LIBERIA: MCC SCORECARD DELIVERED; GOL EAGER FOR THRESHOLD

UNCLAS SECTION 01 OF 03 MONROVIA 001348

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT PASS USTR FOR CONNIE HAMILTON
DEPARTMENT FOR AF/EPS, AF/W AND EEB/IFD/ODF

E.O. 12958: N/A
TAGS: EAID ECON ETRD KMCA MCC PHUM LI
SUBJECT: LIBERIA: MCC SCORECARD DELIVERED; GOL EAGER FOR THRESHOLD
STATUS

REF A) MONROVIA 1322; B) STATE 146777 C) MONROVIA 1201

MONROVIA 00001348 001.2 OF 003



1. (SBU) Summary: Econoff delivered Liberia's MCC scorecard and
reftel points to Minister of Commerce and Industry Frances Johnson
Morris during an introductory call. There has been press reporting
here on President Sirleaf's appeal, during her recent meetings with
the President and others in Washington, for MCC Threshold status for
Liberia. Although Liberia has below-average results in 10 of the
indicators, current GOL initiatives are focused on the "trouble
spots" -- land tenure; strengthening rule of law; controlling
corruption; enhancing health and education; and improving the
business climate. Progress on those initiatives should soon be
reflected in the Government Effectiveness and Regulatory Quality
indicators. Although Liberia is not ranked for two of the
indicators (UNESCO on Girls Primary Education and Heritage
Foundation on Trade Policy),the trends are positive. While The USG
provides a tremendous level of support for Liberia, there are still
areas where additional resources could effectively support GOL
efforts to accelerate its progress in improving scorecard results.
Embassy Monrovia strongly supports MCC Threshold status for Liberia.
The GOL's commitment to reform is unquestionable, but the window is
limited. A modest, well-targeted award could accelerate GOL efforts
to show progress in building a just and equitable society. End
Summary.

Commitment to Primary Education
--------------


2. (U) School enrollment increased 40 percent in the past year,
according to GOL data, and the FY2007-08 education budget is up by
over 40 percent from the previous year. The President has called
for universal primary education and for an end to children selling
items in the streets during school hours.


3. (SBU) According to the UNESCO representative in Monrovia,
Liberia's absence from the rating is due to the time lag in
publication of the annual statistics. He said Liberia may appear in
next year's compilation of 2005 data. More recent data, such as the
census being conducted in March 2008, will not appear for several
years. However, UNESCO confirmed that the information on primary
education expenditures provided by post in response to the initial
MCC request in August was collected by UNESCO at the request of the
Ministry of Finance for the MCC.

Business Climate Improving
--------------


4. (U) In September, the World Bank's International Finance
Corporation included Liberia on its "Doing Business" ranking for the
first time. The ranking (170 out of 178) was a wake-up call for
both the GOL and the Liberian private sector, and provides excellent
ammunition for those who have been advocating reform. During a
presentation to the President and members of her cabinet on November
14, the IFC highlighted administrative reforms (not requiring
legislation) that, had they been made before the deadline, would
have moved Liberia from number 170 to number 140 (assuming other
countries remain constant). Many of the reforms are already in
train and the GOL is eager to continue progress. The IFC
presentation was prepared at the request of the GOL to provide
concrete examples of regulatory changes that would improve the
business climate.


5. (U) Businesses, both Liberian and American, report that things
are getting better. The U.S. Center for International Private
Enterprise (CIPE) held a week-long workshop in early November to
strengthen management of business organizations and teach them how
to cooperate in advocacy efforts. Major legislation, including the
tax code and investment code, is being revised, but the GOL is
instituting reforms in advance of legislative changes. The Ministry
of Finance has restructured its revenue bureau, creating an office
to oversee tax reform. The process of paying taxes is already less
onerous and work continues to broaden the tax base and lower rates.
Although the customs process remains more cumbersome (and subject to
rent-seeking) than necessary, a "one-stop-shop" at the port for
importers has been created, eliminating a third of the steps needed
to clear inbound goods, and the GOL is also working towards
harmonizing tariffs with ECOWAS neighbors. The Liberian Better
Business Forum, a public-private dialogue, has gained new momentum
and will be coordinating more closely with the Poverty Reduction
Strategy initiatives already underway.

Wrestling with Land Reform and Corruption
--------------


6. (SBU) Land reform is fundamental to growth and stability. Many
consider land disputes, if not resolved, to be the most likely
source of future conflict. Unreliable land title records hamper

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economic growth by limiting access to bank loans. Contested land is
difficult to develop, slowing agriculture, mining exploration and
urban planning. The GOL is tackling the complex issue head-on. The
Governance Commission has been charged with proposing comprehensive
land reform. President Sirleaf's government is going beyond just
trying to restore pre-war property records; it is committed to
establishing an equitable system that will correct injustices dating
from the 1822 arrival of settlers under the auspices of the American
Colonization Society. A particularly thorny issue is improving
access to land for women and young men, whose rights under
traditional tenure systems are tenuous.


7. (SBU) The Sirleaf Administration is also committed to fighting
corruption. A bill to establish an Anti-Corruption Commission is
before the legislature. The government has initiated the trial of
Gyude Bryant, chairman of the former (interim) government. The GOL
took the concrete step of raising Civil Service salaries (although
they are still extremely low) and paying salary arrears from past
governments, and is pursuing broad-based civil service reform.


8. (SBU) The battle against corruption is being waged on a more
concrete level. Government ministries, such as Finance and
Commerce, have signs displayed prominently noting which forms and
services are free of charge. The Minister of Foreign Affairs
conducted a publicity campaign detailing the process of applying for
new passports, enumerating the costs and the stages for which there
is no charge. The Deputy Minister of Finance for Revenue reportedly
established a phone number for reporting corruption, but it has not
been widely publicized, and whistle-blower protection legislation,
while endorsed by the President, has not yet been drafted.


9. (U) The Governance and Economic Management Assistance Program
(GEMAP) has been successful in capturing revenue that previously
"leaked" from government coffers. GOL revenues increased 75 percent
last fiscal year, well in excess of GDP growth. Publication of the
FY2007-08 budget and of the FY2006-07 final fiscal outturn is
shining a spotlight on government finances and creating a climate of
transparency.

Government Learning the Ropes
--------------


10. (SBU) All three branches are learning the delicate balancing
act of governing in a democracy. Each branch of government has used
its powers (and the press) to defend its prerogatives and challenge
the other branches. Legislation has been delayed; officials have
been embarrassed by public disclosure; unsubstantiated accusations
have been reported; but through it all the government has functioned
and its institutions are growing stronger.


11. (U) There have been solid steps towards improving government
effectiveness. In addition to becoming eligible for the Kimberley
Process, the GOL is finalizing a chain-of-custody agreement that
will govern logging, and is refining the customs pre-shipment
inspection regime to make it more equitable and effective. Evidence
of commitment to improving daily life is ever more evident as the
dry season arrives: road repairs, uniformed police directing
rush-hour traffic, the opening of newly-rehabilitated markets, shiny
new dumpsters, and work on sanitation system restoration are a few
of the most visible changes. In short, the GOL's commitment to
reform is unquestionable. However, the President needs to show
results quickly to solidify Liberians' expectations of government
effectiveness and transparency before the 2011 elections.

Poverty Reduction is Not Just a Slogan
--------------


12. (SBU) The GOL has a target of July 2008 for its HIPC-related
Poverty Reduction Strategy (PRS). The process is guided by the
Liberian Reconstruction and Development Committee (LRDC),chaired by
the President. Ministerial-level "pillars" of the LRDC focus on
Security; Economic Revitalization; Governance and Rule of Law; and
Infrastructure/Basic Services, such as education and health.
Stakeholder consultations in each county on PRS proposals started in
October and will continue through December. There is keen awareness
that changes are necessary in each pillar to create a just and
stable society conducive to economic growth and development, and
that progress in one pillar is not possible without progress in all.
The Embassy is closely involved in all aspects of the process and
will continue to work with the GOL on supporting initiatives of the
PRS that will move Liberia closer to Threshold status.

What Would Make a Difference?
--------------


13. (SBU) The President is under tremendous pressure to show
results, and is tackling the most fundamental and intractable

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barriers to equitable development. The U.S. Government provides
strong support for Liberia, but there are still areas where we could
do more to enhance the government's efforts. The following
suggestions are all high priorities for the GOL, and are all
receiving donor support. However, a modest, well-targeted
commitment under the Threshold program to speed the process would
help the GOL show results before the public becomes disillusioned
with the slow pace of progress.

-- Private investment (domestic and foreign) is hampered without
basic infrastructure, primarily roads and electricity. Although
international donors are funding infrastructure projects, major
financing gaps remain and investment there would have tremendous
multiplier effects. This would improve the Investment in People
indicators by extending the reach of government programs.

-- Tax reform is key to boosting government revenues, improving
equity, and spreading a sense of participation in the economy. The
Ministry of Finance has made dramatic improvements, with revenue up
75 percent over last year, but advice on crafting legislative
changes or support for further computerization of the revenue system
would improve government resources and effectiveness. This would
boost performance in all three indicator categories, improving
government effectiveness, allowing greater investment in people, and
improving regulatory and fiscal policy.

-- Human capital is desperately inadequate. Boosting the GOL's
capacity to manage (through long-term training, graduate studies,
e-governance systems) would ensure that innovations in government
operations, such as those instituted under GEMAP, are sustainable.
Private sector firms are ham-strung by the lack of professionals
with basic financial, accounting/audit or legal credentials. This
would further improve government effectiveness, regulatory quality,
and economic freedom.

-- The GOL is addressing the land issue, but well-targeted
financial support for consolidation of land records or a catalogue
of pending land disputes could accelerate resolution of the problem,
speed economic develop and support political stability. Resolving
land ownership problems will unshackle the economy and reduce
potential for conflict. It will lay a foundation for ruling justly
and provide extremely visible proof of GOL commitment to progress
and reform.

-- Improvements in the financial sector would ripple through the
economy. Most counties in Liberia still do not have a single bank.
We have been told that if all Liberia's banks formed a syndicate,
they could probably support a loan in the $2-3 million range.
Access to capital will encourage economic freedom.


13. (U) Embassy POC for MCC issues is Economic Officer Lucy Abbott
at AbbottLK@state.gov.

BOOTH