VZCZCXRO7678
PP RUEHMA RUEHPA
DE RUEHMV #1201/01 2850706
ZNR UUUUU ZZH
P 120706Z OCT 07
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC PRIORITY 9344
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 05 MONROVIA 001201 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR AF/EPS JANET POTASH AND FOR AF/W 
DEPARTMENT PLEASE PASS USTR FOR CONNIE HAMILTON 
 
E.O. 12958: N/A 
TAGS: ECON ETRD LI
SUBJECT: LIBERIA: AGOA COUNTRY ELIGIBILITY RECOMMENDATIONS 2008 
 
REF:  STATE 132189 
 
¶1. Following is the text of Embassy Monrovia's AGOA recommendations. 
 The text has also been e-mailed to AF/EPS and USTR. 
 
 
Country: LIBERIA 
Current AGOA Status: Eligible 
 
Country Background Summary: Liberia has a government that was 
democratically elected in multi-party elections in October/November 
¶2005.  The elections were held after United Nation Mission in 
Liberia (UNMIL) disarmed and demobilized over 100,000 combatants. 
The government has moved to exert its authority throughout the 
country by appointing county superintendents, judges and other 
officers but security still depends on the 14,000-strong UNMIL 
deployment.  The first 600 soldiers in the new Armed Forces of 
Liberia have completed initial training and 3,500 new Liberian 
National Police have been trained.  Economic activities are coming 
alive throughout the country with the return of refugees and 
internally displaced persons to towns and cities across the country, 
as well as an increase in investment, both foreign and domestic. 
 
The IMF estimates that the economy grew by 9.7% in 2006 and growth 
is expected to continue in 2007.  The inflation rate in 2006 was 
7.2%.  The GOL budget for the Liberian 2007-2008 fiscal year (ending 
June 30, 2008) reflects a 38% increase in projected revenue over the 
previous year, for a total budget of nearly US$200 million.  Despite 
Liberia's rich natural resources and potential for self-sufficiency 
in food production, the country's productive capacity remains 
depressed by high unemployment, low literacy, corruption, and the 
absence of basic infrastructure. Only about 15% of the workforce is 
employed in the formal sector.  Illiteracy is estimated to be over 
50%. Sustained economic growth is also hindered by the inadequate 
roads, water, sewage and electrical services. 
 
The government has outlined a reform and anti-poverty agenda and is 
exerting efforts to revitalize the economy.  The GOL continues to 
support the Governance and Economic Management Assistance Program 
(GEMAP) and a Staff Monitored Program which was agreed to with the 
International Monetary Fund (IMF).  The Interim Poverty Reduction 
Strategy, initiated in October 2006, is scheduled to evolve into a 
full Poverty Reduction Strategy in July 2008. 
 
Comments on Eligibility Requirements 
 
¶I. Market-Based Economy 
 
¶A. Major Strengths Identified 
 
--Liberia has historically been very open to foreign investment. 
Registering a business in Liberia is relatively simple.  Liberia 
appeared in the IFC's "Doing Business" index for the first time in 
September 2007 (ranked 170 of 178 countries). 
 
--Reform of the budget process continues.  The government submitted 
the budget to the legislature in a timely manner in 2007 and, for 
the first time, published detailed copies of the final budget 
presentation.  The Ministry of Finance (MOF) has slashed processing 
time for vouchers and other payments and used the Cash Management 
Committee to restore better control of expenditures. 
 
--The government has moved to increase transparency and 
accountability in procurement and concessions.  Several contracts 
for investment in iron ore mining, rubber and oil exploration have 
been reviewed and revised to be more equitable. 
 
--GEMAP experts are working with the Ministry of Finance to 
streamline the revenue and expenditure process and close loopholes. 
The budgeting, allotment and disbursement processes have been 
improved.  MOF is evaluating bids to take over the pre-shipment 
inspection of imports and exports to further improve customs 
activities at ports of entry.  Progress in minimizing revenue 
leakage continues and revenue collection increased 38% over the 
previous year. 
 
--A U.S. Treasury Advisor is working with MOF on the implementation 
of the GOL's US$900 million Domestic Debt Resolution Strategy. 
Payments of validated claims of approximately US$300 million are 
already being processed for vendors and include debts incurred by 
previous governments. 
 
--The civil service has been trimmed by nearly 5,000 positions (many 
of them "ghost" employees) in the past year, and the minimum salary 
of civil servants increased 67%, to US$50 a month. 
 
--Liberia signed an Open Skies agreement and a Trade and Investment 
Framework Agreement with the United States in February 2007. 
 
--The first export of Liberian diamonds under a Kimberly Process 
 
MONROVIA 00001201  002 OF 005 
 
 
certificate took place in September 2007. 
The Liberia Electricity Corporation (LEC), with a grant provided by 
the U.S. Trade and Development Agency to the Liberian Ministry of 
Lands, Mines and Energy, has tendered for a feasibility study to 
examine the technical and economic viability of the reconstruction 
and expansion of the Mount Coffee Hydro Power Station in Liberia, 
which was destroyed during the civil war. 
 
--The Liberia Extractive Industries Transparency Initiative (LEITI) 
was established on May 7, 2007, by the Government of Liberia.  The 
membership of the steering group includes the GOL, civil society 
groups, private sector, and development partners.  The LEITI should 
provide clear and independently verified information on how natural 
resource rights are allocated and what extractive industry companies 
are paying the GOL. 
 
--With USG support of US$1.64 million, the GOL is establishing a 
"Chain of Custody" system to ensure traceability of logs and 
guarantee that the GOL collects appropriate fees for timber 
harvested. 
 
--The Central Bank of Liberia issued the first non-bank financial 
institution license in September 2007, permitting OPIC to make a 
US$20 million commitment for loans to Liberian small and medium 
enterprises. 
 
--The Cabinet is considering revisions to the Investment Code that 
would eliminate the 26 sectors of the economy reserved for Liberian 
investors since the 1980s. 
 
--Liberia has enacted laws on intellectual and industrial property 
and copyright, and there is indigenous support for protection of 
intellectual property rights in the press and by organizations of IP 
producers. 
 
¶B. Major Problems/Issues Identified 
--Liberia's economy continues to struggle with the devastation of 
years of conflict.   The economy is less competitive because of the 
high cost of operating in Liberia owing to the need for private 
security services and the lack of basic infrastructure such as the 
road networks, electricity, and water/sewage systems needed to spur 
economic growth.  The costs of rebuilding the damaged infrastructure 
are enormous.  The economy is heavily dependent on the infusion of 
funds made available by international donors, the presence of UNMIL 
(the second largest UN force in the world), and International NGOs. 
Foreign assistance still exceeds the national budget. 
 
--Ongoing economic reforms are beginning to pinch entrenched 
interests, possibly leading to stronger resistance to further 
reform. 
--The continued dominance of the import and wholesale/retail economy 
by Lebanese and Asian businesspeople continues to breed resentment. 
The Ministry of Commerce favors policies protecting Liberian 
ownership of some sectors of the economy.  The monopoly on 
importation of rice, long controlled by non-Liberians, has been 
broken, though in a less than transparent manner.  A Liberian-owned 
company received a six month monopoly from September 2006 to 
February 2007.  The rice market was opened following protest from 
several quarters. 
 
--Although the laws reserving 26 specifically designated types of 
businesses for Liberians (the Liberianization policy) are being 
reconsidered, there are "margins of preference" accorded 
Liberian-owned firms for government contracts and there will likely 
still be protected "carve-outs" for Liberians.  Laws preventing 
foreign ownership of land and acquisition of citizenship remain on 
the books.  These laws have discouraged long-term investment by 
foreign-owned/operated businesses.  Modernization in the sectors 
reserved for Liberians has been hampered by lack of capital and 
technical expertise.  Liberian nationality laws restrict citizenship 
to those of Negro descent.  Some elements within the GOL, both in 
the legislative and executive branches, continue to support 
expansion of the power and reach of the Liberianization policy. 
 
--Despite having enacted laws on intellectual and industrial 
property and copyright, the government has failed to enforce these 
laws.  There is wide-spread sale of pirated CDs, counterfeit drugs, 
and knock-off electronic products. 
 
--Persistent corruption and a culture of patronage inhibit open and 
transparent concession and procurement processes.  The Public 
Procurement and Concessions Commission, created in 2006, has yet to 
develop the capacity and political will to offset fully these 
influences.  Efforts to reform the procurement process at government 
ministries and agencies have slowed government expenditure and 
continue to falter due to lack of institutional capacity. 
 
II. Rule of Law/Political Pluralism/Anti-Corruption 
 
¶A. Major Strengths Identified 
 
MONROVIA 00001201  003 OF 005 
 
 
--Liberia has a democratically-elected government resulting from 
free and fair elections in 2005.  There were two successful 
legislative by-elections in 2007, with a third scheduled in 
December. 
 
--Bth the legislative and judicial branches have demonstrated they 
are independent institutions. 
 
--The legislature holds open sessions and voting results are made 
public, but many issues are still decided only in closed "executive" 
sessions. 
 
--Political parties operate openly and without restriction, and 
participate fully in the political process. 
 
--UNMIL continues to provide stability.  Security sector reform is 
progressing well.  The Liberian National Police (LNP) and Special 
Security Service (SSS) have been trained and reorganized.  Over 600 
members of the new Armed Forces of Liberia (AFL) have been trained. 
 
 
--The government is collaborating with UNMIL, the U.S. Justice 
Department and other stakeholders in rule of law reform. 
 
--The President remains committed to the corruption-fighting 
Governance and Economic Management Assistance Program (GEMAP). 
Liberia has ratified the UN and African Union conventions on 
corruption. 
 
--The independent press is flourishing with multiple newspapers and 
radio stations.  The press, NGOs and opposition parties have freely 
criticized the current government with minimal harassment. 
 
--There has been improvement in health, security and administration 
in the corrections system. 
 
¶B. Major Problems/Issues Identified 
--UNMIL does not ordinarily intervene in quelling criminal activity. 
 (Note:  UNMIL's mandate does not include executive policing 
authority. End note.)  The LNP's capacity and motivation to deal 
effectively with crime is inadequate.  The 3,500 police force is 
insufficient to cope with demand for officers across the country. 
 
--Lack of confidence in the police and judicial system has sometimes 
resulted in mob violence and vigilantism.    The shortage of police 
officers has placed a strain on the limited resources of the LNP. 
Members of the LNP and the judiciary have at times refused 
assignments to rural counties because of inadequate infrastructure 
and living conditions and difficulty receiving pay on a regular and 
timely basis. 
 
--Despite improvements, the judiciary and penal systems function 
poorly throughout most of the country.   Corruption and uneven 
quality of judges remain problems.  There continue to be allegations 
of judicial officials overstepping their authority. 
 
--The National Elections Commission is reliant on funding from 
foreign sources.  It might be unable to satisfy constitutional 
requirements for the holding of municipal, district and chieftaincy 
elections because of the lack of funds.  (Note:  The President, 
citing the high cost of elections, proposed that she be permitted to 
appoint municipal and chieftaincy officials.   Opposition parties in 
the legislature contested the idea, and President Sirleaf recently 
announced that elections for the local officials will be held, in 
two stages, in 2008.  End note.) 
 
--Despite the civil service salary increases, the commitment to 
fight corruption is undermined by the low and irregular salaries and 
the low rate of formal employment (which increases the dependency 
ratio, placing an additional burden on each employed person). 
 
--Former soldiers (who served under previous governments) have held 
demonstrations to express dissatisfaction with the government's 
handling of salary arrears. 
 
--The GOL, although responsive to foreign partners' calls for 
transparency and accountability in government, continues to struggle 
with building and maintaining the political will needed to root out 
systemic corruption. 
 
--Anti-corruption legislation, including asset-freeze provisions 
targeting those on the UN sanctions list, was rejected by the 
legislature in September 2007 on constitutional grounds.  However, 
the President has since reiterated her government's commitment to 
enforce UN Security Counsel sanctions, including the asset freeze 
directed against loyalists of the former president. 
 
--Although several officials have been dismissed for corruption, 
they have yet to be prosecuted. 
 
 
MONROVIA 00001201  004 OF 005 
 
 
-Low levels of capacity and professionalism in the press have 
undermined press effectiveness.  Journalists are poorly paid and 
revert to gift-taking, which weakens their objectivity.  It is 
common practice to pay to have stories published. 
 
--The jurisdiction and mandate of the security forces have not been 
clearly defined and turf battles arise.  (One example was the 
struggle for jurisdiction between the LNP and the Liberian Seaport 
police.)  The eventual role of the new Armed Forces of Liberia is 
yet to be fully defined. 
 
 
III. Poverty Reduction 
 
¶A. Major Strengths Identified 
--Under the Interim Poverty Reduction Strategy, budgetary 
expenditure for health increased by 28% in FY2006-07, and for 
education by 44%.  The President's budget message notes a 39% 
increase in spending on ministries and agencies involved in poverty 
reduction. 
 
--The GOL plans to launch a full Poverty Reduction Strategy in July 
¶2008. 
 
--Support by international partners remains strong, with foreign 
assistance of US$236 million in 2005.  (note:  2006 figures are not 
yet available.  End note.)  Political stability continues to provide 
a foundation for economic growth. 
 
--The removal of UN sanctions on timber and diamonds allows for some 
resumption of legal exports in 2007.   Resumption of activity in 
these sectors would provide both employment and some GOL revenue. 
 
--Investment in the iron ore sector, which has been dormant for the 
last twenty years, is expected to add much-needed employment outside 
Monrovia. 
 
--Improvements in basic infrastructure, including farm-to-market 
roads, should spur agricultural production and increase rural 
incomes.  The Ministry of Agriculture has been instrumental in 
trying to rebuild the agricultural capacity by providing tools and 
seeds. 
 
--Donor-supported projects have been initiated to revitalize the 
tree crop sector, especially smallholder cocoa, oil palm and rubber 
production. 
 
¶B. Major Problems/Issues Identified 
--Poverty remains pervasive.  Basic services, including roads and 
access to electricity and safe water, are not available to most of 
the population. 
 
--The high level of illiteracy reduces employment options. 
 
--Widespread destruction of productive sectors of the economy 
undermines implementation of a robust Poverty Reduction Strategy. 
From a pre-war (circa 1980) national budget in excess of US$500 
million, the government operates with a Liberian FY2007-08 budget of 
US$199 million, limiting its inability to spend adequately on key 
sectors like health, education and housing. 
 
IV. Workers' Rights/Child Labor/Human Rights 
 
¶A. Major Strengths Identified 
--The Liberian Constitution prohibits slavery and forced labor, debt 
bondage or peonage. 
 
--In 2002, Liberia ratified ILO Convention 182 on the Worst Forms of 
Child Labor. 
 
--In 2005, Liberia passed anti-rape and anti-trafficking in persons 
legislation.  More attention has been focused on dealing firmly with 
rape offenders. 
 
--Liberia has repealed People's Redemption Council's Decree number 
12, which prohibited strikes and other workers' actions. 
 
--The Truth and Reconciliation Commission has established a 
structure to begin taking statements. 
 
--Refugees and internally displaced persons are returning to their 
places of origin.  All IDP camps have been closed. 
 
--The UNMIL Civilian Police are a significant stabilizing and 
watchdog force for human rights, as well as a force to assist and 
train the Liberian National Police. 
 
--The labor code was revised in September 2007 to limit firing of 
employees without cause ("Section 1508"). 
 
 
MONROVIA 00001201  005 OF 005 
 
 
--The government has declared that primary education will be free 
and that all children should attend school. 
 
¶B. Major Problems/Issues Identified 
--Although Liberia ratified the ILO Convention on Child Labor, it 
lacks the capacity to fully enforce labor laws. 
 
--Union power is generally weak and the law does not prohibit 
anti-union discrimination. 
--Violence and discrimination against women, especially rape and 
female genital mutilation (FGM), remain problems. 
 
--Slow judicial reform means there are still barriers limiting 
access to a fair trial.  Prisoners are routinely denied due process 
and languish in prison longer than is stipulated by law. 
 
--In outlying areas, due process is undermined by the lack of 
trained judicial officers. 
 
--Costs relating to education (books and uniforms) remain 
prohibitive for many children. 
 
 
¶V. International Terrorists/U.S. National Security 
 
¶A. Major Strengths Identified 
--Liberia is not a sponsor of international terrorism. Liberia 
generally supports U.S. foreign policy interests and has strong ties 
to the United States.  The National Legislature on September 11, 
2006 passed a joint resolution offering Liberia's land, air space 
and territorial waters, as well as any other assets which lie within 
its domain in its fight against global terrorism. 
 
--The GOL has publicly announced its willingness to host AFRICOM. 
 
¶B. Major Problems/Issues Identified 
--The government lacks effective control over its territory and 
borders. Weak law enforcement provides opportunities for diamond 
smuggling and money laundering (and cause loss of revenue from 
fishing and other activities). 
 
--In September 2007 the legislature rejected the anti-corruption 
legislation that included asset-freeze provisions. 
 
BOOTH