Identifier
Created
Classification
Origin
09MONROVIA19
2009-01-07 13:29:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Monrovia
Cable title:  

LIBERIA: WEAK LEADERSHIP UNDERMINES COMMERCIAL FORESTRY

Tags:  EAGR PGOV ECON EAID SENV LI 
pdf how-to read a cable
VZCZCXRO1335
RR RUEHMA RUEHPA
DE RUEHMV #0019/01 0071329
ZNR UUUUU ZZH
R 071329Z JAN 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0668
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRA/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCNDT/USMISSION USUN NEW YORK 1590
RHEHAAA/NSC WASHDC
UNCLAS SECTION 01 OF 03 MONROVIA 000019 

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: EAGR PGOV ECON EAID SENV LI
SUBJECT: LIBERIA: WEAK LEADERSHIP UNDERMINES COMMERCIAL FORESTRY

REFORM

REF: MONROVIA 793

UNCLAS SECTION 01 OF 03 MONROVIA 000019

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: EAGR PGOV ECON EAID SENV LI
SUBJECT: LIBERIA: WEAK LEADERSHIP UNDERMINES COMMERCIAL FORESTRY

REFORM

REF: MONROVIA 793


1. (SBU) Summary: Weak leadership at the Forestry Development
Authority (FDA) has delayed resumption of commercial logging, placed
millions of dollars of potential revenue at risk and jeopardized the
success of the forestry reform program. The companies bidding on
logging concessions consistently demonstrate weak financial and
technical capability, and the FDA's failure to adequately follow law
and regulation in the award of timber concessions is delaying
contract awards and leaving the FDA vulnerable to litigation. While
the findings contained in the latest United Nations (UN) Panel of
Experts (POE) report are consistent with warnings and
recommendations international advisors have shared with the FDA for
months, FDA leadership has criticized those calling attention to
problems and refused to take timely corrective action. This
attitude may herald a return to "business as usual," which will
adversely affect legitimate investment and sustainable, equitable
growth in the sector. The success of the post-sanction commercial
forestry reform program requires a renewed commitment on the part of
FDA leadership to break with the past and concerted donor support
for a responsible timber concession process. End Summary.

CORNER-CUTTING UNDERMINES COMMERCIAL FORESTRY REFORM
-------------- --------------


2. (SBU) Under the pretext of achieving national Poverty Reduction
Strategy (PRS) goals of increased revenue and job creation, the FDA
has cut procedural corners in the first award of timber concessions
since lifting of UN timber sanctions in 2006. This short-sighted
approach has resulted in delayed resumption of commercial timber
activities and failure to reach PRS targets. A rush to award
additional concessions for once-in-a-generation Forest Management
Contracts (FMCs) before resolving issues in the concession award
process jeopardizes revitalization of the sector.


3. (SBU) The first three FMCs, totaling 600,000 acres, were
advertised and awarded in mid-2008 and are with the President for
signature. According to reports from the USAID-funded Governance
and Economic Management Assistance Program (GEMAP) advisor to the

FDA, after the award of the contracts, but before presentation of
the contracts to the President, someone reportedly altered the
documents to substitute one single, up-front rental payment for the
25 annual payments in the original contract. The alteration
effectively reduces the concessionaires' tax obligations by 96
percent, potentially giving away up to $50 million in government
revenues. (Note: In an informal meeting with USG advisors in early
December, one bidder admitted that the FDA had advised them not to
worry about the obligation to pay the bid price annually over the
25-year life of the contract as stipulated in the bid documents.
The bidders said the FDA officials told them that the annual payment
obligation could be altered after the bids had been submitted. End
note.)


4. (SBU) The FDA's Board of Directors officially learned of the
situation in early November and decided to withdraw the contracts
from the President's office and reinstitute the annual payment
requirement. (Note: The role of the Board Chair, Minister of
Agriculture Christopher Toe, in the document discrepancy thus far is
unclear; in a meeting with the Ambassador and USAID Director
November 21 he did say that he favored annual payments and was
seeking to correct the contracts. End note). Post has inquired
several times to the FDA since then to verify that the contracts
have been recalled, but to date there is no indication they have
been either withdrawn or corrected.


5. (SBU) Even before this alteration of the contracts, the process
leading to the award of these three concessions was deeply flawed.
World Bank and USAID advisors noted several irregularities: the
prequalification did not screen out clearly unqualified companies;
bid documents had not been approved by the Board; evaluation
standards were not established in advance by the Inter-Ministerial
Concession Commission (IMCC); and advertisements were not placed
internationally, as required by the Public Procurement and
Concessions Act (PPCA). These violations could leave the FDA
vulnerable to litigation, delay and embarrassment. They also make
it difficult to attract responsible and capable firms able to
rejuvenate the forest sector. A losing bidder has already appealed
the award of the largest contract. Resolution may take months.


6. (SBU) In spite of these mistakes and repeated caution from
advisors and civil society, the FDA proceeded to repeat many of the
same errors as it began a new round of bidding for four large FMCs,
encompassing one-third of Liberia's concessionable forest.
According to international advisors, draft tender documents were
riddled with errors, altered at the last moment (again to substitute

MONROVIA 00000019 002 OF 003


a single rental payment for 25 annual payments),and initially
advertised without legally-required Board and IMCC approval. The
FDA advertised the bid documents in local newspapers but made only
belated, perfunctory efforts to advertise internationally, again
making it difficult to attract responsible and capable firms.


7. (SBU) Overall, the companies bidding on timber contracts are
extremely weak and the FDA is doing little to enforce
prequalification standards or attract firms that are more likely to
perform as promised. USAID-supported due diligence efforts revealed
that the winner of the largest FMC contract did not hold a valid
prequalification certificate at the time of bidding. Most bidders
are funded almost entirely by debt, not a single bidder has any
appreciable equity, and only one appears to have reliable access to
credit. For the six small concessions tendered earlier in 2008,
only three contracts were executed because the other three winning
bidders did not have sufficient capital. Of those contracts
executed, only one is moving forward. Weak companies may not be
able to execute contracts, to protect the forests, to live up to
their community obligations, and to exercise environmental
safeguards. Despite these well-known concerns, the FDA has so far
taken few steps to attract stronger companies, and has shown
lukewarm interest in USAID offers to support a pre-tender marketing
campaign. The FDA has requested USAID assistance again to perform a
due diligence assessment on the next round of FMCs.

ADVICE IGNORED - ACCUSATIONS ABOUND
--------------


8. (U) The international community enthusiastically supports the
FDA's commitment to a speedy resumption of commercial logging and
has made many concrete contributions to that end. GEMAP, U.S.
Forest Service (USFS) and World Bank advisors have made numerous
suggestions for improvements in the concession process; USAID has
offered to assist the FDA with marketing and due diligence; and the
Ambassador and USAID Director expressed concerns in a meeting with
FDA Managing Director John Woods November 21. In each case,
partners have raised concerns in the interest of avoiding the
missteps that caused delay.


9. (SBU) However, FDA management does not see it that way. Woods
wrote in an October e-mail that the advisors were engaging in a
"deliberate attempt to try to retard our progress." He has accused
some international advisors, in writing, of acts bordering on
"economic sabotage" (a crime punishable by imprisonment),of
subverting the national interest, and of putting personal interests
ahead of those of the government. He has speculated, again in
writing, on whether advisors are promoting the prequalification of
stronger firms out of some "side motivation." Most of these
communications have been widely circulated.

UNITED NATIONS REPORT BRINGS ISSUE TO A HEAD
--------------


10. (U) In its December 2008 report, the UN Panel of Experts (POE)
outlined the deficiencies in commercial timber reform during 2008,
saying, "the actions of the Forestry Development Authority do not
appear to be in compliance with some important requirements of the
National Forestry Reform Law and its regulations regarding the
process of awarding contracts for commercial timber concessions."
The report detailed many of the missteps noted above with particular
concern regarding the $50 million change in the payment terms for
three FMCs after the conclusion of negotiations.


11. (SBU) Woods responded on December 17 in a widely circulated
e-mail asserting that the POE report was "based on rumor." He
charged that the POE was motivated by a desire to "undermine
progress in the sector and sabotage the PRS." Woods deflected
responsibility for the missteps and claimed the findings of the
report suggested that U.S. Forest Service and GEMAP advisors were
"not doing their jobs."


12. (SBU) Meanwhile, a leading Civil Society organization involved
in the forestry sector responded to the POE report by publicly
calling for Woods' resignation. In a December 19 letter to forestry
stakeholders, Silas Siakor, Director of the Sustainable Development
Institute (SDI),issued a plea "for those who have leverage with
Hon. Woods... to ask him to resign and pave the way for the
President to appoint a new Managing Director." Woods responded to
the call by questioning the "genuine motive" of SDI. (Note: an NGO
coalition including SDI had issued a statement in October raising
concerns about a number of issues related to the forest sector. The
FDA labeled the group as detractors determined to "sabotage" the
sector and the PRS. End note.)


MONROVIA 00000019 003 OF 003



13. (SBU) USAID Mission Director sent an e-mail to Woods on
December 18, 2008 requesting a response to the issues raised by the
POE report, noting that they were the same issues that GEMAP and
USFS had raised for months and the Ambassador and USAID Director
discussed with Woods in November. Woods responded January 5, 2009.
He conceded that the bid evaluation process had been flawed and
blamed the GEMAP advisor for faulty due diligence conclusions. He
vowed to outsource due diligence and follow a checklist of
procurement procedures but did not suggest how the FDA intended to
attract qualified firms. Woods declared that the altered contracts
had been brought to his office and corrected in accordance with a
Board resolution for 25 annual payments. (Note: Post has not been
able to verify the status of the contracts. End note).

COMMENT
--------------


14. (SBU) Liberia cannot afford to fail in its forestry reform
efforts. "Business as usual" in the sector will adversely affect
legitimate investment, sustainable and equitable growth, and
possibly political stability. Everything in the POE report is
consistent with the concerns and recommendations provided to the FDA
by the GEMAP, USFS and World Bank advisors over the last several
months. By disparaging those who are calling attention to problems,
the FDA discourages timely corrective action. Partners stand ready
to help FDA move ahead, but can only do so if the FDA managers
remain committed to reform.


15. (SBU) Regrettably, current FDA management has proven itself
incapable of making these reforms work. Meanwhile, donor patience
with the FDA's poor performance is actually enabling the
organization to revert to old habits that will gradually dismantle
the reform program. The FDA needs leaders who are willing and
prepared to carry the organization through a period of sober
reflection and dynamic reform. This cannot be accomplished when
those who offer well-intentioned advice are ignored and labeled
saboteurs.


16. (SBU) Even if FDA leadership were removed today, however, the
institution would remain fragile with severely limited capacity.
Comprehensive and timely reform of the concession process for the
once-in-a-generation FMCs may require a more intensive, urgent and
comprehensive strategy including possibly outsourcing the concession
process through a management contract. Such an initiative would
require immediate, concerted support from donors: the alternative
is confirmation that those who benefited under the old system can
resume operations once the donors give up.

THOMAS-GREENFIELD