Chapter 16: National Economy Introduction

Transcription

1 16 National Economy 16.1 Introduction This chapter considers the Simandou Project s impacts on the national economy. The chapter considers the Project as a whole and does not distinguish between mine, rail or port components in relation to their respective impacts. Potential impacts of the Project include changes to: national employment and procurement; government revenue; foreign currency earnings and the exchange rate; dependence on minerals and associated volatility; prices and inflation (including terms of trade); and Gross Domestic Product (GDP). Following an assessment of the significance of these impacts, the chapter considers how the Project will mitigate negative impacts as well as enhance positive benefits through its Regional Development Strategy (RDS) and Social Management Framework (SMF). The remainder of the chapter is structured as follows: Section 16.2 provides a description of the approach used for the assessment, including a definition of the study area and the methods used to assess impacts; Section 16.3 presents the assessment of impacts from the Project in the absence of specific actions to mitigate negative impacts and enhance positive impacts; Section 16.4 describes the SMF and the mitigation measures that are proposed as part of the strategy to mitigate impacts on the national economy, and then assesses the residual impacts after mitigation; and Section 16.5 provides a summary of findings. The assessment in this chapter draws extensively on baseline information presented in Chapter 15: Socio-Economic and Community Baseline. For a full understanding of potential socio-economic and community impacts associated with the Project, the reader should also consult the following chapters: Chapter 17: Employment and Economic Development; Chapter 18: In-Migration; Chapter 19: Land use and Land-Based Livelihoods; Chapter 20: Social Structures and Community Life; Chapter 21: Community Health, Safety, and Security; Chapter 22: Labour and Working Conditions; Chapter 23: Ecosystem Services; and Chapter 24: Human Rights Approach Study Area Development of the Simandou Project will have a wide range of effects on socio-economic and community conditions over geographic areas ranging from the immediate area around the Simandou Mine to the whole of Guinea. The study area for impacts on the national economy has been defined as the whole of Guinea. Details regarding regional and local study areas applied to other socio-economic and community assessments in this SEIA can be found in Chapter 15: Socio-Economic and Community Baseline. 16-1

2 Legal and Other Requirements This assessment has been prepared in line with applicable Guinean laws and development policies as well as international and Rio Tinto standards. Details regarding specific legal and other requirements relevant to the assessment of socio-economic and community impacts, including impacts on the national economy, can be found in Chapter 15: Socio-Economic and Community Baseline Prediction and Evaluation of Impacts To develop an understanding of potential impacts on the national economy throughout the Simandou Project s lifetime (including construction, operation and closure phases), Rio Tinto has developed a preliminary macroeconomic model that takes into account the Project s investment plan, outputs, and key economic data and trends. First constructed in 2008 and regularly updated since, the model uses socioeconomic, population and labour data produced by authorities such as the Republic of Guinea s Ministry of Planning, the International Monetary Fund (IMF), and the United Nations (UN). The projections from this preliminary macroeconomic model are based on: a Net Present Value (NPV) model of the Project as determined by Rio Tinto, using external consensus price forecasts, a nominal average Project load of 95 mtpa, and 3% of the Project s capital expenditure spent domestically; and historical and future predicted economic data, including GDP, monetary and trade data and forecasts of world inflation and trade prices. These data points feed into projections based on Guinean policy and data, including fiscal and monetary policy, domestic demand, imports and exports, and foreign exchange and inflation. The outputs of the model include projections on government finances (revenue expenditure, debt and debt service); GDP components; financial aspects (monetary exchange, US exchange rate and inflation); and aspects of trade, including imports and exports in mining and non-mining sectors. The model is being updated to assess the Project s impact in relation to the current economic circumstances and most recent Project description. This will be done in full collaboration with the Government, development agencies and local universities. The outcome of the updated analysis will be fully disclosed to the public during 2013 and the tool will be made available to the Guinean Government for their use and ongoing application. The preliminary findings of the model relative to Project impacts on the national economy are discussed in Section 16.3 below. Given the methodology described above and the number of external influences on the national economy over the Project lifetime, this assessment, unlike other assessments in this SEIA, does not consider the degree of a potential impact (eg minor, critical) but only notes whether the impact is considered positive or negative Assessment of Impacts on the National Economy Overview This section presents an assessment of potential impacts of the Simandou Project on the national economy of Guinea that is, on macroeconomic conditions in the country and the main administrative regions within which the Project will be developed and operated. This will be one of the largest global investments in a mining venture and one of the largest infrastructure projects in Africa. It will have a significant impact on Guinea s national economy, as well as the economy of the towns and villages in the prefectures and sub-prefectures affected by its development. In addition to the direct impacts mentioned in Section 16.1, the Project will bring benefits to the economic and social environment of the country through its various development programmes, infrastructure 16-2

3 improvements and partnerships with the Republic of Guinea and other stakeholders, as well as further induced opportunities. These will be strategically implemented and managed through the Regional Development Strategy as described in Section Recent analysis undertaken by the Project has identified the potential for up to US$3 billion per year in new economic activity within the zone most closely affected by the project. The Project is continuing to develop this scenario and will analyse this outside of the scope of the SEIA. Findings from the assessment are described in Sections through below National Employment and Procurement Employment Creation Employment opportunities include direct employment by the Project, indirect employment through the Project s suppliers, and induced employment generated through spending and associated job creation in the economy. These Project benefits have already started to arise, with employment of Guineans of approximately in Q1 of 2012, of which 770 are directly employed by Simfer and the remainder through contractors and sub-contractors. This represents a 60% increase in employment of Guinean nationals in 12 months. At present in 2011, 85% of Simfer s labour force is Guinean. These opportunities will result in increased income and spending in the economy, and further benefits in terms of enhancing works skills and experience in the country. The Project also offers exposure to the requirements of a multinational corporation, enhancing the population s capabilities to better participate and compete in a global economy and further the development of a knowledge-based workforce. Large numbers of people will be employed during the construction of the overall Project, with latest December 2011 estimates indicating an average of full time equivalent (FTE) jobs between 2012 and 2015, with a peak of up to FTE jobs at the construction phase s most intensive period. Indirect and induced employment, as determined by the preliminary macroeconomic model, suggests that for every FTE job created during construction, a further 5.29 jobs will be created across Guinea, resulting in the creation of a further jobs in the wider economy. By the time the Project, as a whole, reaches full capacity, it is expected to have an operational workforce of approximately personnel. The employment multiplier, as estimated by the Project through the preliminary macroeconomic model, suggests that for every FTE job created during operations, a further 4.72 jobs will be created in the supply chain across Guinea. Thus a potential further jobs will be created in the broader economy during operation. The Project will continue to prioritise employment of Guinean nationals. Further details of employment created by the mine are provided in Chapter 17: Employment and Economic Development Procurement Opportunities All Project phases will generate large contracts for the purchase of equipment and other goods and services. This will give rise to opportunities for businesses at the local, regional, and national levels, which will be significant for the Guinean economy. The Project has already created opportunities for suppliers, with over US$100 million equivalent in GNF to Guinean suppliers and contracts to over 350 different Guinean companies. In Q1 2012, local spend has already reached more than US$50m equivalent, more than double the average quarterly spend in The Project will continue to prioritise conducting business with national suppliers, focusing in particular on those located in Prefectures related to the Project. The Project is partnering with the Government and various other stakeholders in ensuring that national procurement is maximised. The procurement opportunities associated with the mine are further described in Section 16.4 and Chapter 17: Employment and Economic Development. 16-3

4 Project procurement and expenditure from workers during the Project s construction and operation phases is expected to result in the growth and diversification of the economy in of the study area. Increased income from direct and indirect employment will also allow for improved living conditions. Those benefiting from Project employment opportunities are likely to experience significant uplift in their economic status, particularly if longer-term employment opportunities are gained. Economic development and growth associated with the mine component of the Project at a local level is further described in Chapter 17: Employment and Economic Development. The impact of employment and procurement at the national level will be experienced as a positive impact on the economy. The degree of this impact in relation to the mine at a local level is further assessed in Chapter 17: Employment and Economic Development Government Revenue Government revenue will be affected by the royalties and taxes that the Project will pay in relation to mining production once the Project is operational. The payment of royalties and taxes is a legislative requirement under Guinean mining law. These payments have already started to feed into the national economy. In 2011, the project made payments of over US$700 million to the Republic of Guinea. Most of this was by way of the one-off Settlement Agreement payment, with additional contributions from payroll, land and other taxes paid by the project. The Project is anticipating to commence commercial production of iron ore in 2015 and ultimately to reach a capacity of 95 mtpa at full production. The Project will pay royalties at 3.5% of FOB (1) price of the iron ore throughout the life of the mine. Most of taxes will be paid to the central level at the Public Treasury of the Republic of Guinea; the Social Investment Fund (which is a commitment to engage in local community support), amounting to 0.25% of Simfer S.A. annual turnover, will be disbursed locally (2). Government revenues from royalties and taxes are reallocated into various types of expenditure including recurrent expenditure, grants, repayment of loans and development spending, all of which have the potential for multiple positive impacts. The impact of Project revenues cannot be accurately quantified at this stage as the allocation of increased government revenue to development locally or nationally or into other purposes is unknown. Nonetheless, for the operating lifetime of the Project, increased government revenue as a result of payment of taxes and royalties will be experienced as a positive impact at a national level and to a more limited extent at a local level through the Social Investment Fund. However, the degree of impact of these tax payments will be dependent on Government allocation of spend. Upon closure, the payment of royalties and taxes will stop, leading to a decrease in government revenues and resulting expenditure in the economy. The impact of this cannot be predicted as it will depend on how other sources of revenue have grown and the proportion provided by the Project at the time of closure. If this was to remain at the level predicted for the early years of operation its cessation would have a negative impact on government finances Foreign Currency Earnings and the Exchange Rate The intention of the Project is to export the iron ore produced from the Simandou Mine. This raises the risk of currency appreciation with consequences for other export sectors and the wider economy. The effect is (1) FOB (Free on Board) refers to the international trade term describing responsibilities between buyer and seller in respect of delivery of a product (delivery point, transfer of title and risks, insurance). (2) The Social Investment Fund refers to a yet to be named fund comprising 0.25% of the Simandou Project s annual turnover, which will spent on development activities for communities living in proximity to the Project as required by the Republic of Guinea. As of the writing of this report, the agency or agencies existing or new to which the Social Investment Fund will be paid had yet to be agreed upon with the government. The Social Investment Fund is planned for implementation at first commercial production. 16-4

5 sometimes referred to as Dutch disease, that is the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency (often prevalent in countries with an abundance of mineral and petroleum resources). This leads to currency appreciation, making the country s other products less price competitive on the export market. It also results in higher levels of cheap imports and, in more industrial countries, can lead to de-industrialisation as industries apart from resource exploitation are moved to cheaper locations. Iron ore is expected to contribute to more than 85% of exports by value but this is not expected to lead to a large inflow of foreign currency into Guinea. During operations, revenues are expected to be earned offshore with the funds needed for local expenditure being remitted back to Guinea. During construction, from a national perspective, the proportion of Simandou construction expenditure spent locally will not be significant. As a result the Project is anticipated to have no significant direct impact on the exchange rate. Any effect that does occur will be primarily driven by the Republic of Guinea s use of Project taxes, royalties and dividends. The Simandou economic model assumes that these impacts can be reasonably managed and that other factors such as domestic inflation and Guinea s terms of trade will determine the exchange rate. If these assumptions are built into the model, the exchange rate against the US dollar initially peaks during construction and then levels off and lowers over time Dependence on Minerals and Associated Volatility To date, the Guinean economy has suffered from a lack of diversification, and an overdependence on revenues from the bauxite industry. As a result, the country has been exposed to volatility in the international price of bauxite, which in turn has been reflected in the movements of government revenues, the fiscal deficit and trade balances. In recent years, the Republic of Guinea has started to promote diversification within the mining sector and to encourage the production of intermediate goods such as alumina. However, assuming all else remains equal, if the Project goes ahead and is followed by other major mining projects, the government could become overly dependent on mining revenues, in particular the iron and alumina industries. There is a danger that Guinea, which has already become vulnerable to the price of bauxite, will find itself equally, if not more, vulnerable to the price of iron and alumina. This would be reflected in fiscal revenues, trade and the exchange rate. Increased dependence on minerals and associated volatility as a result of the Project s iron ore production would be experienced as a negative impact at a national level and could continue over the long term, if the Government is unable to exercise sound macroeconomic policy over the years of the Project s operation Changes in Prices and Inflation (including Terms of Trade) The increased demand for goods and services as a result of large capital investments can lead to inflationary effects, and a potential negative impact, on the economy. At the national level the main counter to inflation driven by a resources boom will be competent macroeconomic management through government policy. Given this assumption the Simandou preliminary macro-economic model sees inflation levels stabilise at acceptable levels over time particularly during the time of steady state production. Risks of inflation at a local level will be more significant, and are discussed further in Chapter 17: Employment and Economic Development Gross Domestic Product (GDP) All of the impacts described above are expected to contribute to substantial growth in Guinea s GDP, particularly from the time that the Project reaches steady production. This growth is expected due to payments to Government through royalties and tax contributions, to employees through wages, to local suppliers through contracts and to capital providers through dividends and capital repayments. This can be thought of as the value that a firm has added to bought-in factors by its processes of production. If the 16-5

6 Project was operating at its planned steady state today, its turnover would potentially be equivalent to over 100% of current GDP. In taking other factors into account, the preliminary macroeconomic model indicates that the Project is actually expected to significantly increase the size of the Guinea economy at steady production, even before considering any multiplier effect (1). The Project offers Guinea one of the largest capital investment projects in Africa, with a direct economic contribution that will be made up of: taxes, including corporation tax, royalties, and the Community Investment Fund; labour costs; repayment of capital, interest and dividends; economic contribution (value added); and payment to suppliers and expatriate staff. Overall, the Project will have a positive impact on the economy and GDP of Guinea through the payment of taxes, royalties, community investment, labour payments, purchase of goods and services, and repayment of capital. With the potential to significantly increase the size of the Guinean economy when operational, the Project presents an important opportunity to enhance benefits through sound government policy and the development of a healthy commercial environment Mitigation and Residual Impacts Overview This section presents Project mitigation measures for potential impacts on the national economy. As noted in the impact assessment above, these impacts include changes to: national employment and procurement; government revenue; foreign currency earnings and the exchange rate; dependence on minerals and associated volatility; prices and inflation (including terms of trade); and Gross Domestic Product (GDP). As background to the mitigation measures presented, this section first describes the Regional Development Strategy (RDS) and Social Management Framework (SMF), through which the Project will address socioeconomic and community impacts. The section then summarises mitigation measures for impacts on the national economy. Finally, the section assesses the residual impact significance for the impacts following the application of mitigation measures Framework for Mitigation Measures To mitigate adverse socio-economic impacts and enhance positive benefits among the communities in which it operates, the Project has developed a Social Management Framework (SMF). The SMF falls under the Project s Regional Development Strategy (RDS) and is designed to help to fulfill its objectives Regional Development Strategy The Regional Development Strategy (RDS) identifies the ways in which the Project can facilitate and support linkages between the entire region affected by the Simandou Project and national and local development initiatives in Guinea. The Project aims to extend benefits beyond the life of the Simandou Project by integrating sustainability considerations into all Project decisions and partnering with local and international organisations on development issues. The objectives of the RDS are for the Project to: avoid a net adverse impact on socio-economic conditions; (1) A multiplier in this case would indicate how a direct contribution to GDP would cause further indirect increases to the GDP. Due to the uncertainty around accuracy of multipliers, these have not been applied to Simfer s preliminary macroeconomic model. 16-6

7 become a catalyst of growth so that the Project, the government, donors and other investors can direct resources to well planned development initiatives in a coordinated way; and to the extent possible, ensure that local development aspirations are met. Stakeholder involvement is considered critical to the Project s alignment with Guinean development objectives. Accordingly, the Project will establish a dedicated multi-sector forum or institution (referred to at present as the Regional Development Forum ) representing the Project, various levels of government, communities and other stakeholders, in The Project will also provide funding for the first regional economic plan. Thereafter, the Project envisions that its role would be that of a catalyst and long term stakeholder rather than owner, and that funding for the process in the mid- and long-term would be delivered through a fund established for this purpose (referred to at present as the Simandou Development Fund ) Social Management Framework The Social Management Framework (SMF) provides a structure for the detailed design and implementation of the Project s social mitigation measures, which will be captured in a series of Social Management Plans. As illustrated in Figure 16.1, the SMF groups social mitigation measures into a number of programmes under four themes: Urban and Rural Planning; Employment Creation and Livelihoods; Community Health, Safety, and Security; Cultural Heritage and Awareness. These themes serve to highlight linkages between mitigation measures developed for different impacts and to promote coordination of efforts during detailed mitigation design and implementation. The Social Management Plans will build upon the SMF to describe detailed actions, indicators and targets for each theme to be achieved through their respective programmes. The detailed design and implementation of the SMF mitigation measures will be influenced by a number of factors, as detailed below. Prioritisation: The Project will prioritise mitigation that address negative impacts and risks, with special attention given to negative impacts anticipated to be of major or critical significance. Implementation timeframes will take into account the Project schedule and apply urgency in delivering measures that meet immediate needs in the first year of a given phase (eg construction), which may then be enhanced and expanded in subsequent years to encourage broader and lasting benefits. The Project will also consider appropriate target populations for mitigation, first prioritising Project affected communities (both those affected directly by Project activities and indirectly by in-migration pressures) and vulnerable groups within those communities over other potential beneficiaries. Recognising that impacts, risks, and affected populations (including vulnerable groups) may change over time, the Project will adapt its prioritisation process to findings from ongoing monitoring as necessary. Alignment: Where possible, the Project will align its mitigation with the development policies and plans of local communities and government authorities (eg Local Development Plans, Poverty Reduction Strategy Paper) and objectives identified in relevant development forums (eg Simandou Development Forum, the Village Support Programme [PACV]). However, broader efforts to positively transform Guinea s socio-economic environment will fall under the responsibility of the RDS. While it is anticipated that the RDS and SMF will work together to maximise the value of mitigation by identifying appropriate partnerships and avoiding programmatic gaps or overlaps with other development entities, the SMF will initially maintain Project attention on the timely mitigation of negative impacts in Project-affected communities. 16-7

8 Figure 16.1 Simandou Project Social Management Framework REGIONAL DEVELOPMENT STRATEGY SOCIAL MANAGEMENT FRAMEWORK Vision and Objectives Organisation Funding Programmes Schedule Communication Monitoring and Evaluation Programme Development Project Affected Peoples Beneficiaries Prioritisation Impacts and Risks Project Phase Development Policies Alignment Regional Development Forum PACV Studies and Analysis Urban and Rural Planning Employment Creation and Livelihoods Resettlement and Livelihood Restoration (PARC Framework and Implementation) In-Migration Community Health, Safety, and Security Community Health Community Safety and Security Cultural Heritage and Awareness Tangible Heritage Intangible Heritage Employee Housing Agriculture and Food Security Human Rights Infrastructure Local Procurement SME Development Employment and Work Readiness Capacity Building Stakeholder Engagement Consultation, Information Exchange, and Partnerships Government Donors Communities Civil Society and NGOs Private Sector Grievance Management 16-8

9 Stakeholder Engagement: The Project will engage a variety of stakeholders to consult, exchange information, and work in partnership on detailed mitigation design and implementation. Consultation with Project affected communities in particular will be a critical factor in the design of the Social Management Plans. Any concerns regarding mitigation measures or Project activities will be managed through the Project Grievance Procedure (see Annex 1G: Simandou Project Grievance Procedure) and the outcomes arising from grievance resolution will inform the evolution of mitigation. In addition, the Project will support capacity building within government and civil society organisations to enhance their capabilities over time to participate in mitigation design, implementation, and monitoring. The Project Stakeholder Engagement Plan will describe the processes by which these engagements and partnerships will be managed. The Project will regularly review the efficacy of its engagement and partnerships and adapt activities when appropriate to support the achievement of its mitigation targets. The following sub-sections detail the planned mitigation measures for impacts on the national economy. A comprehensive list of social mitigation measures is provided in Volume V: Social and Environmental Management Plan Mitigation of Impacts on the National Economy The Project recognises that it has the potential for significant impacts on the economic development of Guinea and for communities in the study area. It has therefore committed to optimising positive impacts and mitigating negative impacts through a number of programmes conducted within the principles of sound corporate governance, responsible corporate citizenship, and transparent business interactions with affected communities. The Project s ability to directly act on Guinea s national economy is constrained. Guinea s ability to benefit from the economic opportunities that the Project offers at a national level will depend on good governance, fiscal transparency, and support for local capacity building initiatives that strengthen the workforce and provide a commercial environment in which new businesses can thrive. The Project will therefore seek to support Guinea s creation of a strong macroeconomic environment by working with the Republic of Guinea and other stakeholders throughout the life of the Project and through the design of mitigation and optimisation measures that align with the government s economic development objectives. No SMF programmes are proposed specifically in relation to the national economy, however, the Project s SMF Alignment and Stakeholder Engagement activities will be designed to stimulate government capacity in managing macroeconomic impacts and to inform the development of complementary economic development programmes at the local level (see Chapter 17: Employment and Economic Development). These Alignment and Stakeholder Engagement activities will include the following. Maximising employment of Guinean nationals through programmes within the Project s Employment Creation and Livelihoods theme. These programmes include Employment and Work Readiness, Local Procurement, SME Development and Agriculture and Food Security, as described in Section of Chapter 17: Employment and Economic Development. Giving preference to procuring goods and services within Guinea, provided that suppliers meet Project requirements for delivery, quality and health, safety, and environment (HSE) standards, and that local access to goods and services is maintained. Local suppliers are defined as sole traders, small and medium enterprises (SMEs), or corporations, principally owned by permanent resident(s) of Guinea with the primary business activity being undertaken within Guinea. Maximising national procurement through the Project s Guinea Buy Local Programme (GBLP), a programme developed in partnership with the IFC. Beginning in 2012, the GBLP will operate with a budget of approximately US$4-5 million over three years, with 70% of funding provided by the Project and 30% provided by the IFC. The Project will continue to support the GBLP or other local procurement activities in partnership, where available and appropriate, with the IFC or other donors, civil society organizations, or NGOs beyond this three year period to address needs throughout the Project lifecycle. 16-9

10 Continuing the development of a sophisticated, quantitative macroeconomic model capable of assessing the impact of Simandou and other projects, on the Guinean economy. This will be done by sponsoring an independent external macroeconomist to develop it to a point at which it can be handed to Government, with associated training for relevant officials in the public administration. This will permit a deep understanding of the economic conditions under which Simandou will be developed and, in turn, its implications for the host economy. It is expected that this will also provide an open platform for the Republic of Guinea, multilateral agencies, civil society, and other stakeholders to consider the use and management of long-term mineral revenues and the broader economic impact of the Project. The government will thus be better placed to design and implement a set of targeted policies and measures aimed to maximise the positive effects of mining at this large scale, and to reduce the risks of negative economic implications, which are often referred to as the 'Resource Curse'. Collaborating with the Republic of Guinea to make payments of taxes and royalties in a transparent, accurate and timely manner during the operation phase. As a corporate member of the Extractive Industries Transparency Initiative (EITI), Rio Tinto will ensure that sound financial principles and accounting processes are in place for its business and will publish an annual statement of taxes and royalties paid. In relation to dependence of the economy on the minerals sector, and associated volatility, working with the Republic of Guinea to encourage use of revenues from the Project to promote economic diversification as part of a wider industrial policy and supporting efforts to this end Residual Impacts With implementation of the above mitigation measures, impacts on the national economy are anticipated to be positive, with some negative impacts associated with exchange rate volatility and inflation effects Residual impacts related to the national economy have not been determined here, due to the constraints on the Project s ability to directly act on Guinea s national economy. As discussed above, Guinea s ability to benefit from the economic opportunities that the Project offers at a national level will depend on good governance, fiscal transparency, and support for local capacity building initiatives that strengthen the workforce and provide a commercial environment in which new businesses can thrive. The residual impacts related to employment and economic development, at a local level, are addressed in Chapter 17: Employment and Economic Development Summary of Findings Potential impacts on the national economy and associated mitigation measures are summarised in Table

11 Table 16.1 Summary of Potential Impacts on the National Economy Impact Description Employment and procurement by the Project, prioritising opportunities for Guinean nationals, will result in increased income and spending in the economy, along with other benefits. Government revenue Upon conclusion of the tax holiday, the Project s tax contributions are expected to be 5% of GDP. Foreign currency earnings and the exchange rate The Project will not significantly impact foreign currency earnings and the exchange rate because revenues from the Project will be earned offshore. Dependence on minerals and associated volatility There is the potential for government revenues to become over-dependent on mining, making the economy vulnerable to volatility in commodity prices. Prices and inflation (including terms of trade) Increased demand for goods and services as a result of large capital investments can lead to inflationary effects in the economy. Gross Domestic Product The Project has the potential to significantly increase the size of the Guinean economy during operation. Impact Assessment Positive Positive Not significant Negative Negative Positive SMF Themes and Programmes Regional Development Strategy Social Management Framework: Alignment Development Policies (eg EITI) Regional Development Forum Studies and Analysis Programmes Employment and Work Readiness SME Development Local Procurement Agriculture and Food Security Stakeholder Engagement Consultation, Information Exchange, and Partnerships Capacity Building Key Mitigation Measures Guinea s ability to benefit from the economic opportunities that the Project offers at a national level will depend on good governance, fiscal transparency, and support for local capacity building initiatives that strengthen the workforce and provide a commercial environment in which new businesses can thrive. The Project will therefore seek to support Guinea s creation of a strong macroeconomic environment by working with government and other stakeholders throughout the lifetime of the Project and designing mitigation and optimisation measures for national and local SMF programmes that align with the government s economic development objectives. Specifically, the Project will: maximise the employment of Guinean nationals through the Project s Employment Creation and Livelihoods theme; give preference to procuring goods and services within Guinea and maximising national procurement through the Project's 'Guinea Buy Local Programme' (GBLP); continue to develop the Simandou macroeconomic model to assist in understanding and managing impacts on the national economy throughout the Project lifetime, and hand over of the model to Government, along with appropriate training; collaborate with the Republic of Guinea to make payments of taxes and royalties in a transparent, accurate and timely manner during the operation phase. As a corporate member of the Extractive Industries Transparency Initiative (EITI), Rio Tinto will ensure that sound financial principles and accounting processes are in place for its business and will publish an annual statement of taxes and royalties paid; and work with government to encourage use of revenues from the Project to promote economic diversification as part of a wider industrial policy and support efforts to this end