EQUATORIAL GUINEA

COUNTRY OVERVIEW

LOCATION AND SIZE.

Equatorial Guinea is a small West African nation of 28,051 square kilometers (10,830 square miles), roughly the same size as Maryland. It consists of a mainland enclave called Río Muni, on the west coast of Africa bordering Cameroon and Gabon, and 5 small islands off the coast of Cameroon in the Bight of Biafra: Bioko, Annobón, Corisco, and the 2 small islands known together as Islas Elobey. Total boundary length of Equatorial Guinea equals 835 kilometers (519 miles). The capital city, Malabo, is on the island of Bioko.

POPULATION.

Estimated at 472,214 in July 2000, the population is growing at a rapid rate of 2.47 percent, which will result in the population increasing to over 600,000 by 2010. This fast rate of growth is attributed to the very high fertility rate of 4.94 children per woman, although this is combined with a very high infant mortality rate of 111 per 1,000. The high rate of population growth is reflected in the age distribution of society where over 43 percent of the population is under the age of 14 years old. Equatorial Guinea residents have an average life expectancy of 50 years. The health problems limiting many residents' lives are preventable diseases, including malaria, parasitic disease, upper respiratory infections, gastroenteritis, and pregnancy-related problems.

Decades of economic stagnation have prevented urbanization. There has been some population movement towards the capital in recent years due to the search for jobs in the booming oil industry, although a considerable amount of the population still resides in rural areas.

Although French and Spanish are the official languages, Europeans make up a very small percentage of the population. The primary ethnic groups include Bioko (Bubi and Fernandinos) and Río Muni (Fang) and languages associated with these groups are commonly spoken.

Equatorial Guinea has a literacy rate of 78.5 percent, much higher than the Sub-Saharan African average of 55 percent. Unfortunately, the economic collapse of the 1970s and 1980s left many workers with little skills and very few individuals with high levels of education. The first university in the country was established in 1999 and prior to that very few individuals could afford to study at overseas universities.

OVERVIEW OF ECONOMY

The economic mismanagement of the rule of Francisco Macias Nguema left the economy of Equatorial Guinea in very sad shape by the 1990s. Commercial cocoa production was essentially destroyed and most families in rural areas survived through subsistence farming and through the relatively high levels of foreign aid. But many charities and international lending agencies have ceased providing new funds to the country due to the high level of corruption. With little manufacturing, forestry has been one of the few promising industries which thrived in the early and mid-1990s.

The country is rich in natural resources, specifically oil, gold, titanium, iron ore, manganese, and uranium, although the country has been slow to exploit them. Specifically, the country has only just begun to produce and export oil after finding enormous deposits off Bioko Island in 1991. These oil deposits have attracted a number of multinational corporations —the first significant foreign investments into the country.

Although the discovery of oil can be a blessing to a developing country, the government has recognized some of the problems associated with allowing the economy to be based on oil production and hosted a United Nations Conference concerning the proper governance of such an economy. Besides the obvious potential problems of environmental damage and the difficulty of negotiating with powerful multinational corporations, a number of countries in Africa have recognized the political and economic problems associated with natural resource dependent economies. Economically, reliance on oil makes the economy very susceptible to the extremely volatile oil prices and may lead to the lack of incentive to develop other aspects of the economy such as manufacturing and services. Politically, the profits from natural resources can inspire new levels of corruption in the government, both in filling the pockets of politicians and supporters and in helping the ruling elite to maintain power. The issue of corruption is especially striking in Equatorial Guinea. In 1993 the IMF and World Bank suspended a number of loans and grants due to the discovery of high levels of corruption. Although some of these loans have been reinstated in recent years, levels of corruption have not improved dramatically.

POLITICS, GOVERNMENT, AND TAXATION

In the early 1990s a wave of democracy swept through Eastern Europe, the former Soviet Union, and much of the African continent. While hopes were high that democracy would take hold across the globe, many nations made little progress towards real democracy. In many cases the dictators of the former regimes became the central political figures in supposed multi-party democracies. Unfortunately, Equatorial Guinea was one of these countries.

After the Spanish departed in 1968 and made way for Equatorial Guinean independence, the country suffered harsh political and economic times. The country was ruled by Francisco Macias Nguema, who quickly established a one-party state. Nguema contained any possible opposition, declaring himself president for life and the "Unique Miracle of Equatorial Guinea." Nguema cut off ties to the West and aligned the country with the socialist bloc countries.

The Partido Democrático de Guinea Ecuatorial (PDGE), the country's only political party prior to 1991, was created by Teodoro Obiang Nguema Mbasogo after a successful coup in 1979. After the brutal Nguema regime, internal and external pressure forced the ruling elite to reform the constitution and hold democratic elections. Even after a movement towards multi-party democracy along with much of Africa in the early 1990s, the PDGE remained the central political party, retaining the vast majority of parliamentary seats and Obiang the powerful presidency. In the 1999 elections, the PDGE won over 80 percent of the vote and gained 75 out of the 80 seats in the parliament.

Outside of the formal systems of political parties, clan networks complicate the transition to democratic rule. Some groups, such as the minority Bubi population, have been all but left out of politics. These marginalized groups have become more active in recent years. The militant Movimiento para la Autodeterminacion de la Isla de Bioko (MAIB), for example, has been accused of attacking government installations throughout the country.

Obiang's rule continues to be centered on personality, not ideology. Obiang and the PDGE have maintained tight control over the economy, although they have begun to allow higher levels of international investment.

Equatorial Guinea has been a target of human rights activists in recent years. The current regime has been accused of harassing political opponents, limiting freedom of expression, limiting the development of new political parties, and inhumane conditions in the country's prisons. In 1999 Amnesty International, an international human rights organization, issued reports on the arrest of 3 citizens for "insults against the government and the Armed Forces" stemming from their activities with Amnesty International and their attempt to establish a political party.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Fueled by both the revenues from natural resources and the increased demands for power, roads, and harbors to continue the production of natural resources, the country has made large improvements in the vastly underdeveloped infrastructure. This includes upgrading the port at Luba, the airport at Malabo, and many roads linking major cities. The telecommunications revolution has

slowly been introduced with a new digital network, public phone booths, a cellular system, and even some limited Internet access.

Most of the country's power is generated by a number of oil-fired power plants and a few large dams. The country's power generation capacity will be doubled when a new gas-fired power plant is completed on Bioko. The gas for this power station will be supplied domestically.

These investments in infrastructure have helped increase the attractiveness of the country to foreign investors and have a positive impact on economic development. Unfortunately, the prior political regime left the country's infrastructure in a horrible state. Even with these vast improvements, the lack of developed infrastructure is still a major hindrance to economic development. The country currently has no rail system, few paved roads, and an inefficient communications system. Especially troubling is the lack of physical infrastructure in rural areas.

ECONOMIC SECTORS

The oil industry dominates all economic activity in Equatorial Guinea. The oil industry draws most the country's foreign investment, provides most of the exports, and provides the central government with a tremendous amount of revenue. Unfortunately, this industry has not provided a significant amount of jobs. Most citizens survive through subsistence agricultural production on small family plots.

In recent years the timber industry has played more of an important role in the economy and has contributed to country exports, mostly to Asia. Cocoa and coffee production, once the mainstay of the economy, has declined in importance since the 1970s. Today this sector plays a very small role in the economy. The manufacturing and service sectors also have very little impact on the national economy and provide very few jobs.

AGRICULTURE

Although agriculture employs the majority of the population, it contributed to less than 20 percent of gross domestic product (GDP) in 1998. Most agricultural production is done through subsistence farming. Only a few cocoa and coffee plantations produce agricultural products for sale on the open market. The only efficient agricultural sector is the production and export of timber and timber products. Unfortunately, many environmentalists believe that the level of production may be unsustainable.

COCOA AND COFFEE.

The once thriving cocoa and coffee industry were devastated by years of economic mismanagement under authoritarian rule. Cocoa and coffee production in 1969 stood at an impressive 36,161 tons and 7,664 tons, respectively. By the mid-1990s cocoa production had plummeted to less than 3,000 tons (1993) and coffee production to under 200 tons (1996). Obscured in these numbers is the decline in the quality of the products, which has been especially glaring in the quality of cocoa. With only a few large and inefficient plantations still producing coffee and cocoa, coupled with declining cocoa prices due to the European Union's (EU) loosening of regulations on the percentage of cocoa needed for chocolate production, the future of these 2 industries is bleak.

TIMBER.

Timber exports have been increasing rapidly in recent years due to government promotion of the industry and available capital from oil revenues. By 1997 trade in tropical wood exports alone amounted to almost 6 percent of GDP. The economic success of this industry has been a mixed blessing, increasing economic growth and employment, but threatening serious environmental damage. While environmentalists have become increasingly active on this issue, the most serious challenge to this industry remains the weakening of markets in Asia due to the recent financial crisis. This crisis has both reduced exports to the region and, with the weakening of the Asian currencies, has been followed by a drop in the price of timber from other exports in Asia. The Economist Intelligence Unit argues that the competition from Asian timber exports was felt as early as 1998, decreasing sales substantially. Even with this competition, the recent investments in infrastructure (especially the roads and port systems) may greatly help the timber industry.

FISHING.

The small island of Annabón is situated in the midst of one of the richest fishing areas in the Atlantic Ocean. The 300,000-square-kilometer area around the island is an exclusive maritime fishing zone, although the government of Equatorial Guinea has granted concession to the EU for the use of this zone. Few reliable figures exist on the size of current production, but it is clear that the rich fishing waters offer a substantial opportunity for the development of a large domestic fishing industry.

INDUSTRY

MANUFACTURING.

The manufacturing industry of Equatorial Guinea contributes only a 0.6 percent of GDP. Manufacturing is limited to the mainland processing of timber and a water-bottling plant at Bata. The Economist Intelligence Unit paints a gloomy picture for the prospects of developing a manufacturing industry: "Despite the high overall growth rates, the lack of skills and capital, the small size of the local market, and the weakness of national infrastructure make any significant growth in the manufacturing sector unlikely."

OIL.

In the late 1980s and early 1990s the economy of Equatorial Guinea was fueled by international aid; it is now fueled by oil. The country has emerged as the sixth largest oil producer in sub-Saharan Africa, an amazing feat for such a small country. This sector has attracted a number of significant international investments. These investments have ranged from a joint-venture between local producers and a U.S. partner to produce diesel and methane gas, to contracts for foreign firms to explore for oil offshore, to the pumping of crude oil from existing oil deposits. Oil remains the largest export and is the potential key to further economic development. Profits from the oil industry have been used for the upgrading of the country's infrastructure.

MINING.

The country is believed to have large deposits of gold, diamonds, uranium, bauxite, iron ore, titanium, manganese, and copper. Little domestic production has occurred in this sector, but new mining codes were issued in 1995 to attract investments in the sector. Efforts to negotiate mining contracts with multinational corporations has been much more complex than expected. The lack of infrastructure, less severe for the development of oil resources, is especially damaging to this sector due to the need to ship produces through rural areas to coastal ports. At the very least, the mining sector will take years to develop.

SERVICES

TOURISM.

The pristine environment and rare animals offer the country a tremendous amount of potential for tourism. To date, tourism has made very little contribution to the local economy, although investments in infrastructure and the recent establishment of Mt. Alen National Park may help attract tourists. The recent construction of a number of hotels in Malabo offers some sign of the future significance of tourism to the economy.

INTERNATIONAL TRADE

The international trade position of the country has improved dramatically. Prior to the discovery of oil, exports were dominated by agricultural production, which declined dramatically under the period of authoritarian rule. The trade balance in the late 1980s and early 1990s was in constant deficit, only to improve with the explosion of oil production in the early 1980s. With a depreciation of the CFA Fr, the price of timber from Equatorial Guinea is less expensive relative to timber from other countries. This depreciation has led to a dramatic increase in timber exports. These 2 industries propelled the country into a surplus in the mid-1990s.

With no real manufacturing base, almost every manufactured good has to be imported. The increased activity in the oil sector has led to a surge in imports to service this industry's needs.

The country's main trading partner is the United States, consuming 62 percent of the country's exports and providing 35 percent of the imports. France, Spain, China, Cameroon, and the United Kingdom are also important trading partners.

MONEY

In 1985 the country abandoned the national currency, the bikwele, and joined a number of former French colonies in pegging their own national currencies to the French franc and adopting the CFA Fr. The CFA Fr is supported by the French Treasury and is fully convertible. With this financial arrangement and the competent monetary policy of the regional central bank, the Bank of the Central African States, Equatorial Guinea has greatly helped reduce the levels of inflation from almost 40 percent in 1994 to a range of 6 to 12 percent in 1994-1999. Given the extremely fast economic growth of almost 20 percent in recent years, this inflation-fighting performance is impressive.

Attempts to establish a commercial banking sector following the 1979 coup failed miserably. Only the Banque centrale des Etats de l'Afrique centrale (BEAC) offers commercial financial services, although there are some prospects for new entrants in the commercial center of Malabo.

POVERTY AND WEALTH

Even though Equatorial Guinea is one of the wealthiest countries in Africa, with GDP per capita estimated at more than US$2,000 in 1999, the bulk of the citizenry lives in poverty. Official unemployment stands at almost 30 percent, and the government's social safety net does not adequately provide for the unemployed. The massive economic growth rates have been fueled by the production of oil offshore, an industry that has not substantially increased the number of jobs in the country. Timber, on the other hand, has made some contribution to increasing living standards, although this industry currently remains too small to make a significant contribution to the average worker's standard of living. The bulk of the population remains poor and makes a living off subsistence farming. The majority of Equatorial Guineans live without electricity, basic education, adequate health care, or safe drinking water.

WORKING CONDITIONS

Few studies have examined the working conditions in rural areas. Most people work on small farms for family consumption. Hours can be long and conditions can be harsh due to the lack of advanced farming equipment and farming techniques.

The United States Department of State Human Rights Report (1999) argues that working conditions for employees are substandard in Equatorial Guinea. The current minimum wage, roughly equivalent to US$41 a month does not provide for a sufficient standard of living for families. Labor standards, while officially codified into law, are seldom enforced. Laws declare women to have the same rights as men, but discrimination continues.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

1963. Provinces of Fernando Po (Bioko Island) and Río Muni (3 small islands and the mainland) are joined under Spanish rule.

1968. Country gains independence from Spain.

1979. Macias is overthrown by Brigadier-General Teodoro Obiang Nguema Mbasogo in a violent coup.

1985. Country joins the Franc Zone.

1991. Obiang declares the end of one-party rule.

1991. Large oil and natural gas deposits are discovered.

1994. Investment by Mobil in the oil sector is followed by a number of multinationals over the next couple of years.

1996. Multi-party elections in 1996 are won by Obiang with 98 percent of the vote. This election is widely contested as unfair.

1997. French becomes second official language.

1997. The government claims an attempted coup in May and doubles the size of the military to 2,000.

1998. Attacks on government installations in January. Government blames a militant group for the attacks.

1999. The ruling PDGE increases its majority in parliament.

1999. Border dispute with Sao Tomé and Príncipe is settled by negotiation.

1999. First university established.

FUTURE TRENDS

The future is mixed for the country and the people of Equatorial Guinea. The aggregate growth prospects for the economy remain fairly bright, with high levels of economic growth being forecast for the future. These growth forecasts are dependent on the recent high prices of oil, which historically have been subject to tremendous price fluctuations. A drop in world oil prices could be disastrous for these future growth prospects.

Perhaps even more troubling is the uneven level of development in the country. While the oil sector has been booming in recent years, the bulk of the population remains dependent on subsistence farming for their livelihood. This large part of the population has been relatively untouched by recent economic successes and most likely would be untouched by further economic growth fueled by the oil sector.

On the positive side, Equatorial Guinea has shown some ability to develop the timber industry and has great potential for development in the mining and tourism sectors. The challenge for the country is to find the means to further develop these sectors.

In recent years the country has made some progress in investing in telecommunications, roads, and rail systems. This is one means of using the government revenues from the economic boom in the oil sector to finance economic development in other parts of the country. While this exhibits some positive signs, much more needs to be done.

In many ways, Equatorial Guinea suffers from the same problems as many other African countries. The country is rich in natural resources, yet poor in essentially all other aspects of economic development. The problems ahead will revolve around issues of how to use these resources to stimulate even economic development.

DEPENDENCIES

Equatorial Guinea has no territories or colonies.

BIBLIOGRAPHY

Amnesty International. "Equatorial Guinea. No Free Flow of Information. June 2000." <http://www.amnesty.it/ailib/aipub/2000/AFR/12400400.htm>. Accessed February 2001.

Economist Intelligence Unit. Country Profile: Ghana, Equatorial Guinea. London: EIU, 2000.

Energy Information Agency. "Country Analysis Briefs:Equatorial Guinea October 2000." <http://www.eia.doe.gov/emeu/cabs/eqguinea.html>. Accessed February 2001.

U.S. Central Intelligence Agency. "CIA World Factbook 2000: Equatorial Guinea." <http://www.odci.gov/cia/publications/factbook/geos/ek.html>. Accessed February 2001.

U.S. Department of State. "1999 Country Reports on Human Rights Practices: Equatorial Guinea." <http://www.state.gov/www/global/human_rights/1999_hrp_report/eqguinea.html>. Accessed February 2001.

Nathan Jensen

CAPITAL:

Malabo.

MONETARY UNIT:

Communauté Financiére Africaine franc (CFA Fr). One CFA Fr equals 100 centimes. There are coins of 1, 2, 5, 10, 25, 50, 100, and 500 CFA Fr and notes of 50, 100, 500, 1,000, 5,000, and 10,000 CFA Fr. [The country is part of the "Franc Zone," which includes a number of former French colonies in Africa that share a common currency that is pegged to the French franc. The Communauté Financiére Africaine franc was introduced in 1985.]

CHIEF EXPORTS:

Petroleum, timber, cocoa.

CHIEF IMPORTS:

Petroleum, manufactured goods, and equipment.

GROSS DOMESTIC PRODUCT:

US$960 million (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$555 million(f.o.b., 1999). Imports: US$300 million (f.o.b., 1999).