By Peter Forkpayea Zogolee Zaizay, Contributing Writer
Email: peter011066@gmail.com,p_zaizay@yahoo.co.uk
Empirical Research and studies have shown that Foreign Direct Investment (FDI) supported by minimum tax exemption can jump start the Liberian Economy, spur growth and engender a dynamic democratic development in Liberia.
Studies from developing countries have revealed that a Foreign Direct Investment/FDI, solidly anchored on a Public-Private Partnership/PPP in Liberia with a single currency regime can jump start the Liberian Economy by creating jobs and increasing incomes.
This will require making some hard and difficult to make decisions by our national policy decision makers. The hard and difficult to make decisions will include single currency regime in Liberia in favor of the Liberian Dollar. This decision is very much important to make, because in the history of Liberia, the Country has suffered and continues to suffer the devastating effect of the use of the US Dollar as legal tender in its development.
Cases in point are the 50s, 60s, 70s and 80s, when our extractive industries were booming; but because our currency was the US Dollar, Capital flight undermined the development of the Country.
So, the idea is that since the US Dollar is not the currency of Liberia, and the CBL is not a subsidiary of the Federal Reserve Bank of the United States of America/The US, nor is Liberia a member state of the US, it is very much important that the US Dollar be kept in the Banks and control there from for both macro and micro economic stability in Liberia.
It is very much important for Liberia to take pride in its own currency to finance its democratic development programs. The strength of every currency in the world is the strength of the faith and confidence of its people or subjects in the currency; which is part of the patriotic call to duty by citizens.
The second hard and difficult to make decisions is/are the need to encourage foreign direct investments/FDI in Liberia with definite period of tax exemption from 5 – 10 years. This will help the country to form the needed capital to finance development. This decision should be supported by a strong public – private partnership/PPP as the foundation and anchor on a single currency regime.
The third hard and difficult to make decision is the development of the national insurance industry, because in economics, insurance is not only a function of investment, but a saving on investment, as it helps to generate high revenue and form capital in a country’s economy.
It is a system wherein the healthy pay for the sick, the living for the dead and the effective for the defective vehicles, etc. This leads to fast turnover in terms of revenue generation. The Insurance Industry in Liberia is either neglected or under supported by the national policy decision makers in their financial and economic management decision making processes.
The fourth hard and difficult to make decisions is/are the recapitalization of development banks in the Country to include the Housing and Savings Bank, that will finance infrastructural development such as housing, roads, energy, transport and telecommunication, etc in Liberia; and the Agriculture and Cooperative Development Bank, which will finance agriculture and cooperative development, to enhance capital formation in the economy in order to stimulate economic growth and development in the Country. The Europe and other dormant banks will help to finance the financial and capital markets when recapitalized.
The recapitalization of banks can be made possible through FDI and PPP, when a decision is made on them, and I think the IMF and the World Bank as well as other International Intergovernmental Banks such as AfDB, IFC,etc should lead on this effort.
Useful lessons can be learned from economically thriving societies like China, Singapore, India, Malaysia, Indonesia, etc to inform these hard and difficult to make decisions in Liberia.
These hard and difficult to make decisions can be supported by telling our extractive industries and concessions to establish factories, and/or industries to add value to our resources for export to enhance trade and generate the much needed foreign exchange to promote economic growth and development. It will also help to develop and enhance both our comparative and competitive advantages in trade and development.
These hard and difficult to make decisions will enlarging the our tax or revenue base by creating more jobs through the attraction and deployment of skills, talents and professional expertise developed from our educational and training institutions.
In addition to value addition to our natural resources on the part of our concessions in the extractive industry of our economy, a foreign exchange surrender scheme should be put in place like in the 80s for concessions in the extractive industries in order to change the figures of our growth rate to double digits.
History has shown to us that foreign exchange surrender scheme was made possible in the 1980s; which helped to pool resources in order to stabilize the currency regime by creating a one-to-one parity between the US and Liberian Dollars and reversing capital flight and incentivizing investment in Liberia. This can still happen if we can make the hard and difficult decisions for Liberia’s development.
Another hard and difficult to make decisions is the need to make the Freeport of Monrovia and its subsidiaries to live up to its true meaning by investing in the blue economy of our Country to promote trade.
The Freeport can promote trade by reducing taxes or revenue on imports in favor of transshipment within the MRU with nearly 50 million people, so that goods and services can be made available to rural parts of the MRU countries and in the wider ECOWAS countries, with over 300 million people.
Another hard and difficult to make decision is the need to reform, restructure and incentivize as well as establish an effective and efficient management system of our SOEs so as to enable them to compete in the market place within the Liberian Capitalist Economy so as to move the Liberian Economy from a rent-seeking mercantilist economy to a truly capitalist market economy, where competition can be promoted between public and private sector institutions, in the delivery of goods and services.
The State Own Enterprises/SOEs are not only in ruins, but are suffering from neglect and in dire need of support and/or incentivization for recovery or resuscitation with a focus management in order to contribute to a sustainable national economic growth and development.
Key governance policy development for the reform and restructuring of the SOEs, like the UNMIL did with the security sector/SSR is not only important, but imperative to jump start the Liberian economy. A whole of society approach policy framework is hereby recommended to reinvigorate our SOEs.
This kind of governance policy approach is not only inclusive and social justice in nature, but socially just and participative. As we are, it is the policies of exclusion and social injustice that are at the core of our problems of national development and subsequently led to our fratricidal civil conflict.
The SOEs under a new reformed and restructured agenda and/or mandate can generate revenue or make profits for the government presiding over the state to assist it finance its national development imperatives-especially in the areas of insurance, energy, transport( land, sea and air), environment, and telecommunication infrastructures, etc, as well as create jobs for young professionals that have been trained by our academic, professional and technical institutions to include enlarging the revenue bases of our national economy to spur growth and development.
We think that Liberia’s investment development priorities should not only be focused on the 3.5 to 4 million Liberians, but the over 50 million people in the Mano River Union/MRU and the over 300 million people of West Africa, which will help us to attract huge turnovers from trade and other development economic activities.
These hard and difficult to make decisions can be made possible if we as a nation-state, people and government can take the hard and difficult to make decisions to include nationalization of concessions that will pose threat, undermine or challenge our drive to sustainable economic growth and development. Such concession(s) become part of our SOEs and managed by Liberians.
The primary focus, objective or responsibility for the political economy of any society, state or government is to create wealth and distribute that wealth equitably. The wealth is distributed through trade in the market and under the price system.
This is why; every society, state or government should obligate itself to identify a viable economic option or mode of production that will enable it to not only produce wealth for its people, but to equitably distribute said wealth through an acceptable, fair and just price system. Tolerance should be the hallmark of any democratic governance system.
It is these economic growth models or theories that can generate the figures or numbers to inform wealth creation and the measurements for economic development decision making.
To conclude, value addition is key in Liberia’s economic recovery programs as it will create both wealth and equitable distribution mechanisms in the forms of jobs and incomes and spur growth and enhance the development of Liberia, as well as sustain a single currency regime; which is the lead hard and difficult to make decision for the development of Liberia.
Therefore, any concession or investment enterprise in Liberia that will oppose value addition in the Liberian Economy should be considered as an enemy to Liberia’s progress and said concession should be seized and nationalized as well as operationalized and managed as an SOE by Liberians for the Country’s social and economic development.
As President Donald Trump of America talks about “America First”, it must also be “Liberia First” in Liberia, if we must succeed in our economic development agenda.
About the Author:
Peter Forkpayea Zogolee Zaizay is former Deputy Commissioner General in Charge of Administration, Liberia immigration Service/LIS, Republic of Liberia,