Governance Lapses May Hurt Liberia’s Millennium Challenge

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Report by Rodney D. Sieh, [email protected]

Monrovia – The George Weah-led government risks losing out on the lucrative United States government’s Millennium Challenge Corporation (MCC) award unless it improves its governance evaluations, FrontPageAfrica understands.

Deterioration in the rule of law, corruption, transparency and accountability including the president’s failure to declare his assets and the obstruction of the functions of the Extractive Industry Transparency Initiative could hinder the country’s chances.

The Millennium Challenge Corporation (MCC) is an independent US Government Agency, which   was established in 2004 as a way of devising an innovative approach to support poverty reduction in developing countries to produce sustainable outcomes.

 Sierra Leone, Benin Endured Lost Out Before

In 2013, two West African countries, including Liberia’s next-door neighbours, Sierra Leone and Benin failed to make the cut after losing on Control of Corruption “hard hurdle” indicator forcing the MCC to maintain “continued but limited engagement” with the two countries.

Sierra Leone did bounce back in 2016 after scoring a passing mark of 53 percent – just enough to pass the control of corruption indicator, but still failed to secure the compact because of its poor performance in ‘investing in people and economic freedom’ categories, although it was able to secure the threshold programme.

A year earlier, Liberia’s next-door neighbors secured the threshold programme, but was unable to qualify for the compact because the country could not pass the control of corruption.

The wakeup call forced Sierra Leone to implement publicity programs including a ‘Pay No Bribe’ campaign in a bid to improve the country’s image and its scores.

Every year, “the MCC Board of Directors meets to select countries as eligible to develop a proposal for MCA assistance (see box describing MCC’s assistance programs). Recognizing that development is achieved by a country’s own efforts, policies, and people, MCC’s assistance offers selected countries an opportunity to identify their own priorities for achieving sustainable economic growth and poverty reduce poverty”.

The MCC measures performance standards from independent sources such as the World Bank and the Brookings Institution World Governance Index (WGI).  Although Liberia has made compact and receiving funding from the MCC, the country continues to struggle, barely making the minimum scores.

In 2018, Liberia passed half of the scorecard, corruption and democratic rights.  However, these scores are compared to other institutionally weak countries.  Liberia failed in the following categories:   Fiscal policy with a score of 29%; Regulatory quality 37; Rule of law 49; Government effectiveness 25; Land rights and access 14; Primary education expenditure 8; Natural resource protection 18; Immunization rate 33; Girls’ primary education completion rate 18 and Child health 45.

A country needs to pass 10 out of 20 indicators, inclusive of control of corruption.

Per the 2018 indicator, most of the reds are issues related to budget (funding social services) and economic performance. The danger comes into play when a country begins to see reds on political freedoms and corruption, two worrying indicators.

Toward the end of the Sirleaf administration, Liberia was in a comfortable position. But experts say the US may be sending a signal of concern and this could also be leverage building. “The major contributions of China, Japan, EU diminishes US influence and the Compact is the only major carrot,” said a researcher with a major stakeholder, speaking on condition of anonymity this week.

Kate Hixon, a human rights advocate and former Africa program officer at Freedom House one of the major contributors to the annual assessment of countries on the MCC radar, blogged in a post for Freedom House last September that whoever succeeded Sirleaf would need to do more to stem corruption and expand Liberia’s economy so that all citizens can benefit. “Furthermore, legislation such as the Land Reform Act must be passed to ensure that lingering causes of conflict are addressed and citizens’ rights are not trampled in favor of corporate-led development,” Hixon added.

Hixon added: “Sirleaf’s achievements, particularly her commitment to honor the constitution and make way for new leadership, have raised the expectations of the Liberian people. Peace and stability are essential, but they are no longer enough. The upcoming transfer of power should be taken as an opportunity to move the country further along the democratic path, with a focus on improving transparency, the rule of law, and equality of opportunity for all Liberians.”

There are indications Liberia may not make it in next year’s evaluation as governance under the George Weah Administration is declining especially with the deterioration in the rule of law, GOL officials including President Weah failing to declare assets and obstructing the functions of the Extractive Industry Transparency Initiative.   

US May Suspend If…

Analysts are urging the government to concentrate on its governance indices or risk funding from the MCC, which will obstruct the country’s development and the administration’s pro-poor agenda.

The scoresheet is relevant for countries that have been declared eligible and undergoing compact development and once the compact is signed, the scorecard does not invalidate the compact. However, it will affect a second compact in the coming year.

MCC sources note that if Liberia undergoes a very serious downward trend, not just failure on the scorecard, but very serious human rights violations and grave corruption issues, the US government may choose to suspend the compact. “But this is very rare. Sierra Leone never reached Compact, it was actually going through a Threshold program. They kept failing the corruption indicator which is a mandatory indicator to pass in order to sign a compact,” a source noted this week.

The MCC consistently monitor countries’ fight against graft which has been a cornerstone of its approach to poverty reduction.

Additionally, the MCC also touts transparency and accountability amongst its core values.

Passing the Control of Corruption indicator is viewed as crucial to any country’s qualification

The concerns come amid the mounting decline of the local economy.

Veteran Liberian economist Samuel P. Jackson this week slammed the administration’s economic policy direction as being chaotic and not integrated into achieving sustainable outcomes. “Like mainstreaming the SDGs into your short, medium and long-term development agenda,” Mr. Jackson said in a post directed at President Weah on the social medium Facebook.

The Economist also urged the government to focus on job creation and empowerment of the private sector. “Liberians need jobs that produce income and savings. Stimulating aggregate demand should be your prime objective in the immediate term. Empowering domestic entrepreneurs should be the priority.  You do that by decreasing barriers for MSME development.”

‘No Serious Attraction’, Economist Says

Mr. Jackson said he has seen no efforts so far to expand private sector development. “Either through domestic capital formation or Foreign direct investments. You can do neither without improving the rule of law and effective governance. Liberia is at the near bottom of the World Bank Doing Business Survey ranking. No serious attraction of FDI can occur in this environment.”

Since the end of the civil war, Liberia has faced several constraints and grants from the MCC over to past few years have been instrumental in the improvement of primary education including a Threshold Program that helps increase girls’ primary education enrollment and retention in the three communities with the largest number of out-of-school girls.

While Liberia has qualified for the lucrative award in the past, stakeholders are concerned about the future.

In July 2010, MCC and the Liberian government a $US15 million threshold program grant agreement that focused on improving land rights and access, increasing girls’ primary education enrollment and retention and improving Liberia’s trade policy and practices.

In November 2015, the government signed a $US257 million Liberia Compact aimed at encouraging economic growth and reducing poverty in Liberia by addressing the inadequate access to reliable and affordable electricity in the country and the poor quality of road infrastructure. The compact included: Funding for the rehabilitation of the Mt. Coffee Hydroelectric Plant, Development of a training center for technicians in the electricity sector, Support for the creation of an independent energy sector regulator, and development support for an approach to nationwide road maintenance.

The compact significantly enhances Liberia’s participation in the U.S. Government’s Power Africa Initiative.

Today, only two percent of the population has access to the electric grid, and 84 percent of Liberians currently live on less than $1.25/day.

The 2015 Compact was key, coming on the heels of the deadly Ebola virus outbreak. The grant enabled Liberia to address its energy issues, one of the country’s pressing needs outside of the immediate health crisis.

Much of the compact’s signature investment is being directed at the Mt. Coffee hydropower plant, which has the potential to become Liberia’s largest source of electricity.

The plant when completed will have the power to generate up to 88 Megawatts, nearly a third of the 300 MW Liberia aims to generate by 2030.

Roughly $164.9 million, or 64 percent, of MCC Compact fundshttps://assets.mcc.gov/documents/compact-liberia.pdf are budgeted for the rehabilitation of Mt. Coffee. The government of Liberia had previously planned to contribute about $45 million to the rehabilitation but was forced to redirect resources towards much-needed Ebola response efforts. MCC pivoted to Mt. Coffee to fill a critical investment gap in the wake of the Ebola epidemic.

Investment in Mt. Coffee is a priority for Liberia and, consistent with MCC’s model, addresses one of the most binding constraints to economic growth in the country. However, the US agency had to do things a bit differently in order to make this investment a reality.

A Lot of Benefits for Grant

Over the past few years, the program has provided more than 7,000 scholarships to girls to cover the additional costs of primary school attendance.

The program has also contributed toward mentoring and counseling programs and provided free or inexpensive medical treatment and promoted awareness of health issues, including malaria, HIV/AIDS, nutrition, and sanitation.

The program has also been beneficial to target communities that have benefited from grants to improve the school environment.

Much of the country’s chances of qualifying for the MCC could come down to how fast the Weah-led administration move toward reconciling some of its early lapses as the clock tick toward the next phase of the challenge.

In 2017, the Transparency International (TI) Corruption Perception (2016) ranked Liberia 90 out of 176 countries surveyed with a score of 37.

Under the preview selection period, The US State Department’s Office of Investment Affairs’ Investment Climate recorded that although the government continues to institute measures, programs and strategies to strengthen anti-graft institutions and laws, corruption remains endemic in the Liberian social fabric.

Most importantly, the DOIA gave some credit to the country’s commitment thanks to the country’s participation in the Extractive Industry Transparency Initiative (EITI) and its signatory status to the ECOWAS Protocol on the Fight against Corruption, the African Union Convention on Preventing and Combating Corruption (AUCPCC), and the UN Convention against Corruption (UNCAC).

However, a lot has changed since. In March, international stakeholders were shocked when President Weah appointed a defeated member of the House of Representatives, Mr. Gabriel Nyenkan as head of LEITI, dismissing Konah D. Karmo.

Karmo was appointed by the Multi-Stakeholders Steering Group (MSG) of LEITI in 2014 following a competitive recruitment process in which several other Liberians participated.

President Weah resisted several calls to reinstate Karmo to no avail, dealing a major blow to the organization credited for helping to set the global standard for the good governance of oil, gas and mineral resources.

The LEITI Act of 2009 requires the President to appoint members of the MSG, and “shall designate one of them as the Chairperson and another as the Co-Chairperson. “The power to recruit the Head of Secretariat, Deputy and other staff members of the LEITI Secretariat, therefore, lies with the MSG, according to Section 6.3d of the LEITI Act.”

The DOIA in its 2017 report noted that despite a number of U.S. Government and other donor-funded assistance projects, lack of training, inadequate salaries, and a culture of impunity have undermined the judicial and regulatory systems, which in turn has discouraged investment.  “The USG seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions.”

Glaring Contradictions

The report adds: “If a U.S. firm believes a competitor is seeking to bribe a foreign public official to secure a contract, this information should come to the attention of appropriate U.S. agencies.  U.S. firms and a number of foreign investors have identified corruption as a potential obstacle to new investment.  Foreign investors generally report that corruption is most pervasive in government procurements, the award of contracts or concessions, customs and taxation system, regulatory system, performance requirements, and government payments systems.”

President Weah in his inaugural address in January declared the country opened for business. “To the private sector, I say to you that Liberia is open for business. We want to be known as a business-friendly government.”

The President remarked that the overwhelming mandate he received from the Liberian people is a mandate to end corruption in public service and promised to deliver on this mandate.

“As officials of Government, it is time to put the interest of our people above our own selfish interests. It is time to be honest with our people. Though corruption is a habit amongst our people, we must end it. We must pay civil servants a living wage, so that corruption is not an excuse for taking what is not theirs. Those who do not refrain from enriching themselves at the expense of the people – the law will take its course. I say today that you will be prosecuted to the full extent of the law.”

In contrast, the President has come under immense scrutiny over his failure to declare his assets and the construction of several private projects amid what many see as a total disregard for governance, the rule of law and transparency and accountability, the key issues likely to be on the horizon when the MCC decides Liberia’s fate in the coming year.

Love her or hate her, Mr. Weah’s predecessor, Sirleaf was celebrated for restoring stability in Liberia. Under her leadership, Hixon opined last September, The Liberian economy was on a high and the former president helped establish human rights and gender equality as recognized if imperfectly upheld norms.

Mr. Weah’s predecessor may have laid the foundations for a peaceful and democratic Liberia, but the Weah administration may be racing against time to keep the gains made inconsistent MCC qualifications.

Analysts say while western nations were hoping for continuity, but more progressive reforms in the outcome of the 2017 presidential elections, many also hoped that a populist-based government would usher reforms. This is why some stakeholders are hoping the Weah-led government clamp down on those looking for opportunities to get, grab, and go in the norm of the “It’s my time” sentiment which appears to be prevailing.

For the foreseeable future, key international stakeholders are cautiously looking to see whether the Weah administration can consolidate the gains and build upon them or risk reversing the gains, even without the guns of the past.

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