LIBERIA SHOWS MODEST IMPROVEMENT IN WORLD BANK'S DOING

UNCLAS MONROVIA 000674

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: ECON LI
SUBJECT: LIBERIA SHOWS MODEST IMPROVEMENT IN WORLD BANK'S DOING
BUSINESS INDICATORS


1. (SBU) SUMMARY. Liberia moved up the scale of the World Bank's
"Doing Business Indicators" for the third year in a row, jumping
eight spots to 149th out of 183 countries. While Liberia
implemented quick-win procedural improvements that garnered it a
place among the top ten reformers of 2009, future progress is likely
to be slow, despite the ambitious efforts of the National Investment
Commission. Unsurprisingly, the report reveals monumental
political, legal and financial obstacles, including the absence of a
transparent judicial system, balanced labor laws, deep financial
markets, and an efficient system of property registration. END
SUMMARY.


2. (U) Liberia improved eight spots to 149th in the World Bank's
annual "Doing Business Indicators" (DBI) survey, demonstrating a
second year of modest investment climate reform after an abysmal
2007 debut in the bottom ten countries worldwide. Liberia was also
recognized as the 10th most improved country in the survey. [Note:
Rwanda - long the model of investor-friendly reform in sub-Saharan
Africa - nabbed the top reformer slot. End Note.].


3. (U) Improvements resulted from the GOL Business Reform
Committee's (BRC) close collaboration with private sector
counterparts, mainly the IFC-sponsored Liberia Better Business Forum
(LBBF). While the BRC and LBBF identified four crucial areas to
target for reforms, the DBI survey indicated notable success in only
two areas. Liberia streamlined procedures for opening a business
and obtaining construction permits, eliminating expensive or
redundant steps that give rise to graft or pose time-consuming
constraints that relegate entrepreneurs to the informal sector.
However, the BRC and LBBF achieved minimal gains in the areas of
cross-border trade - where import and export costs remain three
times those of a best practices market such as Singapore - or
registering a property, where reformers failed to cut even a single
permit or procedure from a byzantine system that leaves most people
without formal property rights.


4. (U) Chairman of the National Investment Commission (NIC) Richard
Tolbert, who religiously follows the DBI as a template for reform,
shared his vision for long-term reforms with reporters September 10.
Given the NIC's desire to leverage investment for sustainable job
creation, he vowed to shepherd investor-friendly bills through the
Legislature, including the revised Revenue Code, the Investment Act,
and the Association and Business Law, and closely monitor their
subsequent implementation. The NIC also will work to establish a
credit bureau and a commercial court, two key institutional
shortcomings that detracted from Liberia's standing in the DBI
report.


5. (SBU) COMMENT: Despite a confidence-boosting uptick in Liberia's
ranking, numerous bottlenecks, onerous procedures and opportunities
for graft remain. The NIC has vowed to support investment climate
reform, but progress will require collaboration from the Commerce,
Finance, and Justice Ministries, as well as the Legislature, private
sector and the Office of the President. The President and Minister
of Finance firmly share the NIC's enthusiasm for pro-investment
reforms. However, populist grandstanding and self-interest in the
Legislature, and a lack of technical capacity in the other
ministries will slow a second round of reforms. The great challenge
will be to implement reforms that are not merely cosmetic, but
address complex and politically sensitive issues of land tenure,
judicial reform, and employee rights.

ROBINSON