China Outlines Lending Regulations, Suggestions To Awaken Liberia’s Economy
Report by Alpha Daffae Senkpeni, [email protected]
Monrovia – Chinese banks are open to lending Liberia but only for projects that are sustainable and capable of paying back the loans, says Chinese ambassador to Liberia Fu Jijun.
In an exclusive interview with FrontPageAfrica, the top Chinese diplomat outlined several significant issues that would influence bilateral ties between the two countries and help influence Liberia’s economic development.
“Besides the grant or aid, we also provide concessional loans and if some projects are qualified by meeting the requirements of China, we will continue to do that (give loans),” he said.
China’s Export-Import Bank (EXIM), which is funding the construction of the US$50 million Roberts International Airport’s new terminal, is open to lending to Liberia but has strict restrictions for concessional loans including funding projects that are sustainable enough to payback.
“There are some chances but it is quite limited, frankly speaking, it’s quite limited because the EXIM bank injects money into projects that can produce revenue because it is a loan and not a grant or aid,” he said.
“So it needs to be repaid, so they (the bank) prefer to inject their money into the production sector – the project should be producing money to be sustainable for a long time.”
China is a major diplomatic partner of Liberia, contributing millions of dollars in aid and infrastructure development.
Already, the Chinese government through its China Aid program is constructing a US$50 million ministerial complex and annexes at the Capitol Building, and Ambassador Fu says helping Liberia’s road connectivity has been identified by Beijing as a priority.
“We are committed to helping the new government achieve its goal by implementing His Excellency’s (President Weah’s) pro-poor agenda and we hope Liberians can recover their glorious history through hard and diligent work,” he said.
Ambassador Fu, who assumed diplomatic duties in the country early this year after the inception of the Weah-led administration, says Beijing is fully supportive of the Liberian government although disclosing that sourcing loan might be difficult.
Lending Might Be Difficult
This means sourcing credit for projects like the much publicized coastal highway intended to connect counties in southeast Liberia would require presenting a plan to the borrowers to ensure revenue would be generated from the usage of the road.
Lending such fund would first entail evaluation and estimation by the bank – “but my personal opinion is that, it will be much better than just building the road to be used free. The road should contribute to the revenue and payback the loan,” he said.
President Weah has already sanctioned moves to source a US$536 million loan from a Singaporean financial group to construct the coastal highway.
But since highways in Liberia do not collect toll (road taxes), it makes it difficult for roads to directly raise revenue and payback money invested in such project while economists say road projects significantly impact trade and commerce and fast track the economy.
“I hope the Liberian government can make proposals of production projects which will help you produce revenue and provide employment for the people and use your raw materials by adding value to them instead of just exporting your raw materials which have low value, which I think is not good for the local economy.” – Ambassador Fu.
He suggested that concessional loan proposals should show how new roads could payback, which would require rigorous assessment and subsequent approval by the lender.
Fu says Liberia can tap into opportunities provided by multilateral development framework like the One Belt, One Road Initiative (OBOR) and the Forum on China-Africa Cooperation (FOCAC).
The OBOR has seen over 60 countries and several international organizations using the platform for economic development of their respective countries and firms.
In east Africa, connectivity through railways is helping move commodities faster, injecting exuberance into the regional economy.
In September this year, the FOCAC summit will seek to further deepen cooperation between African countries and China when Liberia will also have the chance at the high level discussions to sign cooperation with China at multilateral or bilateral levels.
The talks would include political consultation, infrastructure cooperation including road, information technology, railway and trade and commerce.
Ahead of the forum, China has already opened its doors to Africa’s importers granting 95% tax waiver and plans to reach 100 % before the end of this year.
“This means China wants to open its market to the world, so we welcome African countries including Liberia to use this platform to promote their products to the Chinese market,” he said, adding that the recent signing of the Africa free trade zone treaty creates would strengthen trade and commerce on the continent.
Economic Reforms Needed
Meanwhile, the Chinese ambassador suggests that the new government must make some economic reforms to shift the dynamics toward industrialization or diversification.
When China opened its door to Foreign Direct Investment back in 1978, the socialist nation swallowed some bitter pills to see to it that the economy grew to becoming the world’s second largest today – only next to the United States of America.
There were special economic zones set up, tax breaks were given to companies, so millions of jobs were created and millions of Chinese gradually became economically potent.
Back then, Liberia’s economy was experiencing a peak in growth. Iron ore and rubber were selling pretty impressively on the world market but failure to industrialize the economy couple with political upheavals is still hunting the economy today.
The country has gone through wars and disasters and the state of the economy is becoming even more appalling and needs recovery.
Ambassador Fu says fixing the West Africa nation’s economy requires sacrifices including “making good policies to attract foreign investments and encouraging local investors.”
“Even at the beginning, you don’t put much tax but you allow the investments and factories to create jobs for your people and then your labourers can learn the technology, the skills to produce something, and in the long run you can learn the management of these investments in the country,” he said, referencing the experience of his country into economic progress.
That was the way China’s manufacturing sector grew into becoming the second largest in the world, he said, while calling on the George Weah-led government to give incentives to investors as a conduit of expanding the economy, while urging young Liberians to acquire employable skills.
“Modern factories need skilled workers, even though some of them (employees) can be trained on the job – so the Liberian government must try to improve the ability of its manpower,” he said.
Influencing Liberia’s Industrialization
Whether through bi-lateral agreements or FDI, China has enormous capacity to inspire Liberia’s improved its value addition chain by ensuring the exports of finished products instead of raw materials.
For jobs to be created and to ensure growth of Gross Domestic Product GDP), industrialization is vital for every economy, he says.
“There are more Chinese companies that are interested in coming to Liberia, now that you have peace and stable political environment based on President Weah’s inaugural speech welcoming foreign investors.
“But there should be some policies to attract FDI and encourage local investments which play important role in developing the economy,” Fu said.