VZCZCXRO3177
RR RUEHMA RUEHPA
DE RUEHMV #0793/01 2841109
ZNR UUUUU ZZH
R 101109Z OCT 08
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0436
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCNDT/USMISSION USUN NEW YORK 1586
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 03 MONROVIA 000793 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/W, INR/AA, AF/EPS, EB 
AID FOR AFR/WA 
ACCRA AND DAKAR FOR FCS 
 
E.O.12958: N/A 
TAGS: EAGR PGOV EINV EAID SENV LI
SUBJECT: SCENESETTER FOR LIBERIA FOREST INITIATIVE RETREAT 
 
REF: 07 MONROVIA 1090 
 
¶1.  SUMMARY: In the next few months, the GOL intends to award the 
last timber concessions on some of the largest tracts of the 
nation's forests for a generation.  The revenue and employment these 
long-term timber concessions will provide is urgently needed. 
Regrettably, resumption of commercial timber activities has been 
stymied by a faulty prequalification and bid evaluation process for 
timber concessions that produced flawed results while unresolved 
land and community rights issues threaten to prevent concessionaires 
from initiating logging.  A rush to award additional concessions for 
once-in-a-generation Forest Management Contracts (FMCs) before 
resolving these outstanding issues risks undermining the near-term 
revitalization of the forestry sector and the longer-term revenue 
and employment gains expected from the timber industry.  As it 
enters its second phase, the Liberia Forest Initiative (LFI) should 
focus its efforts on helping the GOL to resolve these urgent issues. 
 END SUMMARY. 
 
PROBLEMS PLAGUE THE AWARD OF TIMBER CONTRACTS 
--------------------------------------------- 
 
¶2.  In its rush to award contracts, the Forestry Development 
Authority (FDA) and the Inter-Ministerial Concession Committee 
(IMCC) have compromised on prequalification, bid evaluation and due 
diligence, resulting in the IMCC's provisional award of three large 
Forest Management Contracts (FMCs) to bidders who do not meet the 
standards set out in law and regulation and do not have the 
financial, technical and operational capability to effectively 
manage timber contracts, live up to community obligations, exercise 
environmental safeguards, and, ultimately, maximize revenues to 
government and employment opportunities.  Two of the three 
provisional winners do not possess valid prequalification 
certificates designed to detect involvement of undesirable 
individuals.  Also, two of the companies have not demonstrated 
assured access to any capital whatsoever. 
 
THE IMPACT OF THE NEW COMMUNITY RIGHTS LAW 
------------------------------------------ 
 
¶3.  The Legislature passed on September 19, 2008 a version of a 
Community Rights Law (CRL) that is substantially different from the 
version the FDA submitted to the President in August as required by 
the National Forestry Reform Law (NFRL).  The FDA draft was 
developed over a 15-month period in an open consultative environment 
and formulated with the guidance of the Governance Commission.  The 
origin of the version the Legislature ultimately passed is unknown. 
 
 
¶4.  The two bills are in agreement with respect to broad principles 
but differ greatly in how to achieve the objectives of community 
empowerment and commercial contracting.  The FDA-drafted bill denies 
the FDA the mandate to address land issues while the version of the 
bill passed by the legislature and pending Presidential signature 
obligates the GOL to resolve outstanding land claims before forest 
management decisions of any kind are made.  The FDA has highlighted 
the probable implications of each version to the President and is 
urging her to arrive at some compromise between the two. (Note: the 
version that passed may also conflict with another law passed this 
session creating a National Land Commission charged with 
investigating land tenure concerns and make policy recommendations 
to the GOL on the most effective ways to address them. End note.) 
 
 
 
¶5.  The FDA argues that the version that passed imposes complex 
provisions on communities interested in undertaking forestry 
activities and forces logging companies to abide by potentially 
contradictory rules and procedures established by a multitude of 
inexperienced community-level management bodies.  It would also 
require the FDA, along with international partners, to significantly 
restructure their programs and may also undermine the ability of GOL 
to implement and adhere to international conventions.  Conversely, 
the version drafted by the FDA maintains centralized authority over 
the timber industry in line with the NFRL and provides broader 
requirements for community forestry under a set of regulations that 
would be formulated by the FDA in consultation with communities. 
 
¶6.  Comment:  The competing versions of the law reflect a deepening 
schism between the FDA and key civil society partners with respect 
to community rights and pressure from communities for more direct 
input on land issues.  The relationship between the FDA and civil 
society partners deteriorated during the consultation process and 
has largely broken down now that both camps have consolidated behind 
competing bills.  FDA concerns regarding the practical implications 
 
MONROVIA 00000793  002 OF 003 
 
 
of the law on the nascent timber industry are legitimate and the 
manner in which the substitute draft act was submitted is suspect. 
But ultimately legislators responded to the will of their 
constituency who remains strongly in favor of decentralized control 
over land use. End Comment. 
 
THE COST OF DELAY 
----------------- 
 
¶7.  The FDA awarded three limited duration, small acreage Timber 
Sales Contracts (TSC) in February, and the Inter-Ministerial 
Concession Committee (IMCC) recently declared provisional winners of 
three large-scale, long-tenure Forest Management Contracts (FMCs). 
The FDA is currently preparing to tender four larger FMCs of over 
770,000 hectares - roughly one-third of the forested lands proposed 
for commercial timber for the next 25 years. 
 
¶8.  Of the six smaller TSCs, only one is operational.  Two are 
stalled due to overlap of the concession area with private deeded 
land.  None of the FMC winners announced in April 2008 have 
mobilized and there are doubts that the winners have the financial 
ability to perform.  Of the total projection of 100,000 hectares to 
have been operational, only 5,000 hectares are close to being 
harvested.  (Comment: FDA's haste to award contracts by cutting 
corners in the due diligence process has resulted in many of the 
problems that are slowing up the contracting process. End comment). 
 
 
 
¶9.  Ultimately, the delays would make it impossible for the forestry 
sector to make its projected contribution to the Poverty Reduction 
Strategy in terms of job creation, timber exports and government 
revenues.  If the CRL passed by the legislature becomes law, there 
could also be delays in the operations of concessions in other 
sectors such as agriculture and mining while land claims and just 
compensation payments to communities are determined. 
 
IS LFI UP TO THE CHALLENGE? 
--------------------------- 
 
¶10.  Since its establishment in 2006, the Liberia Forest Initiative 
(LFI) - a consortium of forestry sector stakeholders, including USG 
(USAID, Forest Service, State), World Bank, European Commission, 
FDA, Flora and Fauna International, Conservation International, and 
other civil society organizations - has played a major role in 
achieving benchmark reforms in the forestry sector.  The Concessions 
Review, 2006 Forestry Reform Law, associated regulations, and the 
introduction of chain-of-custody procedures have laid the foundation 
for a transparent, accountable system for allocating timber 
concessions in a way that maximizes government revenue and 
employment, and ensures responsible forest management. 
 
LFI RETREAT GOALS 
----------------- 
 
¶11.  During an LFI Retreat in Monrovia October 15-16, participants 
will sketch out priorities for "LFI 2" through the end of 2009, 
including some discussion of the possible resources, assistance and 
partnerships that will be needed to address them.  While LFI may 
have a limited role in addressing the current imbroglio over the 
CRL, it is crucial that LFI help the GOL overcome other challenges 
that have delayed the revitalization of the forest sector. 
 
¶A. Improve the contracting process 
 
The procedure for award of contracts under the Public Procurement 
and Concessions Act (PPCA) is generally transparent, accountable and 
robust, but the GOL has struggled to comply with the new and complex 
procedures and the process remains vulnerable to improper influence 
and the temptation to cut corners.  Adherence to legal and 
regulatory requirements regarding prequalification and bid 
evaluation (confirmed by due diligence) is essential.  Tighter 
screening of bidders will help attract stronger companies and reduce 
future problems.  Heightened compliance with law, regulation and 
industry norms - including more rigorous prequalification screening, 
outsourced due diligence, and targeted promotional outreach - will 
help attract stronger companies better able to revitalize Liberia's 
timber industry -- and to do so quickly.  LFI can help the FDA to: 
 
-- Attract stronger companies to bid:  The companies that have bid 
on the first round of TSCs and FMCs are only marginally qualified, 
at best.  Weak companies may strain to execute these contacts, to 
protect the forests, to live up to their community obligations, and 
to exercise environmental safeguards.  Stronger companies will 
provide information more quickly, which will speed evaluation and 
 
MONROVIA 00000793  003 OF 003 
 
 
due-diligence.  They will mobilize faster.  They will be more 
capable of meeting community and environmental commitments. 
 
-- Simplify the prospectus:  The prospectuses for the first round of 
FMCs have taken several months to prepare.  For the second round, a 
shortage of funding has caused a several-month delay. Simplification 
could also save money and shave months off the tendering process 
while producing more reliable information. 
 
-- Intensify the prequalification.  The current prequalification 
process is not screening out companies that are not qualified. 
Instead, the FDA is giving prequalification certificates to many 
companies that do not meet the standards set out in law and 
regulation.  Some of these unqualified companies go on to bid. This 
bogs down the work of the bid evaluation panel. After the bid, these 
companies undergo due diligence. This bogs down of the due-diligence 
committee, forcing the committee to process applications that cannot 
possibly succeed. Tighter screening at the prequalification means 
faster bid evaluation, due diligence, IMC award, and negotiation. 
 
-- Contract out the due diligence:  Due diligence is a specialized 
skill. It is best performed by law firms, banks or accounting firms. 
 The FDA does not possess the skills in-house, nor would it make 
economic sense to develop these skills.  The FDA could, instead, 
contract with an outside firm to perform due diligence.  The cost of 
the due diligence could be assessed to the bidders. 
 
¶B.  Develop a system by which concessionaire performance is measured 
and evaluated 
 
International forest management standards exist (FSC, ITTO, and the 
EU's VPA model).  Currently, the FDA has not adopted a set of 
performance criteria by which company performance can be measured, 
or developed a framework in which these criteria can be implemented 
and enforced. 
 
¶C.  Institute an effective communications strategy 
 
The FDA needs to begin to take a more leadership role in how the 
reforms unfold and how the donor partners can be serve the FDA's 
long-term interests.  Also, since the lifting of the sanctions the 
various partners have begun to focus in on their own interest areas 
- commercial, conservation and community - and the vision for the 
entire sector is being lost.  It is clearly the FDA's mandate to 
manage and guide developments to prevent the three Cs concept from 
actually splintering the forest sector in Liberia.  Finally, there 
must be a better means to ensure good outreach to stakeholders in 
the government, NGOs, civil society, private sector and affected 
communities so that the implementation of reforms is also 
accompanied by public discussion, comment and education. 
 
ROBINSON