-Liberia Institute of Public Integrity’s Policy Howler
(A Rebuttal To LIPI’s Analysis)
I have been keenly following in recent weeks the work of a self-styled Liberian Diaspora-based “think tank”, Liberia Institute for Public Integrity. A keen watcher of political developments in the country and an avid follower of policy debates, I was fascinated by the emergence of a new group that would not only hold the government to check and ensure proper accountability, but would provide the required policy options and alternatives necessary to address some of the issues we are faced with today.
So, when LIPI was announced to the world, and upon reading the preamble of their first policy disposition, I was momentarily seized in excitement and knew the missing policy void had been filled-a serious policy forerunner was in the making, to follow each and every step of our government and keep their feet to the fire, much like some civil society groups have been trying but struggling to sustain.
In a bolt of few terribly agonizing minutes, my excitement was dead on arrival. By the minute I had completed the first policy paper, dubbed “US$2.02 Billion Spent By Sirleaf Administration: No Accountability of Funds”, I was left wondering, why would serious minded people, pen their names to such poorly constructed, viciously designed and intellectually barren piece of showmanship.
Then came in quick succession the second article “Liberia’s GDP Paradox: Looking Beyond the ‘Fastest Growing Economy’ Public Relations”, much rushed, also poorly written and on close scrutiny seemed initially designed as an opinion piece but packaged for news scripting and airing. Thenand there I knew, LIPI was a disaster unfolding.
In this article, I have tried deliberately to avoid the names of the key actors behind the group and whatever motives they might hold for the single most important reason, that this platform could still prove useful provided the organizers think more strongly on issues they might want to engage, the timing of those engagements and improving the quality of research and efforts placed into a work of such magnitude, especially with reputations clearly on the line.
Of concern also, is the seeming contradictory assertion that LIPI is “non-partisan and independent”, when all the evidence in both work point clearly to a partisan agenda.
We begin with the first article ““US$2.02 Billion Spent By Sirleaf Administration: No Accountability of Funds”. Under this “policy paper” the group misses an important opportunity to sell itself as a strong policy “think tank” by failing to provide a fair and consistent analysis that would enlighten readers to draw conclusions for themselves. The caption of the paper is a conclusion in itself, not supported in any measure by substance found in the text. The caption, therefore, makes the paper a bit confusing and at best deceptive.
In the methodology and approach, the group did a yeoman’s job scanning through all the fiscal reports and outturns and on my own elementary calculations of those revenue figures, the two billion dollar reference in their paper is not in doubt. I am just left to wonder, why would a non-partisan and independent “policy think tank” fail so miserably in satisfying other critical requirements for drafting a good policy paper? Though the group cited missing information on the Ministry of Finance website, it made no mention of conducting any interviews or requesting any information, or inquiry from the authorities. I would want to believe, a government functionary consistent with Liberia’s Freedom of Information Law is under obligation to deliver such records once requested. So, the internet based desk review fell short of providing all the required information needed to do a truly “independent and non-partisan” analysis. Alternatively, and from a truly unbiased point of view, the very missing fiscal reports 2009/2010 and 2011/2012 can be found in the 2012/2013 approved budget on the same website.
So, we have a policy paper, developed by a think tank that fails to speak to the authorities holding the information, fails to seek information where not publicly available, and fails to conduct other secondary research. I maintain it was necessary for the think tank to conduct key informant interview to avoid the confusion created in paragraph 7 of their policy paper cited below and to show some semblance of credibility.
“We further analyzed the budgets and fiscal reports in an attempt to determine any inconsistencies in the figures being reported so that we can get a more accurate number. For instance, we found that the actual revenue reported in the 2012/2013 Annual Budget for Fiscal Year 2010/2011 was US$393.13 million. In comparison, the fiscal report for 2010/2011 showed actual revenue of US$389.3 million. There is a difference of US$3.83 million between the numbers reported by the former minister of finance and the amount reported by the current minister of finance for the same period, without any explanations.”
On account of our research, it seems the explanation provided by the authorities for this disparity makes far more sense than the confusion the author sought to create by failing to seek clarification. We have found that the difference in the amount account for vendor shares. According to government sources, during the period of the FY10/11 budget and at the end of the FY09/10 budget, the Government of Liberia out sourced the printing of driver license, car license plates, and residence permitsto private businesses operating within Liberia that had capacity to pre-finance these contracts.
Consequently, the US$393.13m represents gross actual revenue collection on the Tax Administration System which included up front deduction by the banks in favor of the vendors procuring the plates and various permits, consistent with the MOU signed between the Ministry of Finance and the Vendors. The US$389m contained in the fiscal outturn represent the actual revenue out of the US$393m that was used to finance government expenditures. Just a single phone call was sufficient to provide the context and clarification required.
“We also obtained the figures reported in the “Consolidated Fund Statements,” which has not been published on the Websites of the Ministry of Finance. The figures reported for revenue in 2010/2011 was $384.10, while the figure reported for the same period in the budget for 2012/2013 was $393.13. This means that the current minister has reported two figures for the same period for actual revenue, creating a difference of $9.03 million (384.10 million-$393.10), without explanations. This questions the integrity of the financial information being produced by the Government.”
We found in our inquiry with authorities at the Ministry of Finance, that the difference referenced above, constitutes the reconciled FY09/10 cash carry forward of US$10.7m which is indicated in footnotes on the same page of the report referenced by LIPI.
I am left baffled why would a report authored by LIPI and prepared on the personal computer of former Auditor General John Morlu (see file properties for authorship), would pretend not to understand or know how government financial reports are prepared. But using the point as an attack weapon, LIPI questions the integrity of government financial information, but yet failed to read the material properly.
The State-Owned Enterprises Gaffe
On more substantive issues, the group charges that the Sirleaf Administration has raised over 2 billion without accountability and further asserted that the amount excludes contribution from state owned enterprises. An additional thirty minute research would have helped LIPI avoid this horrendous miscalculation.
As a matter of fact, most, if not all of these state-owned enterprises contribute to the national budget. On close scrutiny, there is a revenue line in the revenue budget as per the revenue code titled “dividend from government owned enterprises” that captures all of the payments made by these entities. Though the budgetary contributions from these entities have not been consistent over the 7 year period mentioned in the report, nevertheless, these entities made contribution to the national budget amidst their own challenges for investment capital to expand their operations after more than two decades of mismanagement and decline.
Total budget support from LPRC over the 7years period amounts to US$7m, while NPA brought roughly US$500k, NOCAL about US$8.9m. FDA does not pay dividend, but overall forest revenues generated over the same period amounts to US$32m to name a few.
LIPI 3.4 Billion Budget Mirage
“Prior to the Chevron and Exxon Mobile concessions in the oil and gas industry, the President announced during her 2010 State of the Nation Address that the Government of Liberia has signed US$16 billion in Concessions agreement. That number is now being boasted at US$20 billion in investment. All things held constant, the administration is expected to collect and expend another US$3.5 billion, with very minimal oversight.” The assertion is interesting and brings to light two issues. First, the injustice the writers have done by not doing their homework in properly projecting and by making loose and lazy endnotes. The phrase “all things held constant, the administration is expected to collect and expend another US $ 3.5 billion, with very minimal oversight” is lost. What is very minimal oversight? Who is overseeing who, and what does this mean?
Further to this, the assumption that revenue would grow in this order is pathetically erroneous. Even for a non-financial expert like me, I do know for a fact that government revenue assumptions are not based on a straight line approach of the calculations, instead assumptions are based on existing economic realities which are subject to changes year on year.
The assumption that the resource envelops will remain at US$672m for the next four year is very wrong and exposes the writer’s lack of understanding of revenue projections. For example the FY13/14 draft budget which has been submitted to the National Legislature is US$553m based on existing economic realities during the execution of the FY12/13. The draft FY13/14 is about US$120m short of the previous FY12/13 US$672m approved budget. So, on this year-on-year projection, there is a no way revenue will grow in the order described in the LIPI policy paper.
The 2 billion, No Accountability Storyline
This is the plot that LIPI lost even before it started. On reading the heading of the article (not policy paper), I was desperately seeking to unearth the accounting disaggregation showing lack of accountability for this massive volume of money. But I was disappointed as I could not find a single line in the entire policy paper supporting this assertion.
I am left wondering if the original policy draft was tempered with, or if this is a finished scholarly work. Let’s start running some numbers in further analyzing LIPI’s point. First, when LIPI says “no accountability”, I am refusing to interpret this to mean, the Sirleaf Government raised $2 billion in seven years and stocked pile those funds and have not spent a dime. I am being liberal to think, LIPI is saying the government has not shown how this money (huge of course, and we should credit the Sirleaf administration for raising this much) has been spent.
But if we hold the assumption, that the latter is LIPI’s primary inquiry and not a conclusion (quite contrary to the report headline though), then LIPI did a massive disservice as an independent and non-partisan think tank for failing to seek information on how these funds had been used over the seven years, assuming the information is not already available.
I have taken the liberty to help LIPI, given the relatively long distance barrier between the frontrunners of the group and authorities on the ground. Below is a breakdown of the spending by functional classification:
Employee’s compensation – US$724m; civil servants minimum salary payment increased from US$12 to about US$125 over the seven years period.
Payment for goods and services – US$534m; the effective operations and running of government offices was lacking before the inception of the Sirleaf administration and with the infusion of these funds, all functionaries are properly functioning. Prior to the Sirleaf administration, only few government ministries and agencies especially the Executive Mansion and certain floors of the ministries of Finance and Foreign affairs, Office of the Speaker and Pro-temp, the vice President Office, etc had constant electricity, computers, operational vehicle etc. Now over the period of the 7years, all spending agencies of government through the budget have functional facilities that are fully operational.
Transfers and subsidies for the operation of Health, education and social services institutions- US$455m; all the major hospitals, clinic, health centers, govern schools, universities, technical colleges across Liberia were supported through the budget over the past 7years despite being supported by the donors. Some of the hospital and clinics that were fully supported by our international partners were turned over to the government of Liberia two years before the end of the President first term in 2011. Included in this figure also is the payment of the county development funds (US$1.5m per and about US$21m for 7 years) and the various social development funds averaging about US$9m per year and totaling about US$63m over the seven years period.
Interest and Charges (Domestic and foreign debt servicing)- estimated at US$87m: The writers again did not do justice to the readers when they decided to withheld information on government debt servicing initiative over the 7years period. Despite Liberia reaching the HIPC completion point in 2010 where about US$5b stock of external debt was waived, there are still debts on the government books that need to be serviced through interest and principal repayments. Those debts include domestic, external, banking charges from the CBL central bank which include government contribution to the recapitalization of the CBL.
In addition to capital investment of over 300 million, targeting roads, bridges, electricity and other infrastructure, one is left wondering what on earth were the drafters thinking when they made the “no accountability” statement.
Structure, Content and Linkages
The LIPI report cannot be deemed a policy paper but could rather pass for an opinion or op-ed. The structure, content and linkages took away a lot from the quality of this material. A whole host of irrelevant citations, at one point taking up to one full page of literature, as the author struggled to draw relevant connection to contemporary Liberian issues. Most of the research, especially those attributed to foreigners, appears to be a Google key word search cut and paste.
A further detailed review of the paper shows that the authors were afraid of performing real analytical work and decided to choose the low path of attacking the President and her family. For example, rather than provide analysis on the funding received from Trust and Foundations in general, the authors selected to focus on the first family when the true record is that some of the authors run organizations in Liberia that received funding from Foundations in different parts of the world. Calling for the President and her Son to publish income from donation sources is a good beginning in driving accountability but NGOS, led by some of the forerunners should themselves publish their annual financial statements and open their organizations for scrutiny.
I intend as of this writing, to do a Freedom of Information Request asking some of these NGOs to provide accounting spreadsheets and paper-based receipts of their dealings with donors. This is real transparency and I hope the request for information would be granted.
The second policy paper was boring, ravaged with irrelevant citations taking close to half of the nine-page press statement. But the critical issues raised in the release was that the World Bank and IMF were running a public relations campaign by citing Liberia’s 7.5% GDP growth and by extension the Ministry of Finance was trumpeting this figure as an achievement. It further went to claim hysterically, that the economy under former President Taylor won the GDP context, as it grew over 106 percent.
My first impulsive question would be, what if Liberia had recorded half that amount in GDP growth, would LIPI pounce on that as a poor performance and a regression from the previous period or would LIPI downplay the lack of performance, as GDP itself is not an accurate measure of a country’s economic prosperity?
Also, it is an elementary economic principle that GDP is not the only measure of economic success and widely accepted theory that a much more people centered approach to growth calculation needs to be developed. Nevertheless, GDP still remains the universal and widely known standard for measuring economic growth and stability.
Therefore, I see LIPI’s reaction to the GDP story as an unfair and misplaced attack. First, Minister Amara Konneh is quoted by the very LIPI as saying “…while growth in gross domestic product alone is not sufficient to ensure strong and equitable development, it is encouraging; it shows that the overall health of the economy is good” but he still takes bullets for making a clearly unselfish, unscripted, fair and reasonable statement of fact.
On the Taylor GDP question, the writer deliberately avoided context and chose to present a much skewed picture of the GDP situation. He even failed to provide supplementary data from the same website he visited, “http://www.tradingeconomics.com/liberia/government-debt-to-gdp”, that would have shown a better context to the percentages and the numbers he had presented. For starters, it is important to note that even before Taylor took over, growth was in free fall during the Doe era. With the war years factored in and the election of Taylor in 1997, there was virtually no serious economic restart, though the economy was thriving and did register some positive growth.
The 106% in question was generated on account of the resumption of major economic activity and merely stabilized the economy. With Taylor first national budget somewhere in the region of a meager 32 million dollars, and considering the war years, it was crucial to calibrating all the wheels of industries. But the fact remains, this economic rebound was nominal, as the writer would agree the country was far worse off than it is today.
But what was the actual GDP in dollar value and volume of economic activity, the writer did not say. What is the relationship between a country’s GDP and its GDP to debt ratio? The writer chooses to deliberately ignore these ancillary facts, to support his skewed argument. Burdened by debt, our debt to GDP ratio in 2004 stood at 1087, compared to 44.9 in 2012.
It is instructive to note that the debt-to-GDP ratio is one of the indicators of the health of an economy. “It is the amount of national debt of a country as a percentage of its Gross Domestic Product (GDP). A low debt-to-GDP ratio indicates an economy that produces a large number of goods and services and probably profits that are high enough to pay back debts”.
By and large, I think our friends in the diaspora missed the plot and exposed their agenda a little more too early. They are appearing as attack dogs and propaganda machinery desperate to pounce on any opportunity to discredit the current government. Liberia is not new to these external aggressions by its own citizens in forced and sometimes self-imposed exile, but the intellectual and non-partisan banner under which they want to appear is deceptive and hypocritical. The two papers should have been an introduction for LIPI on the policy stage but I am afraid, it has cost their credibility dearly, and a lot more scrutiny will follow on their subsequent releases.