Foreign direct investment (FDI) in Guinea
Foreign direct investment (FDI) – whereby individuals or businesses from one country establish commercial operations in another – is what the Organisation for Economic Co-operation and Development (OECD) considers “an integral part of an open and effective international economic system and a major catalyst to development’”. This has certainly been the case in the West African country of Guinea, where a number of foreign direct investment initiatives – especially those implemented by Rusal, one of Guinea’s top foreign investors – have helped to drive the country’s economy forward.
In Guinea, the right FDI programmes can have an immensely positive impact. Guinea is blessed with abundant natural resources; its bauxite and iron deposits are among the largest in the world. However, foreign companies considering direct investment in Guinea have long been deterred by the challenges of FDI in Guinea. The World Bank puts it this way: “infrastructure challenges linked to it being a low-income, post-conflict and resource-rich country, a situation aggravated by low population density and disperse habitat.”
Unfortunately, these are not the only challenges Guinea faces when it comes to attracting foreign direct investment. A potentially devastating blow came in early 2014, when West Africa’s Ebola crisis took hold. There was an outpouring of FDI from Guinea and the other countries affected by the crisis: in 2015, the World Bank estimated Guinea’s forfeited output losses caused by the Ebola crisis and subsequent loss of foreign direct investment at $535m. Guinea’s cumulative real output loss was estimated at 13% of GDP.
This loss of FDI was catastrophic for Guinea, noted the country’s Guinean prime minister Mamady Youla, who said: “Most of the companies operating in the regions affected by Ebola left the country during that period, which had a very, very significant impact on the economy”. It should be noted that while many foreign direct investment vehicles fled in the wake of the Ebola crisis, not all did: Rusal has been operating FDI projects in Guinea for over a decade, and is Guinea’s largest foreign employer. When the crisis hit, Rusal remained in Guinea and helped organise the response to the crisis.
Guinea, which is still recovering from the impact of the epidemic, ranked 163rd out of 190 countries in the 2017 Doing Business report – which considers the best places for FDI globally - published by the World Bank. That represents a jump of two positions in the rankings compared to the previous year.
Rusal’s role in the FDI fightback in Guinea
However, while many foreign direct investors fled Guinea as it faced the tumultuous challenges of the last five years, not all did. One that stayed and has continued to invest in the country is Rusal. A critical source of FDI for Guinea, Rusal is the country’s largest foreign employer and has continued to invest directly in the country.
For example, in 2014 Rusal launched the Dian-Dian FDI project, which would see the business begin mining at the world’s largest bauxite deposit. As part of the project, significant funds were ringfenced in order to fund infrastructure development such as railway and port development in Guinea. This, said Vladislav Soloviev, Rusal’s CEO, was a project that would “prove to be a win-win for the Guinean government and Rusal, which will help to develop a positive investment climate in the republic and improve Rusal's competitiveness as a leader in the global aluminium industry and one of the largest investors to Guinea.”
In 2016, Rusal and Guinea signed an annex to the agreement that split the development of the Dian-Dian FDI project into three stages, with the first stage – the construction of a mine with the annual bauxite capacity of three million tonnes – scheduled for completion by the end of 2017.
As well as the obvious positive impacts Rusal’s FDI has had – and will continue to have - in Guinea, Rusal’s relationship with the Guinean people offers a case study for how foreign direct investment can help drive sustainable growth in developing nations more generally.
Rusal has not just assisted the country through the direct effect its FDI has had on jobs and investment, but has also sought to help Guinea reach its sustainable development goals. Rusal has supported projects as varied as improving the health of its workforce, establishing better water supplies and supporting education.
When Ebola struck, Rusal – unlike others - did not seek to disengage from its investments in the country, but quickly identified what it could do to help. In just 50 days and at a cost of $10 million, it build the Centre for Epidemic and Microbiological Research and Treatment (CEMRT), a medical facility which was to be at the epicentre of the fight against Ebola in Guinea and prove instrumental in the development of a Russian anti-Ebola vaccine.
The scope of Rusal’s foreign direct investment in Guinea shows how – when done well – the benefits of FDI can go far beyond the merely monetary. FDI can help to forge powerful links between countries and provide opportunities for social investments that countries such as Guinea may not be able to fund themselves, creating a positive cycle that can help developing nations become more competitive prospects for FDI in the future.
Unsurprisingly, attracting further foreign direct investment is one of the more significant strands of Guinea’s future economic strategy. Recognising the importance of FDI to its economy, the government of Guinea has recently taken steps to make it a more appealing setting for foreign direct investment into the country. The 2016-2020 National Plan for Economic and Social Development seeks to facilitate access to Guinea’s natural resources by encouraging foreign private sector actors from all over the world to build – and benefit from – the critical infrastructure that Guinea needs through public-private partnership (PPP) schemes.
The government has dedicated US$5.5 billion to implement FDI PPP projects between 2016 and 2020; so far, the Guinean government has scheduled 36 PPP infrastructure projects. Guinea needs additional foreign direct investment to propel its economy and society forward, but with the help of businesses such as Rusal, it is moving in the right direction.