VZCZCXRO1238
RR RUEHMA RUEHPA
DE RUEHMV #0252/01 0931412
ZNR UUUUU ZZH
R 021412Z APR 08
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 9902
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 MONROVIA 000252 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR AF/W-PDAVIS, INR/AA-BGRAVES, AF/EPS, EB 
AID FOR AFR/WA-YMALCION 
ACCRA AND DAKAR FOR FCS 
 
E.O. 12958: N/A 
TAGS: EAGR PGOV EINV SENV LI
SUBJECT: LIBERIA: INITIAL TIMBER CONTRACTS MARK MILESTONE BUT RAISE 
CONCERNS 
 
REF: 2007 MONROVIA 1090 
 
¶1. (SBU) SUMMARY: Liberia has marked another step towards the 
resumption of legal commercial logging by awarding new timber 
concessions for the first time since United Nations timber sanctions 
were imposed in 2003.  The Forestry Development Authority (FDA) held 
a bid opening ceremony February 29 to kick off the evaluation and 
award process for six timber sale contracts (TSC).  Although these 
initial six contracts are expected to yield only $850,000 in 
licensing fees over three years, and logging is not expected to 
commence until October of this year, the provisional awards re-open 
a vital revenue stream to the Government of Liberia (GOL).  This 
first exercise of the FDA's new contract allocation regulation was 
not without flaws, but is a step in the right direction.  A rush to 
award concessions for larger Forest Management Contracts (FMCs) 
before resolving outstanding issues related to the bid evaluation 
process are a cause for concern.  Civil Society has also objected to 
any award of FMCs prior to agreement on a Community Rights and 
Access Law.  END SUMMARY. 
 
¶2. (SBU) The UN sanctions on Liberian timber were lifted in 2006. 
The FDA, with the help of the United States Forest Service (USFS), 
has worked for the last three years to reestablish a legal and 
operational framework for commercial logging.  Under the new law and 
supporting regulations, companies must be pre-qualified in order to 
bid on timber contracts.  Contracts are awarded based on the highest 
bid premium - the amount the bidder is willing to pay in excess of 
the annual land rental fee of 1.25 USD per hectare.  An undisclosed 
minimum bid is established, by regulation, to ensure the GOL 
maximizes public revenues.  In the past the GOL did not employ 
competitive bidding procedures and therefore did not receive fair 
bid premiums for logging contracts. 
 
¶3. (SBU) Despite pressure from the government and industry to 
restart logging, only six companies were pre-qualified to bid on the 
first set of contracts and only three chose to bid.  Two of the TSCs 
were awarded at the minimum bid level while the other four were 
awarded at a small bid premium over the minimum bid requirement. 
The bids, if finally approved following due diligence, will provide 
$850,000 in licensing fees to the GOL (via the FDA) over the next 
three years. 
 
¶4. (SBU) The pre-qualification and bid evaluation process was not 
entirely smooth.  Two bidders filed identical business statements 
and seem to have received financing from the same source, indicating 
possible fraud or collusion.  Also, some large companies with tax 
arrears were given clearance in violation of FDA regulation. 
Although a Ministry of Finance source tells us all tax arrears had 
been paid, an FDA source assured us that was not the case, thereby 
injecting a measure of doubt as to the transparency and fairness of 
the process.  After the bidding, FDA due diligence revealed that 
none of the three provisional contract winners had the financial or 
staff capability to perform the contracts.  The FDA has given the 
three firms 30 days to demonstrate financial ability but it is 
unclear what will happen if the firms are unable to meet that 
deadline. 
 
¶5. (SBU) The FDA announced that the next round of pre-qualification 
of companies has begun and the FDA published tenders for three 
long-term Forest Management Contracts (FMC) the week of March 10. 
Unlike TSCs which are for limited duration (three years) and small 
acreage (less than 5,000 hectares), FMCs are for larger forest areas 
(50,000-400,000 hectares) and longer term duration (up to 25 years). 
 Bids for these initial FMCs are due April 18.  The FDA is also 
preparing tenders for possibly four additional FMCs in the coming 
months. 
 
¶6. (U) Civil Society groups have registered intense objection to the 
award of FMCs prior to an agreement on a Community Rights and Access 
Law that would establish community tenure rights for forest lands. 
Global Witness and other international NGOs stated March 27 that 
"resumption of large-scale logging before this law is implemented 
will undermine the efforts of rural communities to develop and 
prosper."  The law was originally scheduled for completion in 2007 
but continued disagreement among stakeholders makes it unlikely the 
law will be concluded before the end of 2008.  Civil Society 
determination to defer FMCs until a law is implemented is at odds 
with GOL's desire to stimulate employment and capture revenues from 
the timber sector as soon as possible. 
 
¶7. (U) Meanwhile, Swiss-based SGS Group is finalizing the Standard 
Operating Procedures for the implementation of its five-year Chain 
of Custody contract to track timber exports and ensure traceability. 
 During an explanatory workshop for forestry officials and industry 
representatives March 20, SGS outlined the steps logging companies 
must take after they are awarded a TMC or FMC before they can 
initiate logging.  The new Forestry Law regulations and Chain of 
 
MONROVIA 00000252  002 OF 002 
 
 
Custody procedures require companies to inventory concession areas 
and provide block maps and other documentary reporting to SGS before 
the FDA will issue an authorization to commence logging operations. 
Given these requirements, it is unlikely logging will commence on 
these initial TSCs before October 2008. 
 
¶8. (SBU) COMMENT: With the Forestry Reform Law, associated 
regulations and the new Chain of Custody procedures, the FDA has 
created the foundation for a transparent, accountable system for 
allocating concessions in a way that maximizes government revenue 
and ensures responsible forest management.  Despite initialstumbles, the process represents a dramatic improvement over how 
timber contracts were awarded in the past.  The tender was offered 
openly and competitively with an adequate minimum bid in place to 
ensure potential collusion did not result in inadequately-priced 
contracts.  A solid due diligence effort at this stage is vital to 
ensure the integrity of these initial awards and to provide lessons 
learned that inform and improve the next wave of more sensitive FMC 
concessions. 
 
¶9.  (SBU) COMMENT, CONT.: Symbolic success notwithstanding, the 
dearth of qualified TSC bidders and the homogeneity of bids are 
disappointing, and the FDA's rush to award FMCs before some obvious 
procedural flaws - and lingering community access issues - are 
addressed is a cause for concern.  While the FDA faces intense 
pressure to issue timber contracts as fast as possible, it must also 
ensure that the award and evaluation of those contracts are in 
accordance with forestry and procurement regulations, thereby 
reinforcing the foundation the FDA worked so hard to build.  END 
COMMENT. 
 
DBOOTH