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RR RUEHMA RUEHPA
DE RUEHMV #0019/01 0071329
ZNR UUUUU ZZH
R 071329Z JAN 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0668
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRA/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUCNDT/USMISSION USUN NEW YORK 1590
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 03 MONROVIA 000019 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: EAGR PGOV ECON EAID SENV LI
SUBJECT: LIBERIA: WEAK LEADERSHIP UNDERMINES COMMERCIAL FORESTRY 
 
REFORM 
 
REF: MONROVIA 793 
 
¶1.  (SBU) Summary:  Weak leadership at the Forestry Development 
Authority (FDA) has delayed resumption of commercial logging, placed 
millions of dollars of potential revenue at risk and jeopardized the 
success of the forestry reform program.  The companies bidding on 
logging concessions consistently demonstrate weak financial and 
technical capability, and the FDA's failure to adequately follow law 
and regulation in the award of timber concessions is delaying 
contract awards and leaving the FDA vulnerable to litigation.  While 
the findings contained in the latest United Nations (UN) Panel of 
Experts (POE) report are consistent with warnings and 
recommendations international advisors have shared with the FDA for 
months, FDA leadership has criticized those calling attention to 
problems and refused to take timely corrective action.  This 
attitude may herald a return to "business as usual," which will 
adversely affect legitimate investment and sustainable, equitable 
growth in the sector.  The success of the post-sanction commercial 
forestry reform program requires a renewed commitment on the part of 
FDA leadership to break with the past and concerted donor support 
for a responsible timber concession process.  End Summary. 
 
CORNER-CUTTING UNDERMINES COMMERCIAL FORESTRY REFORM 
--------------------------------------------- ------- 
 
¶2.  (SBU) Under the pretext of achieving national Poverty Reduction 
Strategy (PRS) goals of increased revenue and job creation, the FDA 
has cut procedural corners in the first award of timber concessions 
since lifting of UN timber sanctions in 2006.  This short-sighted 
approach has resulted in delayed resumption of commercial timber 
activities and failure to reach PRS targets.  A rush to award 
additional concessions for once-in-a-generation Forest Management 
Contracts (FMCs) before resolving issues in the concession award 
process jeopardizes revitalization of the sector. 
 
¶3.  (SBU) The first three FMCs, totaling 600,000 acres, were 
advertised and awarded in mid-2008 and are with the President for 
signature.  According to reports from the USAID-funded Governance 
and Economic Management Assistance Program (GEMAP) advisor to the 
FDA, after the award of the contracts, but before presentation of 
the contracts to the President, someone reportedly altered the 
documents to substitute one single, up-front rental payment for the 
25 annual payments in the original contract.  The alteration 
effectively reduces the concessionaires' tax obligations by 96 
percent, potentially giving away up to $50 million in government 
revenues.  (Note: In an informal meeting with USG advisors in early 
December, one bidder admitted that the FDA had advised them not to 
worry about the obligation to pay the bid price annually over the 
25-year life of the contract as stipulated in the bid documents. 
The bidders said the FDA officials told them that the annual payment 
obligation could be altered after the bids had been submitted.  End 
note.) 
 
¶4.  (SBU) The FDA's Board of Directors officially learned of the 
situation in early November and decided to withdraw the contracts 
from the President's office and reinstitute the annual payment 
requirement.  (Note: The role of the Board Chair, Minister of 
Agriculture Christopher Toe, in the document discrepancy thus far is 
unclear; in a meeting with the Ambassador and USAID Director 
November 21 he did say that he favored annual payments and was 
seeking to correct the contracts. End note).  Post has inquired 
several times to the FDA since then to verify that the contracts 
have been recalled, but to date there is no indication they have 
been either withdrawn or corrected. 
 
¶5.  (SBU) Even before this alteration of the contracts, the process 
leading to the award of these three concessions was deeply flawed. 
World Bank and USAID advisors noted several irregularities:  the 
prequalification did not screen out clearly unqualified companies; 
bid documents had not been approved by the Board; evaluation 
standards were not established in advance by the Inter-Ministerial 
Concession Commission (IMCC); and advertisements were not placed 
internationally, as required by the Public Procurement and 
Concessions Act (PPCA).  These violations could leave the FDA 
vulnerable to litigation, delay and embarrassment.  They also make 
it difficult to attract responsible and capable firms able to 
rejuvenate the forest sector.  A losing bidder has already appealed 
the award of the largest contract.  Resolution may take months. 
 
¶6.  (SBU) In spite of these mistakes and repeated caution from 
advisors and civil society, the FDA proceeded to repeat many of the 
same errors as it began a new round of bidding for four large FMCs, 
encompassing one-third of Liberia's concessionable forest. 
According to international advisors, draft tender documents were 
riddled with errors, altered at the last moment (again to substitute 
 
MONROVIA 00000019  002 OF 003 
 
 
a single rental payment for 25 annual payments), and initially 
advertised without legally-required Board and IMCC approval.  The 
FDA advertised the bid documents in local newspapers but made only 
belated, perfunctory efforts to advertise internationally, again 
making it difficult to attract responsible and capable firms. 
 
¶7.  (SBU) Overall, the companies bidding on timber contracts are 
extremely weak and the FDA is doing little to enforce 
prequalification standards or attract firms that are more likely to 
perform as promised.  USAID-supported due diligence efforts revealed 
that the winner of the largest FMC contract did not hold a valid 
prequalification certificate at the time of bidding.  Most bidders 
are funded almost entirely by debt, not a single bidder has any 
appreciable equity, and only one appears to have reliable access to 
credit.  For the six small concessions tendered earlier in 2008, 
only three contracts were executed because the other three winning 
bidders did not have sufficient capital.  Of those contracts 
executed, only one is moving forward.  Weak companies may not be 
able to execute contracts, to protect the forests, to live up to 
their community obligations, and to exercise environmental 
safeguards.  Despite these well-known concerns, the FDA has so far 
taken few steps to attract stronger companies, and has shown 
lukewarm interest in USAID offers to support a pre-tender marketing 
campaign.  The FDA has requested USAID assistance again to perform a 
due diligence assessment on the next round of FMCs. 
 
ADVICE IGNORED - ACCUSATIONS ABOUND 
----------------------------------- 
 
¶8.  (U) The international community enthusiastically supports the 
FDA's commitment to a speedy resumption of commercial logging and 
has made many concrete contributions to that end.  GEMAP, U.S. 
Forest Service (USFS) and World Bank advisors have made numerous 
suggestions for improvements in the concession process; USAID has 
offered to assist the FDA with marketing and due diligence; and the 
Ambassador and USAID Director expressed concerns in a meeting with 
FDA Managing Director John Woods November 21.  In each case, 
partners have raised concerns in the interest of avoiding the 
missteps that caused delay. 
 
¶9.  (SBU) However, FDA management does not see it that way.  Woods 
wrote in an October e-mail that the advisors were engaging in a 
"deliberate attempt to try to retard our progress."  He has accused 
some international advisors, in writing, of acts bordering on 
"economic sabotage" (a crime punishable by imprisonment), of 
subverting the national interest, and of putting personal interests 
ahead of those of the government.  He has speculated, again in 
writing, on whether advisors are promoting the prequalification of 
stronger firms out of some "side motivation."  Most of these 
communications have been widely circulated. 
 
UNITED NATIONS REPORT BRINGS ISSUE TO A HEAD 
-------------------------------------------- 
 
¶10.  (U) In its December 2008 report, the UN Panel of Experts (POE) 
outlined the deficiencies in commercial timber reform during 2008, 
saying, "the actions of the Forestry Development Authority do not 
appear to be in compliance with some important requirements of the 
National Forestry Reform Law and its regulations regarding the 
process of awarding contracts for commercial timber concessions." 
The report detailed many of the missteps noted above with particular 
concern regarding the $50 million change in the payment terms for 
three FMCs after the conclusion of negotiations. 
 
¶11.  (SBU) Woods responded on December 17 in a widely circulated 
e-mail asserting that the POE report was "based on rumor."  He 
charged that the POE was motivated by a desire to "undermine 
progress in the sector and sabotage the PRS."  Woods deflected 
responsibility for the missteps and claimed the findings of the 
report suggested that U.S. Forest Service and GEMAP advisors were 
"not doing their jobs." 
 
¶12.  (SBU) Meanwhile, a leading Civil Society organization involved 
in the forestry sector responded to the POE report by publicly 
calling for Woods' resignation.  In a December 19 letter to forestry 
stakeholders, Silas Siakor, Director of the Sustainable Development 
Institute (SDI), issued a plea "for those who have leverage with 
Hon. Woods... to ask him to resign and pave the way for the 
President to appoint a new Managing Director."  Woods responded to 
the call by questioning the "genuine motive" of SDI.  (Note:  an NGO 
coalition including SDI had issued a statement in October raising 
concerns about a number of issues related to the forest sector.  The 
FDA labeled the group as detractors determined to "sabotage" the 
sector and the PRS.  End note.) 
 
 
MONROVIA 00000019  003 OF 003 
 
 
¶13.  (SBU) USAID Mission Director sent an e-mail to Woods on 
December 18, 2008 requesting a response to the issues raised by the 
POE report, noting that they were the same issues that GEMAP and 
USFS had raised for months and the Ambassador and USAID Director 
discussed with Woods in November.  Woods responded January 5, 2009. 
He conceded that the bid evaluation process had been flawed and 
blamed the GEMAP advisor for faulty due diligence conclusions.  He 
vowed to outsource due diligence and follow a checklist of 
procurement procedures but did not suggest how the FDA intended to 
attract qualified firms.  Woods declared that the altered contracts 
had been brought to his office and corrected in accordance with a 
Board resolution for 25 annual payments.  (Note: Post has not been 
able to verify the status of the contracts. End note). 
 
COMMENT 
------- 
 
¶14.  (SBU) Liberia cannot afford to fail in its forestry reform 
efforts.  "Business as usual" in the sector will adversely affect 
legitimate investment, sustainable and equitable growth, and 
possibly political stability.  Everything in the POE report is 
consistent with the concerns and recommendations provided to the FDA 
by the GEMAP, USFS and World Bank advisors over the last several 
months.  By disparaging those who are calling attention to problems, 
the FDA discourages timely corrective action.  Partners stand ready 
to help FDA move ahead, but can only do so if the FDA managers 
remain committed to reform. 
 
¶15.  (SBU) Regrettably, current FDA management has proven itself 
incapable of making these reforms work.  Meanwhile, donor patience 
with the FDA's poor performance is actually enabling the 
organization to revert to old habits that will gradually dismantle 
the reform program.  The FDA needs leaders who are willing and 
prepared to carry the organization through a period of sober 
reflection and dynamic reform.  This cannot be accomplished when 
those who offer well-intentioned advice are ignored and labeled 
saboteurs. 
 
¶16.  (SBU) Even if FDA leadership were removed today, however, the 
institution would remain fragile with severely limited capacity. 
Comprehensive and timely reform of the concession process for the 
once-in-a-generation FMCs may require a more intensive, urgent and 
comprehensive strategy including possibly outsourcing the concession 
process through a management contract.  Such an initiative would 
require immediate, concerted support from donors:  the alternative 
is confirmation that those who benefited under the old system can 
resume operations once the donors give up. 
 
THOMAS-GREENFIELD