J.2_Agenda_For_Transformation-_April_15,_2013.pdf

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 i ii REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

TABLE OF CONTENTS

Letter from the President……………………………………………………………………….viii

Table of Contents ............................................................................................................................................... i

Figures….. ..........................................................................................................................................................v

Tables…………...............................................................................................................................................vii

Acronyms ..........................................................................................................................................................xii

Executive Summary .......................................................................................................................................xvi

SECTION I: History, Current Context, and the National Vision

Chapter 1. From Recovery to Inclusive Growth and Wealth Creation

1.1 Introduction

1.2 Historical Issues Around Growth and Inequality In Liberia

1.3 Achievements of the Recovery Phase—the Foundations for Inclusive Growth

1.4 Remaining Binding Constraints to Growth

Chapter 2. Liberia RISING 2030—Achieving Middle Income Status

2.1 Introduction

2.2 The National Vision of Middle Income in the Context of Liberia

2.3 The Path to Middle – Income Status

Chapter 3. Geography, Population, Demographics and Poverty

3.1 Introduction

3.2 Geography

3.3 Population and demographics

3.4 Demographic Projections

3.5 Dimensions of Poverty in Liberia

3.6.

Other Dimensions of Poverty

Chapter 4. External Environment: Opportunities and Challenges

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 iii

4.1

Introduction

4.2.

Opportunities FROM the External Environment

4.3.

Challenges Posed by the External Environment

SECTION II: Medium – Term Growth and Development Strategy

CHAPTER 5. Developing Liberia’s Growth Strategy—Method and Process

5.1 Introduction

5.2 The National Vision: Liberia RISING 2030

5.3 Medium-Term Growth and Development Strategy (AfT)— Development Process . 30

CHAPTER 6. Experiences and Lessons Learned From the Lift Liberia PRS

6.1 Introduction

6.2 Summary of Lessons Learned from the Lift Liberia PRS

6.3 Implications for the Agenda for Transformation

CHAPTER 7. Objectives and Structure of the Agenda for Transformation

7.1 Introduction

7.2 Objectives of the Agenda for Transformation

7.3 The Structure of the Agenda for Transformation

CHAPTER 8. Pillar I—Peace, Security and Rule of Law

8.1 Security

8.2 Peace and Reconciliation

8.3 Justice and Rule of Law

8.4 Judicial Reform

8.5 Capacity Development Needs and Opportunities for Security Sector

CHAPTER 9. Pillar II—Economic Transformation

9.1. Private Sector Development

9.2 Macroeconomic Issues

9.3 Infrastructure

9.4 Agriculture and Food Security

9.5 Forestry—Development and Protection

9.6 Mineral Development and Management

9.7 Capacity development Needs and Opportunities for Economic Transformation Sectors

CHAPTER 10. Pillar III—Human Development

10.1 Education

iv REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

10.2 Health and Social Welfare

10.3 Social Protection

10.4 Water, Sanitation and Hygiene (WASH)

10.5 Implications of the Human Development Strategy for Other Pillars

10.6 Capacity Development Needs and Opportunities for Human Development

CHAPTER 11. Pillar IV—Governance and Public Institutions

11.1 Political Governance

11.2 Public Sector Modernization And Reform

11.3 Economic Governance

11.4 Capacity Development Needs and Opportunities for Enhanced Governance

Chapter 12. PILLAR V—Cross-Cutting Issues

12.1 Gender Equality

12.2. Child Protection

12.3 Persons with Disabilities

12.4 Youth Empowerment

12.5 The Environment

12.6 HIV and AIDS

12.7 Human Rights

12.8 Labor and Employment

12.9 Capacity Development Needs and Opportunities for enhanced Cross-cutting Strategies

12.10 Cross-Cutting Issues and the Strategy Pillars

12.11 Conclusion

Chapter 13. Costing of the AfT

13.1

Introduction

13.2 Approach, Methodology, Assumptions

13.3 Summary of AfT Costs

13.4 Costing of Priority Interventions

Chapter 14. Macroeconomic Policy Framework

14.1 World Economic Outlook

14.2 African Economic Outlook

14.3 Liberian Economic Overview

14.4 Sources of Growth in Liberia

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 v

14.5 Potential Risks

14.6 Government Finances

14.7 Government Borrowing and Fiscal Rules

Chapter 15. Implementation Strategy

15.1 Organizations Leading AfT Implementation

15.2 The New Deal for Engagement in Fragile States

15.3 Institutional Framework for Implementing the AfT

Chapter 16. Monitoring and Evaluation Strategy

16.1 PRS I M&E Experience: Key Challenges and Lessons

16.2 Policy Framework and Guiding Principles of an Enhanced M&E Strategy

16.3 Objectives of an Integrated Results-focused M&E Strategy

16.4 Links Between MTEF/Budget and AfT Monitoring

16.5 Scope and Design of the Integrated M&E System

16.6 Main Content and Function of the Monitoring Plan

16.7 Geographical and Stakeholder Aspects

16.8 Evaluation Aspects

16.9 The M&E Institutional Arrangements and Roles

16.10 Institutional Framework: Roles and Responsibilities

16.11 Progress Reporting, Reviews, and Communication Strategies

16.12 Utilization, Communication, and Dissemination Strategy

ChAPTER 17. Risks and Mitigation Strategies

17.1 Mitigation Strategies

FIGURES

Figure 1.1: Key Events in History and Real GDP

Lack of access roads and bridges reduces competitiveness of otherwise potentially attractive sectors

Figure 3.1: Counties in Liberia and the Spatial Distribution of Population, 2008

Figure 3.2: Percentage of Households with Essential Assets Deficiency by County

Figure 5.1: Relationship Among the Planning Tools

Figure 5.2: Results Framework for the Agenda for Transformation

Figure 12.1: Cross-cutting Issues: Special Poverty Problems

Figure 12.2: Cross-cutting Issues and the Growth and Development Pillars vi REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

Figure 12.3: Categories of Cross-cutting Issues and Nature of Interactions: Human and Non-human Issues

Figure 13.0: AfT Investments in US$ Millions

Figure14.1 Values of Net Exports

Figure 15.1: Pillar Alignment with the New Deal PSGs

Figure 16.1 Integrated Aft-MTEF-NCDS Monitoring and Planning

Figure16.2. The Results Chain for Liberia

Figure 16.3: Overview of the Integrated M&E System

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 vii

TABLES

Table 1.1:

Remaining Constraints to Growth: Diagnostics Matrix

Table 2.1: Countries that Crossed into Middle-Income, 2000–2011

Table 2.2: Liberia, LICs, and Countries that Crossed to Middle Income

Table 3.1: Population Trends in Liberia, 1962–2008 (census statistics)

Table 3.2: Select Demographic Features of Liberia by County

Table 3.4: Total Population under Three Different Fertility Scenarios, 2008-2038

Table 3.5: Working-age Population under Three Different Fertility Scenarios, 2008–2038

Table 3.6: Educational Sector Indicators under Medium Fertility Scenario, 2008–2038

Table 3.7: Health Sector Indicators under Medium Fertility Scenario, 2008–2038

Table: 3.3: Distribution of Poor Population by County

Table 8.1: Sector Goals for Peace and Security

Table 8.2: Goals, Strategic Objectives and Outcomes for Peace and Security Sectors by 2017 .. 55

Table 9.1: Economic Transformation Pillar Results Chain

Table 9.2: Sector Goals for Economic Transformation

Table 9.3: Summary Matrix for Economic Transformation

Table 10.1: Sector Goals for Human Development

Table 10.2: Goals, Objectives and Outcome Indicators for HD Sectors

Table 11.2: Goals, Objectives and Outcome Indicators for Governance Sector

Table 12.1: Goals for Cross-Cutting Issues

Table 12.2: Summary Matrix for Cross-Cutting Issues

Table 12.3: Summary Matrix of Cross-Cutting Issues and Growth and Development Pillars... 146

Table 13.0: AfT costs in millions of United States Dollars

Table 13.1: Costs of Priority Interventions of Pillar I

Table 13.2 Costs of Priority Interventions for the Economic Transformation Pillar

Table 13.3: Costs of Priority Interventions for the Human Development Pillar

Table 13.4: Costs of Priority Interventions for the Governance Pillar

Table 13.5: Costs of Priority Interventions for the Cross Cutting Issues Pillar

Table 14.1: Overall Economic Activity Expected During the First MTEF and the AfT Period. 166

Table 14.2: Expected Inflation Rates

Table 14.3: The Values of Exports and Imports Forecasted over the PRS Period

Table 14.4: Full Balance of Payments Data viii REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

Table 14.5: Overall Estimated Revenue Over Time

Table 15.1: New Deal FOCUS and TRUST Principles

Table 16. 1: Medium-Term Budget Framework Plan

Table 16.2: Framework Roles and Responsibilities

Table 17.1: Summary of Main Risks and Mitigation Measures

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 ix

LETTER FROM THE PRESIDENT

This development strategy, the Agenda for Transformation (AfT), is an important step toward fulfilling our government’s commitment to lift Liberians out of poverty to prosperity.

The Agenda for Transformation, our medium term development strategy, is a major paradigm shift in the history of Liberia’s development. Over the past several years, our national development agenda has been confronted by unforeseen circumstances which have required us to think harder, develop new ideas, and take deliberate actions. The Lift Liberia Poverty

Reduction Strategy, spanning 2008-2011, placed Liberia on the path of recovery. Under this strategy, we have seen big, tangible gains in the areas of peace, national security, stability and infrastructure development, among others. The onus is now on all of us to consolidate these gains, extend the impact to ordinary citizens in our towns and villages and situate the country on the path of economic transformation and inclusive growth.

This is what the Agenda for Transformation is all about. The Agenda for Transformation was developed through a country-wide participatory process involving consultations in 154 districts of Liberia. Students, youth leaders, business communities, women’s organizations, persons with disabilities, religious and traditional leaders, farmers, teachers, health workers, and local community opinion leaders participated in these district-level discussions.

During these consultations, Liberians appreciated the bottom to top approach of national development planning and spoke to rebuilding Liberia on the foundation of equality and respect for individual rights and dignity. Liberians expressed their aspirations for a reconciled society, in which each Liberian can access quality education, basic health care, and critical infrastructure, all of which would help Liberia achieve a higher standard of living.

This Agenda prioritizes the expectations and aspirations of our people expressed at those county-wide consultative meetings. Throughout this Agenda, we focus on creating more jobs, building infrastructure, generating energy, and improving the quality of life by spreading the benefits of growth to all our citizens. We prioritize the provision of basic skills to our young x REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 people to enhance their productivity for nation- and state-building. We pursue national healing and reconciliation and an open, transparent, and accountable democracy that will ensure political stability.

The Agenda for Transformation in itself will not—in the next five-year timeframe—be able to achieve all that Liberia is poised to do. Instead, it is the first step toward achieving the goals set out in Liberia RISING 2030, Liberia’s long-term vision of socio-economic and political transformation and development. The Agenda sets out specific goals and objectives that

Liberia must achieve in the next five years, moving toward a more prosperous and inclusive society. The Agenda for Transformation is consistent with the principles of the Paris

Declaration, the Accra Agenda for Action and the New Deal for Engagement in Fragile

States.

While it represents an essential step in our nation’s long-term development, the Agenda is meaningless if it is not backed by concerted actions. This is not just another document to be placed on the mantelpiece; it must be seen as a living framework for meeting Liberians’ expectations for social and economic development, sustained and accelerated growth. The challenge is to ensure that expectations arising from the consultations are met in a timely and comprehensive manner. The call for a combined effort of government, civil society, private sector, and the Liberian citizenry has never been louder. Failure to deliver on the expectations contained in this Agenda is not an option. Our success depends on consistent planning, effective coordination, robust implementation, prudent and efficient use of resources, and most importantly, a collective will to succeed. The Liberian Government, for its part, remains committed to making the reforms required to fulfill our people’s vision for development:

attracting foreign investment to create more jobs, promoting balanced growth countrywide.

As a Government, our sincere thanks go to all the participants in the Agenda’s preparation:

local county officials, civil society organizations, private sector actors, legislators, and all ministries, agencies, and commissions, especially the Ministry of Planning and Economic

Affairs.

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 xi

Finally, we thank our development partners, who provided both financial and technical support to the entire process. In implementing this Agenda, we look forward to their continued collaboration to achieve the objective of transforming Liberia. I call on all

Liberians, both in the country and in the Diaspora, to seize the opportunities the Agenda provides to make our collective dream a reality.

Ellen Johnson Sirleaf President, Republic of Liberia xii REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

ACRONYMS

ABE Alternative Basic Education

ADA African Development Aid

AFL Armed Forces of Liberia

AfT Agenda for Transformation

AGOA Africa Growth and Opportunities Act

BPHS Basic Package of Health Services

BRC Business Reform Committee

CBL Central Bank of Liberia

CSA Civil Service Agency

DoD Department of Defense

ECCD Early Child Care and Development

ECOWAS Economic Community of West African States

EPA Environmental Protection Agency

FCPF Forest Carbon Partnership Facility

FDA Forestry Development Authority

FDI Foreign Direct Investment

GAC General Auditing Commission

GBV Gender-based Violence

GC Governance Commission

GDP Gross Domestic Product

GNI Gross National Income

GoL Government of Liberia

GSA General Services Agency

HFO Heavy Fuel Oil

HIPC Highly Indebted Poor Countries Initiative

ICT Information and Communications Technology

IFC International Finance Corporation

IMF International Monetary Fund

INHRC Independent National Human Rights Commission

KWH Kilowatt Hour

LACC Liberian Anti-Corruption Commission

LC Land Commission

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 xiii

LD Liberian Dollar

LDA Liberia Development Alliance

LDHS Liberia Demographic and Health Survey

LEC Liberia Electricity Corporation

LEITI Liberia Extractive Industries Transparency Initiative

LGS Liberian Geological Survey

LIC Low-income Country

LIPA Liberia Institute of Public Administration

LISGIS Liberia Institute for Statistics and Geo-Information Services

LNP Liberia National Police

LTA Liberia Telecommunications Authority

LTC Liberia Telecommunications Corporation

LWSC Liberia Water and Sewer Corporation

MACs Ministries, Agencies and Commissions

M&E Monitoring and Evaluation

MCC Monrovia City Corporation

MDA Mineral Development Agreement

MDG Millennium Development Goals

MIA Ministry of Internal Affairs

MoCI Ministry of Commerce and Industry

MoE Ministry of Education

MoF Ministry of Finance

MoGD Ministry of Gender and Development

MoHSW Ministry of Health and Social Welfare

MoJ Ministry of Justice

MoL Ministry of Labor

MoT Ministry of Transport

MOU Memorandum of Understanding

MoYS Ministry of Youth and Sports

MLME Ministry of Lands, Mines and Energy

MoPEA Ministry of Planning and Economic Affairs

MoPT Ministry of Post and Telecommunications

MPW Ministry of Public Works

MSMESs Micro, Small and Medium Enterprises

MTEF Medium-term Economic Framework xiv REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

MW Megawatt

NACP National Aids Control Program

NCHE National Commission for Higher Education

NCD National Commission on Disabilities

NCDS National Capacity Development Strategy

NGO Non-governmental Organization

NHPP National Health Policy and Plan

NIC National Investment Commission

NIDFO National Industrial Development Financing Organization

NOCAL National Oil Company of Liberia

NPA National Port Authority

NSC National Security Council

NSL National Standards Laboratory

NTA National Transit Authority

NWRSB National Water Resource and Sanitation Board

OVC Orphans and Other Vulnerable Children

PFM Public Financial Management

PLWHA People Living with HIV and AIDS

PMTCT Prevention of Mother-to-Child Transmission

PPCA Public Procurement and Concessions Act

PPCC Public Procurement and Concessions Commission

PPP Public-Private Partnerships

PRS Poverty Reduction Strategy

PSIP Public Sector Investment Plan

PWD Persons with Disabilities

PTA Parent Teacher Association

SEZ Special Economic Zones

SMEs Small and Medium Enterprises

SOE State-Owned Enterprises

SWG Sector-Working Group

TOKTEN Transfer of Knowledge Through Expatriate Nationals

TRC Truth and Reconciliation Commission

TTI Teacher Training Institutes

TVET Technical and Vocational Education and Training

UNDP United Nations Development Programme

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 xv

UNMIL United Nations Mission in Liberia

WAPP West Africa Power Pool

WASH Water, Sanitation and Hygiene xvi REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

EXECUTIVE SUMMARY

The Agenda for Transformation (AfT) is the Government of Liberia’s five-year development strategy. It follows the three–year (2008-2011) Lift Liberia Poverty Reduction Strategy (PRS), which transitioned Liberia from post-conflict emergency reconstruction to economic recovery. The AfT will not deliver transformation by the end of the next five years. . Rather, it is the first step toward achieving the goals set out in Liberia RISING 2030, Liberia’s long-term vision of socio-economic transformation and development. The AfT articulates precise goals and objectives and corresponding interventions that move Liberia closer toward structural economic transformation, prosperity and inclusive growth.

Ultimately, the success of the AfT will entail making hard choices and taking deliberate and bold steps to ensure that resources are directed towards priority areas and interventions. Aid resources are particularly important in this regard, since AfT financing will rely heavily on funding from development partners. It is expected that aid flows to the AfT will be consistent with the Paris Declaration, the Accra Agenda for Action and the New Deal for Engagement in Fragile States.

The structure of the AfT is as follows: Chapters 1 and 2 highlight the history from which Liberia has emerged, the work that has been done in the reconstruction phase, and the vision of where Liberia is heading. Chapter 3 presents an overview of the geography, population, and poverty in Liberia. Chapter 4 discusses the global and regional trends and the potential opportunities and risks that they pose to Liberia’s development agenda.

Chapter 5 outlines the process of developing this strategy; its relation to other strategic plans, including Vision 2030; and the collaborative process from which it emerged. Chapter 6 looks at the accomplishments and lessons learned from the predecessor strategy to the AfT, the first PRS of Liberia.

Informed by the lessons of the past, Chapter 6 also outlines key principles that are internalized in the AfT and in its strategic choices. Chapter 7 describes the objectives and the structure of the AfT.

Chapters 8 through 12 constitute the main strategy itself. They describe the specific goals and objectives across five pillars that Liberia plans to achieve in the next five years, and the binding constraints to growth that need to be unlocked. Chapters 13 and 14 discuss the costing of the priority interventions in the AfT, the macroeconomic policy framework and implementation strategy, respectively. Chapter 15 discusses its monitoring and evaluation (M&E) framework, and Chapter 16 concludes with a description of the risks to realization of the strategy, and plans to mitigate those risks.

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 1

SECTION I: HISTORY, CURRENT CONTEXT, AND

THE NATIONAL VISION

CHAPTER 1. FROM RECOVERY TO INCLUSIVE GROWTH AND

WEALTH CREATION

1.1 INTRODUCTION

Liberia is certainly on the rise. Since 2003, the country has enjoyed peace, two democratic elections, and nearly a decade of economic recovery. During this time, the Government of Liberia (GoL) and Development Partners (DPs) have remained committed to strengthening recovery and reconstruction and to translating the benefits of peace to ordinary Liberians. Several short- and medium-term development plans have since been implemented. The GoL’s 150-Day Action Plan of 2006 provided the first glimmer of hope to war-battered Liberians that the newly democratically elected government would protect basic rights and restore vital social services. The 150-Day Action Plan and subsequent plans were a precursor to subsequent plans, such as the Interim Poverty Reduction Strategy of 2007 and the complete Lift Liberia Poverty Reduction Strategy of 2008–2011. These strategies and plans provided stimulus to an already struggling and weak economy, strengthened the rule of law and significantly improved the national security environment, widened the reach and impact of government services, especially in healthcare and education, rehabilitated some infrastructure and generally reduced the punishing burden of poverty for many Liberians. Today’s images of crops growing in replanted fields; traders hawking wares in the bustling markets of Monrovia;

cars immobilized by thick traffic snarls; uniform-clad children rushing to school—are clear, visible signs that economic recovery has taken hold.

However, descent into conflict occasioned far more significant damage to infrastructure and institutions than the gains from the period of recovery have been able to resolve. The path from recovery to prosperity demands a greater quantity of public investment than has been possible so far. By United Nation’s Human Development Index, Liberia still remains one of the poorest countries in the world. Significant stretches of the already struggling rural agrarian economy is cut off from urban Liberia during the raining season due to inaccessible, impassable primary roads. Despite sustained GDP growth in the recovery period, unemployment remains high, especially among the country’s youthful population. Many of these challenges require more long-term strategic interventions which the Government of Liberia now aims to deliver through the Agenda for Transformation. Thus the AfT now effectively becomes the roadmap to take Liberia from recovery toward middle income country status by 2030.

This chapter reviews the historical issues of growth and inequality that fueled the conflict in Liberia. It then discusses the progress that Liberia has made in establishing the foundations for more inclusive

2 REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 growth during its recovery and reconstruction phase with the help of the Lift Liberia PRS. It further summarizes the binding constraints to inclusive growth and wealth creation that remain to be addressed by the AfT.

1.2 HISTORICAL ISSUES AROUND GROWTH AND INEQUALITY

IN LIBERIA

By 2013, Liberia will have crossed the 10-year milestone within which post-conflict countries face an omnipresent threat (50 percent chance) of relapsing into violent conflict.1 To permanently move beyond that threat, Liberia’s growth and development must be seen to be widely shared, with its benefits spread across the population. Liberia is determined not to repeat the mistakes of its past, when income inequality and socio-political marginalization fueled a brutal conflict that shook the nation for 14 years.

In the decades preceding the start of instability in the late 1970s, Liberia’s growth record was remarkable.

The country had grown at an average rate of more than 7 percent annually during 1955–1975. By 1980, Liberia’s gross domestic product (GDP) per capita peaked at US$1,765 (purchasing power parity, constant terms), bringing the country close to the middle-income threshold. Despite eight years of strong growth since the peace settlement, today’s average level of GDP per capita is only US$310—still well below that historical peak. However, that early growth had been driven by a number of isolated sectors.

By the early 1970s, iron ore accounted for more than half of Liberia’s export earnings; rubber and other cash crops accounted for 15 percent of all value added.2

While this growth delivered results on top-line statistics, it also masked serious problems of poverty and inequality in much of the country. In 1970, less than 20 percent of the labor force was employed in the formal modern sector, while 74 percent was employed in low-productivity agriculture. Concessions employed only 7 percent of workers, despite their large share in GDP and exports. Wage inequalities across the sectors were stark: in 1974, per capita GDP in the agricultural economy was less than US$120 per year, compared to almost US$900 in the cash-crop economy and an estimated US$2,500 in the concessions sector.3 A mere 3.9 percent of the population controlled more than 60 percent of income, and a large share of the benefits from enclave sectors was repatriated by foreign investors. Human capital levels were extremely low, with only 25 percent of the labor force (above age 15) literate. The average level of educational achievement in the country as a whole was only 1.3 years.

By the 1970s, the GoL was trying to counteract these trends, but the efforts were too little, too late. With the global decline in commodity prices during the late 1970s, expected revenue flows from natural resource rents failed to materialize, and the government’s fiscal position deteriorated. Liberia began a long-term economic decline, which was exacerbated by a subsequent military coup and ultimately outright civil conflict (Figure 1.1). Following the signing of the 2003 peace agreement, the country has grown steadily and boasts significant opportunities for growth, with well-managed reactivation of the iron ore and cash crop sectors and prospects for the discovery of commercial quantities of oil. The prospect of Liberia reaching middle-income status is becoming a reality once again.

1World Bank, ‘Crisis Impact: Fragile and Conflict-Affected Countries Face Greater Risks.’

http://go.worldbank.org/3DUSQ99Y30.

2http://www.liberianembassyus.org/index.php?page=about-liberia.

3 World Bank, 2012. Liberia - Inclusive growth diagnostics. Washington D.C. - The World Bank.

http://documents.worldbank.org/curated/en/2012/02/16575286

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 3

Figure 1.1: Key Events in History and Real GDP

However, Liberia has learned from its recent history that economic growth is necessary but not sufficient;

that growth must lead to both structural transformation and economic diversification; must generate productive formal sector employment for a large number of citizens; and must be the ‘rising tide that lifts all Liberian boats’. These lessons are recognized in the Lift Liberia PRS, which aimed to revitalize the traditional resource sector – iron ore, rubber and timber – to begin the process of structuring the foundation for sustainable and inclusive growth. The first PRS sought to achieve specific objectives in four broad areas: expanding peace and security; revitalizing the economy; strengthening governance and the rule of law; and rehabilitating infrastructure and delivering basic services. Significant achievements were made in each of these areas, which have created the foundations for growth on which the AfT will continue to build.

1.3 ACHIEVEMENTS OF THE RECOVERY PHASE—THE FOUNDATIONS FOR

INCLUSIVE GROWTH

Starting from a state of post-conflict instability, weak state institutions, and an economy left in shambles by nearly two decades of violence, the Lift Liberia PRS achieved significant successes and reforms.

Perhaps one of the most critical achievements has been the maintenance of peace and security. Following 17 years of war, Liberians have been able to achieve a level of reconciliation that has allowed society to function peacefully. Furthermore, two relatively peaceful, democratic elections have been held (2005 and 2011). This success reflects hard work on the part of the citizens, as well the Government’s actions to strengthen social cohesion; build capacities to manage tension without outbreaks of violence; promote reconciliation; and gradually lessen political polarization. As part of the PRS, Liberian security institutions, primarily the Armed Forces of Liberia (AFL) and the Liberia National Police (LNP), were rebuilt and reformed into professional and capable institutions. Although challenges remain and Liberia continues to rely on the support of a large force of United Nations peacekeepers, the country will assume

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4 REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 full responsibility for maintenance of security over the coming years. This peace and security has allowed Liberians to return to their farms, start businesses, return to their country from abroad, and witness the surge in flows of Foreign Direct Investment (FDI) to Liberia.

To revitalize the economy, the three-pronged economic strategy of the PRS focused on (i) rebuilding critical infrastructure; (ii) reviving traditional resource sectors; and (iii) establishing a competitive business environment. Initial actions in these areas have set the stage for near-term growth. Infrastructure and basic services saw more than US$500 million of direct investment, with key components of infrastructure (including airports, ports, and roads) renovated or reconstructed. During the PRS, nearly 2,500 kilometers of paved and laterite roads were reconstructed or rehabilitated; electrical generation capacity increased from practically zero to 23 megawatt (MW); 48 kilometers of power transmission and distribution lines were constructed or renewed; and implementation began on the regional West Africa Power Pool (WAPP) cross-border electrification project. To revive traditional economic sectors, Liberia attracted leading global firms that have begun to reinvest in forestry, rubber, and mining. As a result, exports have increased from US$175 million in 2006 to US$295.2 million in 2011. In addition, Liberia has attracted foreign direct investment (FDI) in several non-traditional sectors including petroleum, oil palm, hotels, finance, industry, and infrastructure. In total, FDI is poised to reach roughly US$16 billion and create more than 100,000 jobs over the next several years.

However, these investments alone will not be sufficient to diversify the Liberian economy, nor create jobs for the roughly 500,000 Liberians who will graduate from secondary and post secondary institutions in the next 5 to 10 years. Therefore, the Government has worked out a plan to establish a competitive business environment for firms in Liberia. It has reformed the Tax Code and the Investment Code, making them more competitive and beneficial to growth. It has streamlined business registration processes; established a one-stop-shop for customs clearing; and started implementing proactive industrial policies as a way of facilitating the growth of local micro, small, and medium enterprises (MSMES). The Government also made it a priority to achieve a stable macroeconomic environment, which is necessary for growth. Further, it maintained a cash-based balanced budget; significantly increased government revenue; moved toward multi-year financial planning; and achieved US$4.9 billion of cumulative debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. These and follow-up actions are creating the right incentives for further growth in employment, GDP, and public and private investment.

The Government has also focused strong efforts on improving governance, strengthening justice, and restoring confidence in the rule of law. During the PRS period, it created the Liberia Anti-Corruption Commission (LACC), the Public Procurement and Concession Commission (PPCC), and the Liberia Extractive Industries Transparency Initiative (LEITI). To make government institutions more transparent, capable, and oriented toward service delivery, the Government created a comprehensive Civil Service Reform Strategy, which reduced the number of civil service employees, and rationalized the functions and mandates of nine ministries and agencies (M&As). The delivery of justice improved as the Government developed and implemented a national and county-level case management system; deployed public defenders throughout the country; and replenished the ranks of trained magistrates for the first time in 20 years. Policies that increasingly put power in the hands of local communities are taking hold with the passing of the Community Rights Law, endorsement of a National Decentralization Policy, and the creation of county-level branches for government service-delivery.

The PRS also focused on building the capacity of the health, education, and social service systems— improving institutions and service delivery. To improve education, 439 schools were constructed, renovated, or rehabilitated, while teachers were trained and received salaries that matched their

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 5 qualifications. School curricula were modernized and aligned with West African standards. In the health sector, functioning health facilities increased from 354 to 550; health workers increased from approximately 5,000 to more than 8,000; and the number of facilities accredited for provision of services increased. These investments are beginning to show results in increased school enrollment at all levels;

increased levels of schooling and training for teachers; and substantially improved health outcomes.

The Lift Liberia PRS made great strides toward recovery, but it did not meet all of its goals due to the country’s enormous institutional and human capacity deficits. Moreover, in the process of addressing institutional concerns, some important opportunities for achieving immediate measurable results were missed. The AfT places greater focus on interventions to target the most pressing problems and binding constraints, while capitalizing on the lessons learned from the Lift Liberia PRS.

1.4 REMAINING BINDING CONSTRAINTS TO GROWTH

To reach its targeted levels of growth, Liberia will need high levels of investment. As a result of underinvestment during the civil war, combined with the depreciation and destruction of public and private infrastructure, the value of capital stock per unit of labor in Liberia has substantially declined.

Currently, the average Liberian worker has about one quarter of the value of capital stock available prior to 1980.4 In order to understand the main constraints to higher investment in the country, a growth diagnostic study was undertaken and the following key remaining challenges to stimulating increased investment and growth were identified:

• Weak infrastructure—especially roads and power. The World Bank’s Doing Business 2012 survey of Liberian firms5 shows that 59 percent identify electricity as a major constraint and 39 percent identify transportation as a major constraint.6 Despite the fact that infrastructure programs received the largest amount of funding during the PRS period, most of the country is still connected only through seasonal laterite roads and occasional electricity supply. Poor roads limit the ability of farmers to get their goods to markets, and also constrain development of some of the Liberia’s most promising sectors—agriculture, tree crops, and forestry. Electricity supply is mainly confined to the capital and power tariffs are US$0.54 per kilowatt hour (kWh) on average, which is three times higher than the Sub-Saharan African average. Private businesses often rely on their own generators, at high cost—a serious constraint to small-scale manufacturing and industrial MSMEs.

• Difficulty in accessing finance. This constraint is particularly critical for manufacturing and agricultural MSMEs. Due to a high incidence of non-performing loans, high informality, and low financial literacy among borrowers, Liberian banks are generally risk averse. Most loans are short term and extended mainly for trading and other service activities. Loans to manufacturing and agricultural activities, which are needed to fuel emerging MSMEs, account for less than 10 percent of total bank loans. Although the Government has been easing registration procedures to make it more attractive for small businesses to formalize, the majority of firms still exist in the informal sector, further limiting their ability to access finance. As a result, only 10 percent of firms used banks to finance investment in 2009. In the Doing Business survey, 40 percent of Liberian firms cite finance as

4 World Bank, 2012. Liberia - Inclusive growth diagnostics Washington D.C. - The Worldbank (http://documents.worldbank.org/curated/en/2012/02/16575286) 5 World Bank Doing Business 2012 Survey, (http://www.doingbusiness.org) 6 World Bank Enterprise Survey 2009, (http://www.enterprisesurveys.org). Results based on a survey of 150 firms conducted during September 2008- February 2009.

6 REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 the number one constraint of the business environment, compared to roughly 20 percent in Sub- Saharan Africa and 16 percent globally.

• Difficulty in launching new export activities, due to missing inputs (also known as coordination failures). Diversifying Liberia’s economy beyond the traditional natural resource-dependent export products and toward other agricultural and small-scale manufacturing products and services is a key priority. Although numerous studies have shown that Liberia has a comparative advantage in exporting cocoa, coffee and other tree crops, semi-processed agricultural goods, and light manufactured textiles, these value chains are still very weak and key inputs such as affordable fertilizer, farm-to-market transportation, cold storage, and affordable electricity are often lacking. A number of donor, NGO, private sector and government initiatives are addressing these gaps, but these activities are poorly coordinated.

• Weak and unclear property rights. Land ownership in Liberia has a complex and confusing history, with land rights alternating between communities and the state. Today, less than 20 percent of the country’s total land is privately titled and registered. During the PRS, the Government adopted the Community Rights Law (2006) and the Community Right Act (2009) in order to properly formalize community ownership. Despite these attempts, land rights remain poorly defined, with many rural lands having overlapping and unresolved ownership. Implementing records management and land registration systems for rural property—an unfulfilled deliverable from the PRS—remains a priority.

In the Doing Business 2012 indicators, Liberia is ranked 176th out of 183 countries in terms of ease and cost of registering property. Commercial contract enforcement is also a challenge. To address this problem, in 2011 the Government established a separate Commercial Court to help clear the backlog of cases and improve contract enforcement.

Other challenges to growth and inclusiveness include:

• Low levels of human development. Years of war interrupted schooling for many citizens, resulting in low educational attainment. Further, the war interrupted people’s ability to acquire practical work experience, and there is a general lack of management and entrepreneurship skills and business and financial literacy, all of which are critical for the growth of MSMEs. The education system is still being rebuilt and is struggling to deliver quality practical and vocational training. Private sector-led training and educational support services are still in their infancy. A discrepancy between demand and supply of skills may become even more apparent as jobs are created that require specialized skills training (e.g., specialized personnel in mining, agricultural processing, and tourism). The Liberian civil service also faces capacity constraints.

• High administrative and regulatory costs. Although the Government has reduced red tape, MSMEs continue to face unnecessary legal and regulatory burdens and are subject to onerous licensing regimes. The costs of getting permits, paying taxes and trading across borders are still high. Petty corruption (payments for licenses, bribes at checkpoints, etc.) adds additional burdens.

• Continued risks regarding security and stability. The risk of instability arises from both the threat of internal tensions and external conflicts in neighboring countries. Maintaining peace and security is sine qua non for attracting domestic and foreign investment and stimulating growth in the long run.

As Liberia transitions to taking responsibility for domestic security from UNMIL, significant investment will be needed to maintain a stable and peaceful environment, conducive to the growth of economic activities.

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 7

As Liberia moves into its next five-year period of development, the country plans to make significant progress on easing each of these constraints, while prioritizing some over others (e.g., electricity and road infrastructure will be the top priority in the immediate term). Overall, the Government’s goal is to achieve double-digit rates of economic growth, which is ambitious but achievable with high investments in critical primary growth sectors.

Table 1.1: Remaining Constraints to Growth: Diagnostics Matrix

Source: Adapted and modified from the Liberia Growth Diagnostic, World Bank, 2011.

Potential Constraint

Traditional Export Sectors (e.g., concessions, large-scale agriculture)

Non Traditional Tradable Sectors (e.g., small-scale agriculture, manufacturing, tourism, services)

Geography Not binding. Excellent location, favorable climate, rich in natural resources.

Infrastructure Not binding. Can be circumvented through private provision.

Binding. High cost/lack of access to electricity and roads reduces competitiveness of otherwise potentially attractive sectors.

Human capital A problem, but not currently binding.

Traditional sectors can circumvent by importing skilled labor.

A problem, but not currently binding. A lack of education and skills, especially among the population that missed out on schooling during the war. However, unemployment and underemployment among more educated is also high.

Macro risks

Not binding, although risks related to exposure to shocks in international commodity prices will need to be monitored and managed.

Not binding. Future risks related to revenue volatility, commodity price volatility, real exchange rate appreciation and Dutch Disease need to be monitored and managed.

Micro risks

Not binding, but land tenure issues and lack of clarity on land-use policy, including clarity on the concession process, constitute areas of future risk.

Binding. Clarity and security of property rights is an area of concern.

Information externalities

Not binding. Businesses are aware of what opportunities are within reach.

Coordination externalities Not binding for large corporations.

Binding, as new activities that require a different set of inputs and skills than what is available generally fail to emerge, especially for MSMEs in the agriculture sector, processing and manufacturing.

Lack of international finance

Not binding. Liberia is funded to a high degree by external sources, and increases in such funding could encounter a limit in absorptive capacity.

Lack of local finance

Not binding. Capital accumulation by banks has been growing and reserves are sufficient.

Poor financial intermediation

Not binding for large enterprises that can self-provide finance or source finance internationally.

Binding. Banks have capital but are unwilling to extend credit (especially long-term loans) to the agriculture and manufacturing sectors due to high perceived risk of non-payment, poor recourse.

8 REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

Lack of access roads and bridges reduces competitiveness of otherwise potentially attractive sectors

REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 9

CHAPTER 2. LIBERIA RISING 2030—ACHIEVING MIDDLE

INCOME STATUS

2.1 INTRODUCTION

Liberia aspires to become a middle-income country by the year 2030. As discussed in Chapter 1, Liberia was on the cusp of becoming a middle-income country by the 1980s; and was one of the highest-income countries in Africa. But years of conflict have reversed the country’s development. As part of its development agenda, the Government undertook the development of Liberia RISING 2030, a visioning exercise that included the perspectives of diverse stakeholders from Liberian society and took a broad view of Liberia’s economic, political, social, and human development over an 18-year timeframe (2012– 2030).

While Liberia RISING 2030 sets the broad aspiration for the country, the AfT defines the initial steps toward that vision. It provides the medium-term planning framework to guide public investment programs and ensure inclusive growth, reduce marginalization, and build human, social and physical capital. It operationalizes the vision by outlining the major priorities and interventions required for growth and wealth creation in Liberia. Given that the National Vision and the AfT were developed simultaneously, provisions will be made for annual reviews of the AfT to ensure that it remains consistent with the National Vision.

This chapter outlines the vision and defines what middle income means in the Liberian context, and describes the path that Liberia must follow to reach this goal. The chapter then describes the experiences of a number of other countries that were able to achieve middle-income status in recent years.

2.2 THE NATIONAL VISION OF MIDDLE INCOME IN THE CONTEXT OF

LIBERIA

While there is no single standard definition of middle-income status, it is often defined as per capita income of more than US$1,000 (in constant terms).7 Starting from Liberia’s current level of income per capita, crossing the middle-income threshold requires the economy to grow by about 9 percent per year from 2012 until 2030. This goal may be ambitious, but not unachievable. For example, from 2006 until 2010, Liberia’s GDP grew at 7 percent, on average—and this was before major export activities and investments had been rekindled. Moreover, a number of low-income countries that transitioned to middle-income during the last decade—including a number of African countries (Angola, Cote d'Ivoire, Cameroon, Congo, Lesotho, Equatorial Guinea)—achieved per capita gross national income (GNI) growth of 9 percent or higher over an 18-year period (1993 – 2011). Several countries in Asia that crossed to middle-income status in the last decade (including Indonesia, China, and Vietnam) grew even faster over the same period.

7 The World Bank defined middle-income countries as those with a GNI per capita level above $1,005 and below $12,275. Gross National Income (GNI) comprises the total value of all goods and services generated by a country in one year (its GDP) plus the net income from domestic factors of production used abroad (notably interest and dividends) minus the income of foreign factors of production operating in a country. The World Bank measures GNI according to the Atlas method, which adjusts for exchange rate fluctuations and reports each country’s income in real U.S. dollars. (http://data.worldbank.org/about/country-classifications).

10 REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030

While Liberia will target the GNI per capita threshold of roughly US$1,000 as an overarching target for its economic development, the country must also meet other economic, political, social, and human development targets as well. By 2030, the country aims to have a peaceful and inclusive political system, a diversified economy, stable institutions, and healthy and productive citizens. The Government will earn its legitimacy by providing efficient services to all Liberians, investing in public goods, and working consciously to equalize economic opportunities, while relying increasingly on market forces and proper regulations.