The US State Department's 2024 Investment Climate Report has shed light on Liberia's investment landscape, identifying both promising opportunities and significant challenges facing potential investors. Despite ongoing issues with corruption and infrastructure, Liberia's rich natural resources and potential for growth present attractive prospects for investors across various sectors.
Liberia is highlighted as offering a range of investment opportunities, particularly in natural resources such as mining, agriculture, fishing, and forestry. The report also points to specialized sectors like energy, telecommunications, agribusiness, climate financing, tourism, and financial services as areas ripe for investment.
However, the report underscores a critical need for infrastructure development, with particular emphasis on electricity generation, the national airport, and transportation networks, including roads and bridges.
The report notes that Liberia's economy, which suffered extensive damage from over a decade of civil wars that ended in 2003, has been gradually recovering. Yet, the country has not yet reached pre-war levels of economic development. The economy is heavily reliant on imports for basic necessities, including fuel, clothing, and rice, the latter being a staple food.
Liberia's GDP is among the lowest globally, although there was a 4.7 percent growth in 2023, with projections indicating a 5.3 percent increase in 2024, according to the World Bank. The newly inaugurated President Joseph N. Boakai, in January 2024, pledged to tackle corruption, establish more predictable business policies, and improve the investment climate. However, it remains uncertain whether these promises will be effectively implemented.
The report highlights persistent challenges, including low human development indicators, expensive and unreliable electricity, poor roads, and inadequate internet access, especially outside urban areas. Corruption remains a significant barrier to investment and development. Transparency International's 2023 Corruption Perceptions Index revealed that Liberia's ranking dropped from 142 out of 180 countries in 2022 to 145 out of 180 in 2023.
The lack of trust in the banking sector and limited access to business financing result in most transactions being conducted in cash. The Central Bank of Liberia and commercial banks are promoting mobile money adoption, but the long-planned National Electronic Payment System (NEPS) remains inactive, causing issues with the integration and interoperability of banking instruments.
Despite these challenges, Liberia's abundance of natural resources and large tracts of potentially productive agricultural land present significant investment opportunities. While a few large international concessionaires have successfully invested in agriculture and mining, the process of negotiating these agreements with the government is often prolonged and politicized, with companies sometimes resorting to bribery.
The fishing industry, though historically less developed compared to pre-war levels, holds potential for investment, but struggles to meet necessary standards and economies of scale for global export markets.
The report outlines the government's approach to foreign direct investment, noting that it often lacks proactive encouragement. Business leaders report difficulties in engaging with government representatives without offering bribes. The weak legal and regulatory framework, lack of transparency in contract awards, and widespread corruption are significant deterrents. Government decisions affecting the business sector are frequently influenced by political cronyism rather than investment climate considerations.
Foreign and domestic entities may own and establish businesses in many sectors, though land ownership is restricted to Liberians, with non-citizens permitted to hold long-term leases. The National Investment Commission oversees and monitors investments, and the 2010 Investment Act sets minimum capital investment thresholds for foreign investors. Businesses must register with the Liberia Business Registry, and investment contracts are reviewed by the Inter-Ministerial Concessions Committee and sometimes the Ministry of State for Presidential Affairs.
Liberia has bilateral investment treaties with France, Germany, and Switzerland, and enjoys preferential access to the U.S. market under the Generalized System of Preference (GSP) and the African Growth and Opportunity Act (AGOA). However, there is no bilateral taxation treaty with the U.S., although a treaty exists for shipping and aircraft earnings.
The report details Liberia's legal regime, noting that while companies are required to adhere to International Financial Reporting Standards, enforcement of national laws and international standards is inconsistent. The legal system operates under both common law and local customary law, leading to conflicting decisions and delays. The lack of antitrust laws and ineffective competition oversight further complicates the business environment.
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Property rights are protected under Liberian law, but enforcement is weak. Foreigners may lease land, but land ownership remains restricted to Liberians. Intellectual property rights are also weakly enforced, with many infringements occurring openly.
The financial sector is underdeveloped, with a limited capital market and a banking sector facing liquidity issues and low public confidence. The Central Bank of Liberia regulates the sector, but many foreign investors prefer obtaining credit from foreign banks. Liberia permits 100 percent repatriation of funds and has no restrictions on foreign exchange, though its financial sector remains vulnerable to shocks.
Liberia does not maintain a Sovereign Wealth Fund or similar entity, and state-owned enterprises, which cover various sectors, often face calls for dissolution or privatization. The report concludes that while Liberia presents significant investment opportunities, addressing corruption and infrastructure deficiencies will be crucial for realizing its full potential.
