Private Sector Development A Key to Nation Building and Sustainable Peace in Liberia
This paper discusses Private Sector Development as a key to nation building and sustaining peace in post war Liberia. Private Sector Development is a strategy for promoting lasting peace through economic growth in Liberia by incorporating private industry and competitive markets into our country’s overall development framework. The private sector can alleviate poverty by contributing to economic growth, job creation and providing a source of income for poor people. It can also empower poor people by providing a broad range of products and services at lower prices. Small and Medium Enterprises can be the engines of job creation, seedbeds for innovation and entrepreneurship. But in many poor countries like Liberia, small and medium enterprises are marginal in the domestic ecosystem. Many people operate outside the formal legal systems, contributing to widespread informality, a perception/treatment as illegal which results to lack of expansion and low productivity. They lack access to protection, financing and long- term capital, the basic foundation of multinational companies. This paper addresses Private Sector Development in Liberia and its strategies and objectives.
Overview of Liberia and Its Private Sector
Liberia is a rather strange place. It should not be a poor country, but it certainly is. For a few years in the 1970s, Liberia’s per capita income was equivalent to that of Japan. Liberia is now ranked by the World Bank as one of the poorest countries on the planet unlike Japan who is doing extremely well economically. Liberia needs peace and stability, not only to protect human rights and make for a better life for citizens, but also to allow economic progress to take place.
Liberia’s Political Risk rating has improved again, while the country rating deteriorated in the World Bank Group’s Control of Corruption rating. According to the Index of Economic Freedom, who ranked Liberia for the first time in 2011, the government is committed to private sector development. However, weak capital markets, outdated laws impeding investment, and rampant corruption are serious deterrents to entrepreneurial activity and business growth.
According to the 2009 Enterprise Surveys, access to finance, corruption, crime, theft and disorder are the major constraints to doing business and investment in Liberia.
Liberia jumped 10 spots in 2010 “DOING BUSINESS RANKING”. This is due to improved scores in four indicators, especially a substantial jump in the Dealing with Construction Permits indicator. According to 2011 report, the time it takes to obtain a construction permit has been reduced from 321 to 77 days and the cost, while still high; it is almost at a third of what it was the previous year.
There are two major issues affecting the business climate in Liberia — regional and internal instability and widespread corruption. After fourteen years of civil conflict in which the country’s infrastructure and institutions were virtually destroyed, followed by high wave of crimes in some parts of the country, investors are wary of making large capital investments. Bilateral and multilateral sanctions imposed on Liberia during the civil conflict also had significant impact on the Country. Investors’ concerns are also exacerbated by the presence of armed security forces in and around the capital city, Monrovia, and by their poor past human rights record.
The Liberian government has made little effort to address corruption in any sector. Investors find the bureaucratic red tape daunting, the requests for bribes overwhelming, and the contracts made in Liberia difficult to enforce. In the past, there has been interference by the executive branch in the workings of the Judicial and Legislative branches of Government. In some cases over the past several years, judgments by the Supreme Court of Liberia, the highest court in the land, were not carried out because of presidential interference.
For the Liberian Private Sector to better serve the poor, the challenge is the creation of a more enabling business environment that can increase the capacity of the formal sector to create more jobs, especially lower- qualified but better paid jobs especially in the agro- manufacturing sector. By putting in place a concrete and attainable policy framework that also encourage SME’s to transition from the informal sector to the formal sector, because this will increase productivity and trade options between Liberia and neighboring countries.
Seen from many factors, it is not growth per-se that is an issue in Liberia but shared growth. Especially, growth that is inclusive of all major sectors and labor intensive sectors in general, resulting in broad based job creation, greater and wide spread income generation activities among all sectors of the Liberian population.
Private Sector Development Strategy for Liberia
Private Sector Development is a strategic tool for nation building and sustaining peace in Liberia by promoting economic growth in the Country. This can be achieved by incorporating private industry and competitive markets into our country’s overall development framework. Supporters of this approach argue that Private Sector Development is an important part of poverty alleviation. They further argue that the Private Sector can go a long way in developing countries towards the provision of basic services, empowering the poor by improving quality and access to health services, education and infrastructure. Strategies and best practices for ensuring Private Sector Development is a popular topic among policy makers.
Any approach to Private Sector Development, the policy and action recommendations that follow it should be grounded in the realization that, savings, investments and innovations that lead to development are undertaken largely by private individuals, corporations and communities.
The Private Sector can alleviate poverty and sustain peace by contributing to Liberia’s economic growth, job creation and provision of income for poor people. It can also empower poor people by providing a broad range of products and services at affordable cost.
Small and Medium Enterprises can be the engines of job creation, seedbeds for innovation and entrepreneurship. But in many poor countries Liberia included, small and medium enterprises are marginal in the domestic ecosystem. Many people operate outside the formal legal systems, contributing to widespread informality, which results to them been treated as illegal with a direct results of low productivity and limited expansion capacity. They lack access to financing and long- term capital, the base that multi-national companies are built on.
Part of the many responsibilities of governments in developing countries includes creating the conditions that make it possible to secure the needed financial resources for investment.
These conditions including, the state of governance, microeconomic policies, public finances, the financial system and other basic elements of a country’s economic environment are largely determined by the actions of domestic policy makers. Their challenge is to capitalize on advances in the macroeconomic stability and democracy and to launch reforms that bring about further changes in institutional frameworks to unleash and foster the private sector growth and development.
Most of the recommended actions involve more than one actor working together. Where government is implementing policy change, it is often with the direct support and involvement of multilateral development institutions. Where the private sector is taking a more active stance on sustainable development, it is often civil society raising the profile of this issue. Where government is implementing regulatory reforms, it may be in direct consultation with representatives of the private sector.
The overall goal of stakeholders in this initiative should be to facilitate linkages between large businesses, potential investors, and Small Medium Enterprises (SME’s) and facilitate the development of new products and services that lead to more equitable job creation. The below bulleted points are essential in the achievement of this goal:
• Stakeholders should use their position to facilitate the formation of broad based Pro-Poor Partnerships with the general perception of it, as a neutral and fair broker in the development of a robust private sector development strategy for Liberia in partnership with other economic development agencies active in the country i.e. UNDP, UNIDO, ILO, IFC, IMF, World Bank, USAID etc.
• They should champion the attraction of needed investments especially Foreign Direct Investment (FDI) including the creation of investment incentives by the Government of Liberia, which appeal to investors.
• Policy makers should advocate for the creation of microfinance/inclusive finance policy and enabling SME development policies including their regulation.
• Policy makers should take the lead in engaging the private sector with the expansion into rural areas for the purpose of pro-poor and total development which will enable decentralization of economic activities.
• Policy makers should advocate for more investment in those sectors that bring in value added instead of mere commercial returns. Because this will bring in more return on investment and create more jobs, which are all essential in nation building and sustaining peace.
• Policy makers should campaign for outward growth strategies including export oriented SME’s, because this will increase the amount of moneys coming in from other countries and will subsequently increase trade and foster development.
• The Private Sector through its representatives should partner with policy makers to advocate for the development of agro-manufacturing industries through agricultural incubators.
• Policy makers should create the environment that will appeal to businesses to increase value chains and make necessary the frame work for access to international and regional markets for SME’s.
• Policy makers should take the lead in promoting Pro-Poor (Public and Private Partnerships).
• Policy makers should advocate for the Incorporation of gender in all development strategies. Because this will create an enabling environment for each and everyone, which leads to lasting peace.
• Policy makers should advocate for the absorption of internally displaced people and ex-combatants in all productive sectors of the economy. This is essential in maintaining the peace we enjoyed today and to avoid recurrence of the 14 years civil crisis. This point is very essential in nation building, because when people are marginalized for too long enough, they resolve to uprising as a final way out.
• Policy makers should work on reversing the collage curriculum to enable collages provide the needed skills for the job market
In conclusion, a good starting point for all this to happen is for Stakeholders to immediately start discussions with all other economic development players identified in this document and active in Liberia, to develop a robust Private Sector Development Strategy into which all the major players in Liberia’s economy including the Government should be fully consulted and their buy-in enlisted.
This is what needs to be done as a starting point of this huge but very important task of rebuilding Liberia and sustaining the peace. The Private Sector Development strategy should include outward growth strategies such as regional and international trade. It is paramount that stakeholders see reasons to start the process of funding and technical assistance, to enable the Private Sector Development Strategy process start without any further delay; because Liberia is at a very crucial point. This is necessary to keep us on this pace of rapid development and peace. It is also important to ensure that all strategic partners be part and parcel of this process right from the start.
Written by Mr. Michael Fallavius Fayiah a Senior Student of the African Methodist Episcopal University reading Economics and Accounting. Mr. Fayiah is a Trained Entrepreneur, with emphasis in Business Concept Development/Planning. Cell#:+231-(0)886-598-014 /Email:firstname.lastname@example.org
NB: This paper was initially presented by Mr. Michael Fallavius Fayiah at the 43rd Annual Conference of the Liberia Studies Association in 2001 held at the North Carolina Central University, Durham, North Carolina, USA, through the kind sponsorship of Her Excellency Madam Ellen Johnson-Sirleaf, President of the Republic of Liberia.