Matching Opportunity Against Achievement to unearth government Failure

P. Samuel Goweh, MA-DLB; BSc, Economics – (+231) 886833658/770958631
s.goweh@gmail.com

Introduction

The hope and expectation of Liberians have been ditched by the Unity Party (UP) led government. This is evidenced by gross mismatch of available resources and opportunities against achievement. Between 2005 and 2014, net official development assistance to Liberia surged to 6.97 billion (see figure 1) an amount that is more than double net official development assistance to Liberia within 45 years (1960-2004). Moreover, between 2005 and 2013, Liberia attracted more than 16 billion in foreign direct investment.

Besides, our rainforest which most of the rural communities depend on for food, energy and other basic needs had been auctioned to oil palm companies such as Golden Veroleum (GVL), Equatorial Palm Oil (EPO) etc., all in the name of development. However, in the midst of copious resources, international and domestic supports, more than 80 per cent of the Liberian population still live below the poverty line (less $1.25 per day), more than 90 per cent of our total road network remained unpaved while access to safe drinking water, electricity and health services still remain a major challenge for our country.

This paper peruses data from the World Bank, International Monitoring Fund (IMF) and other international institutions to presents evidence on unmatched of achievement against surge in international aid flow, foreign direct investment and domestic resources available to the UP led government between 2005 and 2015 and argues that in the midst of huge foreign and domestic supports, the Unity Party (UP) led government has decimally perform.

Can aid promote growth and reduce poverty?

Although the question of aid promoting economic growth and enhancing poverty reduction is yet to be fully answer, an intermediate position has been that more aid spurs growth under specific conditions such as recipient countries having good macroeconomic policies, political stability etc., (Reddy, 2009).

Traditional economists have long view foreign aid as a tool for overcoming the saving gap in developing countries. Their argument is based on the assumption that developing countries are pool because they lack the capital necessary for marketing income – generating investment. Mainstream economics literature suggest that aid can help developing countries by closing this financing gap that otherwise leaves them in in a poverty trap (Abuzeid, 2009). In  addition, ‘the big push’ theory put forth by celebrity economist Jeffery Sachs argument portray aid as the necessary catalyst for investment that would, inter, lead to  growth and presumably initialize an upward path to economic development poverty reduction.

Moreover, Asia, the home of more than half of the world population is a classic example of aid success story. Economic growth and poverty reduction in China, India, Korea and many Asian countries are heavily rooted in International Development Assistance. For instance, the ‘Green Revolution’ which is the prime source of Asia food security is been hugely supported by the United States public and philanthropic sector. Manufacturing based of countries such as Korea, Malaysia and Thailand grew out of the United States and Japanese aid for core infrastructure and technological upgrading (Jeffrey Sachs, 2009).

Assessing aid flow to Liberia between 1960 – 2014

As presented below (figure 1), this government has received official international development assistance than any government in the history of our country since 1960. From 2005 to 2014 the UP led government received 6.97 billion in international aid. This amount is more than double the 3.11 billion which Liberia received in aid from 1960 to 2004. Besides, with the exception of Ivory Coast, Liberia is the highest recipient of aid within the Minor River Union region from 2005 to 2014.  

Source: Author’s calculation based on World Bank data

 Foreign direct investment as engine of growth and poverty reduction

It has been established through empirical evidence that foreign direct investment (FDI) is not only an integral component of economic growth, but is consider the most important asset to reduce poverty (Pourqoly, 2013). Foreign direct investment (when properly manage) enhances employment, improve human capital in host country, enhances technology transfer to host country, increases tax revenue and promote domestic investment (Ucal, 2014). These benefit associate with FDI are expected to contribute to higher economic growth and employment which are an effective tool for achieving improvement in the reduction of poverty.

Assessing foreign direct investment flow to Liberia between 2005 – 2015

In addition to huge inflow of international development assistance between 2005 and 2014, Liberia attracted more than 16 billion in foreign direct investment (FDI). Most of these investments have been channeled primarily into the palm oil, iron ore, rubber and timber industries with Companies like Golden Veroleum (GVL), ArcelorMittal, Equatorial Palm Oil, Alpha Logging, Atlantic Resource, China Union etc., all having their share in Liberia’s FDI.

Over the span of only two years (2008-2010), about 25 per cent of the country’s total land area, 40 per cent of its forest and 46 per cent of the country’s intact rainforest – roughly 26,000 km2 was contracted to logging companies such as Alpha Logging and Atlantic Resource (Witness, 2012).

In addition, oil Palm companies like Golden Veroleum, Equatorial Palm Oil, have taken huge portion of land which majority of Liberia’s rural population depend upon for food and basic needs. Golden Verolum alone was awarded a concessionary agreement with the Liberian government for a 350,000 hectare of land for the period of 65 years with possibility for contract extension (Witness, 2015). This area of interest is spread across four southeastern counties – Rivercess, Sinoe, Grand Kru and River Gee.

Source: Author’s calculation based on World Bank data

 

As shown below (table 1), this government has given out Liberian’s vast land including rainforest to foreign companies for agriculture purpose than any government in the history of Liberia. Of the 1,086,110 hectare awarded in concessionary agreement to foreign agriculture companies, 671,680 or 61.8 per cent is awarded between 2005 and 2015 by the unity party led government. These concessionary agreement include: Sime Darby, a Malaysian company that signed a 63-year concessionary agreement with the government of Liberia in 2009, a concession that covers 269,520 hectares, located in Grand Cape Mount, Gbarpou, Bomi and Bong Counties; the Equatorial Palm Oil, a joint UK-Indian company that signed a 65-year concessionary agreement in 2011, covering a total of 201,298 hectares in Grand Bassa, River Cess and Sinoe Counties and Golden Veroleum, an Indonesian company, with a 65-year agreement signed in 2010, covering 210,382 hectares in Sinoe, Grand Kru and Maryland Counties (Paczynska, 2016).

Table 1: Total land area awarded Agriculture companies

 

# Plantation Area cover (Ha)
1 Equatorial Palm Oil (clamed expression area) 185,669
2 Equatorial Palm Oil 15,629
3 Golden Veroleum (area of interest) 350,000
4 Golden Veroleum (area approved) 210,382
5 Firestone (Liberia) 126,514
6 Liberia Agriculture Cmpany 18,396
7 Sime Darby Plantation 269,520
8 Others 269,520
  Total area of plantation 1,086,110
Source: Global Witness July 2015 report

Assessing Poverty Level

Despite huge inflow of international development assistance and foreign direct investment to Liberia between 2005 and 2015, poverty and poor infrastructure are structurally ingrained in Liberia. An estimated 85 per cent of Liberia’s population is without formal employment and 84 per cent of the population living on less than $1.25 per day. The situation is even worse when one consider the Human Development Index (HDI) multidimensional deprivation in terms of education, health and standard of living. According to the index 52 per cent of Liberia’s population live in severe poverty (Bertelsmann Stiftung, 2016).

As of 2015, the United Nations Development Program (UNDP) Human Development Index ranked Liberia 177 out of 188 countries. As per the Global Finance Magazine 2014 ranking, Liberia is the world fourth poorest country and the only country in the Minor River Union region among the world 10 poorest countries.

Infrastructure development

Liberia’s basic infrastructure such as road network and electricity remain in awful condition. Public road network falls short of the country’s needs both in coverage and quality. Liberia’s domestic road network remains largely underdeveloped and access to rural countries is particularly limited. Up to the publication of this paper, only about 10 percent of Liberia’s total road network is paved ( AFRICAN DEVELOPMENT BANK GROUP, 2013).

Although Madam Sirleaf during her 2005 campaign, promised to electrify Liberia during her first six months in office, more than 10 years has elapsed and Liberia’s electricity sector is one of the poorest relative to the rest of sub-Saharan Africa and the world. Liberia has possibly the highest cost for electricity on the continent and in mid-2011, Liberia’s rate of access to electricity by the population to publicly provided electricity was close zero, with the Liberia Electricity Cooperation (LEC) effectively serving about 1% of the Monrovia urban population. Comparable rates were 28.5 per cent for sub-Saharan Africa, and 6% and 43.7% respectively for MRU neighbors Sierra Leone and the Ivory Coast (AfDB, 2013).

The Poverty Reduction Strategy (PRS1) aimed at improving access to safe drinking water from 17 percent in 2003 to 50 percent in 2011. However, the PRS1 and PRS2 are now history and only 25 percent of Liberia’s population have access to safe drinking water (World Bank, 2011).

Access to basic and secondary health care services is still a major problem in Liberia as more than 75 percent of the population has no access to referral health services. Inadequate health services have resulted to the country been the home of some of the highest infant and maternal mortalities rate in the world with 157 death out of 1,000 infant and 580 death out of 100,000 mortality (WHO, 2012).

Conclusion

Despite successes associated with international development assistance and foreign direct investment, the United Party led government under the stewardship of Madam Ellen Johnson Sirleaf has failed to make maximum use of huge influx FDI and aid to lift Liberians out of poverty. And while these FDI and aid are yet to benefit the poverty stacking population of Liberia, the country’s natural resource envelope has been depleted under this government.

The reluctance on the part of government official especially those from the ruling party to use the word “failed” because of the consequence it carries and the action it demand does not change the realities on ground. Although there are some tangible achievement of this government, when grading the government on average, it is obvious that this government has failed to meet the expectation of Liberians.  The reason a child failed at the end of the academic year is not necessarily that the child has no blues or passing marks, but based on the fact that the reds or failing marks surpass the blue on average. In the case of the Unity Party led government, I agree that from 2005 to present things are not hundred per cent the same. Indeed there are some positive changes taking place around us. However, these positive changes do not commensurate time and resources available to this government.

References

AFRICAN DEVELOPMENT BANK GROUP. (2013). Liberia nfrastructure and Inclusive Growth. Tunis: Temporary Relocation Agency (TRA).

Abuzeid, F. (2009). Foreign Aid and the “Big Push” Theory: Lessons from Sub-Saharan Africa. Stanford Journal of International Relations, 2.

AfDB. (2013). Liberia Infrrastructure and Inclusive Growth. Tunis: Temporary Relocation Agency (TRA).

Bertelsmann Stiftung. (2016). BTI 2016 — Liberia Country Report.

Jeffrey Sachs, G. B. (2009, May 22). Can Foreign Aid Reduce Poverty? . pp. 68-78.

Paczynska, A. (2016). Liberia rising? Foreign direct investment, persistent inequalities and political tensions. ISSN: 2164-7259 (Print) 2164-7267 (Online) Journal , 9.

Pourqoly, A. A. (2013). The Relationship between Foreign Direct Investment, Institutional Quality and Poverty: Case of MENA Countries. Journal of Economics, Business and Management, 161-162.

Reddy, C. M. (2009). Development Aid and Economic Growth: A Positive Long-Run Relation . International Monetary Fund.

Ucal, M. Ş. (2014). Panel Data Analysis of Foreign Direct Investment and Poverty from; the Perspective of Developing Countries. Procedia – Social and Behavioral Sciences , 1102-1103.

Witness, G. (2012, September). Signing their Lives Away: Liberia’s Private Use Permits and Destruction of Community-Owned Rainforest. pp. 1-2.

World Bank. (2011). Water Supply and Sanitation in Liberia, Turning Finance into Services for 2015 and Beyond. Adventure World Press .

 

 

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About Cholo Brooks 12612 Articles
Joel Cholo Brooks is a Liberian journalist who previously worked for several international news outlets including the BBC African Service. He is the CEO of the Global News Network which publishes two local weeklies, The Star and The GNN-Liberia Newspapers. He is a member of the Press Union Of Liberia (PUL) since 1986, and several other international organizations of journalists, and is currently contributing to the South Africa Broadcasting Corporation as Liberia Correspondent.