* TrainingSeminars 4  Annex 3 Page 1 of 1 GUINEA - LENDING PROGRAM - FY1998-FY2000 Proposed IBRD/IDA Lending Program Scenarios FY98-00 High Case Base Case Low Case FY Project USS(M] USS(M USSM 98 PESAC (SAC III) 70 70 70 CAPACITY BLDG (99S) 15 15 15 MICROFINANCE- (99S) 5 (LIL) 5 (LIL) 5 (LIL) Subtotal 90 90 90 99 CONAKRY URBAN 35 (APL) 15 (APL) 0 POPULATION & HEATH REPRO. 15 10 0 VILLAGE SUPPORT 30 (APL) 15 (APL) 15 (APL) FINANCLAL & PRIVATE SEC. 20 0 0 Subtotal 100 40 15 2000 PUBLIC SECTOR ADJ. 50 0 0 EDUCATION FOR ALL 30 (APL) 15 (APL) 15 (APL) JUDICIAL CAPACITY BLDG 10 10 0 FINANCIAL & PRIVATE SEC. 0 15 0 Subtotal 90 40 1S TOTAL FY98-2000 USSM) 280 170 120 :TOTAL FY98-2000 (SDR) 200 120 86 LIL= Learning Innovation Loan APL=Adaptable Program Loan 11/18/97  Annex 4 Page 1 of 1 Guinea - Selected Indicators of Bank Portfolio Performance and Management Indicator 1995 1996 1997 1998 Portfolio Assessment Number of Projects under implementation" 17 18 13 11 Average implementation period (years)b 4.76 4.52 4.17 3.77 Percent of problem projects" ' by number 29.41 33.33 15.38 18.18 by amount 21.60 35.06 16.42 21.03 Percent of projects at risk' d by number 80.00 66.67 63.64 70.00 by amount 75.98 76.32 64.45 73.14 Disbursement ratio (%)' 26.11 20.68 27.24 7.91 Portfolio Management CPPR during the year (yes/no) Supervision resources (total US$ thousands) 961.74 939.08 986.57 158.26 Average Supervision (US$/project) 56.57 52.17 75.89 14.39 Memorandum item Since FY80 Last five FYs Projects evaluated by OED by number by amount (US$ millions) Percent rated U or HU by number by amount a. As shown in the Annual Report on Portfolio Performance (except for current FY) b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: investment projects only.  Annex 5 Page 1 of I Guinea - Bank Group Fact Sheet FY 1995-2001 IBRD/IDA Lending Program, FY 1995-2001 PWa Cuff" Pmw Catw' FY95 FY96 FY97 FY98 FY"9 FYO0 FYl Co._mitum" Mum) 65.5 53.8 25.0 65.0 101.0 6oQ Q0 Auiwluxe 0.0 65.1 0.0 0.0 19.3 0.0 0.0 Bduciion 64.9 12.3 0.0 t0 0.0 100.0 0.0 Ifinifg 0.0 22.7 0 0.0 Q0 0.0 0.0 L Wtisedo 35.1 0.0 0.0 100.0 0.0 0.0 0.0 Pcpufltld*Nuha 0.0 0.0 0.0 0 14.9 0 0.0 pRMicS2 rlL 0.0 0.0 0.0 0.0 39.6 .0 0.0 1311mDeelopmart 0.0 0.0 0.0 0.0 25.7 0.0 0.0 W erSwy & Sd 0.0 0.0 100.0 M0 0.0 0.0 0.0 TOTAL 100.0 ion 0 100.0 100.0 100.0 100.0 100.0 Laidibewau-t AdjuhatloWa 35.1 0.0 0.0 100.0 M0 0.0 0.0 Specificinvmnut loansaddh 64.9 100.0 100.0 0.0 100.0 100.0 0.0 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Dissmts (USSn) A hamntioune 10.4 1.4 0.5 9.3 0.0 0.0 0.0 Specific wmbnatlom Ndoeha 57.4 466 56.1 15.4 24.3 26.3 13.9 ReRPye-nt SS) 2.3 3. 3.9 1.1 0.0 0.0 0.0 .Itut(SSm) 5.7 6.3 6.7 1.4 Q0 0.0 0.0 . Rne that rcthe bm"m (L. most lily) scao. For D)A coqries. plann. comninitin.ents ar iwip u byFYbutW theeyear4otal rnnp the f1gw. we dm in bacet. A footnote indicates if the patem of IDA lending hanun chaacuistics (e.g, a high dege of f&ontomfing bekloaing,r impines). For blend countries, planned I3RD and MDA cmmit Ka pried for eat year a acOMitdaL b. For fuate lending. romded to n_m eO r 5% To ceveytde thrust of comtny stmteu more clearly, staff may spe a c. Stucual adjustneA bloo . etor _amatloom mid debt service reduction loans. Now*c Di_burserme;t do i atted e nd of tOm fast week of the month.  Annex 6 Page l of 1 Guinea - IFC and MIGA Program, FY95-98 Past Category 1995 1996 1997 1998 IFC approvals (USSm)5 0.00 0.00 0.00 .20 Sector (%/0) 0.00 0.00 0.00 0.00 Food & Agro-Business 0.00 0.00 0.00 100.00 TOTAL 100.00 100.00 100.00 100.00 Investment instrument (%) Loans 0.00 0.00 0.00 100.00 Equity 0.00 0.00 0.00 0.00 Quasi-Equity 0.00 0.00 0.00 0.00 Other 0.00 0.00 0.00 0.00 TOTAL 100.00 100.00 100.00 100.00 MIGA guarantees (USSm) 0.00 0.00 8.35 8.35 MIGA commitments (US$m) 0.00 0.00 0.00 0.00 Excludes AEF projects. blncludes quasi-equity types of both loan and equity instruments.  Annex 7 Page 1 of 3 Guinea - Key Economic Indicators Actual Estimate Projected Indicator 1991 1992 1993 1994 199S 1996 1997 1998 National accounts (as % GDP at current market prices) Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Agriculture' 24.2 24.4 24.5 24.7 24.S 25.8 26.2 26.5 Industry' 33.0 32.3 31.8 31.6 31.4 35.6 36.0 36.3 Servicese 42.8 43.3 43.7 43.7 44.0 38.6 37.8 37.2 Total Consumption . 84.4 88.8 89.0 91.0 89.9 90.0 88.7 87.9 Gross domestic fixed 16.5 16.5 16.2 13.6 14.5 13.0 14.2 14.7 investment Government investment 7.8 7.5 7.1 6.1 6.5 5.5 6.5 6.6 Private investment 8.7 9.0 9.1 7.5 8.1 7.5 7.7 8.0 (includes increase in stocks) Exports (GNFS)b 28.4 24.2 22.4 19.8 21.7 19.0 21.3 21.2 Imports (GNFS) 29.3 29.5 27.7 24.4 26.1 22.1 23.7 23.9 Gross domestic savings 15.6 11.2 11.0 9.0 10.1 10.0 11.3 12.1 Gross national savings' 8.2 4.2 5.5 4.9 6.2 5.4 6.7 7.4 Memorandum items Gross domestic product 2982 2974 3176 3395 3673 3918 3973 4270 (USS million at current prices) Gross national product per .. 490.0 510.0 520.0 540.0 560.0 560.0 580.0 capita (US$, Atlas method) Real annual growth rates (%/o, calculated from 1987 prices) Gross domestic product at 2.4% 3.0%/o 4.7% 4.0%/e 4.4% 4.5% 4.8% 4.9% market prices Gross Domestic Income 0.3% 40.2% 2.4% 4.4% 3.1% 4.7% 4.4% 4.5% Real annual per capita growth rates (