Liberia: Pres. Weah Pleads with Firms ‘That Made America Great’ to Invest in Liberia
Monrovia – While breaking grounds for the construction of a 48-inch diameter raw water intake pipeline at White Plains last week, which was destroyed during Liberia’s civil war, President George Manneh Weah made a poignant call to Liberia’s traditional stepfather, the United States of America to make its presence felt in Africa’s oldest republic. He specifically requested that the great American companies that built America should come to Liberia and do business.
Report by Rodney D. Sieh, [email protected]
For President Weah, the absence of major US investment in Liberia does not reflect the long-standing partnership the two countries have enjoyed since 1864, when the United States established diplomatic relations with Liberia, 17 years after it became the first independent nation on the African continent.
Said the President: “We are partners in progress, government in and out. America is our partner and we need to feel the presence of America in this country. We need to see your companies that made you great country, we need to see them here. If it means that we will get all American companies in this country for Liberia to succeed then we will do it. But we must be fair with each other, we must work together for the benefit of our both countries.”
Over the years, the country founded by the American Colonization Society, an organization that resettled freed African-Americans and freed slaves in Liberia, has heavily relied on America’s help.
While the U.S. assistance and engagement has been critical to Liberia’s long-term development, very few American companies do business in Liberia.
The most visible being Firestone which many believe came to Liberia as a matter of convenience.
Long after Liberia’s independence, in the 1920s, the US access to rubber had been restricted by the European colonial powers, Britain and the Netherlands, which held a monopoly in rubber production.
At the time, US Secretary of Commerce Herbert Hoover considered rubber a vital resource due to its usage for car tires and began working with American rubber companies in order to find a rubber source that was controlled by US interests.
Liberia proved to be a haven for what America wanted and the U.S. Department of Commerce-subsidized a worldwide search for a place for rubber plantations. The US rubber magnate, Harvey Samuel Firestone, dispatched experts to Liberia in December 1923 to do a soil survey.
Three years later, in 1926, the Liberian government granted Firestone a 99-year lease for a million acres to be chosen by the company wherever in Liberia at a price of 6 cents per acre.
Firestone then set about establishing rubber tree plantations of the non-native South American rubber tree, Hevea brasiliensis in the country, eventually creating the world’s largest rubber plantation.
Firestone also provided a $5 million loan at a 7% interest rate to the government to pay the foreign debts it had and to build a harbour needed by Firestone. The loan was given in exchange for Firestone having complete authority over the government’s revenues until the loan was paid.
Over time, the loan took a larger and larger portion of the Liberian government’s incomes, growing from 20% of the total revenue of Liberia in 1929, to 32% in 1930, to 54.9% in 1931 and nearly the whole revenue in 1932. An estimation made by a member of the American Legation in Liberia said that Liberia really paid a 17% interest rate for the loan.
When the price of rubber fell during the Great Depression, Firestone stopped its development of the plantation, using just 50,000 acres and cutting wages in half, and, depriving the Liberian government of tax incomes, the government missed a payment to the loans to the company. Firestone asked the US government to send a warship to Monrovia to enforce the debt payment, but President Franklin Delano Roosevelt rejected the “gunboat diplomacy”. The loans to the company were finally paid in 1952.
US-Liberia relations have often been one of permanent dependency , focusing primarily on consolidating democratic progress; improving capacity, transparency, and accountability of governance institutions; promoting broad-based, market-driven economic growth; improving access to high-quality educational and health services; and professionalizing Liberia’s military and civilian security forces, while helping Liberia build capacity to plan, implement, and sustain its own development efforts in each sector.
exports to Liberia include agricultural products (with rice as the leading category, vehicles, machinery, optic and medical instruments, and textiles. The main imports from Liberia to the United States are rubber and allied products; other imports include wood, art and antiques, palm oil, and diamonds. Both countries have a trade and investment framework agreement and Liberia is eligible for preferential trade benefits under the African Growth and Opportunity Act. But Liberia has been unable to fully take advantage of these trading arrangements, because it does not produce much to sell to the US. Liberia is an importing nation, importing about $207 million per month (ref. Sirleaf’s 2015 State of the Nation Address.”
Besides Firestone, Liberia’s U.S.-owned and -operated shipping and corporate registry is the world’s second-largest. U.S. the shipping and corporate registry is headquartered in Virginia, USA.
“We are partners in progress, government in and out. America is our partner and we need to feel the presence of America in this country. We need to see your companies that made you great country, we need to see them here. If it means that we will get all American companies in this country for Liberia to succeed then we will do it. But we must be fair with each other, we must work together for the benefit of our both countries.”President George Manneh Weah
The Corruption Effect
While the US is often criticized for not having much investments in Liberia, other than Firestone and LISCR, diplomatic observers say, the lack of more American businesses could be attributed to corruption.
US companies are said to be wary of investing in “high corruption” countries because they are afraid to be entangled in corruption by being coerced to give bribes or engaged in other back door dealings, and exposing themselves to reputation risks, especially in the wake of the “foreign corrupt practices act” (FCPA which is vigorously enforced by the US Department of Justice.
Diplomatic observers say, corruption is not just an issue the Weah administration is dealing with but one many predecessors before him had to endure. This is why many, like former Auditor General John Morlu are skeptical that the Liberian President’s recent call would generate much traction in Washington, bearing a miraculous clampdown on graft – or the perception of it therefore, is drastically reduced.
“In Liberia, Corruption has been the “single, most” “binding constraint” to growth and development since 1847 to 2019,” says Mr. Morlu. “American companies aren’t coming soon because corruption kills, corruption discourages ethical investors and business owners. Even the International Monetary Fund (IMF) cannot save a corrupt nation, it never has, it never will, go back – since 1945 to 2019. The risk exposure for American companies is just too high when it comes to hyper corrupt nations like Liberia. So, the reward has to be relatively higher, which beyond natural resources what else can Liberia offer to compensate for such a high risk.”
Additionally, the cost of putting into place strong and effective FCPA compliance systems and to monitor the effectively in countries like Liberia, where USA Today carried a banner headline saying that “Liberia is Most Corrupt Country, can be highly prohibitive for American businesses to bear.
Section 312, PEP, of the USA PATRIOT Act has compounded the problem by ensuring that American companies watch out for and report instances in which they are doing business with “politically exposed persons.”
Last April, Cari Votava, a World Bank senior financial specialist lamented that that many Liberians are concerned about corruption and want to see it is tackled effectively. Votava said when corruption is high in a nation, the country cannot use its resources and taxes to support its citizens.
Said Votava: “Corruption is very complicated because we see a lot of it in many countries. You may read the newspapers and learn that there are many international organizations that study corruption, why it happens, how it happens, but it keeps raiding the country,” she said.
Votava made the case that various studies have shown that there is a correlation between how much corruption takes place in a country and how much poverty exists as well. “When a nation is more corrupt, many investors don’t want to invest there, because they don’t want to be paying bribes, which can produce problems,” she said.
For Votava, investors usually invest in a nation to create jobs for the citizens, especially in the local communities and help the economy to expand because economic development reduces poverty.
In order to fight corruption, she said, “You need good laws; laws that prevent corruption and criminalize corruption. The law has to state that bribery is a criminal offense. One who takes bribe should be prosecuted and the money taken to be given back to the state. The penalty for corrupt officials or individuals needs to be high with longer time in prison.”
Laws, Liberia has. In most cases, implementation has been the problem.
Over the past years, several major scandals have further dampened Liberia’s woes. The saga of the missing 16 billion Liberian dollars and the mystery surrounding the US$25 million that was expected to be infused into the economy offered more excuses for credible, potential investors to stay away.
“In Liberia, Corruption has been the “single, most” “binding constraint” to growth and development since 1847 to 2019.”John Morlu, Former Auditor General, Liberia
The Citizenship Effect
Compounding Liberia’s problems is what many see as probably the most discriminatory laws on the books regarding foreigners and citizenship.
In Liberia, citizenship is governed by Chapter 4 of the 1984 Constitution and the 1973 Aliens and Nationality Law. Both the constitution and the law discriminate on the basis of race, stating that “only persons who are Negroes or of Negro descent shall qualify by birth or by naturalization to be citizens of Liberia.” However, in other respects there are contradictions: while the constitution provides for equal rights to men and women to transmit citizenship to their child, the law discriminates on the basis of gender for children born outside the country. Meanwhile, the statutory attribution of citizenship to every child born in Liberia is not confirmed by the constitution.
The UN Committee on the Rights of the Child has expressed concerns about the very low rate of birth registration, and also about the restriction of citizenship on the basis of color and racial origin. The UN Committee on the Elimination of Against Women also urged Liberia to remove gender discrimination in the law.
Next door neighbors, Ivory Coast, often hailed for its fast-paced development has done the opposite and numerous companies from France and other foreign nationals are taking advantage.
In 2013, the Ivorian parliament approved new laws to ease access to citizenship for millions of foreigners and improve state regulation of land ownership, two issues at the heart of a decade of political crisis and violence.
Immigrants from Ivory Coast’s arid neighbors flocked to the West African nation following independence in 1960, lured by then President Felix Houphouet-Boigny’s promises of land for anyone willing to develop it for agriculture.
The open-door policy helped build Ivory Coast into the world’s top cocoa grower and a regional economic powerhouse. But millions of immigrants and their children were unable to become Ivorian nationals.
When soldiers launched a failed coup attempt in 2002, igniting a civil war that divided the country between a rebel-held north and loyalist south, they claimed to be fighting discrimination against northerners and foreigners.
Changes to the laws on nationality and land tenure were conditions of the first peace agreement signed between the government and the rebels in 2003. “The political crisis … put back on the agenda the question of the abnormally prolonged foreign status of certain populations,” President Alassane Ouattara wrote in an introduction to one of the proposed nationality laws. “Despite having entirely integrated the social fabric and considering themselves Ivorian, (they) remain legally non-nationals,” he wrote.
Last September, Ghanaian President Nana Akufo-Addo declared and formally launched the “Year of Return, Ghana 2019” for Africans in the Diaspora, giving fresh impetus to the quest to unite Africans on the continent with their brothers and sisters in the diaspora.
Since independence in 1957, successive Ghanaian leaders have initiated policies to attract Africans abroad back to Ghana.
Ghana’s parliament passed a Citizenship Act in 2000 to make provision for dual citizenship, meaning that people of Ghanaian origin who have acquired citizenships abroad can take up Ghanaian citizenship if they so desire. That same year the country enacted the Immigration Act, which provides for a “Right of Abode” for any “Person of African descent in the Diaspora” to travel to and from the country “without hindrance.”
Ghana has been targeting Americans for more than three decades, beginning with Jerry John Rawlings who made a concerted effort to encourage celebrities to take residency in Ghana. Such moves by the Government of Ghana have encouraged American companies to move into Ghana, as they know they can at least start in a country where they have returning Americans who understands their cultures.
Until the late 1990s, the number one destinations of African Americans were Kenya, South Africa, and Senegal. Today, Ghana is leading.
The Bottlenecks Effect
Besides the citizenship issue, Liberia’s scoring low on the doing business also serves as a deterrent to potential investors.
In the World Bank Doing Business 2020 Report, Liberia is trailing when it comes to removing constraints in starting up a small-scale business, while Togo and Nigeria have made some tremendous strides in the Sub-Saharan region and remain among the top global performers, the report shows.
US companies looking to invest often rely on the U.S Embassy’s assessment of prevailing conditions in the country before making a move.
The embassy works to assist American businesses and potential investors by maintaining close contacts with the Government of Liberia and the local business community and provide balanced assessments and information to American companies and potential investors on general business environments and opportunities in Liberia.
According to the embassy’s website, the economic & commercial section of the Embassy “works closely with Liberia’s Ministry of Commerce and Industry and serves as a liaison to the key private sector trade and investment organizations including the Liberia Business Association and Chamber of Commerce. The section serves as the Embassy’s focal point for promoting the African Growth & Opportunity Act (AGOA), coordinating AGOA trade-related activities with the public and private sectors. Finally, by virtue of our partnership with the U.S. Department of Commerce, the section can provide certain branded commercial services to American companies upon request, such as the fee-based Gold Key Service and International Company Profile.”
The process was key during the Sirleaf era which saw US petroleum giants Chevron and ExxonMobil make an unsuccessful play for oil in Liberia.
The low doing business score also points to the core of Liberia’s unattractiveness to investors despite repeatedly trumpeting its “open for business” mantra.
As Liberia stalls, its neighbors are seizing on the opportunities at their disposal. Next door Ghana for example, plans to revise its laws on oil and gas licenses in an effort to spur production and will revoke licenses from four companies that have not developed their assets.
Mohammed Amin Adam, Ghana’s deputy minister for petroleum, told Africa Oil Week in Cape Town that the proposed changes would allow companies producing in blocks to explore elsewhere in the same area without having to get a new license. The ministry sent the plans to parliament last Friday, he said. “We are changing our strategy,” Adam said, adding they had provisions in law that “constrain investment”.
They would also allow companies to continue exploring in marginal fields even once their license had expired. Parliament has 21 days to review the regulatory changes, and Adam said he expected them to go forward without delay.
In Liberia, legislators have been prone to brown envelops which often stall passage of laws key to luring investors.
For the immediate future, political observers say it is unlikely that President Weah will get his wish and break a barrier that his predecessors have been unsuccessful at breaking.
The government’s primary concern at the moment is working to maintain the Millennium Challenge Corporation Funding after failing to pass the 2020 scorecard, putting pressure on the government to perform or could be kicked out of the program if it were to fail the next scoring in 2021.