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).

Ex-official Likens Weah’s Policy Pronouncements To A “Pie In The Sky”

Monrovia, 26 Oct 2018: Former Liberian Finance Minister Mr. David Farhat who once contested the presidency has likened many policy pronouncements of the pro-poor agenda of the three-party coalition government in Liberia to a “pie in the sky”.
Former Liberia Finance Minister David Farhat
Former Liberia Finance Minister David Farhat

” When they said pro-poor,  Liberians thought emphasis would have been focused on the poorest of the poor in society,” he said.

 But the  opposite is instead happening in the West African nation as people who possessed relatively nothing before entering government just nine months ago are now building or buying luxurious houses and riding expensive cars, some costing more than US$70,000 while most citizens can hardly afford food or send their children to school,” Farhat lamented in a press statement issued on Wednesday.
In a related development, professor Thomas Kaidor of University of Liberia’s  graduate school, Thursday ironically welcomed President Weah’s free tuition pronouncement for undergraduate students at all public universities and colleges, and wondered how such “populist” policy pronouncement would be implemented when the President persistently cries that he inherited a broke national treasury.
In a radio talkshow analysis of the free tuition pronouncement, Prof Kaidor, himself a policy analyst, criticised President Weah for often making major policy pronouncements without budgetary appropriations, citing projects like the military hospital, the  coastal highway, new city of Monrovia on Bali Island and linking Kesselly bouvelard with 12th Street suburb via an overhead bridge.
The University professor said these public projects were yet off the ground notwithstanding while private projects conspicuously those of President Weah are fast rising.
By Tepitapia Sannah
Bureau Chief
West African Journal

Opinion: Students At Public Universities and Colleges In Liberia To Get Free Tuition

The decision by the Government of Liberia (GoL) to provide free tuition for students is welcome news, but I think the priority is mixed, farfetched and mind-boggling. I think it is troubling no matter how nice it sounds.

Teacher Training At Tubman University Liberia
Teacher Training At Tubman University Liberia

I expect that the party has started and the balloons are already out for the celebration. Good, but in my mind, this isn’t a strategic priority right now given the alarming and distressing economic situation in the country.  It makes me wonder what’s behind this sudden act of kindness.

If you read the just released World Bank Assessment (WBA) report on Liberia, it paints a complex economic situation (a country on the brink of failure) with more than expected declining and widening fiscal deficit compounded by a significant shortage in revenue intake, grotesque underperformance, blockbusting non-discretionary expenditures, and runaway inflation set off by decreasing foreign exchange supply and other negative externalities. Does it sound like a pretty nice picture to you for any new social program at this size and magnitude?

Grand Gedeh Community College Logo
Grand Gedeh Community College Logo

Let me say that in Public Policy there’s a time when collective actions by government are warranted. As a policy wonk, I understand that. But, providing free education to student when there’s depleting foreign aid and limited economic activities driven by new businesses and decreased revenue, it makes no sense whatsoever for government to make an already bad situation worse.  We understand the act of kindness and hardships, but a more prudent approach was not this decision. I’m sorry. Look, I admit we cannot be critical about every decision this government makes, but there’s a time when you call a spade a spade. This isn’t a spade. It is a Jack. It makes the administration look like a bunch of jokers. At this point, I can sense vulgarity from some ‘Cdcians’ reading this, but that’s fine.

According to “Front Page Africa” (a Liberian daily newspaper), the Vice President for UL Relations said that based on 20,000 students projection taking 15 credits you will have a budget of $1.2Million to cover the costs. Now that the government has agreed to cover this costs for the UL we also need to consider the costs of the other Public Universities and Colleges and explain where the government will get the funds to cover all of these costs.

I think for now, the more farsighted and logical thing was to engage the Administration of the University of Liberia (UL) to maintain the current $4.00 US dollars per credit per course or better yet, reduce the per credit amount by $0.25 cents to say $3.75 US dollars until the entire situation was assessed. The President should have sanctioned a committee of the best minds to propose the best way forward. Part of this committee’s work would have been a financial analysis of the costs and benefits and using data (facts) to drive decision-making. This committee would have included institutional and education policy-makers who would brainstorm ways in which government can pay for these added expenditures and to limit questions about “…how are they going to pay for it?”

Any important tenet of policy making, design decisions, suggestions, and choices shouldn’t be driven by gut feelings alone. Rather, adequate analysis and data-driven decision-making to ensure effectives and robustness of the outcome. Now, to many, it doesn’t pass the smell test. It appears as though government is trying to recover from the pejorative of issues it is faced with.

Students of Harbel Community College Liberia
Students of Harbel Community College Liberia

Done right, I think free education should start from the pre-primary and primary levels, in order to strengthen the foundation first and build for the future. Focus should be on creating the environment for learning; by renovating and modernizing established schools, erecting new ones where appropriate, paying teachers on time, providing nutritional services since hunger impacts learning, etc. Moreover, making teaching an attractive career choice and recruiting the best and brightest minds in the field should take precedence.

Graduation at the University of Liberia
Graduation At University of Liberia – File Photo

Look, I’m not saying the poor UL students don’t deserve it. They do. But it is not the right time. If I had the chance to advise the President, I would tell him to focus on developing the economy and bring everything to bear on it. Make this a strategic national priority for now. When people are able to find fairly decent paying jobs, they will care for themselves and their families. They’ll pay their own school fees. The rationale here is that Liberians need to start working. Creating jobs will create additional tax dollars to spend on social programs like free education for all. In contrast, even in mature economies like the U.S. where resources are in abundance, public colleges and universities aren’t free.

Let’s assume that this government finds free education a strategic priority choice; it then would have been appropriate to learn a thing or two from our nex- door neighbor – Sierra Leone.

Under the leadership of President Julius Maada Bio, the country pursued a similar flagship initiative to increase access to education benefiting 1.5 million Sierra Leone students – from pre-primary to secondary levels. But, it wasn’t a government only funded inventiveness; it started as a Public Private Partnerships (PPP) that included UK Aid, World Bank, Irish Aid, World Food Programme (WFP)and UNICEF.  Additionally, the Maada Bio government increased its education budget from 12 to 21 percent so that the education program would be broad-based to covers tuition, admission fees, teaching and learning materials, text books, examination and assessment fees – the whole yard. This sounds like a more ‘pro poor’ education policy objective to me, than just free tuition. Do you agree?

Lofa Community College
Lofa Community College

Look, I give credit to President Weah for this gesture, since it will help ease the burden on students and parents who are making a lot of sacrifices under extremely difficult economic conditions. However, by just reducing school fees without adequately studying the situation is the wrong approach of stretching an already cash strapped government that has no wiggle room because of large budget deficits. I would have felt better if the President had proposed to reduction in salaries of top government officials to pay for this initiative first. Well, the damage is done.

Political Subdivision Map of Liberia map
Political Subdivision Map of Liberia

So, I caution this administration to do itself a favor and learn from this lapse in judgment. This isn’t how government works. Moving Liberia forward requires new mindset and new ways of looking at the world by enabling policy makers to do their homework first. The ‘status quo’ is not sustainable. An initiative requires taking a systematic approach by examining both formal and informal impediments such as political, legal, bureaucratic, organizational, economic, financial, and social factors that affect it. Decisions that impact a lot of people cannot be hastily done. These things take time and effort to get it right. Be smart people. The world is watching!

The Author:

Dr. A. Joel King
Dr. A. Joel King

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 Cousera and volunteers at the American Academy of Management (AoM) and Strategic Management Society (SMS)