17 March 2016

Liberia: 'Pulling Together' After Ebola & Economic Downturn – Commerce Minister

Photo: Embassy of Republic of Liberia - Paris
Commerce Minister of the Republic of Liberia, Axel Addy.

When Axel Addy was tapped by President Ellen Johnson Sirleaf to become Liberia's Minister of Commerce and Industry three years ago, after almost a year as deputy minister, the country's economy was growing and recovery from 25 years of conflict and civil war seemed to be on track. Addy, who has a BA from California State University and an MA from the University of California-Los Angeles, began with a focus on empowerment of small and medium enterprises [SMEs] and economic diversification. But plummeting world commodity prices followed by a completely unanticipated outbreak of Ebola brought the economy to a near-standstill. In an AllAfrica interview last month during the U.S.-Africa Business Summit in Addis, Addy outlined the government's efforts to re-ignite growth.

What is the government doing to get the economy growing again?

The economic downturn we are experiencing began before the Ebola outbreak due to the fall in commodity prices, particularly rubber and iron ore – our two primary exports. We were working with investors on planning how to maintain operations in Liberia when Ebola hit. Ebola slowed down everything, so much so that the GDP dropped below one percent. Now that we are Ebola-free, one focus has been on existing investors with large concessions. Investors in the mining sector, given the huge fall in iron prices in the global market, have had to slow down operations. Some have had to close down operations. We are working with them to see what we can do together to weather the storm.

What can be done to promote recovery?

There are a number of things we've looked at, including incentives to maintain some level of presence. In the rubber sector, for example, we're looking for ways to diversify. Firestone is our biggest concession. It's been there for over a century. But private operators were hit the most. Last year, we made a preliminary intervention through the Central Bank to the tune of $5 million for private operators in the sector. There's still a need to really tackle this challenge because of the number of jobs at stake. We are looking at partners, like the IFC, to see if we can set up some sort of stimulus to help deal with this crisis. It's an ongoing process.

How are you using rubber trees once they are too old to produce latex?

Firestone made an investment to begin the processing of rubber wood. They have huge acreage of old trees that they have to fell, so they have started to process rubber wood. We have been promoting it domestically, and demand for rubber wood is increasing. We've been looking for other ways to bring in private operatives to make rubber wood furniture in Liberia for export to external markets. A number of SMEs operating in the sector had to close because of Ebola. With the dramatic slowdown in our economy, there was no market. It will take a while to get them back up and running.

What about ArcelorMittal, another major multinational which re-started producing iron ore in the country a few years back.

The minister of Land and Mines is working closely with Arcelor Mittal team to see how we can tackle the challenges to ensure that they will maintain some sort of presence in Liberia.

What additional steps is the government taking to reignite commerce and the economy in general?

We hosted two investment delegations. A Dutch delegation was recently in Liberia, and then a Belgium delegation. The extractive sector has been hit [that we have been] forced to look to other strategic areas for investment. We've decided to prioritize agriculture [where] we believe we have comparative advantage. We used to export fish as far as Japan, so there's huge potential there for tuna export. Even processing for the domestic market, there's huge potential there. We are talking to a number of companies. We recently had [a visit from] a Chinese company that is interested in agriculture and marine fisheries. We also have major oil palm investors still in Liberia; we have investors in cocoa. We are working with those players to get them to the next level of operation which is value addition and processing. We are hoping that those operations will get to the next level where they will create opportunities for employment.

We will use technology to curb corruption.

We are also focusing on SMEs. They are responsible for almost 80% for all transactions in countries like ours but often operate in the informal sector. We have been working to encourage SME formalization and participation in the economy. We recently passed the Small Business Empowerment Act, which mandates that the government must spend 25% of its public procurement on Liberian SMEs. That's $50 million in opportunities. So it creates opportunities for SMEs - everything from supplying stationery to providing catering. We spent time talking to the U.S. SBA [Small Business Administration [and] developed that law based on the same principles. There's a tendering process [and] a vetting through our Public Procurement and Concession Commission. For the little guys it can be quite intimating, but we are also looking at ways to relax the rules to create more opportunities for SMEs. We just got into the budget circle, but already I am beginning to see more and more entrepreneurs venture into the space.

One key barrier to participation is access to finance. We are coming up with creative ways to work with banks to do micro lending to SMEs that are pursing public procurement contracts. We want to fast track that, and to see how we can attract investors in the non-traditional areas. One key sector for us is tourism. Liberia is a very beautiful country. With the right investment and right policy environment, we can truly unlock the potential to be a transformation sector and create huge employment opportunities for our young people. We have been working with the ITC – International Trade Center to help us formulate policies going forward.

'Small Light Today Big Light Tomorrow'

What is the current status of electricity production, which the president has made a priority since she took office in 2007?

'Small Light Today Big Light Tomorrow'. That's the promise we hope to fulfill in December. Thanks to the Compact signed last October, the MCC [Millennium Challenge Corporation, a U.S. government agency] is now bringing additional investment needed to get the Mount Coffee Hydro back on line. All indication is that it's going be back on line in December, which will bring our power generation to about 126 megawatts, slightly below prewar level (around 160 megawatt).

This will reduce the cost. Right now a consumer is paying somewhere around 57 cents per kilowatt hour. We have now brought on one Heavy Fuel Oil generator [which will reduce the cost to] somewhere around 35 cents. Another 18 megawatts will come on in June of this year. That will also help to [further] reduce the cost. But the best alternative is the hydro. All of the contractors are working diligently. We have a lot of support, from the EU, Norway and now MCC to really get this on line in December.

Will Mount Coffee principally supply Monrovia?

We are going to be supplying Monrovia initially. But we recently passed the new Energy law which brings in private operators - a first. This creates opportunities for transmission and distribution beyond Monrovia. We have several programs, including the West African Power Pool, which brings power to the rural areas from Cote d' Ivoire, so we already have power in some of the rural cities. Ganta, one of the biggest trading cities is getting power, and we hope to expand that distribution to other capitals.

What about power for those areas that are and likely will remain off the national grid?

There are a number of initiatives. The World Bank for example funded mini hydro which is providing power to some remote areas. That program is being explored in other arears, where it will be too expensive to get on grid. We're talking to interested investors. No taker as yet but it's something that we continue to explore.

How would you characterize the progress being made to eliminate corruption?

This whole issue of corruption is tied to capacity. And you know countries with limited capacities tend to have a lot of discretion in their systems. We recently acceded to the WTO [World Trade Organization] after seven years of negotiation. When we started the negotiation with WTO, the corruption equation came up. How do we make sure that Liberia is an enabling, transparent and predictable environment where businesses can thrive? We are committed to reforming the system, modernizing the system. For example, it takes seven to 21 days to clear goods at the port, because within the system there's too much discretion. By moving to a single-window, automated platform, the ability to intervene for self-benefit is reduced substantially.

Technology is critical, everything from doing visa on arrival to security checks, residence permits, work permits, license issuance - all of these things. We are still using systems that allow too much discretion. With a more efficient, modern system, you promote transparency in the system
and tackle corruption.

On the Ministry of Commerce website, you can find just about all the laws and policies governing trade in our country. By making information readily available, you will see citizens more compliant with the law.

What are some health and education priorities in the post-Ebola period?

Our health system has taken a serious hit. When you look at education and health – two critical areas for any democracy – the health burden is something that is not sustainable without private sector participation and private sector innovation. And so this is something that we are encouraging. We are looking for ways to bring in more private sector operatives. Many Liberians spend thousands of dollars to go to places like Ghana to get basic diagnostics, when it's something that can be done in Liberia. The people say, well, 'bring the private sector is mostly for the haves and the have-nots get left out'. But if you know Liberia you know it's a very intimate country where everybody is related, and so when a relative gets sick, no matter how poor they are, the family will come together to ensure their needs are met. And so this perception that private sector participation will crowd out public service and the quality of public service I don't really believe it. I believe it is strongly needed. Too often we hear some of the crazy stories of just the limited access people have to health services and sometimes it's a life or death decision.

The other challenge we have is in education. And this is another area where there is a need for private sector participation. The financing needed to transform the education is very high. Bringing in the private sector – in technical and vocational training for example – to build the capacity of a very restless youthful population could fill that gap. We're looking for ways to bring the private sector into public universities to provide services. I went to school in California, for example, and I remember everything from the library to catering services to copying and printing services were outsourced. People find this difficult to accept in public institutions in Africa, but it needs to happen because the public sector cannot finance alone. It's almost impossible to keep tuition at a point where it's affordable, so we are open to innovations to move forward.

As you work to rebuild the economy, what role are women playing?

We have very strong women in leadership, starting with the president. And we see that in the legislature. When you look at the impact of women, you see how important it is to have women's participation. Sixty-three percent of the population is under 25. Half of that population are young girls looking for mentors. But we have challenges - rape, gender-based violence, sexual reproductive health issues [needing attention]. This is ongoing for a new administration coming in, because capacity to tackle these challenges is not there. Resources needed to address these challenges are not there. There's a need for innovation in how we tackle these challenges.

 You empower one woman you empower a family.

There are more girls in school than in the past. We see more women entrepreneurs taking advantage of public procurement programs than their male counterparts, and this is something we are trying to encourage. But our laws still provide challenges to women's ability to move up. Land ownership and those sort of things are prejudiced [against] women. The president has been instrumental in promoting reforms. Over time we will see the benefits - but not tomorrow. You empower one woman you empower a family.

Are you concerned that insecurity could hamper recovery?

There's concern about drawdown of UNMIL [United Nations Mission in Liberia], but Liberians have experienced over a decade of peace so I am not worried about the security situation. Our security apparatus have to be a part of the community. During the Ebola crisis we saw the power of the community to police their individual communities. I think this can transfer into security. Getting the community involved, getting the community to take ownership –this is one thing that is missing in education and health. Everybody believes the government must take care of their needs.

Taking that Ebola experience, it was not until the community took ownership of their individual communities that we began to see results. Communities taking responsibility and managing the services in their communities can translate into security. It can translate into health and education.

Liberians are optimistic. We are going through a very difficult time as the economy has literally collapsed, but we have to understand that we've come a long way from ten years ago. A lot has been achieved. And there are still opportunities out there to move forward. Now we have to focus on diversification in agriculture and in services. We do have advantages. We have the U.S. dollar as our second currency, which makes us attractive. We have favorable investment policies and laws that make Liberia conducive for investment. And we have a population that is eager to learn, eager to work - that's open to new ideas. I think we can take advantage of that.

While times may be difficult, I believe challenges can be overcome. When you look at the numbers, in terms of the number of deaths predicted for Ebola, you would have thought everybody would have moved out of Liberia. I believe in the resilience of the culture, in the resilience of the Liberian people. We will also make it through this period.

Is there sufficient political will to achieve these goals?

Our president has done an excellent job maintaining the peace for over a decade. When you look at the cost implication of civil unrest - what we lost and the decades it set us back - you see how valuable peace is. I think the average Liberian citizen appreciates that.

It's in the interest of all Liberians to maintain peace and security.

There are always political divisions about what could have been done better; no administration in any country is perfect. What is important is that while we push our different political agendas that debate is not destructive to the gains we've made. That's how all political parties should look at it. Liberia needs to be seen as one country belonging to all Liberians..

We are approaching our political season - in some respects it's already started. And so it's normal to see the differing opinions of what we could have been done. What is important is for Liberians to look at Liberia as one country belonging to all Liberians – and to continue to work together, whatever our differences. We have witnessed two elections in [post-war] Liberia, and I must say it's a testament to our growing democracy [that] the losers went to court. That's first sign we are maturing.

Despite our differences, across the political divide, there's consensus that Liberia is for all of us. It's in all of our interest to maintain peace and security as we go to another level of democracy when we bring in a new president.

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