VZCZCXRO7508
PP RUEHMA RUEHPA
DE RUEHDK #2459/01 2851640
ZNR UUUUU ZZH
P 121640Z OCT 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 6548
INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 DAKAR 002459 
 
SIPDIS 
 
SIPDIS 
 
DEPT PLEASE PASS USTR FOR CONNIE HAMILTON 
DEPT FOR AF/W AND AF/EPS - JANET POTASH 
 
E.O. 12958: N/A 
TAGS: ETRD ECON AGOA PU
SUBJECT: AGOA ELIGIBILITY REVIEW - GUINEA-BISSAU 
 
REF: STATE 163056 
 
Embassy Dakar is pleased to provide information for Guinea-Bissau's 
AGOA eligibility review.  The following information is based on the 
template provided and has also been provided via e-mail to AF/EPS. 
 
 
Country:  GUINEA-BISSAU 
Current AGOA Status:  Eligible 
 
Country Background Summary:  Guinea-Bissau's population in 2005 was 
1.6 million.  2005 GNI was USD 283 million and GNI/capita was USD 
¶180.  Following legislative elections in 2004, the United States 
lifted FAAA Section 508 sanctions against Guinea-Bissau.  Following 
free and fair presidential elections in 2005, Joao Bernardo "Nino" 
Vieira was inaugurated as President.  That concluded Guinea-Bissau's 
transition back to democratic rule.  The Government is actively 
pursuing austerity measures and fiscal control in hopes of 
attracting donor and investor attention.  However, the economy 
remains very weak.  Guinea-Bissau has not yet had much success 
attracting foreign investment and has not yet taken advantage of its 
AGOA membership to increase exports to the U.S.  However, the 
Government is beginning to take some positive steps.  In September 
2006, USAID launched an AGOA Resource Center to the Chamber of 
Commerce.  In the long-term, with key infrastructure and sectoral 
improvements, Guinea-Bissau has the potential to export products, 
including processed cashews, fish and seafood, fruits, and even 
rice.  AGOA eligibility remains an important symbol of U.S. 
engagement with this post-conflict state and offers an incentive to 
encourage the Government to enact market enhancements, continue 
security sector reform, economic development in key sectors, and 
institutionalize recent democratic advances. 
 
Comments on Eligibility Requirements 
 
¶I.  Market-based Economy 
 
¶A.  Major Strengths Identified 
Before the 1998-99 civil war, trade reform and price liberalization 
were the most successful features of the country's structural 
adjustment program under IMF sponsorship.  Privatization has 
nominally continued under IMF auspices since the war, but progress 
remains slow due primarily to lack of private sector response. 
Guinea-Bissau remains open to foreign private investment, but 
minimal infrastructure remains a significant disincentive. 
 
Under the enhanced HIPC initiative Guinea-Bissau could be eligible, 
upon completion of arrears and fulfillment of other obligations, for 
up to USD 790 million in debt relief.  According to GOGB officials, 
the country owes USD 481 million in multilateral debt and USD 511 
million in bilateral debt (none owed directly to the United States). 
 The GOGB will need to negotiate a new PRGF program to become 
eligible for further debt relief.  For the moment, donor priority is 
focused on assisting the GOGB to cover immediate operational 
expenditures. 
 
Guinea-Bissau joined the West African Economic and Monetary Union 
(WAEMU) in 1997, and has made efforts to harmonize its policies with 
the standards of the WAEMU, including a switch to a single 
value-added tax (VAT) rate.  As of April 2006, the World Bank had 
disbursed USD 293 million of a USD 309 million program to support 
sectors like transport, energy, the economic recovery plan, 
agriculture, health, education, and private sector rehabilitation. 
 
 
Notably, in 2006, the government initiated a privatization program 
for 14 companies with an estimated total market value of 
approximately USD 51 million, including two hotels. 
 
¶B.  Major Issues/Problems Identified 
A post-conflict society, with an economy devastated by a 1998-99 
civil war, Guinea-Bissau is ranked 172 out of 177 among countries on 
the 2005 UNDP Human Development Index.  Misappropriation of funds by 
earlier regimes led the IMF to suspend its assistance and in turn 
triggered a similar suspension by most bilateral donors.  The 
suspension of almost all aid deepened the country's economic 
paralysis.  By late 2006 there was some renewed interest by the 
World Bank, IMF, and bilateral donors to support Guinea-Bissau's 
reform efforts and development needs. 
 
II.  Political Reforms/Rule of Law/Anti-Corruption 
 
¶A.  Major Strengths Identified 
The democratically elected government is improving the rule of law. 
Evidence includes:  the court system is functioning, though with 
serious resource constraints; customs receipts are channeled 
directly into state coffers; and the Ministry of Finance must clear 
on all disbursements to ministries and public bodies. 
 
¶B.  Major Issues/Problems Identified 
 
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The Government has difficulty paying civil sector and military 
personnel on time.  The Government must move rapidly to reform and 
downsize the bloated and outdated military, including creating a 
military retirement system which will be costly and difficult to 
implement without significant outside assistance. 
 
III.  Poverty Reduction 
 
¶A.  Major Strengths Identified 
The new government is expected to resubmit the National Poverty 
Reduction Strategy Paper (DENARP) for further review. 
 
¶B.  Major Issues/Problems Identified 
During 2003, the dismissal of the Assembly and the increasingly 
autocratic behavior of ex-President Kumba Yala led to World Bank and 
IMF rejection of Guinea-Bissau's Poverty Reduction Strategy Paper 
(PRSP).  The GOGB is working on a draft renewed PRSP and plans to 
submit this document to the WB/IMF Executive Boards in late 2006 or 
early 2007. 
 
Of 1.6 million people, 58.9 percent of the men and 82 percent of the 
women are illiterate, including a majority of members of the 
National Popular Assembly (ANP). 
 
IV.  Workers' Rights/Child Labor/Human Rights 
 
¶A.  Major Strengths Identified 
In March 2001, with U.N. support, a tri-partite National Council for 
Social Consultation (CNCS) was legally established and began 
functioning.  The Council conducts collective consultations on 
salary issues and on draft legislation related to labor issues.  The 
ANP ratified Convention 182 on the worst forms of child labor in 
July 2002.  The Constitution grants all civilian workers the right 
to form and join trade unions. 
 
The right to strike and protection against retribution is 
guaranteed. 
 
Guinea-Bissau does not engage in gross violations of internationally 
recognized human rights. 
 
¶B.  Major Issues/Problems Identified 
Female genital mutilation (FGM) is practiced widely.  Child labor, 
including some forced child labor, is a problem.  Institutions 
created to work for the elimination of the worst forms of child 
labor are not effective because of a continuing severe economic 
crisis. 
 
¶V.  International Terrorism/U.S. National Security 
 
¶A.  Major Strengths Identified 
Guinea-Bissau has been a vocal supporter of U.S. anti-terrorist 
actions, and does not engage in activities that undermine U.S. 
national security or foreign policy interests. 
 
¶B.  Major Issues/Problems Identified 
In 2006 there were credible, public reports of significant 
quantities of cocaine transiting Guinea-Bissau en route to Europe. 
Guinea-Bissau is a preferred transit point in West Africa for 
traffickers because of the government's inability to monitor and 
control its borders and the corruptibility of officials who do not 
receive regular salaries. 
 
Jackson