VZCZCXRO2338
RR RUEHMA RUEHPA
DE RUEHMV #0076/01 0221018
ZNR UUUUU ZZH
R 221018Z JAN 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0715
RUEATRA/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 06 MONROVIA 000076 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/IFD/OIA - J. NATHANIEL HATCHER 
PLEASE PASS OPIC AND USTR 
 
E.O. 12598: N/A 
TAGS: EINV EFIN ETRD ELAB ECON PGOV OPIC USTR KTDB LI
SUBJECT: LIBERIA: INVESTMENT CLIMATE STATEMENT 2009 
 
REF: STATE 123907 
 
¶1. There is growing investor interest in Liberia, particularly in 
agriculture, construction, the extractive industries and tourism. 
UN sanctions on timber exports were lifted in 2006 and on diamonds 
in early 2007 as Liberia became compliant with the Kimberly Process. 
 The removal of sanctions opens the way to renewed investment 
activity in those sectors.  Liberia debuted on the International 
Finance Corporation (IFC) "Doing Business" ranking and the 
Transparency International corruption index in 2007, and improved 
sharply in 2008.  The National Investment Commission announced $132 
million in new investment in 2008, and total business registrations 
in 2008 increased 12% from the previous year.  (Note:  All currency 
amounts are in U.S. dollars.  End note.) 
 
¶2. Five years of peace have helped Liberia recover from the ravages 
of civil war.  Much of Liberia's infrastructure -- including roads, 
electrical grid, and communication systems -- remains in ruins but 
progress, supported by the substantial infusion of international 
development assistance, continues.  Facilities for foreign visitors 
are adequate in the capital, Monrovia, but virtually non-existent in 
the rest of the country.  There is a tremendous demand for jobs, 
with employment in the formal economy estimated at about 15% of the 
available labor force.  Most labor is unskilled, and the illiteracy 
rate is estimated to be between 60% and 85%.  While there are no 
landline phones, cell phone service is widely available and coverage 
is being extended into rural areas.  Although Internet access is 
available, it remains relatively expensive, especially for 
high-speed connections.  It is likely that major foreign investments 
will be expected to include support for schools, medical, and other 
social services as part of any concession agreement. 
 
¶3. There are three serious challenges the Liberian government must 
address as it works to ensure equitable economic growth and reduce 
poverty:  land tenure disputes, corruption, and the related factor 
of a dysfunctional judicial system.  Expanded investment in 
promising sectors such as agriculture, forestry, mining, or tourism, 
and the ability to provide affordable housing for more Liberians, 
depends on rapid clarification of the tangled land tenure regimes 
and a significantly improved judicial system. 
 
Openness to Foreign Investment 
------------------------------- 
 
¶4. The impact of years of violence and bad governance undermined 
rule of law and created unchecked opportunities for corruption.  The 
government has benefited from the Governance and Economic Management 
Assistance Program (GEMAP), which seeks to institute accountability, 
responsibility, and transparency in the fiscal management of the 
government and key state-owned enterprises.  GEMAP has had a 
positive effect in many areas that influence foreign investment 
decisions such as mining and forestry policies, and transparency in 
the procurement process.  However, lack of training, inadequate 
salaries and a culture of corruption have created a judicial system 
that actively hampers investment. 
 
¶5. Liberia improved by 13 ranks on the IFC's "Doing Business" 
ranking in 2008, reaching number 150 out of 181 countries.  The 
Liberia Better Business Forum, a public-private initiative 
established in late 2007, is guiding proposals to further improve 
the business climate.  However, the government continues to wrestle 
with finding the balance between an open, nationality-neutral 
investment climate that would encourage the energy, ideas, and 
capital that create jobs and provide lower prices and higher value 
for consumers, and "empowering" domestic businesses. 
 
¶6. Seeking to empower Liberian businesses, the government in 1975 
promulgated a "Liberianization Policy," an Act to amend the General 
Business Law.  The Act set aside 12 business activities exclusively 
for Liberians.  An amendment in 1998 increased the number of sectors 
reserved for Liberians to 26.  These businesses include: 
 
-- Block making with cement, clay or like materials 
-- Supply of sand, stone and granite 
-- Operation of gas stations 
-- Peddling 
-- Ice cream manufacturing 
-- Commercial printing 
-- Travel agencies 
-- Advertising agencies 
-- Graphics and commercial arts 
-- Distribution in Liberia of locally manufactured products (this 
provision shall not prevent manufacturers or producers from 
transporting or otherwise distributing their products to Liberian 
citizens or qualified persons for resale) 
-- Cinemas 
 
MONROVIA 00000076  002 OF 006 
 
 
-- Production of poultry products 
-- Importation or sale of second-hand or used clothing 
-- Retail sale of rice 
-- Ice making or sale of ice 
-- Operation of water purification or bottling plant valued at less 
than $100,000 or the sale/distribution of water purified in Liberia 
-- Importation and sale of used cars 
-- Tire repair 
-- Auto repair shops with investments of less than $50,000 
-- Entertainment centers not connected with established hotels 
-- Retail sale of animal and poultry food 
-- Taxi and trucking 
-- Shoe repair 
-- Retail sale of timber and planks 
-- Bakeries 
-- Retail sale of pharmaceuticals 
 
¶7. The Act is still in force but has not been effective in 
increasing Liberian participation in commercial industries, nor has 
enforcement been consistent.  The Liberianization Act mandates that 
qualified Liberians be employed at all levels, including upper 
management of foreign-owned companies.  Some businesses owned by 
non-Liberians operate in contravention of the law.  Using the 
Liberianization law, the Ministry of Labor has delayed work permits 
for expatriates and intervened in negotiations between 
investors/management and their Liberian employees. 
 
Conversion and Transfer Policies 
-------------------------------- 
 
¶8. Both Liberian and U.S. dollars are legal tender.  Most business 
and government transactions (such as taxes) are conducted in U.S. 
dollars; most street transactions are in Liberian ("Liberty") 
dollars.  The Investment Code allows the transfer of funds 
associated with investments, including profits.  There are no 
restrictions on converting or transferring investment funds.  ATMs 
are not connected to global electronic banking networks and 
traveler's checks and credit/debit cards are rarely accepted. 
 
¶9. The Central Bank of Liberia regulates foreign exchange transfers. 
 Transfer of sums in excess of $10,000 must be reported to the 
Central Bank of Liberia, and no more than $7,500 in foreign currency 
banknotes can be moved out of the country at one time.  Larger sums 
must be transferred via bank draft or other financial instruments. 
Persons without a Liberian bank account are limited to two outgoing 
$5,000 over-the-counter cash wire transfers per month. 
 
Expropriation and Compensation 
------------------------------ 
 
¶10. The Embassy is aware of one claim by a U.S. firm of 
expropriation (looting) by LURD rebels who attacked Monrovia in 
2003, before the current government was elected.  The claimant has 
not been in touch with the Embassy since 2004. 
 
Dispute Settlement 
------------------ 
 
¶11. Liberia's legal system is similar to the criminal and civil law 
in the United States, but laws are not implemented consistently or 
predictably.  Investors cannot rely on the court system as a fair 
arbiter of disputes.  Judges and other judicial officers are poorly 
paid, courthouses are in disrepair, and administrative support is 
weak.  Judgments can be purchased, and foreign firms tend to be at a 
disadvantage.  In 2008 an unreasonable court finding caused a major 
foreign rubber company to cease operations, and frivolous suits have 
been used to harass other investors.  Due to the backlog of cases, 
it can be years before a hearing takes place.  The Sirleaf 
government is committed to judicial reform, an there are plans 
underway to expand Alternative Dispute Resolution mechanisms, but 
reform will take time. 
 
Performance Requirements/Incentives 
------------------------------------ 
 
¶12. The Investment Incentive Code of the Republic of Liberia (the 
Code), adopted in 1966 and revised in 1973, prohibits 
nationalization of private enterprises and aims to attract foreign 
investment.  The Government is revising the Code, but under the 
current Code, approved projects must ensure the employment of 
Liberians at all levels and expand employment and training 
activities as the enterprise grows.  In addition, investors must 
permit Liberians to purchase shares or otherwise participate in the 
ownership of the enterprise, include a local value-added content of 
not less than 25% of the value of gross output, and utilize Liberian 
origin raw materials and other supplies.  An approved investment 
 
MONROVIA 00000076  003.2 OF 006 
 
 
should use imports only when local products are not available in 
sufficient quantity and/or its quality or price is not comparable to 
the intended import, as determined by the Government.  Investment 
incentives may include exemption from customs duty and tax exemption 
on profits re-invested in fixed assets, with exemption of the 
remaining profits from 50% of the income tax that would be otherwise 
payable.  There is also provision for loss carry-over and 
accelerated depreciation of fixed assets.  The National Investment 
Commission of Liberia (NIC) implements the Code, and more details 
are available on the NIC website:  http://www.nic.gov.lr/ 
 
Right to Private Ownership and Establishment 
--------------------------------------------- - 
 
¶13. Land ownership is restricted to Liberian citizens.  Chapter III, 
Article 22 of Liberia's Constitution states: 
 
"Every person shall have the right to own property alone as well as 
in association with others, provided that only Liberian citizens 
shall have the right to own real property within the Republic. 
Private property rights, however, shall not extend to any mineral 
resources on or beneath any land or to any lands under the seas and 
waterways of the Republic.  All mineral resources in and under the 
seas and other waterways shall belong to the Republic.  Non-citizen 
missionary, educational and other benevolent institutions shall have 
the right to own property, as long as that property is used for the 
purposes for which acquired; property no longer so used shall 
escheat to the Republic." 
 
¶14. The 2006 Forestry Reform Law states that natural forests are 
owned by the Republic, with two exceptions (Chapter II, Section 
2.1).  Rights to land ownership and to use of resources such as 
minerals and timber are likely to evolve in coming years. 
 
¶15. Many foreign businesses have entered into long-term leases, but 
disputes over land ownership and squatters' rights remain 
contentious, particularly for large concessions.    Violence based 
on land disputes erupted in Nimba County in late 2008. 
 
Protection of Property Rights 
------------------------------ 
 
¶16. Conflicts between customary and statutory land tenure systems 
have not been reconciled.  The official archives, including property 
deeds and secured property interests, were looted during the war and 
disputes over real estate ownership are difficult to adjudicate. 
The lack of adequate facilities and salaries for judicial officers 
also degrades enforcement of property rights as judges sometimes 
decide cases in favor of the highest bidders.  The Ministry of 
Lands, Mines and Energy, which is in charge of survey and validation 
of land claims, is planning to implement a national mining cadastre 
that could eventually incorporate land title registrations.  There 
have been cases of fraud by government-licenses land surveyors. 
 
¶17. Liberia is a member of the World Intellectual Property 
Organization (WIPO) and a contracting party to international 
conventions and treaties on the protection of intellectual and 
industrial property rights, including the Berne, Paris, Lisbon, 
Vienna and Washington conventions and the Madrid Agreement.  The Act 
adopting the New Copyright Law of Liberia, approved in July 1997, 
provides the legal and administrative framework for protection of 
intellectual and industrial property rights.  The Copyright Office 
(CRO) and the Industrial Property Office (IPO) manage these issues, 
but lack the capacity to function effectively. 
 
¶18. As of January 10, 2008, all imports of intellectual property 
must be so identified on the import permit (rather than being 
identified as "general merchandise").  All businesses dealing in 
intellectual property must reflect that on their business 
registration form. 
Holders of intellectual property rights have access to judicial 
redress but enforcement is minimal.  Infringement of intellectual 
and industrial property rights is prevalent.  Movies and music are 
duplicated.  Counterfeit drugs, apparel, cosmetics, and computer 
software and hardware are sold openly.  Broadcasters do not tend to 
pay royalties for use of protected material. 
 
Transparency of the Regulatory System 
------------------------------------- 
 
¶19. The Liberian government is committed to improving Liberia's 
ranking in the next "Doing Business" index by making regulations 
more transparent, accountable, and effective.  One focus is 
completion of "one-stop shops" to facilitate imports and investment. 
 The government's implementation of GEMAP and agreement with policy 
prescriptions advanced by the International Monetary Fund (IMF) are 
 
MONROVIA 00000076  004 OF 006 
 
 
showing results.  New regulations are improving the transparency of 
the government's Public Procurement and Concession Commission 
(PPCC).  Harmonization of the regulatory environment across 
ministries and agencies with conflicting rules and regulations is 
ongoing.  However, regulators can still be arbitrary or 
heavy-handed. 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
¶20. The Liberian banking system provides basic banking services but 
there is no effective capital market or options for portfolio 
investment.  Financial institutions are undercapitalized and unable 
to meet the credit demands of the business community.  Total assets 
of the six commercial banks were approximately $158 million in 2008. 
 Minimum capital requirements were raised to $6 million in 2008, and 
will be further increased to $10 million in 2010.  The minimum 
capital adequacy ratio was increased from 8% to 10% in 2008.  Banks 
have continued to reduce the proportion of non-performing loans 
since 2003, but loan quality remains low. 
 
¶21. The weak judicial system means financial institutions find it 
difficult to recover bad loans through the courts.  In addition, 
there is no effective credit rating system, and many firms lack the 
business records necessary for credit approval.  The obstacles to 
domestic travel and communication increase the risk in accepting 
collateral outside Monrovia and the lack of reliable land title 
hampers access to credit. 
 
¶22. The United States has programs to support investment in small 
and medium Liberian companies, some of which provide services, such 
as lodging, communications, and construction, which improve the 
overall investment climate.  In 2007, the Overseas Private 
Investment Corporation committed $20 million to the Liberia 
Enterprise Development Finance Corporation (LEDFC) to support small 
and medium Liberian enterprises.  LEDFC, which works closely with 
the commercial banks, is the first non-bank financial institution 
licensed by the Central Bank of Liberia.  This program should 
strengthen the financial sector and improve access to capital by 
growing Liberian firms.  The African Development Foundation has 
invested $1.67 million in Liberian small and medium-sized 
enterprises, including farmer cooperatives, as of the end of 2008 
and has about $1 million in the pipeline for the first half of 2009. 
 These projects provide sustainable jobs, technology transfer, 
financial and general management training 
 
Political Violence 
------------------- 
 
¶23. There has been no significant political violence since the 
signing of the Accra Comprehensive Peace Agreement in 2003 and the 
deployment of 15,000 UN peacekeepers throughout Liberia.  The former 
Armed Forces of Liberia (AFL) was completely demobilized and with 
USG assistance a modern, professional force is being trained.  By 
the end of 2010, the AFL will reach initial operational capability, 
but will still rely on international support.  The Liberian National 
Police is also being restructured and includes an Emergency Response 
Unit (ERU), which has the ability to respond rapidly and to address 
sudden tactical police emergencies.  The UN troops are gradually 
being withdrawn as Liberia's security forces gain in strength and 
experience and now number under 12,000.  Increasing freedom and 
transparency for the Liberian people has lead to vigorous pursuit of 
perceived rights, which results in active, often acrimonious, but 
non-violent political debate.  That said, access to land remains a 
volatile issue that has led to violent disputes on the local level. 
 
Corruption 
---------- 
 
¶24. The government is tackling corruption, but it remains systemic. 
In 2008, Transparency International rated Liberia 138th of 179 
countries on its corruption perception index, up from 150th place 
the previous year.  The Mo Ibrahim African governance index showed 
Liberia as "most improved" in 2008, and in the 2008 World Bank 
Worldwide Governance Indicator Liberia showed more improvement over 
the past two years in "control of corruption" than any other country 
in the world.  Although corruption is being addressed, travelers may 
encounter officials who solicit bribes (often  euphemistically 
referred to as "cold water" or "my Christmas"). 
 
¶25. There have been improvements in the transparency of government 
procurement, and the 40% increase in government revenues in 
FY2007-08, on top of the 75% increase FY2006-07, reflects progress 
in corralling revenue leaks.  Since taking office, the Sirleaf 
administration has boosted civil service salaries over 150% and 
started paying salary arrears incurred by past governments. 
 
MONROVIA 00000076  005 OF 006 
 
 
However, the starting government salary is still only $70 per month 
and despite efforts at reform there are still delays in paying 
government employees.  The Sirleaf administration is wrestling with 
how to maintain civil service parity while removing incentives to 
corruption in positions of traditionally high rent-seeking 
potential. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
¶26. OPIC provides coverage for investors in Liberia.  GSP 
eligibility was restored in February 2006. 
 
Labor 
----- 
 
¶27. The Liberian labor force is predominantly illiterate and 
unskilled, and most Liberians lack basic computer skills.  The 
literacy rate is believed to be about 15% for those below age 
thirty-five.  Many skilled professionals have emigrated.  The 
employment rate in the formal sector is approximately 15%. 
 
¶28. Employees enjoy freedom of association, they have the right to 
establish, and become members of organizations of their own choosing 
without previous authorization or coercion.  In this regard, no 
employer shall discriminate against an employee because of 
membership in a labor organization.  While labor laws and policies 
themselves do not distort or impede investment, labor disputes are 
subject to arbitrariness with Liberian employees favored in legal 
disputes with foreign investors, regardless of the merits of the 
case.  Labor legislation was revised in 2007, repealing a decree 
that prohibited workers from striking and repealing section 1508 
(3), which permitted employees to be dismissed without cause. 
 
¶29. According to Liberian law, labor organizations and associations 
have the right to draw up their constitutions and rules, to elect 
their representatives in full freedom, to organize their 
administration and activities, and to formulate their programs.  The 
labor law specifies that no industrial labor union or organization 
shall exercise any privilege or function for agricultural workers 
and no agricultural labor union or organization shall exercise any 
privilege or function for industrial workers. 
 
Foreign Trade Zones/Free Ports 
------------------------------ 
 
¶30. In 1976, the government of Liberia created the Liberia 
Industrial Free Zone Authority (LIFZA) to promote industrial and 
corporate growth, but no FTZs are active now.  Almost no 
manufacturing is done in Liberia. 
 
Foreign Direct Investment Statistics 
---------------------------------------- 
 
¶31. Investment and commercial activity continue to increase.  The 
National Investment Commission reported $132 million in new 
investment in 2008, a 36% increase over 2007 and exceeding the 
target of $100 million.  Business registration data confirm the 
sharp increase in investment activity.  According to statistics from 
the Bureau of Domestic Trade at the Ministry of Commerce, total 
businesses registrations in 2007 (foreign and domestic) increased 
12% over the previous year, from 6,764 firms in 2006 to 7,569 firms 
in 2007.  Of total business registrations in 2007, 564 were foreign 
firms.  Partial-year figures for January-September 2008 show 860 
foreign firms registered in Liberia.  (Note: businesses must 
register annually.  End note.)  Although more detailed statistics 
are still not available, more data are being produced every year. 
 
 
THOMAS-GREENFIELD 
 
 
 
Drafter:  ECON: LKAbbott/DCarey/ASheriff, 
  1/13/2008 
 
Cleared: USAID:  MHomer 
P/E:   SKoutsis 
DCM:  BARobinson 
 
Approved: AMB 
 
 
the extractive industries, and agriculture, particularly iron ore, 
rubber and oil palm.  Foreign firms have invested in the GSM 
cellular phone market, and have also expressed interest in the 
 
MONROVIA 00000076  006 OF 006 
 
 
privatization of the Liberia Telecommunications Corporation.  There 
is extensive replanting of rubber trees and general rehabilitation 
and expansion of tree crop plantations.  Under the Kimberly Process, 
Liberia has resumed export of diamonds.  The lifting of UN timber 
sanctions in 2006 and signing of the forestry chain-of-custody 
agreement in December 2007 opened the way to export of timber 
products.  There is increasing interest in mining and oil 
exploration.  Firms interested in investment opportunities in 
Liberia should contact the National Investment Commission at 
http://www.nic.gov.lr/.