Identifier
Created
Classification
Origin
08MONROVIA1067
2008-12-30 15:55:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Monrovia
Cable title:  

LIBERIA: Encouraging Investment?

Tags:  EINV ECON EFIN OPIC LI 
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R 301555Z DEC 08
FM AMEMBASSY MONROVIA
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INFO RUEHZK/ECOWAS COLLECTIVE
UNCLAS SECTION 01 OF 02 MONROVIA 001067 

SENSITIVE
SIPDIS

E.O. 12598: N/A
TAGS: EINV ECON EFIN OPIC LI
SUBJECT: LIBERIA: Encouraging Investment?

REF A) MONROVIA 999; B) MONROVIA 336; C) MONROVIA 32

UNCLAS SECTION 01 OF 02 MONROVIA 001067

SENSITIVE
SIPDIS

E.O. 12598: N/A
TAGS: EINV ECON EFIN OPIC LI
SUBJECT: LIBERIA: Encouraging Investment?

REF A) MONROVIA 999; B) MONROVIA 336; C) MONROVIA 32


1. (SBU) Summary: In recent meetings with the Ambassador, two top
GOL officials confirmed that they expect the revised Investment Code
to pass quickly after the legislature convenes in mid-January.
President Sirleaf has called on her Cabinet to expedite major
concession agreements, but investors continue to express frustration
at the slow pace of negotiations. New procedures designed to
improve transparency continue to slow negotiations, and the Cabinet
itself is divided on the appropriate balance between the need for
revenue now and the need to provide incentives that recognize the
challenges of starting a business in Liberia. End Summary.

GOL: Investment Code Will Pass
--------------


2. (SBU) Minister of State for Finance, Economic, and Legal Affairs
Morris Saytumah, who serves as President Sirleaf's representative on
concession negotiations, expressed certainty during a December 10
meeting with the Ambassador that the much-delayed revisions to the
Investment Code (Ref B) would be re-submitted to the legislature in
January and would pass without difficulty. According to the new
Code, incentives will be standardized according to the size of the
investment and the priority of the sector or region, rather than by
the current time-consuming, discretionary process of negotiation.
(Note: The draft Investment Code revision was withdrawn from
legislative consideration last year after protests by members of the
Liberian business community, who objected to the lack of
consultation prior to elimination of protected sectors of the
economy. The revised draft reflects a compromise. End note.)

Why are approvals so slow?
--------------


3. (U) By the numbers, investment is a success story in Liberia,
having increased steadily from an admittedly low base of $20 million
in 2005 (excluding $1 billion invested by Mittal Steel) to $97
million in 2007. However, major U.S. investors in tree crops,
minerals and other sectors are increasingly frustrated by the lack
of progress in concession negotiations.


4. (SBU) During an introductory call on Chairman of the National
Investment Commission (NIC)Richard Tolbert November 11, the
Ambassador said U.S. investors report feeling sidelined as firms

from other countries conclude deals. Noting reports that
negotiations drag on, commitments are ignored, and meetings are
cancelled at the last minute, she asked Tolbert if he was satisfied
with the pace of investment approvals. (Note: The NIC, chaired by
Tolbert, adjudicates requests for investment incentives. The other
members of the Commission are the Minister of Finance; Minister of
Justice; Minister of Planning & Economic Affairs; Minister of
Commerce & Industry; and the Minister of State for Finance & Legal
Affairs. End note.)


5. (SBU) Tolbert said he shares the frustration caused by his
Cabinet colleagues' over-estimation of Liberia's appeal to investors
and desire to secure short-term funding at the expense of
longer-term goals. He reiterated President Sirleaf's call for
flexibility in approving investments that will boost employment (Ref
A),and noted that Liberia is too small a market to attract major
U.S. firms. He expressed appreciation for OPIC and ADF programs
that support small-to-medium businesses in Liberia, and called on
them to be expanded. He pointed out that investment creates a
middle class, which provides political insurance for Liberia's
stability.


6. (SBU) With regard to American investors specifically, Tolbert
agreed the process has been lengthy. He blamed Liberia's volunteer
outside lawyers, who review major agreements but tend to get tangled
in endless detail. He also criticized U.S. firms'
"take-it-or-leave-it" approach, calling for more patience and an
understanding of the difficulty the GOL faces in negotiating
agreements: there are very few qualified people, and so little
technical support that even copying documents can be a challenge.
He also criticized the tendency of U.S. investors to go straight to
the President for help with every problem.


7. (SBU) Comment: From their statements in meetings with us, it is
clear several major U.S. investors are considering Liberia only in
response to President Sirleaf's personal request. They have a right
to expect expeditious, transparent and professional negotiations,
and to convey their concerns when the negotiation process stalls.
There are tremendous opportunities for investors in Liberia, but the
risks are high. As commodity prices drop, every deal delayed has
cost Liberia money, and the lack of progress in concluding
negotiations damages its reputation. Some delays are understandable
given the complexity of proposed contracts, inexperience with new
and complicated concession laws, and the lack of capacity within the
government to engage investors efficiently. But other delays remain
inexplicable and suggest to investors that the GOL is not always a
reliable negotiator.

MONROVIA 00001067 002 OF 002




8. (SBU) Comment continued: The USG has an interest in supporting
GOL efforts to improve the legal and regulatory regime and to
conclude concession agreements in line with international best
practices. Investors also stand to benefit from improved
transparency and accountability in the concession process, and the
new procedures will help underpin growth and stability. Post will
continue to support these reforms, but we will also continue to
stress the need to be fair, professional and expeditious in response
to legitimate proposals for investment. The draft Investment Code,
while probably still not WTO compliant, will be an improvement and
should remove most discretion from decisions on investment decisions
and help expedite future deals.

THOMAS-GREENFIELD