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Country Commercial Guides for FY 2000: Liberia Report prepared by U.S. Embassy Monrovia, released July 1999 Note*

CHAPTER VII: INVESTMENT CLIMATE

1. A.1 OPENNESS TO FOREIGN INVESTMENT

PRESIDENT TAYLOR CONTINUED TO EXPRESS HIS ADMINISTRATION'S SUPPORT FOR THE FREE-MARKET SYSTEM AND AN "OPEN DOOR" TO FOREIGN INVESTMENT. DESPITE ITS COMMITMENT TO THE FREE-MARKET SYSTEM, THE GOVERNMENT HAS GRANTED MONOPOLIES ON RICE, GASOLINE, AND CEMENT IMPORTS AND PRODUCTION.

THE 1975 ECONOMIC "LIBERIANIZATION" LAW PROHIBITS FOREIGN OWNERSHIP OF CERTAIN BUSINESSES, SUCH AS TRAVEL AGENCIES, RETAIL GASOLINE STATIONS, AND BEER AND SOFT DRINK DISTRIBUTORS. IF THERE ARE QUALIFIED LIBERIANS, THE LIBERIANIZATION LAW ALSO MANDATES THAT LIBERIAN NATIONALS SHOULD BE EMPLOYED AT ALL LEVELS, INCLUDING UPPER MANAGEMENT. USING THE LIBERIANIZATION LAW, THE MINISTRY OF LABOR HAS SOMETIMES HELD UP WORK PERMITS FOR EXPATRIATES AND INTERVENED IN NEGOTIATIONS BETWEEN INVESTORS/MANAGEMENT AND THEIR LIBERIAN EMPLOYEES.

QA.2 CONVERSION AND TRANSFER POLICIES

THERE IS NO DIFFICULTY OBTAINING LIBERIAN CURRENCY AT THE UNOFFICIAL RATE OF APPROXIMATELY 40 LIBERIAN DOLLARS TO ONE U.S. DOLLAR. THE OFFICIAL RATE IS 1:1. THE ONLY DENOMINATION OF LIBERIAN CURRENCY AVAILABLE IS A FIVE DOLLAR NOTE.

THERE ARE NO RESTRICTIONS ON CONVERTING OR TRANSFERRING INVESTMENT FUNDS INTO A FREELY USABLE CURRENCY AT A LEGAL MARKET CLEARING RATE.

QA.3 EXPROPRIATION AND COMPENSATION

THERE WERE SIGNIFICANT CASES OF EXPROPRIATION BY THE GOVERNMENT OF LIBERIA AGAINST U.S. FIRMS DURING THE SEVEN-YEAR CIVIL CONFLICT, 1990-1997. THE CLAIMANTS HAVE YET TO RECEIVE ANY COMPENSATION FROM THE GOVERNMENT.

CURRENTLY, THE COMMON PRACTICE BY THE GOVERNMENT OF DISCRIMINATING AGAINST FOREIGN CREDITORS/INVESTORS BY PAYING THEM ONLY A SMALL FRACTION OF WHAT IS OWED TO THEM IS TANTAMOUNT TO EXPROPRIATION.

A.4 DISPUTE SETTLEMENT

THE JUDICIARY HAS ALWAYS BEEN SUBJECT TO POLITICAL, SOCIAL, FAMILIAL, AND FINANCIAL PRESSURES, AND THE EQUAL APPLICATION OF JUSTICE IS NOT ALWAYS OBSERVED. CORRUPTION AND LACK OF PROFESSIONALISM REMAIN A RECURRENT PROBLEM. THERE HAVE BEEN SIGNIFICANT INSTANCES OF EXECUTIVE BRANCH INTERFERENCE IN THE DECISIONS OF THE JUDICIARY, INCLUDING DECISIONS BY THE LIBERIAN SUPREME COURT, THE HIGHEST COURT IN THE COUNTRY. AT THIS TIME, THERE ARE NO CONSISTENT AND EFFECTIVE MEANS FOR ENFORCING PROPERTY AND CONTRACTUAL RIGHTS.

QA.5 PERFORMANCE REQUIREMENTS/INCENTIVES

THE NATIONAL INVESTMENT COMMISSION IS EMPOWERED TO GRANT INCENTIVES TO FOREIGN INVESTMENT, BUT THE MOST SIGNIFICANT INCENTIVES GRANTED ARE THE MONOPOLIES IN SUCH AREAS AS RICE AND GASOLINE IMPORTATION. THESE MONOPOLIES OPERATE AS A DISINCENTIVE TO FURTHER FOREIGN INVESTMENT.

THE FEE SCHEDULE FOR RESIDENCE PERMITS IS DISCRIMINATORY; FOR A FIVE-YEAR PERMIT, CITIZENS OF THE ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS), USD100; NON- ECOWAS AFRICAN CITIZENS, USD 300; AND ALL OTHERS, USD 550. WORK PERMITS ARE THE SAME FEE FOR ALL APPLICANTS.

A.6 RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT

FOREIGN AND DOMESTIC ENTITIES HAVE THE RIGHT TO ESTABLISH AND OWN BUSINESS ENTERPRISES; HOWEVER, NON-LIBERIAN CITIZENS CANNOT OWN REAL ESTATE IN THE COUNTRY.

A.7 PROTECTION OF PROPERTY RIGHTS

THERE IS NO RECOGNIZED SYSTEM, SUCH AS A TITLE SYSTEM, FOR RECORDING SECURED INTERESTS. MANY RECORDS WERE DESTROYED DURING THE CIVIL CONFLICT, MAKING DISPUTES OVER REAL ESTATE OWNERSHIP COMMON.

QA.8 TRANSPARENCY OF THE REGULATORY SYSTEM

ALTHOUGH THE TAYLOR ADMINISTRATION IS PUBLICLY COMMITTED TO DEVELOPING CLEAR, CONSISTENT AND TRANSPARENT POLICIES TO ENCOURAGE INVESTMENT, IT HAS NOT YET DONE SO. VERY LITTLE PROGRESS HAS BEEN MADE IN ADDRESSING THE CRITERIA LAID OUT BY THE INTERNATIONAL MONETARY FUND (IMF) FOR CREATING AN IMPROVED ECONOMIC ENVIRONMENT WHICH WOULD ATTRACT INTERNATIONAL INVESTMENT. INVESTORS STILL MUST COPE WITH MYRIAD MINISTRIES AND AGENCIES, CONFLICTING RULES AND REGULATIONS, AND MUCH BUREAUCRATIC RED TAPE.

WHILE LABOR LAWS AND POLICIES THEMSELVES DO NOT DISTORT OR IMPEDE INVESTMENT, LABOR DISPUTES ARE MOST OFTEN SETTLED IN THE FAVOR OF LIBERIAN EMPLOYEES, REGARDLESS OF THE MERITS OF THEIR COMPLAINTS.

QA.9 EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT

FOREIGN INVESTORS FIND IT DIFFICULT OBTAIN CREDIT ON THE LOCAL MARKET DUE TO THE LACK OF BANKING SERVICES. BANKS CHARGE A FEE TO DEPOSIT MONEY, WITHDRAW MONEY, OR A CASH A CHECK. MUCH OF THE TOTAL ASSET BASE OF THE BANKS IS NON-PERFORMING.

QA.10 POLITICAL VIOLENCE

CHARLES TAYLOR'S INAUGURATION AS LIBERIA'S 21ST PRESIDENT ON AUGUST 2, 1997, SIGNALED AN END OF THE SEVEN-YEAR CIVIL WAR IN WHICH MORE THAN 150,000 PEOPLE DIED, HUNDREDS OF THOUSANDS WERE DISPLACED, AND THE COUNTRY'S INFRASTRUCTURE WAS TOTALLY DESTROYED.

THE GOVERNMENT HAS A POOR HUMAN RIGHTS RECORD, WITH MOST ABUSES ATTRIBUTABLE TO THE SECURITY FORCES. ON SEPTEMBER 18, 1998, SECURITY FORCES ENCIRCLED AND KILLED PERHAPS HUNDREDS OF ETHNIC KRAHNS WHO WERE AFFILIATED WITH A FACTION THAT HAD OPPOSED TAYLOR DURING THE CIVIL WAR. KRAHN LEADER ROOSEVELT JOHNSON SURVIVED THE INITIAL ATTACK AND SOUGHT REFUGE IN THE AMERICAN EMBASSY ON SEPTEMBER 19; POLICE OPENED FIRE ON JOHNSON AND SEVEN SUPPORTERS IN THE ENTRYWAY OF THE EMBASSY, KILLING TWO MEMBERS OF JOHNSON'S PARTY, AND WOUNDING OTHERS, INCLUDING TWO EMBASSY EMPLOYEES.

SECURITY FORCES CONTINUE TO BE A SOURCE OF INSTABILITY IN THE COUNTRY. ON APRIL 21, 1999, SECURITY FORCES WERE INVOLVED IN LOOTING OF SEVERAL INTERNATIONAL NON- GOVERNMENTAL ORGANIZATIONS FACILITIES IN VOINJAMA, IN THE NORTHERN REGION OF LIBERIA. THE UNITED STATES DEPARTMENT OF STATE ISSUED A TRAVEL ADVISORY ON APRIL 29, 1999 WARNING U.S. CITIZENS AGAINST TRAVEL TO LIBERIA DUE TO THE UNSTABLE SECURITY SITUATION.

QA.11 CORRUPTION

CORRUPTION CONTINUES TO REACH THE HIGHEST LEVELS OF GOVERNMENT. SOME GOVERNMENT OFFICIALS HAVE AMASSED FORTUNES, WHILE THE MAJORITY OF LIBERIANS CONTINUE TO LIVE IN POVERTY. U.S. FIRMS CONSISTENTLY IDENTIFIED CORRUPTION AS A MAJOR OBSTACLE TO FOREIGN DIRECT INVESTMENT.

THE GOVERNMENT ESTABLISHED A 18-PERSON PUBLIC SERVICE COMMISSION TO UNDERTAKE A COMPREHENSIVE REVIEW OF THE LIBERIAN CIVIL SERVICE, BUT THERE HAVE BEEN NO EFFECTIVE MEASURES TAKEN TO COMBAT CORRUPTION. CORRUPTION IN THE PUBLIC SECTOR IS EXACERBATED BY THE GOVERNMENT'S FAILURE TO PAY ITS EMPLOYEES A LIVING WAGE WITH REGULARITY.

CORRUPTION IS PERVASIVE IN EVERY AREA OF GOVERNMENT. INVESTORS REPORT THAT BRIBES ARE EXPECTED BY MOST CIVIL SERVANTS AND SECURITY OFFICIALS WHOM THEY ENCOUNTER IN THE COURSE OF DOING BUSINESS. THERE HAVE BEEN NO CONVICTIONS OF CORRUPT OFFICIALS, AND LITTLE IS DONE TO PURSUE COMPLAINTS MADE BY INVESTORS.

2. C. OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS

LIBERIA DOES NOT PARTICIPATE IN OPIC OR OTHER INVESTMENT INSURANCE PROGRAMS.

THE U.S. EMBASSY PURCHASES LOCAL CURRENCY AT THE LOCAL PARALLEL RATE. IT IS LIKELY THAT THE LIBERIAN DOLLAR WILL REMAIN THE SAME OR DEVALUE SLIGHTLY OVER THE COURSE OF THE NEXT YEAR.

3. D. LABOR

THERE IS SHORTAGE OF HIGH TECHNOLOGY SKILLS IN THE LIBERIAN LABOR FORCE. THE MAJORITY OF THE LABOR FORCE IS UNSKILLED, AND THE OVERALL LITERACY RATE IN THE COUNTRY IS 15 PERCENT. DUE TO THE AFTEREFFECTS OF THE CIVIL CONFLICT, THERE ARE FEW TRAINING OR EDUCATIONAL OPPORTUNITIES IN LIBERIA. MANY SKILLED PROFESSIONALS HAVE EMIGRATED ABROAD. THE UNEMPLOYMENT RATE IS APPROXIMATELY 85 PERCENT AND MAY INCREASE WITH THE INFLUX OF RETURNING REFUGEES FROM NEIGHBORING WEST AFRICAN COUNTRIES.

4. E. FOREIGN TRADE ZONES/FREE PORTS

THE FREE PORT OF MONROVIA IS BEING RENOVATED AND MAY BECOME OPERATIONAL IN THE FUTURE.

5. F. FOREIGN DIRECT INVESTMENT STATISTICS

SINCE THE CIVIL CONFLICT, NO RELIABLE STATISTICS HAVE BEEN AVAILABLE.