By Opa Dualu
Economic growth is a measure in the increase of production, services, and the output of value of anything with quantifiable indicators. It is heavily influenced by targeted decisions that enable growth to be realized. This does not materialize in a vacuum; it must be intentional or at least pushed in the direction of upward mobility. This upward growth can be felt through increase in profit by businesses, increase in local investments and uptake in hiring decisions, increase in purchases by consumers thus further driving up growth – it becomes a self-fulfilling prophecy especially when government austerity measures are in full swing to boost efforts in this area. Economic growth requires expert minds to steer this process however; it must be balanced with objective conservative fiscal policy and aggressive interventionist decision-making strategies. In essence, growth must be planned, targeted and guided throughout to get the desired results.
Real Gross Domestic Product (GDP) is arguably the best way to measure true economic growth – it encapsulates the country’s entire economic output and reflects the true measure of its value, this includes goods and services. Keep this in mind however, the higher your imports, the lower your economic growth hence the lower your GDP. It is worth noting that total GPD is not usually exhaustive; it only includes things that society measures and values at a given point in time. The adverse effect of environmental costs, the psychological costs of poor governance, the impact of family separation due to the lack of local jobs – seeking greener pasture elsewhere, etc., are not taken into account and in most instances negatively affect overall growth.
A foundational part of growing your budget is to first understand those indicators that bring down the budget from the onset. The budget does not accumulate in isolation; there are several mitigating factors that play into how much budget a country is going to generate. Consider your national debt to GDP ratio, national exports and local production, local consumption, tax base and how aggressively the government is working to expand that base, how favorable are local conditions for investments; macro poverty outlook indicators are a good gauge to future budget determinations and accumulations.
Secondly, is your current budget designed and targeted at economic growth drivers such as human capital, specialization and trade, local productivity, financial capital, entrepreneurship, etc.? Are your fiscal policies and strategies targeted at local job creators such at small businesses, farmers, and in our case, a scheme to bring in diaspora monies? Are you creating the environment to keep your most skilled citizens or are they leaving? Does government hire the most prepared – the best and brightest the country has to offer? Have you maximized every potential source of revenue generation? What is the government’s revenue collection strategy? Make it public and let it be scrutinized.
See World Bank and Statista breakdown/projections below on our debt ratio and other outlooks to give us a better insight:
Table 1 Liberia: National debt in relation to (GDP) from 2016 to 2026
It is important to stress that debt is not necessarily a bad thing. On the contrary, national debt can actually be beneficial in the long-term if the following are taken into consideration: 1) Is it being incurred as an expansionary fiscal policy tool for long-term benefits; 2) Is it for job creation purposes; 3) Does it lower taxes and expand the tax base; 4) Is it not being seen as a source of salary payment but rather as an economic tool that creates infrastructure to increase government intake? What is the cost/benefit analysis on the debt? The key question here is: Why are we taking on this debt? You will have a good debt when the debt pays for itself in the short-term while continuing to increase the government revenue in the long-term. When debt is used appropriately, it stimulates the long-term growth and prosperity of a nation and creates the environment that keeps on giving – a sustained, higher intake of revenue. Furthermore, when the debt is moderate, it can boost GDP enough to reduce the debt-to-GDP ratio thus increasing our GDP and hence decreasing our debt burden.
On the other hand, after taking into account the above listed recommendations and fit them into you fiscal policy strategy, here are a few targeted moves you can employ to drastically increase revenue intake and ramp up government expenditures for national development – debt is optional!
Moreover, a conservative figure using basic analysis is going to be attached to some areas considered below to give the reader an idea of what Liberia can generate from these areas to get our national budget growing for development – the numbers will vary depending on how the strategy is applied. All of this will be achieved using currently available resources.
Nevertheless, Liberia must start this by redesigning the budget, having the lion’s share going directly to growth drivers listed above. First, the leader (Google “A Guide to Picking Liberia’s Next President”) must make a Liberia-centered decision and find $200 million in the current budget to go to programs described below. This is how s/he finds that money: Issue an emergency order (because we are in an emergency and been in one for the last 50 years!) stating that no official in government will make more than $1000/month, inclusive of every benefit – government is about service not getting rich! Want to get rich? Go start a business!
End all personal purchases for officials except those exclusively restricted to the job duties. This includes transport, loan payments, scratch cards, gas slips, rent payments, overseas medical bills (let them use JFK or personal dime), constituency visits, extra sittings, etc. Government is not responsible for officials’ upkeep. Restrict all government travels – use your already existing foreign ministry. This is fair and equitable given that our per capita income is roughly $600 per annum! Why paid the living expenses of someone you’re paying a salary? This is theft and must be stopped.
Ram this through the legislature – yes you can – and ensure no official makes more than 5 times the average civil servant’s salary. Make the tough, but easy decision by taking the people’s monies from the pockets of overpaid politicians and give it back – the people will stand by you! Focus on these tasks and do not be side tracked by any artificial barriers – blast through them:
- Strengthen the Judiciary – The foundational basis of attracting and maintaining anything of value is to first up your protection capabilities to the level or greater than the value to be protected – a state cannot protect something of greater value than itself! A responsible judiciary ensures security. This phrase is common throughout Liberia but it is entirely true: “Good money is afraid of bad environment.” To attract the kind of resources and investments we need to increase our budget intake, government must provide judicial security that secures that money. The executive should instruct our anti-graft institutions to setup special judicial monitoring taskforce under the justice ministry to report to the president on a quarterly basis. Give full prosecutorial powers and separate courts to these institutions and publically reprimand, prosecute and heavily punish judges who fall outside the guidelines of the law. Aggressively enforce all judicial mandates especially when it is against government officials. Establish trust in the system and give investors the comfort to bring their money back. Protect their money as if it were your own. The potential exist to take in hundreds of millions of dollars if the judiciary is strengthened.
- Specialization and Trade – A developing country’s greatest output will not come from worthless degrees issued by glorified high schools masquerading as universities. Shift most of your resources from these so-called universities to trade and entrepreneurial skill development. Cut your university applicants to only a quarter of what it currently is, only accepting the very best and push them towards the skills we need to develop. Tighten your university standards and weed out those undeserving and wasting limited resources. Stop pushing this ridiculous narrative that everyone must go to college. Instead, change the message that everyone must specialize and learn a trade. Make grades 1 through 12 truly free and put quality in the high schools. This will give Liberia the greatest output and quicken our efforts towards development. As our trade folks apply their skills, expansionary opportunities will be created and there will be new windows for tax collections. Think a rising tide lifts all boat kind of scenario. There is no better way to improve your human capital index than to get people practicing what they learned, and as they grow and perfect their skills, so will our economy and by default our national budget – potential intake, $1B+!
- Liberian Revenue Authority (LRA) – Revisit your current revenue collection laws and applications. Where are the leakages? Have you plugged all the holes? Are the revenue collection reaching all especially those who benefit most from the system? Why are we still having field agents doing door-to-door revenue collections/enforcements in 2021? The LRA is bleeding tens of millions of dollars every month because it has not plugged the holes and position a team whose sole task will be to look into expanding Liberia’s revenue collections. To grow the budget, we must grow our capacity and collection techniques. Refocus revenue generation efforts and categorize some payers with special makers for special review.
Why is the Freeport of Monrovia open only 8 hours a day and not on weekends? There is no reason why the Freeport, one of the largest generators of taxes, is not open 24/7! There is a huge potential that government could double and possibly triple revenue intake from the ports if they operated efficiently and effectively without closing – we’re talking almost over a billion dollars annually in revenue if you plugged the holes and operated the ports like any other serious ports!
Secondly, find a way to end any lopsided contracts or ensure Liberia gets a bigger share from these foreign managers who take a huge share of port revenue – we can do this ourselves. Revisit the contracts and if there are any breaches – which is certain there are – go to arbitration and immediately fully nationalize the posts or entirely privatize it with an open profit sharing option that does not harm the public and benefits Liberia the greatest. Make arrangements with government entities in similar categories.
Find a way to fairly standardize, tax and enforce every transaction in the economy – capture a piece of every transaction especially money transfers between individuals.
Why are there no addresses and a database of owners of all the real-estate around the country? Just having all the structures (this is to make a point; some structure require more payment based on their valuation) in Monrovia pay $30/quarter and assuming there are two hundred thousand of them, the government can increase its tax intake by $24M/years! This is excluding the rest of the country and lands. If government wants to increase it tax intake, it has to create the infrastructure that supports such endeavor.
- Agriculture, Fisheries and Roads – Agriculture is arguably our best option to quickly develop and increase national budget. A lot of time has been spent on this area. Read “Common Sense Economics for Liberia” to explore some of the options presented. This piece is not going to say a lot given the recommendations already out there on agriculture, but will re-echo the following: places like Ecuador is exporting $4B in bananas each year – that’s two times our entire GDP; Costa Rica exports over a billion dollars in bananas! Nigeria and Ghana are among the top 5 producers of cassava worldwide; this is a multi-billion dollar industry with thousands of jobs opportunities. Government can encourage people to grow cassava and strategically place cassava collection hubs across the country for export. Rice, poultry, pig farming, the list is long. Why Liberia is not taking full advantage of these opportunities to put our people to work and grow the budget? Why are we not planting to cut out our share? Liberia could literally shut down all the mines – there is little benefit coming from concessions given our poor governance institutions and wide spread corruption – focus on agriculture, triple our GDP and also our budget in 10 years! This space has the greatest potential for GDP growth and budget increase.
Moreover, we have about 350 miles of coast line – lots of fish and two third of the population is protein deficient! How is this possible? Why are we giving unchecked access to foreigners to fish in our waters at little to no benefit to us? These people are taking billions from us each year – this is lunacy! Fix this. To start, invest in 20 mid-size commercial fishing boats at a cost of hundred thousand dollars apiece. Build four offloading hubs: one in Robertsport, Monrovia, River Cess and Harper. These hubs will double as mini factories to package catch for shipment to market – here at home and abroad. Seek out professional to run this area and get outside help if you must, but no matter what you do, ensure Liberians are the main engines that run this industry. Gradually grow this area for national development. This industry will create thousands of direct and indirect jobs; expand government reach but most importantly, give our people hope and a belief in themselves once again.
On the other hand, roads are a whole lot easier to incorporate than Liberians are led to believe. Government does not need five billion dollars to pave all the roads for national development! Do what others have done to get their economies growing and when you can, pave the roads using the revenue intake opportunities you have created. In the intern, you can make our highways accessible year round by doing some basic road work that works.
Here’s how: set aside $100M and recondition our highways in specific areas with the greatest delays. We must be practical and tailor our solutions to local conditions. Hire 100 thousand Liberians for 6 months and pay each $75/month (total wages $45M – note that the average monthly income in the country is about $65!). Buy shovels, diggers, wheelbarrows, rock drills, and dynamite to blast through available granite along these road ways to fill problem areas (about $10M). Invest $20M in compactors, dump trucks, mobile rock crushers, front end loaders and other road building equipment. Set aside $15M for fuel and repairs, $5M for food, and use the balance $5M for discretionary purposes.
Get the engineers and supervisory team from Public Works and the AFL (no need to pay them; they are already getting salaries) – government should also enlist voluntary prison labor. Now position these workers at crucial areas around the country and prepare our roads for year round usage. If properly done, these roads will be good for 15-20 years! In this time, charge a toll and use that money to gradually pave the roads a few miles at a time each year. Yes, it’s that simple. Remember, always find a way to expand your tax base on a larger portion of the population and not burden few people with heavier tax liabilities.
- Shipping, Export/Import – Invest in a mid-size, fairly used cargo ship for $20M and put it under our maritime program – yes you can find used container ships at cheaper prices. Use this ship to bring goods home to Liberia and take our exports to the rest of the world. You can put this under an established shipping line initially and gradually develop the skills and organization to do it ourselves. Cheapen our exports/imports, expand this industry, grow your tax base and make our people lives better. Keep in mind that the economy is about growth and directional mobility – keep it moving.
- Diaspora and Airline – Visit with major airlines and present them with this proposal. Liberia is not in the position to run and maintain an airline. However, Liberia does have the traffic to be a profitable destination. Negotiate with a company like Delta Airlines and present a profit-sharing arrangement where the airline maintains and operates the plane but designate Liberia as the primary destination. The plane will be painted with a Liberian Logo (say, Air Liberia), serve Liberian foods and carries a Liberian Crew (hopefully Liberian Pilots if not yet we can settle for the rest of the crew for now) and Liberia can lease/buy the plane and put it under the management of this major airline.
The arrangement can start with one plane and two trips a week and gradually work its way up. All travel arrangements will be made through this airline until we develop the knowhow to do this ourselves. Similar arrangements can be applied to power and electrification, sanitation, transportation etc., either locally or internationally – think privatization. In order to grow your budget, you must bring in people who have the money. A direct flight between New York and Robert’s International will go a long way and bring in millions in tax revenue and expansionary opportunities.
Remember the economy is a living entity; you must constantly breathe life into it to keep it alive and vibrant. This is why it is crucially important to have a leadership team who has the skills, experience and commitment to actualize this national vision. In the end, to grow your intake opportunities, you must improve your people’s lives and by default grow your economy and revenue.
Mr. Dualu is the author of a series of articles on how to improve Liberia’s current desperate conditions. Some of those articles include: “Common Sense Economics for Liberia”, and “Leveraging Liberia’s Resources to Lift the Pro-Poor Agenda”. The author works as a financial professional out of Massachusetts.