Identifier
Created
Classification
Origin
08MONROVIA649
2008-08-19 14:46:00
CONFIDENTIAL
Embassy Monrovia
Cable title:  

LIBERIA: POWER PROJECT PREVAILS IN THE FACE OF

Tags:  EINV ECON ENRG PGOV LI 
pdf how-to read a cable
VZCZCXRO3959
RR RUEHPA
DE RUEHMV #0649/01 2321446
ZNY CCCCC ZZH
R 191446Z AUG 08
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0299
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHOT/AMEMBASSY OTTAWA 0174
C O N F I D E N T I A L SECTION 01 OF 03 MONROVIA 000649 

SIPDIS

DEPARTMENT FOR AF/W

E.O. 12958: DECL: 08/15/2018
TAGS: EINV ECON ENRG PGOV LI
SUBJECT: LIBERIA: POWER PROJECT PREVAILS IN THE FACE OF
POLITICAL CONTROVERSY

REF: A)MONROVIA 591 B) MONROVIA 427 C) MONROVIA 336
D) MONROVIA 139

Classified By: CDA Brooks Robinson for reason 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 03 MONROVIA 000649

SIPDIS

DEPARTMENT FOR AF/W

E.O. 12958: DECL: 08/15/2018
TAGS: EINV ECON ENRG PGOV LI
SUBJECT: LIBERIA: POWER PROJECT PREVAILS IN THE FACE OF
POLITICAL CONTROVERSY

REF: A)MONROVIA 591 B) MONROVIA 427 C) MONROVIA 336
D) MONROVIA 139

Classified By: CDA Brooks Robinson for reason 1.4 (b) and (d).


1. (C) Introduction and Summary: Buchanan Energy's John
MacBain informed President Ellen Johnson Sirleaf and other
top officials August 14 that the OPIC Investment Committee's
approval of a US$112 million loan for their proposal to
generate electricity from rubber wood chips (Ref B) made at
OPIC's September 18 board meeting was now a "formality."
Chairman of the National Investment Committee (NIC),Richard
Tolbert, responded that despite weeks of controversy
regarding investment incentives in general and the company in
particular, the Deputy Speaker of the House has assured him
Buchanan's proposal will "sail through in a day" when sent to
the legislature for ratification.


2. (C) Tolbert had been the target of ill-informed
politically motivated legislative attacks regarding
investment incentives granted a previous rubber wood chip
project by Buchanan Renewable Energy (BRE, Ref D). A flurry
of "no-confidence" votes against him and two other officials
involved in approving the investment incentives highlighted
the legislative focus on personal (as opposed to
issues-based) politics and profit, rather than on poverty
reduction. The stage-managed controversy, which flared July
24 with Tolbert's testimony, faded August 8 when the House
withdrew the no-confidence votes against the three officials
(who had sent written apologies to the legislature August 1).
Buchanan and Tolbert have emerged unscathed but the same
cannot be said for Liberia's investment or political climate.
End introduction and summary

The background: "No Confidence" in Chair of NIC
-------------- ---


3. (SBU) Buchanan Renewable Energy, which entered Liberia
with plans to export rubber wood chips as biomass, is also,
under the name Buchanan Energy (BE),moving ahead with plans
for the OPIC-supported 34 MW rubber wood chip-powered
electricity generation project. (Note: BRE/BE's majority
owner is Canadian investor John MacBain. End note.) The

dispute centered on failure to seek legislative ratification
required for incentives on investments over US$10 million,
and approval of 100% tax waivers, rather than the 90% waivers
the NIC is authorized to grant. (Note: Days of discussion
of that issue provided confusing misinformation. The GOL
Investment Committee had, appropriately, granted customs (not
tax) exemptions on BRE imports that totaled approximately
US$3.6 million, not US$150 million as claimed. End note.)
Legislators and the media trumpeted claims that US$600,000 in
revenue from the "illegal tax waiver" was "missing." In
fact, the figure bears no relation to any possible
calculation of tax or duty on 10% of BRE's investment.


4. (SBU) NIC Chairman Tolbert, after evading legislative
calls for his testimony three times, appeared before the
House on July 24 to respond to accusations regarding apparent
irregular investment incentives. There had been press
reports in the days preceding Tolbert's testimony that he
would be charged with contempt of Congress and subjected to
fines and imprisonment if he failed to appear. Although he
skipped a July 22 deadline to testify, pleading illness, in
his testimony two days later he described discrepancies in
investment incentive agreements (including the one for BRE)
as an "honest error." The House ended the session by voting
"no confidence" against Mr. Tolbert by a vote of 25-19 and on
July 28 President Sirleaf announced she was declaring BRE's
agreement null and void.

The confusion spreads: "No Confidence" in Finance and Justice
-------------- --------------


5. (SBU) The House followed its no-confidence vote against
Tolbert by summoning acting Minister of Finance Tarnue Mawolo
and Deputy Minister of Justice Ciennah Clinton-Johnson, who
had represented their respective ministries on the
inter-agency committee that approved the waivers. Despite
Mawolo's eloquent (and accurate) explanation that no laws had
been violated as the actual investment amount did not
approach the $10 million threshold requiring legislative
approval, and Clinton-Johnson's apologies for the "mistake,"
both were also subjected to votes of no-confidence on July

29. One newspaper identified the key issue as a struggle
over how much power the legislature has over confirmed
presidential appointees.

What was the President doing?

MONROVIA 00000649 002 OF 003


--------------


6. (C) The President's July 28 declaration that BRE's
agreement was null and void, while dramatic, was moot. BRE
had never used the incentive because the President had
subsequently granted all heavy equipment of the type they
imported a 100% duty waiver in an effort to facilitate
infrastructure rehabilitation. The President's statement,
in which she also said she had been unaware of the provisions
of the investment agreement, was troubling. Econoff attended
the meeting where she was briefed on BRE's proposal, in which
she had stated there would not be any trouble gaining
legislative approval for the plans (Ref D). Having fanned
the flames, she then declined further comment on the matter,
saying the matter had not officially crossed her desk from
the legislature.

And suddenly it ends
--------------


7. (SBU) Tolbert, while reported as "exasperated" by an
American investor who met with him the afternoon of July 24,
continued to express public confidence the truth would
prevail. He told us privately in early August that he had
been advised to stay quiet and apologize regarding the
incentive issues. On July 30, he issued a very clear written
statement on the process of granting the BRE incentives,
which appeared to help calm the waters. Deputy Minister of
Finance Mawolo told us July 30 that all numbers being cited
by the press and the legislature were baseless; the
legislators were in the process of haggling over their share
of the "missing" revenue and all would soon blow over. BRE
officials, throughout the controversy, said they planned to
keep quiet and did not expect the uproar to affect their new
power plant deal. Their confidence proved justified.
Tolbert's August 14 e-mail response to MacBain's notification
of OPIC approval stated that "the tide of public opinion has
turned completely in my favor and pro BRE with the House
voting by 24-2 to overturn its previous motion and lots of
positive newspaper and radio and TV stories on this case."

Now what?
--------------


8. (C) Although Tolbert, the other GOL officials, and BRE
were eventually exonerated, the (grossly inaccurate) public
perception is that the NIC granted an illegal tax waiver of
US$150 million to a foreign investor while Liberians are
going hungry. At least one American large potential investor
contacted post for an explanation of the confusing press
reports. The controversy reinforces the conventional wisdom
that any legislative involvement in the investment process is
a quagmire of delay and rent-seeking, and confirms that
legislators are determined to get a share of any deal that
looks as if it might be profitable. The much-delayed
revisions to the Investment Code (ref C and previous) are
still bogged down in negotiations with the Liberian Business
Association on protecting segments of the economy for
Liberians, but until investment procedures are regularized,
and discretionary incentives greatly reduced, Liberia will
continue to be a challenge for foreign investors.

Comment
--------------


9. (C) President Sirleaf's motives are the most intriguing
aspect of this drama. The incident could not have been
spontaneous, but it is hard to see who benefits (besides the
legislators who, we assume, will head off on recess with
slightly fatter wallets). We have heard a theory that
Tolbert returned to Liberia from the United States in 2005
with Sirleaf's assurance he would be her chosen successor.
Certainly, in his own mind, that remains the most likely
post-Sirleaf scenario. However, the theory holds, Tolbert
has become impatient with Sirleaf's reluctance to clarify
transition plans, leading the President to toss him to the
mercy of the legislators as a warning not to be too
ambitious.


10. (C) Tolbert's air of arrogance and entitlement, and his
terrible relations with the legislature, have made him the
poster child for the return of the True Whig Party
Americo-Liberian status quo ante, and may be one reason for
Sirleaf's reluctance to embrace him as successor. The
situation was probably sparked by personality conflicts and a
desire to send a message, but fueled by partisanship and
exacerbated by unfamiliarity with the legal or economic
issues at stake. Tolbert's name continues to surface when
top economic posts are under consideration, most recently as

MONROVIA 00000649 003 OF 003


Budget Director. While we find that option unlikely, we
cannot rule out that Sirleaf will once again show favor now
that her message, and power, are clear.


11. (C) The controversy also highlights tensions between the
executive and legislative branch and the immaturity of
Liberia's new political framework. The house vote of "no
confidence" against the three officials (and the Senate's
parallel obsession with concluding a no-confidence vote in
its leader) was a significant distraction as Liberia headed
into the second month of the fiscal year without a budget.
The President has recently stepped up her charm initiative
with legislators, meeting them July 30 to update them on the
Poverty Reduction Strategy, encouraging her ministers to keep
them fully informed, and praising them lavishly during former
President Bill Clinton's recent visit. They accepted her
request to extend the session in order to address important
legislation that was put aside during the futile witch-hunt
and to confirm the newest nominees to her economic team (Ref
A).
ROBINSON