On 2nd Thoughts: Why are investors shunning Liberia despite huge opportunities?

By Othello B. Garblah

Liberia provides investment opportunities, mainly in the mining, agriculture, fishing, and forestry industries and in other sectors such as energy, agribusiness, telecommunication, tourism, and financial services.

However, despite these opportunities, the country has failed to attract any investment over the last seven years. Many factors are responsible for this lack of investment, such as the government surrendering its responsibilities to investors to build roads, schools, hospitals, and, in some cases, housing units.

An investor’s primary objective in investing in any country is to minimize risk and maximize returns, not to assume the government’s responsibilities.

The latter, coupled with the lack of favorable conditions such as political stability, market potential, infrastructure, human capital, and legal protection, has turned potential investors away from Liberia.

Liberia is certainly rich in natural resources and has the raw materials lacking in many of its neighbouring countries. However, it has failed to attract any investment since the regime of former President Ellen Johnson-Sirleaf.

In fact, few companies that took the risk to invest during former President Sirleaf’s 12 years have either folded up or transferred ownership to someone else.

The case of Sime Darby, BHP Billiton, Buchanan Renewables, and West African Telecom, among others, in the mining and agriculture sectors, are classic examples of investments that folded up on the heels of former President Sirleaf’s regime.

Repeated protests orchestrated by local political rivalry (political instability) forced the Malaysian Oil Palm Company Sime Darby to park up and leave its investment in the hands of a company with little or no experience in the sector.

In addition to repeated protests at concession areas backed by political actors, the government’s dedication to its responsibilities to investors, requesting them to build schools, roads, and hospitals in concession communities, also makes investing in Liberia a risky venture.

It is the government’s responsibility to build roads, hospitals, and schools for its people from the taxes and revenue collected from investors and not to burden them with such tasks.

When a government surrenders its corporate social responsibility to a company or an investor, it puts itself in the pocket of the investor, who sits at an advantageous point of the table during negotiations.

The recent negotiation between Arcelor Mittal Liberia and the Liberian Government and the company’s refusal to allow a multi-user rail unless it becomes regulated are explicit examples.

Another factor that makes investors shun Liberia despite its rich natural resources is its huge human capacity gap and weak legal system, which does little or nothing to protect investments amidst an inherently corrupt and skillless human resource capacity.

An investor once said she could not invest in Liberia because she could not afford to pay people for stealing from her- simply put, most Liberian workers could not be trusted.

Liberia lacks skilled workers, which would require an investor to bring in experts at additional costs—something every investor wants to avoid. Liberia’s investment incentives do not include immigration waivers.

When considering investment destinations, investors also consider the cost of doing business. Liberia’s poor infrastructure and lack of stable electricity also make it unattractive to investors.

Foreign direct investment in the Liberian economy will continue to decline unless the government creates an enabling environment for investment, including favorable conditions such as political stability, market potential, infrastructure, human capital, and legal protection.

The situation at Bea Mountain in Capemount County, where increasing protests forced Sime Darby to abandon its plantation, could also force Bea Mountain Company out of Liberia. The Government should begin to rethink the practice of surrendering its responsibilities to investors while signing concession agreements. Investors aim to minimize risk and maximize returns, not assume the government’s responsibilities.