LIBERIA: AGOA ELIGIBILITY REVIEW 2009

UNCLAS SECTION 01 OF 05 MONROVIA 000772

SENSITIVE
SIPDIS

DEPARTMENT PASS USTR FOR CONNIE HAMILTON
DEPARTMENT FOR AF/W AND AF/EPS ANN BREITER AND GABRIELLE MALLORY

E.O. 12958: DECL: N/A
TAGS: ECON ETRD LI
SUBJECT: LIBERIA: AGOA ELIGIBILITY REVIEW 2009

REF: STATE 85086


1. (U) COUNTRY BACKGROUND SUMMARY: Liberia has a government that was
democratically elected in multi-party elections in October/November

2005. The government has moved to exert its authority throughout
the country but security still depends on the 12,000-strong UNMIL
deployment. The first 2,000 soldiers in the new Armed Forces of
Liberia have completed initial entry training, over 3,500 new
Liberia National Police have been trained and an armed Emergency
Response Unit is being trained and activated. Economic activity,
marked by an increase in investment, is increasing.


2. (U) The IMF estimates that the economy grew by 9.5% in 2007 and
strong growth is expected to continue in 2008. The inflation rate
in 2007 was 11.4%. The Government of Liberia (GOL) budget for the
2008-2009 fiscal year (ending June 30, 2009) reached $298 million,
20% higher than the final budget the previous year, and over 60%
higher than the initial 2007-08 budget. Despite Liberia's rich
natural resources and potential for self-sufficiency in food
production, the country's productive capacity remains depressed by
high unemployment, low literacy, poor health, corruption, and the
absence of basic infrastructure. Only about 15% of the workforce is
employed in the formal sector. Illiteracy is estimated to be over
50%. Sustained economic growth is also hindered by the inadequate
roads, water, sewage and electrical services.


3. (U) The government launched Liberia's three-year Poverty
Reduction Strategy (PRS) in July 2008, and the first national Census
since 1984 was completed in March 2008. The GOL continues to
support the Governance and Economic Management Assistance Program
(GEMAP) and an IMF Staff Monitored Program. END SUMMARY.


I. Market-Based Economy
--------------


4. (U) Major Strengths Identified

-- Liberia remains open to foreign investment, attracting over $97
million in new investment in 2007.
-- Registering a business in Liberia is relatively simple. The GOL
announced 21 reforms to the business climate in May, with a focus on
Starting a Business, Trading Across Borders and Dealing with
Construction Permits. Those changes improved Liberia's ranking in
the IFC "Doing Business" index from 170 of 178 in 2007 to 157 of 181
countries in 2008.
-- The GOL hosted an inter-agency AGOA workshop in March.
-- Liberia cleared its arrears to the World Bank, IMF, and African
Development Bank (approximately $1.6 billion),and reached HIPC
Decision Point in March, 2008.
-- Reform of the budget process continues. The government submitted
the budget to the legislature in a more timely manner in 2008 and
continues to publish detailed copies of the final budget and
quarterly fiscal outturns. The 2008-09 budget of $298 million is
over 60% higher than the initial 2007-08 budget.
-- Civil service salaries were increased 27% for FY2008-09, to $70 a
month for the lowest level of basic pay.
-- U.S. Treasury advisors are working with the Ministry of Finance
to improve tax administration and finalize the GOL's $900 million
Domestic Debt Resolution Strategy.
-- The Kimberly Process regulating diamond exports is becoming more
robust.
-- The Liberia Extractive Industries Transparency Initiative (LEITI)
is off to an impressive start. The membership of the steering group
includes the GOL, civil society groups, private sector, and
development partners.
-- The GOL has established a "Chain of Custody" system to ensure
traceability of logs and guarantee that the GOL collects appropriate
fees for timber harvested.
-- The Central Bank of Liberia issued licenses to three new
foreign-owned banks in 2008.
-- Liberia has enacted laws on intellectual and industrial property
and copyright, and there is indigenous support for protection of
intellectual property rights in the press and by organizations of
intellectual property producers.


5. (SBU) Major Problems/Issues Identified

-- Liberia's economy remains less competitive because of the high
cost of operating in Liberia owing to the need for private security
services and the lack of basic infrastructure such as the road
networks, electricity, and water/sewage systems needed to spur
economic growth. The costs of rebuilding the damaged infrastructure
are enormous. The economy is heavily dependent on the infusion of
funds made available by international donors, the presence of UNMIL
(the second largest UN force in the world),and International NGOs.
Foreign assistance still exceeds the national budget.
-- Ongoing economic reforms are squeezing entrenched interests,
possibly leading to stronger resistance to further reform.
-- Delays in initiating commercial export of timber will have a

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negative impact on the budget.
-- Concerns about possible corruption provoked GOL annulment of a
mining tender that increased the uncertainty of the investment
climate and further threatens the budget balance.
-- The continued dominance of the import and wholesale/retail
economy by Lebanese and Asian businesspeople continues to breed
resentment. The Ministry of Commerce favors policies protecting
Liberian ownership of some sectors of the economy.
-- Laws preventing foreign ownership of land and acquisition of
citizenship remain on the books. These laws have discouraged
long-term investment by foreign-owned/operated businesses.
-- Modernization in the sectors reserved for Liberians has been
hampered by lack of capital and technical expertise.
-- Liberian nationality laws restrict citizenship (and land
ownership) to those of Negro descent.
-- Despite having enacted laws on intellectual and industrial
property and copyright, the government has failed to enforce these
laws. There is wide-spread sale of pirated CDs, counterfeit drugs,
and knock-off electronic products.
-- Persistent corruption and a culture of patronage inhibit open and
transparent concession and procurement processes. The Public
Procurement and Concessions Commission, created in 2006, has yet to
develop the capacity and political will to offset fully these
influences. Efforts to reform the procurement process at government
ministries and agencies have slowed government expenditure and
continue to falter due to lack of institutional capacity.

II. Rule of Law/Political Pluralism/Anti-Corruption
-------------- --------------


6. (U) Major Strengths Identified

-- Liberia has a democratically-elected government resulting from
free and fair elections in 2005. There were six successful
legislative by-elections since 2006.
-- Both the legislative and judicial branches have demonstrated they
are independent institutions, and relations among the three branches
of government are becoming more effective.
-- The GOL improved sharply on the World Bank Institute index for
Control of Corruption.
-- The Government launched the Anti-Corruption Commission in
September 2008, which will be responsible for investigating and
prosecuting graft and bribery at all levels.
-- The General Accounting Commission has initiated audits of 18 GOL
ministries and agencies, and completed five of them.
-- A Civil Service Reform Strategy was launched in September.
-- The civil service has been trimmed by nearly 5,000 positions
(many of them "ghost" employees) in the past year and the
streamlining will continue as the government launches a biometric
payroll system as part of its civil service reform strategy.
-- The Ministry of Finance (MOF) has slashed processing time for
vouchers and other payments and used a Cash Management Committee to
exert better control of expenditures.
-- The GOL has moved to increase transparency and accountability in
procurement and concessions. Several contracts for investment in
iron ore mining, rubber and oil exploration have been reviewed and
revised to be more equitable.
-- The legislature holds open public hearings on the most
contentious issues.
-- Political parties operate openly and without restriction, and
participate fully in the political process.
-- UNMIL continues to provide stability. Security sector reform is
progressing well. The Liberia National Police (LNP) and Special
Security Service (SSS) have been trained and reorganized. Over
2,000 members of the new Armed Forces of Liberia (AFL) have been
trained.
-- The government is collaborating with UNMIL, the U.S. and other
stakeholders in rule of law reform.
-- The President remains committed to the corruption-fighting
Governance and Economic Management Assistance Program (GEMAP).
Liberia has ratified the UN and African Union conventions on
corruption.
-- The independent press is flourishing with multiple newspapers and
radio stations. The press, NGOs and opposition parties have freely
criticized the current government with minimal harassment.
-- There has been improvement in health, security and administration
in the corrections system.
-- Q ongoing work of Liberia's Truth and Reconciliation CommissionQhas allowed
some pQle, especially those in rural areas, to move
past the 14 years of conflict they experienced. It has also
encouraged ordinary citizens to take part in civil society groups in
order to help their communities recover from the war.


7. (SBU) Major Problems/Issues Identified

-- Although legislature holds open sessions and voting results are
made public, many issues are still decided only in closed
"executive" sessions.
-- The Legislative and Judicial branches lag behind the Executive in

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capacity and commitment to reform.
-- Although the General Audit Commission has completed five audits,
the President has not forwarded them to the Legislature, so the
results are not public.
-- UNMIL's mandate does not include executive policing authority.
The LNP's capacity and motivation to deal effectively with crime is
inadequate. The 3,500 police force is insufficient to cope with the
demand for officers across the country.
-- Lack of confidence in the police and judicial system has
sometimes resulted in mob violence, vigilantism, and trial by
ordeal, especially in rural areas.
-- The shortage of police officers has placed a strain on the
limited resources of the LNP. Members of the LNP and the judiciary
have at times refused assignments to rural counties because of
inadequate infrastructure and living conditions and difficulty
receiving pay on a regular and timely basis.
-- Despite improvements, the judiciary and penal systems function
poorly throughout most of the country. There continues to be a lack
of coordination between the Judiciary and the Ministry of Justice on
rule of law issues.
-- Corruption and uneven quality of judges remain problems. Some
rural magistrates are barely functionally literate. There continue
to be allegations of judicial officials overstepping their
authority.
-- Lengthy pretrial detention and denial of due process were
problems.
-- Traditional justice methods like trial by ordeal remain common in
many places.
-- Despite the civil service salary increases, the commitment to
fight corruption is undermined by the low and irregular salaries and
the low rate of formal employment.
-- Although several officials have been dismissed for corruption,
they have yet to be prosecuted.
-- The Executive branch relies heavily on the court system in
addressing issues of corruption. Many ministries either lack
administrative measures to address corruption or fail to act.
-- Regulatory actions, especially in the telecommunications sector,
are done without effective consultation with industry.
-- Former soldiers (who served under previous governments) have held
demonstrations to express dissatisfaction with the government's
handling of the dismantling of the former Armed Forces of Liberia.

-- The GOL, although responsive to foreign partners' calls for
transparency and accountability in government, continues to struggle
with building and maintaining the political will needed to root out
systemic corruption.
-- The Legislature has failed to enact legislation to freeze assets
of those on the UN sanctions list on constitutional grounds.
However, the President has since reiterated her government's
commitment to enforce UN Security Counsel sanctions, including the
asset freeze directed against loyalists of the former president.
-- Low levels of capacity and professionalism in the press have
undermined press effectiveness. Journalists are poorly paid and
revert to gift-taking, which weakens their objectivity. It is
common practice to pay to have stories published.
-- The Legislature has not yet ratified the Code of Conduct for
Liberian Public Servants or the Freedom of Information Act.

III. Poverty Reduction
--------------


8. (U) Major Strengths Identified

-- The GOL launched a three-year Poverty Reduction Strategy that
focuses on security, economic revitalization, rule of law/economic
governance and infrastructure and basic social services.
-- The March census provided updated information that underpins
implementation of the PRS and confirms Liberia's population at 3.4
million people.
-- The ongoing effort to clear Liberia's arrears to the
International Financial Institutions and eventually provide Liberia
with Heavily Indebted Poor Country and Multilateral Debt Relief
Initiative debt relief will make Liberia eligible for additional
development assistance and allow the government to increase spending
on poverty reduction.
-- The GOL enacted legislation that underpins progress towards HIPC
completion point, including bills that limit transfer of funds
between budget lines and merge the Bureau of the Budget into the
Ministry of Finance.
-- The Ministry of Education receives the largest budget allocation
(almost 10%),and the Ministry of Health and Social Welfare received
7.3% of the total. Net primary enrollment was 38% in 2007.
-- Budgetary expenditure for health increased by 28% in FY2006-07,
and for education by 44%. The President's budget message notes a
39%Qcrease in sQding on ministries and agencies involved in
poverty reduction.
-- The GOL has been proactive in tackling the food security crisis
while moving towards a more market-oriented economy. (Note: 60% of
Liberians live below the poverty line.)

MONROVIA 00000772 004 OF 005


-- In May, the GOL suspended the $2 a bag tariff on rice imports and
the President started encouraging Liberians to grow more of their
own food.
-- In August, the GOL raised the price ceiling on rice, while
lowering the ceiling for petroleum products. This was accompanied
by waiving taxes for low-income earners.
-- Support by international partners remains strong, with foreign
assistance of $236 million in 2005. (Note: 2006 figures are not yet
available. End note.) Political stability continues to provide a
foundation for economic growth.
-- The removal of UN sanctions on timber and diamonds allows for
some resumption of legal exports in 2008. Resumption of activity
in these sectors would provide both employment and some GOL
revenue.
-- Investment in the iron ore sector, which has been dormant for the
last 20 years, is expected to add much-needed employment outside
Monrovia.
-- Improvements in basic infrastructure, including farm-to-market
roads, should spur agricultural production and increase rural
incomes. The Ministry of Agriculture has been instrumental in
trying to rebuild the agricultural capacity by providing tools and
seeds.
-- Donor-supported projects have been initiated to revitalize the
tree crop sector, especially smallholder cocoa, oil palm and rubber
production.
-- Liberia's HIV/AIDS rate is under 2%, and the GOL is conducting
prevention campaigns.
-- Employees who earn the minimum salary of $70 are exempt from
taxes.
-- Donor-supported projects have been pledged to support an increase
in staple crop production, especially rice, in response to the
dramatic rise in global commodity prices.
-- On grid electricity in Monrovia is anticipated to increase nearly
five-fold before year's end due the addition of seven megawatts from
generators funded by the Government of Norway and installed with the
assistance of the USG.
-- Liberia's first national policy on energy was prepared and
validated by a series of public workshops.



9. (SBU) Major Problems/Issues Identified

-- Poverty remains pervasive. Basic services, including roads and
access to electricity and safe water, are not available to most of
the population.
-- Land tenure remains a volatile issue manifesting in sporadic yet
violent clashes. Unresolved, land disputes could jeopardize
economic growth projections, especially anticipated revenue from
forestry concessions, and limit potential growth in agriculture.
-- Liberian enterprise development is hampered not only by poor
access to capital but also a lack in business development services.
Fledging small and medium scales enterprises compete among
themselves rather than cooperate to improve the competitive stance
of their respective value chains.
-- The high level of illiteracy reduces employment options.
-- From a pre-war (circa 1980) national budget in excess of $500
million, the government operates with a Liberian FY2008-09 budget of
$298 million, limiting its ability to spend adequately on key
sectors like health, education and housing.
-- Liberia is unlikely to meet the Millennium Development Goals.
For example, maternal mortality remains high, at 994 per 100,000
live births in 2007.

IV. Workers' Rights/Child Labor/Human Rights
--------------


10. (U) Major Strengths Identified

-- The GOL constituted a Tripartite Commission (government,
business, labor) in 2008 to focus on labor reforms.
-- Management and workers agreed to a collective bargaining
agreement at Liberia's largest private employer, Firestone Liberia.

-- Liberia has repealed People's Redemption Council's Decree Number
12, which prohibited strikes and other workers' actions.
-- The labor code was revised in September 2007 to limit firing of
employees without cause ("Section 1508").
-- The Liberian Constitution prohibits slavery and forced labor,
debt bondage or peonage, including by children.
-- In 2002, Liberia ratified ILO Convention 182 on the Worst Forms
of Child Labor.
-- In 2005, Liberia passed anti-rape and anti-trafficking in persons
legislation. More attention has been focused on dealing firmly with
rape offenders.
-- The Truth and Reconciliation Commission has collected more than
18,000 statements from Liberia and the Diaspora and has held almost
700 witness hearings. It has provided psychosocial counseling to
war victims, empowered women's groups to stand up against
gender-based violence, and held reconciliation and memorial

MONROVIA 00000772 005 OF 005


ceremonies at the massacre sites throughout the country.
-- Refugees and internally displaced persons are returning to their
places of origin. All IDP camps have been closed.
-- The UNMIL Civilian Police are a significant stabilizing and
watchdog force for human rights, as well as a force to assist and
train the Liberia National Police.
-- The government has declared that primary education will be free
and that all children should attend school.


11. (SBU) Major Problems/Issues Identified

-- Although Liberia ratified the ILO Convention 182, it lacks the
capacity to fully enforce labor laws.
-- Union power is generally weak and the law does not prohibit
anti-union discrimination.
-- Liberia has not yet ratified ILO Convention 138 on minimum age.
-- Child labor is a problem. There were reports that children were
tapping rubber at smaller rubber plantations and private farms,
children were forced to work in hazardous conditions in other
industries and children were forced by their guardians to sell items
in the street.
-- Despite GOL efforts to stem the practice, some incidences of
trial-by-ordeal were reported.
-- Violence and discrimination against women, especially rape and
female genital mutilation, remain problems.
-- Child abuse, trafficking in persons, and racial and ethnic
discrimination were problems.
-- Costs relating to education (books and uniforms) remain
prohibitive for many children.


V. International Terrorists/U.S. National Security
-------------- --------------


12. (SBU) Major Strengths Identified

-- Liberia is not a sponsor of international terrorism.
-- In the UN, Liberia voted with the United States on 55.6%
important votes and on 80% of important consensus resolutions.
-- The National Legislature on September 11, 2006 passed a joint
resolution offering Liberia's land, air space and territorial
waters, as well as any other assets which lie within its domain in
its fight against global terrorism.
-- The GOL has publicly announced its willingness to host AFRICOM.


13. (SBU) Major Problems/Issues Identified

-- The government lacks effective control over its territory and
borders.
-- Weak law enforcement provides opportunities for diamond and
illicit drug smuggling and money laundering and cause loss of
revenue from fishing and other activities.


ROBINSON