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| A busy market day in Monrovia |
While Liberia
might have experienced growth over the last decade, the country has been
swamped by huge economic challenges especially since the twin shock (Iron ore
and rubber prices reduction) coupled with the post Ebola epidemic. In this
article, we strive to explore the challenges for achieving sustainable pro-poor
growth and poverty reduction in Liberia against the backdrop of an increasing
disillusion with Liberia’s performance in these regards in recent years. A
review of our economy, though indicative of past successes, still highlights an
excessive belief that macroeconomic stabilization and investment in human
development more or less automatically would translate into pro- poor growth
–something that has diverted attention from the need to think through the
challenges of achieving sustained pro-poor growth. In order for us to break
such a trend, we must strive not to only present the many trends of stagnation
in poverty reduction but to redirect our focus to the following:
o
Diversifying of our economy through the development
of the manufacturing and service oriented sectors
o
Increasing our focus on the issue of population
growth.
o
Developing a rapid and long-term sustainable
program that focuses on the intensification of the agrarian sector of our
country.
Liberia’s
economic development and poverty reduction efforts since the end of the civil
carnage has in many ways been noteworthy. Though not significantly, we have
witnessed some improvements regarding economic sustainability with resources
being channeled to capital investments across major parts of the country (i.e.
the growth corridor, the Mount Coffee hydro, referral hospitals and communal
roads among others). Despite these, Liberia is still in a very early development
stage both in terms of demography and the economy. With the many attractions in
the urban areas, the demographic transition seems to be tilted towards
urbanized areas thereby leaving fertile rural land rich for agricultural
activities in a state of abandonment. Our modern non-farm sector is in it state
of infancy while urbanization remains very low. Moreover, even with what seems
to be a liberalization of trade and commerce, Liberia has a fairly closed
economy when measured against actual trade flows. Export makes up 23.5% (2015) of
our GDP (USD 2.3 billion/World Bank /
Exports as % of GDP) while our economy remains heavily reliant on imports (USD
1.3 billion, 2016 estimate CIA World
Factbook). Import commodities include: fuels, chemicals, machinery,
transportation equipment, manufactured goods; foodstuffs etc. covering imports
from Singapore 28.7%, China 16%, South Korea 15.3%, Japan 10.3%, Philippines
6.6% (CIA World Factbook, 2015).
Real GDP growth
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
8.2%
|
12.7%
|
6%
|
5.1%
|
6.1%
|
7.4%
|
8.3%
|
2013
|
2014
|
2015*
|
2016*
|
2017*
|
|
|
8.7%
|
0.7%
|
0%
|
2%
|
4%
|
|
|
*Estimate (IMF World Economic outlook, 2016).
Urban population as % of total population
1960
|
1980
|
2000
|
2016
|
19%
|
35%
|
44%
|
50%
|
*Estimate (World Bank Urban Population).
In spite of our
country-specific feature (seaport), which gives us a natural advantage when
compared to Uganda for example, which is land-locked and has to endure huge
tariff through high transport costs on both exports and imports, our
international competiveness is weak. Liberia ranks 131 out of 138 countries on
the Global Competitiveness Index (GCI) according to World Economic Forum Global
Competitiveness ranking. Additionally, Liberia still struggles with the issue
of a dual currency regime (US$ and L$) while the only monetary tool
intervention available by the Central Bank is to periodically auction US$ with
the hope of stabilizing the economy-something which is not a long term
sustainable strategy.
To date, what
seems to be an impressive economic development and poverty reduction efforts,
which involves the establishment of anti-graft institutions, the introduction
of the Poverty Reduction Strategy (PRS) and the Agenda for Transformation (AfT),
has to date been based on discrete events; favorable circumstances
(International goodwill), reforms across government and periodic events (sudden
fall in the exchange rates). While these appear to have yielded some form of
one-face bonuses, these cannot be expected to drive our long-term future growth
even though they are essential preconditions. Of late, our most outstanding
discrete events have been the peaceful transfer of power dividend we enjoy
after almost 74 years and a significant increase in foreign aid. The rubber and
iron ore boom in the last few years contributed significantly to a marked but
was short-lived boost due to the fall in demand from China and other steel
importing nations.
Total population
1990
|
2000
|
2010*
|
2016*
|
2021*
|
N/A
|
3.065 million
|
3.778 million
|
4.399 million
|
4.944 million
|
*Estimate (IMF World Economic outlook, 2016)
While peace and
stability have a particularly large positive impact on economic growth, a very
low economic activity and coupled with the additional cost of doing business
due to huge energy cost, it has affected greatly our macroeconomic stability.
Even with all of the reforms that have been reaped, growth has slowed down due
to decline in international markets and economic instability. Lest we forget,
these trends are expected to continue at such a declining rate of growth even
up to present and beyond (See World Bank and IMF report on declining Iron ore
and Rubber prices).
Unless our rate
on investments increases, high rates of sustained economic growth will be
difficult to achieve. We must increase our investments on capital projects
(roads, bridges etc.), the manufacturing, service oriented and agrarian sectors
and the provision of cheap and affordable energy supply. While the importance
of exports for growth is undeniable, sustainable growth also needs to be built
on increasing and stable domestic demand, and a development and deepening of
domestic production linkages (effective supply chain). To secure sustainable
high rates of economic growth in the years to come, Liberia needs a viable
private sector that increases the productive capacity in the economy
continuously through competitive pressure, and responds with higher investments
rates. To achieve this, it will require an environment centered on peace and
tranquility, a liberalized economy and macroeconomic stability, which are
pre-conditions and serves as an engine for a more productive real economy.
Moreover, the
extent to which economic growth has to be pro-poor has also been determined by
the specific interventions made by government and the relevant stakeholders as
well as external factors. Favorable iron ore and rubber prices favorably
affected the poverty-base during the boom. Many small farm startups began with
higher dividend to farmers. Of late, what we have witnessed is a somewhat
reduction in poverty despite our unfavorable changes in terms-of-trade which
has partly been driven by increased support from donors in areas of health and
education.
Finally,
Liberia cannot expect continued increases in pro-poor changes and or donor
support (President’s Weah recent trip to Paris and Nigeria are classic
examples) in terms-of-trade so long poverty reduction mechanisms aren’t
sustained and based primarily on redistributive factors. For pro-poor growth to
become sustainable it must be based on growth in which the poor are given
opportunities as economic actors, i.e. economic development that creates
productive employment opportunities for the poor, productivity gains in
agriculture (both with regard to labor and land) and economic diversification (development
of the non-farm sectors). This calls for a focus on employment and
employability and labor productivity while focusing on human resources and the
need to create conditions that are conducive to unleashing the creative and
productive forces that are needed and inherently necessary with particular
emphasis on the poor as a starting point. This when achieved, will lead to an
enhanced employment and huge returns on labor and strengthening the productive
resources and capacity of the individual people, in general Liberians and in
particular, the poor. This will open up opportunities for all and all our
people to make full use of the productive resources at hand and as a main
avenue for reducing income poverty and achieving pro-poor growth.
ABOUT THE AUTHOR:
Stephen Johnson
holds a Bachelor of Science degree in Economics and a Master Degree (MBA,
Highest Honors) in Finance. A post graduate Leadership Certificate from the
John F. Kennedy School of Government, Harvard University and has a Master in
Public Policy from the Penn State University. He has over 15 years of
experience in finance, governmental administration/policy, special
programs business development, account management, process improvement, and team
leadership. He can be contacted
at stepkirsten@live.com.
There
is a popular maxim which states “pride comes before a fall, but in governance, it
also often triggers the collapse”. Liberia’s political history is littered with
too many examples of leadership were, according to subsequent post-mortem,
forced them to their knees as a result of toxic decision-making brought on by
arrogance or excessive self-confidence and of course, ignorance and pride.
History tells us that in the final analysis we were left with the word “hubris”
again and again. The perennial problem of hubris in leadership continues to
show its ugly face as our nation sinks deeper and faster than the titanic
without finding any visible tributary upon which we can sail as a nation and people.
The critical question we must answer is:
