Liberia: Troubling Issues Impeding Liberia’s Foreign Direct Investments

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Monrovia – Attracting Foreign Direct Investment to a country with massive infrastructure challenges is an uphill task for any government. It becomes even more compounded when corruption and policy issues are perceptible by investors.

Report by Alpha Daffae Senkpeni, [email protected]

The Liberian government is keen on attracting more FDIs in order to achieve its Pro Poor agenda.  The government’s Technical Economic Management Team (TEMT) is cognizant that in order to “turn the economy around requires sustained private investments in key sectors of the economy.”

According to a TEMT’s report recently sent to the Liberian Senate, the government is clearing several investments for the short term, which its says will become operational in 2019. 

But the report adds that the private sector remains “constrained by critical road, electricity and port infrastructure”. In actuality, the government itself creates some of these issues. 

Low Int’l Ranking

Liberia’s low-quality infrastructure, bureaucratic burdens, high level of corruption, unskilled labour force and comparatively very high supply chain costs are also effecting investors, a World Bank recent report says. 

The West African nation is ranked 172nd out of 190 countries in the 2018 Doing Business report compiled by the World Bank. This means, Liberia is amongst countries that are unattractive to foreign investors. 

According to the UN Conference on Trade and Development’s world investment report, FDI flows to Liberia fell sharply by 60.4 per cent from $627 to $248 million since 2015. 

Several sources within the management circle of foreign firms in the country say investors are edgy about the well being of their investments, while some say the safety and security of lives and properties of the investors are still a big concern.

Liberia’s GDP is put at 2.5% with projection of 3.0% growth before the end of 2018. Much of this growth will depend largely by increased production of gold and iron ore, following the uptick in the prices of gold and iron ore on the international market. 

But as investors continue to express concern about the lack of specific regulations to support the private sector and help protect their rights. This would signal a bad sign to firms eyeing Liberia.

Forbes, one the world’s most famous business and economic magazines, in a report released last October placed Liberia amongst the least attractive destinations for doing business. Obviously, the country’s poor infrastructure and power influenced that rating.    

The rating has raised many eyebrows as the administration of President George Weah closes its first of a six-year tenure. However, most of the blames for such dismal score were directed back to the former administration of Ellen Johnson Sirleaf.

As Weah’s first year in the hot seat elapse, some economists say investors are still apprehensive about existing hurdles that have the propensity of hurting FDIs. 

Entrenched Corruption 

Amongst some of the hurdles, corruption is atop. The recent massive scandal unearthed by FrontPage Africa involving the head of the National Housing Authority and a Burkinabe firm seeking to construct 5,000 low-income housing units in the country is an evident. 

In the recording obtained by FPA, NHA Managing Director Duanah Siryon can be heard discussing kickbacks in the tone of US$160,000 to be allegedly distributed amongst top government officials including the Ministers of Justice, Finance and State and Presidential Affairs.

The NHA scandal is happening as investigation of a reported “missing L$16 billion” continues in the country. The missing banknotes saga remains indelible, leaving the rest of world concern about the stability of the country’s economy.  

As the government struggles to manage the damage already done, an ugly picture twirls the investors-sphere. It shows how bribery is an entrenched factor that could influence foreign investment in Liberia. It also reechoes how corruption is unendingly dogging the investment sector.

Corruption is not the only menace crippling the investments. The apparent failure of government to live up to its part of bargains signed with concession companies is also an egregious issue affecting FDIs. 

FPA has gathered that two major concession companies are sweating over the government’s failure to implement parts of concession agreements. The situation is reportedly putting these foreign investments in a tight corner. 

Some corporate insiders say investors are also worried that their investments are vulnerable to attacks from locals due to government’s lackadaisical posture. 

Sime Darby’s Feeling the Pinch 

Take palm oil giant Sime Darby for example: the company is unable to possess all the 220,000 tract of land the government agreed to give it as enshrined in the 2009 concessional agreement. 

Since the Malaysian firm begun clearing, it has paid more than US$2 million in crops compensation to citizens in the concession area because these communities insist the land does not belong to the government. It has been a rocky road that no investors would want to ply. 

Currently, the company only occupies 10,500 hectares after pouring huge capital in the construction of a palm oil processing mill. This leaves the management scratching its head since it cannot acquire the needed palm produce from 10,500 hectares to supply the mill. 

Put in context: the company’s ability to expand its investment and at the same time create jobs for more Liberians is being strangulated due to the prevailing situation. 

Unlike the land issue, the company is also worried that the existence of private oil palm mill is troubling. Theft of its produce continues to increase by the day. The presence of private mills within the concession area is a violation of Section 5.4 of the 2009 agreement. 

Amongst other things, the government agreed that “it shall not grant any license to any third parties to construct or to operate” mill within 60 kilometers of the border of the concession area. 

In violation of this, currently there are several mills being operated in places such as Madina where people rely on palm harvested from Sime Darby Planation to produce oil. Illegal harvesting and theft of the company’s palm continue to increase, as attacks with deadly weapons such as guns and cutlasses on its planation security are frequent.

Sources inside the company say despite complaints to the government, the administration is yet to intervene in line with the concession agreement to ensure the firm’s protection.

Regardless the firm’s current dilemma, local communities continue to demand latrines, hand pumps and other support as part of the company’s corporate social responsibility. The company only operates a planted 10,500 hectares of land, and it is paying surface rental for what is equal to 120,000 hectares. 

According to sources, the government is now planning to increase the surface rental from US$1.25 per hectare of land to US$2.50 per hectare of land after 8 years.

MNG Gold’s Troubles 

Also, Turkish mining company MNG Gold is facing its own challenges. The situation recently sparked speculations that the firm is contemplating pulling out of the country. The company operates mines in Grand Cape Mount and Bong Counties.

One source, who is within the top management, says their investment faces threats. The source cited a November 2018 incident when its concession in Kokorya, Bong County came under attack by some locals. 

The attack was a reprisal following a fatal car accident involving a Chinese firm hired by MNG Gold. The company’s offices were ransacked and looted. Pillagers made way with several items, some of which were later retrieved by the Liberia National Police. 

“No matter how much the companies deliver in terms of good practices of operations and community development, payments of tax, royalties, wages and scholarships, and the number of jobs they create, the reputation of companies are being laid on the line with baseless massive fines, alleged accusations and unpredictable court cases,” the source told FPA.

MNG Gold’s incident reechoed a previous violent protest involving steel giant ArcelolMittal in Nimba County, which happened in 2014. Several aggrieved youths of the county had staged a protest after complaining that the steel company was ignoring their plight. 

Their protest turned violent and caused the destruction of several valuable equipment including a train and heavy-duty mining truck. It left a bad image for the country, sending a certain message that Liberia was still prone to violence – the kind that scares away foreign investors.

Lebanese Are Also Worried 

Lebanese have huge investments in Liberia and are almost controlling the entire economy. Any new investors might seek at least a tip of advice from someone on the ground – like the Lebanese – before making his move here. 

But they too also endure all of the challenges that come along with investing in the country. Recently, the president of the World Lebanese Culture Union called on the government to review regulations that directly affect the Lebanese business community.

At the celebration of his country’s 175th Independence celebration held in Monrovia recently, Ahmed Wazni stressed that in order to make Liberia more “business friendly” the government must review its laws.

Said Wazni: “We called upon the government to review its laws and regulations directed to non-Liberians and the business community in general so as to make Liberia more business friendly and to create an enabling environment for foreign investors.” 

While President Weah parades the world in an apparent bid to attract investors, experts say reviewing polices and curbing corruption in the investment sector could be his niche. 

It might well assure potential investors that Liberia is ready to open up for business as declared by the Liberian leader during his inauguration at the SKD Sports Complex.

But popular Liberian economist Samuel Jackson in a recent article asserted that President Weah’s Pro-Poor Agenda is “overly optimistic” and “will have insurmountable problems in accessing international capital markets under [the] current in-country circumstances.” 

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