Africa

Special Feature: “Economic Outlook of Liberia 2019”

Liberia’s rapid decline is becoming alarming and unsustainable without the right policy actions to reverse course.

2018 Economic Freedom Score - Liberia

2018 Economic Freedom Score – Liberia

The current state of the global economy is expected to make things muddy for a country whose standing in the world has diminished from the fourth poorest country in the world in 2016 by Business Insider to #1 today, according to a USA Today report, and which GDP per capita per purchasing power parity (PPP) (not always an indicator of economic growth and wealth) has decreased from $934 U.S. dollar to $710 U.S. dollars within the same period.

While the current government bears the brunt of the decline, the country was already on a downward spiral during the last few years of the Ellen Johnson Sirleaf Administration.

I think it is time that we take a capricious but nuanced perspective on the economic outlook of Liberia in 2019 and provide an honest and balanced perspective as to the global economic conundrum and headwinds ahead and propose recommendations for policy makers seeking measurable indicators to drive decision-making and prepare for the future.

These trends are particularly important for Liberia to achieve its Pro-Poor Agenda for Prosperity and Development (PAPD) of the Sustainable Development Goals (SDG), if we expect to improve the living standards of our suffering people.

In Context

The outlook for the global economy in 2019 is becoming alarming even in established economies. The recent stock market volatility in the U.S. (at one point, 138% of stock market gains from the Obama Administration was wiped out and barely restored), unprecedented global interest rates hikes by the U.S. Federal Reserve to address monetary concerns, escalating trade tensions between U.S. and China (a tit-for-tat action), Brexit debacle in Europe and the murky state of UK politics, economic softening in China, slide in oil prices, inflationary pressures coupled with other global concerns (labor market tightening) are creating uneasiness worldwide.

Liberia National Investment Commission

Liberia National Investment Commission

Most economic indicators suggest that the global economy looks poised to slow from 3.8% in 2018 to 3.5% or less in 2019 and the risk of a global recession is becoming more likely.

All these geopolitical tensions mentioned earlier, suggest a daunting and challenging time ahead for the country since it lacks the structure, mechanism and fundamentals to react to shocks and would require policymakers to craft out effective monetary and fiscal policies to tackle these economic trends. But instead, most leaders are involved in political and/or social activities to the detriment and future of the country.

In October 2018, President George Weah unveiled the “Pro-poor Policy” agenda as a road map for building a “harmonious society”, developing the country, uniting and reconciling the Liberian people, educating and developing its youths and promoting peace and human rights; all bold and aggressive policy actions that are expected to take place in just under five years (by 2023).

PAPD

PAPD

The question is how is this going to happen if the resources aren’t available based on future economic outlook? And as the concept notes from the National Budget suggest, a macroeconomic environment that continues to pose challenges. Is it expected that with the economic challenges, this government will continue to rely on aid and remittances as the main source of foreign exchange regimens?

Look, we are richly endowed with water, mineral resources, forest, and climate favorable to agriculture and principal exports such as iron ore, diamond, gold and rubber and yet we are the poorest country on the face of the earth. Think about it!
Liberia is 43,000 square miles with a little over four million people. What the hell are we doing, people!

As one author suggested, Liberia is not a poor country. The problem it has is that it has been blessed with mostly bad rather than good leadership in its entire 170 years history. It is unimaginable that at the dawn of the 21st Century with all the resources in the world, yet our people lack access to clean drinking water, unable to feed ourselves, continue to be trapped in poverty.

I believe that some countries, because of geography or bad luck are trapped in poverty, but don’t see that in the case of Liberia. It isn’t bad luck; it is bad and terrible leaders who care more for themselves than people.

Alternatively, Liberia Gross Domestic Product (GDP) per PPP, increased from $6 billion U.S. dollars to about $6.12 billion dollars by 2017 according to the CIA World Fact Book; an increase from 0% in 2015 to 2.5% in 2017. Under the Ellen Johnson administration total USAID obligations to Liberia between 2006 to 2017 was $3.242 billion dollars (USAID Foreign Aid Explorer Dashboard). This is excluding obligations from the IMF, World Bank, United Nations, and other NGOs. Similarly, the European Development Fund (EDF) contributed $285 million U.S. dollars for the period 2008 to 2013 and $310 million U.S. dollars for the periods 2014 to 2020 and yet, 84% of our people live on less than a $1.25 per day, 59% of our people are illiterate, 55% have limited access to food and 1.3 to1.4 million of the population live in life-threatening poverty.

Western Union Location In Liberia

Western Union Location In Liberia

So, it doesn’t appear that we haven’t had the resources; it is also because of greed and mixed priorities.

Today, most of the world have progressed through stages of development in the ‘post-industrial society’ when the service sectors generate more wealth than the manufacturing sector of an economy and the codification of knowledge is essential for growing an economy. For close to two centuries we haven’t even evolved to where we engage a robust manufacturing sector, and we call ourselves a country?

I suggest that this government hit the STOP button and reset its vision of ‘Hope for Change’, if it wants to provide for its people and begin to address the many pressing issues such as lack of coherent monetary and fiscal policies, shortages in tax revenues and the problem of liquidity.

The Crystal Ball

According to the EIU, political stability is presumed to continue in the short-run, and this is the one sweet spot. But systematic, widespread and endemic poverty, corruption, high inflation, pain and suffering will continue and remittances which dominate aid will decrease as labor market tighten in the West causing a spillover effect.

The risk of a global recession will also make things worse and impact any poverty reduction effort.

In a previous paper, I argued that any poverty reduction strategy must be buttressed and strengthened with sustained economic growth. The Sustainable Development Goals (SDGs) known as “Transforming Our World: the 2030 Agenda for Sustainable Development” adopted in 2017 by the United Nations is an ambitious inter-governmental set of 17 goals and 169 targets that are people-centered, transformative, universal and integrated and build on the Millennium Development Goals (MDGs).

Its intended purpose is to end poverty and hunger, improve health and education, make cities more sustainable, combat climate change, protect the world and oceans from environmental degradation and foster prosperous, peaceful, just and inclusive societies in which people can live and strive peacefully.

UN Sustainable Development Goals

UN Sustainable Development Goals

I sincerely think that PAPD should have been built on SDG and MDG since the objectives are relative the same, instead of crafting a new framework. So how can the PAPD become successful?

First, by increasing Foreign Direct Investment (FDI). The caveat is that size and growth potential of markets are a major driver of FDI – a challenge for Liberia. Moreover, favorable business climate depends on strong and robust institutions and investor-friendly regulations. Liberia fails on that too. Case in point, there’s no shortage of stories about business people who have been duped and scammed through unscrupulous and unprincipled people masquerading in the Liberian Government hierarchy.

Second, by leveraging the Better Utilization of Investments Leading to Development (BUILD) Act passed by the US Senate on October 5, 2018 to counter China’s investment on the Continent. The initiative is characterized as bringing US relationship with Africa from underground (resource focused on oil, gas and minerals, etc.) to above ground (infrastructure, agriculture, etc.) per se.

I see this as an opening for Liberia to achieve sustainable, broad-based economic growth if requirements are met. As a forewarning, success in the program requires public accountability, high standards of transparency, environmental and social safeguards which I think this government will have a challenge based on how they do business today.

AGOA - US/African Business Partnership

AGOA – US/Africa Business Partnership

Third, the African Growth and Opportunity Act (AGOA) enacted by the U.S. Congress to assist economies of sub-Saharan African countries develop a market-based economy and improve economic relations between the U.S. and the region. The act was extended on June 29, 2015 up to 2025. We haven’t moved the needle on that; an opportunity missed.

The Future

So, as we enter 2019, I think that thirst-quenching, vitalizing or invigorating the Liberian economy for the 21st Century will take clear policy actions, steps and skills to reduce poverty and increase the standard of living of our people. The world is changing. We cannot rely on what was done by previous administration. We must continue to reinvent ourselves as a people and government.

The history of Liberia is riddled with the same old failed and outdated promises that do nothing to move the needle one iota. Changing Liberia will require honesty, commitment, leadership, toughness and bold steps that include putting in the right mechanisms and structure that will combat corruption and limit waste in government.

Recommendations

At this moment, the government must develop and implement strategy that will result into economic diversification, increase business investment and trade, build robust institutions, maintain (if not build) its current infrastructure and continue to maintain the peace.

Liberian Dollars

Liberian Dollars

For one thing, there is a need to bolster human capacity development by increasing investment in Technical Vocational Education Training (TVET) and Science Engineering and Mathematics (STEM) and the list goes on.

And so, I like to propose the following recommendations for the current administration:

  1. Build positive relationships with Diaspora Liberians, so that those retiring can begin to transfer wealth and knowledge.
  2. Create efficiency and effectiveness in how taxes and fees are collected to help finance development. Simplify taxes for business entities and minimize corruption and ill-gotten gains.
  3. Strengthen the judiciary system as a catalyst to declare war on corruption and persecute individuals or persons engaged in ill-gotten gains and corrupt practices and the net-net is that a well-functioning judicial system underpins economic development.
  4. Prioritize two strategic objectives at a time or simultaneously. Maybe self-sufficiency in food production first and growing the service sector as a means of creating employment next or undertake both at the same time.
  5. Improve tax policies and improve ability to collect revenues in especially hard-to-tax sectors.
  6. Create a positive and welcoming environment where businesses (especially foreign entities) can strive and grow.
  7. Improve ease of doing business so it is easy to create and grow a business.
  8. Mobilize domestic resources to increase market size for goods and services.
  9. Develop dynamic capabilities in either agriculture or the service industry and achieve sustained competitive advantage.
  10. Leverage aid resources to achieve maximum impact and outcome by enforcing transparency and accountability across the board.
  11. Leverage data, quantitative research and machine learning algorithm to drive effective decision-making and help solve practical, real-world problems.
  12. Improve revenue intake by automating custom systems and streamlining logistics processes.

To conclude, I think efforts to address items mentioned earlier must be done effectively and efficiently in order to improve livelihood and impact lives and leveraging limited resources to realize those objectives.

Business District In Monrovia

Business District In Monrovia

I like to caution that public service is never about amassing wealth and ill-gotten gains. It is about contributing to the greater good and effecting social and/or societal change. Nothing more. Nothing less.

Otherwise, our nation of birth will continue to lag at the bottom of the economic and development pyramid and eventually the laughing stock of the world.

Lastly, we must start to rethink and find novel ways of fighting corruption and poverty.

The status quo has not worked and never will.

HAPPY NEW YEAR!!!

References:

  1. World Bank.org
  2. Economics Intelligence Unit (EIU) Global Microscope

     3. Public Policy Magazine

    4. The African Economic Outlook from the African Development Bank (AFDB)

    5. USAID Foreign Aid Explorer Dashboard

About the author

Dr. A. Joel King has a doctorate in Management and a diploma in Public Policy Economics from University of Oxford and Executive Coaching from University of Cambridge, UK. 

He is a Wharton Online Scholar and an academic tutor at Coursera and volunteers at the American Academy of Management (AOM) and Strategic Management Society (SMS).