Prez Sirleaf To Raise Liberia’s $35 M Income To Botswana’s $1.3 B?
By J. Yanqui Zaza
May 26, 2010
Surrounded by remnants of the Grand Old True Whig Party such as Clarence Simpson, now an advisor to the Firestone rubber plantation; Varney Sherman, current chairman of the ruling party and legal counselor to Liberian-ArcelorMittal (New Democrat Online); Estrada Bernard, Richard Tolbert; Florence Chenoweth, Clavenda Bright-Parker, etc, President Ellen Johnson Sirleaf did direct her foot soldiers to deliver the good news. The delegation dutifully selected and used the prosperity of Botswana and demonstrated how Liberia’s economic Poverty Reduction Strategy will spur economic prosperity
Her lieutenants assured the audience at the town hall meetings that the Sirleaf government would emulate the good polices of Botswana. That’s good promise. However, the government would need to reform its policy on: (1) spending and (2) generating revenue from Liberia's lucrative minerals if it intends to keep its promise. Since there are many reports on government expenditure, let us review the revenue policy.
In 2009, Liberia received about 10% ($35 m/$347m) of its budget from 71 investors managing Liberia minerals. The 71 entities such as latex from firestone, Iron ore, diamond, gold, timber, etc represent almost the most lucrative minerals. Unlike Liberia, Botswana’s royalty income funded 50% of its $2,6 billion dollar budget in 2009.
So, can the Iron Lady use the current economic system (i.e., the market oriented system that calls for the maximization of profits) to create an environment conducive for government to receive such a gigantic amount? Or does the President have the magical power to change profiteers to philanthropists; meaning profiteers willing to generously remit a significant portion of their profits to government's coffer?
Certainly, Botswana did not generate the $1.3 billion dollars from the diamond industry because profiteers felt sorry for the country. Neither was the success based on endowment in minerals or its homogeneity. Zaire, Gabon, Sierra Leone, Liberia are rich in natural minerals, but none is prosperous. Somali is a homogenous society, and it is ravished by civil war. The secret behind Botswana is that the government broke every rule in the so-called Washington consensus, setting up state-owned companies. For instance, there is no private diamond mining in Botswana. The diamond industry, controlled through Debswana, was formed as the De Beers Botswana Mining Company in 1969 after De Beers found diamonds there in the 1960s. The government of Botswana owns part of the company and receives part of the profit, which is then funneled into public programs. (An article called Power v Poverty by Duncan Green carried by Newsstatemen, 12/16/08).
Unlike Botswana, Liberia embraces the same old capitalistic system that bred the fourteen-year old civil war. It abhors government role. For instance, in the case of Liberia diamond industry, there are 32 diamond dealers. The dealers cheat the government when the government institute weak regulations, and they smuggle diamonds outside of Liberia through porous borders if the government institute rigid regulations.
Besides the effectiveness of regulations, there is the issue of conflict of interest involving government officials. Many of Liberian officials, apparently due to the shortage of skilled manpower, end up serving as business partners, consultants, and lawyers of investors such as Firestone, Mittal Steel, etc. So, how is it possible for Liberia to generate reasonable share of the dividends of our resources when our lawmakers and presidential appointees are also serving two masters at the same time?
Without explaining how to institute an economic system that reduces conflict of interest, for instance, the delegation provided power point presentations and narrative of Liberia economic boom during the 70s. According to the news service of Nagbe Sloh, they said in 1972, Liberia’s per capital annual income of US $800.00 was much higher than Botswana. Now, after three decades, Botswana’s annual per capital income is now $10,000 than Liberia’s $200 today. The advisers stated that government has laid the foundation through the poverty reduction strategy, and will revitalize the economy, strengthen governance, and the rule of law. Additionally, they stated that Liberia would protect property rights of investors and citizens, and skillfully manage its resources. Again, what economic principles our government would employ in the management of our resources was left out of the presentation.
Even if the intention is sincere, many of the lucrative minerals are now under the control of de facto owners. And I don't think the Sirleaf government has the political will and capital to renegotiate any of these contracts. Importantly, the World Bank and international partners such as the United States of America want no part of the economic system that Botswana has instituted. For example, GEMAP, Millennium Challenge Corporation, HPIC have asked poor countries including Liberia to focus on good governance and not on the idea of involving or increasing government role in the management of its resources, the principal reason why Botswana is ahead of the game.
President Sirleaf, herself, does not only embrace the trickle-down concept, but has aversion for the economic system that permits government involvement. In 2009 at an Economic Forum held in France organized by the European Union to evaluate the capitalistic system, President Sirleaf informed her host that she agreed with the idea that government involvement in economic activities would impede economic progress.
Paradoxically, why did the Sirleaf government select the economic policy of Botswana as an economic principle that Liberia is or would emulate if she abhors government involvement? Was the choice of Botswana’s economic policy an accident or an attempt to deceive the audience? Or is the current percentage of revenue remitted from our natural resources adequate to build roads, erect hospitals, construct bridges, etc?