LIBERIA: 21 REFORMS TO IMPROVE THE BUSINESS CLIMATE MAY

UNCLAS SECTION 01 OF 03 MONROVIA 000336

SENSITIVE
SIPDIS

E.O. 12598: N/A
TAGS: EINV BEXP EFIN ETRD ECON KMCA LI
SUBJECT: LIBERIA: 21 REFORMS TO IMPROVE THE BUSINESS CLIMATE MAY
BOOST MCC SCORE

REF: A) MONROVIA 255 AGOA WORKSHOP


1. (SBU) SUMMARY: The GOL has announced 21 reforms to improve
Liberia's ranking in the IFC "Doing Business" index by enhancing the
business climate. The rapid progress reflects President Sirleaf's
commitment and the productive collaboration between the GOL and the
business community to target regulatory changes that do not require
legislative action. There was special emphasis on reforms that will
also affect Millennium Challenge Account ratings. The reform
process is on-going, with the more complex changes to be tackled
next. However, legislation revising the Investment Code that was
withdrawn in February for further consultations with the business
community has not been resubmitted to the legislature. The full
list of 21 reforms is at para 8. END SUMMARY


2. (U) Liberia debuted at number 170 of 178 countries on the
International Finance Corporation's "Doing Business" index in
September 2007. The pride of being rated for the first time was
mitigated by the stark recognition that onerous GOL procedures are
hampering economic growth. President Sirleaf called for a
government-wide initiative to improve Liberia's standing as much as
possible for the 2008 rankings, establishing a cabinet-level
Business Reform Committee in January to revise administrative
procedures that taint the business climate and calling for
implementation by April (in time for the next IFC rating period).
The reforms were announced April 29 but had been phased in over the
past few weeks.


3. (U) The IFC supported the GOL by creating a public-private
partnership, the Liberia Better Business Forum, to brainstorm on the
most effective changes. The short-term focus was on regulatory
changes that could be made without legislative approval and targeted
four of the indicators: Starting a Business; Construction
Permits/Licenses; Trading Across Borders and Registering Property.
The reforms in Starting a Business may improve Liberia's performance
on that element of the MCC scorecard. A new website containing
regulations and other essential information is in progress and
should be launched in May as part of a massive publicity campaign.
There are already notices posted at ministries informing the public
that government forms and Tax Identification Numbers are free, and
providing contact information in case of questions or problems.


4. (U) The improvements include reducing the number of required
signatures, establishing time limits for GOL approvals, and
consolidating officials in one location to reduce the need to go
from place to place for permits and approvals. One major systemic
change is publication of procedures and prices for obtaining permits
and registering a business. The next step is to refine the current
reforms and identify the longer-term reforms.

Skeptical Optimism
--------------


5. (U) At an April 30 workshop on the Starting a Business reforms,
the business community was engaged but skeptical that the reforms
alone will significantly reduce corruption and delays. Participants
were introduced to the officials at the Ministry of Commerce and
Industry (MoCI),Ministry of Finance (MOF),and the Ministry of
Foreign Affairs (MoFA) at the Assistant Minister and Director level
who have been charged with implementing the changes. Regarding past
frustrations with corruption and inefficiency, participants were
told to look forward, not backwards, and to notify one of the
officials in charge should there be problems in the future.


6. (U) While welcoming the changes, business community
representatives noted that even with the reforms clerks have
discretion to demand bribes. They highlighted the need for more
realistic salaries and better working conditions for civil servants,
noting that officials in the domestic trade office share desks and
work with (an inadequate number of) old typewriters. If civil
servants are backlogged in processing paperwork, it will remain
tempting to pay an over-worked typist to "expedite" an application.
One new reform, permitting businesses to register throughout the
year rather than requiring that every business register in January,
should even out the workload. Multi-year registration, under
consideration but requiring legislative approval, would also ease
the crunch.

Still Plenty of Room for Improvement
--------------


7. (U) Several further changes proposed by the business community
are under consideration but require legislative action. These
include adjusting the fees for registering a business and easing the
requirement that Articles of Incorporation be signed by the Minister
of Foreign Affairs and not a designee. The quagmire of land tenure
conflicts is also likely to require legislative, if not
constitutional, reform.

List of Agreed Reforms
--------------

MONROVIA 00000336 002 OF 003




8. (U) The major innovation is publication of flow charts explaining
every stage of each process and specifying authorized fees. The GOL
has also clarified that business registration at the Ministry of
Commerce precedes application for licenses or permits from sectoral
ministries. There had previously been confusion about whether
companies should register before or after receiving the necessary
permits to conduct their business.

STARTING A BUSINESS (MCA indicator)

-- Standard form for articles of incorporation will enable
businesses to register without an attorney;

-- Computerized list of corporate names; (This list will be posted
on-line when the website is operational so entrepreneurs can check
in advance that their proposed name is available.)

-- Co-location of the MoFA official at the MoF to eliminate the need
to go to several ministries;

-- Reduction of MoFA approval time for new Articles of
Incorporation to 5 business days;

-- Reduction of MoCI approval time for new business registrations
to 5 business days;

-- Reduction of the number of required MoCI signatures from 4 to
2;

-- Elimination of MoCI's previous practice of physically inspecting
all new business sites before approve the registration; (Screening
will be random, to confirm accuracy of business registrations.)

-- Implementation of a standard checklist that will specify all
required forms and fees prior to application. The checklist will
also allow the ministry to quickly identify whether or not
applications are complete prior to acceptance;

-- Reduction in approval time from 90 days (as reported in last
year's DB survey) to 30 calendar days. Applications not rejected
within 30 days will be deemed approved;

-- Reduction in the number of signatures required for approval at
the Ministry of Public Works from 4 to 2 (zoning and technical
services). NOTE: Where a project involves an international
government or has a market value in excess of US$1M, the Minister's
signature will be required. The 30 day approval time will still
apply.

IMPORTS

-- 50% reduction in customs usage charges from 3% to 1.5%;

-- Creation of a tiered fine structure for violation of
pre-shipment inspection requirements;

-- The Seaport Police and National Police are the only authorized
security forces at the port. Unauthorized security officials and
other nonessential staff have been removed;

-- Elimination of the Ministry of Transport vehicle import permit
clearance fee;

-- Reduction in the number of required MoCI signatures for an
Import Permit Declaration from 4 to 3;

-- Reduction of pre-shipment inspection (PSI) fees from 1.5 to
1.1% of FOB value;

-- Shift from compulsory PSI to compulsory destination inspection
(DI) for rice, petroleum and cement;

-- Reduction in clearance steps from 40 in early 2007, to 24 in
July 2007, and further reduced in April 2008 to 9 steps (with PSI)
and 11 steps (without PSI).

EXPORT

-- Elimination of the MoF Excise Tax Division and the Bureau of
Concessions from the process;

-- Approval and processing of all MoF export documents (including
transshipment and bonded goods clearance) at the port vs. at the
ministry;

-- Elimination of the MoF export clearance requirement. NOTE: an
Export Permit Declaration is still needed.

REGISTERING PROPERTY (an MCA indicator)
--------------

MONROVIA 00000336 003 OF 003




9. (SBU) There were no reforms announced in this round but that does
not reflect a lack of concern. Land tenure issues are the biggest
threat to Liberia's stability and the focus of a broad range of
initiatives. On the most fundamental level, the Archives, housed in
the Ministry of Foreign Affairs, is building shelves to try to
provide safer storage for the deeds and land records, many of them
crumbling papers from the 1800s that were not destroyed in the war.
The GOL has created a Land Commission and is taking other steps to
tackle the problem but progress will be slow and careful.


10. (SBU) Regarding non-real property, Liberia has a solid legal
base for protecting intellectual property rights but enforcement and
implementation are almost non-existent. A new Board for the
Copyright Office, appointed by President Sirleaf in late 2007, could
add new vigor to that organization.


11. (SBU) Comment: These reforms were identified through an
effective process of private-public consultation. Success depends
on two factors: the willingness of firms to report shortcomings in
implementation to the appropriate GOL authorities and the ability of
the GOL to address those shortcomings. We believe the political
will is there, but it remains to be seen if it will be enough to
overcome the low salaries and deeply entrenched habits of Liberia's
civil service. Continuing difficulties in passing revisions to the
Investment Code do not bode well for the next round of reforms that
will require legislative approval. The Investment Code was updated
in consultation with the International Finance Corporation (IFC) and
others, but the President withdrew it in February after strong
objections by members of the business community. Despite what was
described as fruitful consultations, the draft bill has not been
resubmitted to the legislature and we see no signs in the broader
business community of support for those reforms.

ROBINSON