By Rodney Sieh
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.
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.
Read from source Front Page Africa