Will USAID Support the Idea to Build A Tire Factory in Liberia?

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J. Yanqui Zaza

The effort in Part I called “USAID awards $16M to Nathan to fight corruption but says nothing about the 66 fraudulent concessionary agreements and illegal wealth accumulation” was to question the idea that USAID and other foreign experts are training incompetent, inefficient, and lazy Liberian employees in order to reduce corruption and the cycle of violence. I think these views are wrong, rather USAID and others should not only question why some elected leaders are gullible to corruption, but also should analyze their own purpose of existence.

For example, are USAID and others ordinary trainers/assistants or are they agents of principals (i.e., countries) which are searching for resources on the cheap?

If no employee is inherently, incompetent or inefficient, then, certainly, Liberian employees are no exception. On the other hand, since USAID and others are merely implementers of the missions of their principals, wouldn’t it be a good idea to look beyond the policies of these agents? Why look at the interest of the principals? This is because any country (i.e., which is a principal of an agent), for example, Corporate America, is a competitor within the economic global arena. It is a competitor in search of cheap natural resources, in search of a regular supply of unskilled labor to work at slave-wage plantation companies such as Liberian Firestone Rubber Plantation Company.

For instance, did the World Bank, one of Liberia’s economic advisers, and USAID oppose the interest of Corporate America, during the recent re-negotiation of Firestone concessionary agreements, to continue to produce tires in Dayton, Ohio, America? No, because the tire factory in Dayton, Ohio employs a significant number of US citizens. And, were Liberia to add value to latex (i.e., for example to manufacture tires in Liberia), domestic revenue will increase, but Dayton, Ohio tire factory would not get latex from Liberia.

Adding value to the latex would generate additional revenue for Liberia. However, adding values would require an investment in Liberia’s education, which would reduce the number of unskilled labor needed to tap latex for Dayton Ohio tire factory. The million dollar question is did the World Bank and/or USAID advocate for more unskilled labor or advocate for educational policies whose end effect would be to reduce the number of unskilled labor? Certainly, USAID and the World Bank did nothing to undermine the interest of Dayton tire factory to get latex from Liberia and produce tires.

If Liberia should move ahead, stakeholders should re-evaluate Liberia’s relationship with its competitors and the different agents of our Nation-state. I am forwarding a few of my inputs for review and critical analysis:

Gold or Special Drawing Rights (i.e., a privilege to borrow money): Adding Gold and reducing Special Drawing Rights might reduce the need for Liberia to borrow money from the IMF, an arrangement that might reduce IMF’s revenue. Importantly, such an economic arrangement might not only reduce Liberia’s debt, but also it could calm the fears of foreign suppliers because the Central Bank does not have money to refund or repay debt owed by local merchants. Gold value, the price of which is expected to hit $1,650 in 2020, can be exchanged and/or sold for value. Further, an increase (i.e., by adding gold) in our country’s Net International Foreign Exchange Reserves would serve to reduce the prices of goods and services in Liberia.

Liberia’s Unemployment rate at 3%: The 2015 Survey by USAID reported that Liberia’s unemployment rate is around 3%. This number is wrong because it includes schooled aged-boys and girls and rural residents who live on subsistence farming. Unfortunately, this favorable percentage is encouraging money-lending institutions into believing that the buying power of Liberian consumers is high since 97% percentage of the population is employed. I surmise this forms part of the reason why small businesses are not paying their loans because the low but misleading unemployment figures indicated that their business would be profitable. Worse, money-lending institutions have and continue to encourage Liberia’s schooled-aged children to abandon schooling and related activities and gravitate towards street hawking and other fast-money making activities that yield little or no tangible profits or benefits.

Review factors used in computing the Denominator (Nominal Gross Domestic Products). The IMF and the World Bank have advised Liberian officials to use Nominal Gross Domestic Product, whose values are usually higher than the values of Real Gross Domestic Products, to compute (1) Debt to GDP ratio, (2) Budgetary shortfall, (3) Income per capital, (4) National debt to Gross revenue ratio, etc.

For example, the Liberian government to reduce its Debt to GDP ratio from 35% in 2017 to 26% in 2018. The low number indicated that Liberia could borrow more money. Thereafter, government officials and the IMF reported that the government had more room to borrow more money because Liberia’s debt to GDP ratio was 26%, far below the benchmark of 38%.

If the rises and falls in inflation (i.e., prices) should account for the difference between Real Gross Domestic Product and Nominal Gross Domestic Products, where are the factors to account for the 9% decrease? How did the IMF report US $3B as the Nominal Gross Domestic Product in 2017, if Real Gross Domestic Product in 2017was less than $1B, according to the 2018 Annual Report of the Central Bank? The percentage of 200% (i.e., $3B minus $1B is equaled to a $2B increase, which is divided by $1B) is far above the 2018 inflationary rate of 25%. Predictably, the IMF prefers the 26% because Liberia is perceived to be in a position to borrow more money.

Budgetary Document: Revenue projection-The Ministry of Finance Development and Planning stated that Liberia’s economy is bad, yet its revenue projection numbers in 2016/2017 are not significantly different from the revenue projection numbers in subsequent years, including 2020/2021. I guess it figures that high revenue projection will satisfy preconditions to enable it borrow more money from the Central Bank of Liberia. The 1999 Central Bank Act stipulates that the Liberian Government should not borrow more than 5% of the total Liberian gross national revenue. However, GOL can borrow more money from the Central Bank if its revenue projection is higher than the actual projection.

Unearned revenue: The Liberian Revenue Authority, Central Bank of Liberia and others should prepare a schedule of reconciliation detailing earned income and unearned income, if not available. A schedule of reconciliation would help policymakers to understand that a portion of the government’s deposits at the Central Bank represents projected revenue for previous or subsequent fiscal periods. This schedule is even more important since the Central Bank reports on a calendar basis, while the government prepares its budget on fiscal year (July 1 through June 30).

Buy used vehicles and re-used vehicles: Liberian government should buy durable-used vehicles, apply Generally Accepted Accounting Principles (ISA 16) and end the selling of government vehicles at book value: Officials are selling government’s vehicles after a few years in operation because the vehicles have reached their threshold (i.e., maybe set at $500 or $10,000), over which it depreciates as assets. Re-using vehicles would reduce our budgetary deficit and, by extension, reduce interest rates and serve to ultimately increase poor people’s purchasing power.

Financial Capital Market: If a Liberian financial market is to be useful for trading, our Central Bank should ensure that: (1) businesses should publish financial data such as revenue projection, earnings per share, debt to assets ratio, prices of short-term and long-term bonds, assets, liabilities, equity, etc.; (2) underwriters/consultants should evaluate a business’s Initial Offering Price, (3) independent rating agencies should appraise and assign grades (AAA+ BBB, etc.) to bonds/stocks, (4) create or encourage private-capitalists to establish financial institutions similar to institutions such as Bloomberg, LLC and New York Stock Exchange, which are equipped and capable to provide trading platforms; and (5) Security Exchange Commission monitors and regulates trading.

Domestic revenue mobilization:
Reduce utility cost by encouraging them to publish financial statements: Institute measures to increase the buying power of consumers since more cash in the hands of consumers would result into increase in tax revenue. For instance, accountability and transparency, in the form of publishing financial statements, usually result into increased cash-savings of customers. Therefore, Government should require both public and private utility providers to publish their financial statements in accordance with Section 2-5 of the September 16, 2010 Freedom of Information Act.

Decentralize government administration office-buildings across the fifteen counties. This approach would tend to reduce the cost of housing (rent expense), thereby, allowing tenants to use their cash-savings from exorbitant rental payments to buy other goods and services, which will tend to increase tax revenue.

AGRICULTURE THE ENGINE OF THE ECONOMY: Let us not allow the World Food Program and the International Monetary Fund to dictate our agricultural program. The idea put forward by the IMF that a government should not play a role in our agriculture is ill-advised because Western countries are playing a role in their agriculture programs. For instance, if the government agent (i.e., the World Food Program) did not purchase the excess food produced by farmers in western countries and ship the excess food to poor countries, those farmers would not be profitable. Why farmers would not be profitable?

Every year, farmers produce more food than customers in those countries demand, which would force the price of food to drop below a profitable price. In order to keep the price of food at a profitable price for farmers in Western countries, World Food Program purchases the excess food and ships the excess to poor countries.

The government should investigate pre-1980 policies of the Agricultural Cooperative Development Bank(ACDB), and review reasons, if any, why many entrepreneurs do not borrow money to produce food. For example, commercial banks appropriated L$72B loan for entrepreneurs in 2018 and CBL allocated US$5M to agriculture in 2018. Also, government should serve locally produced food at government ceremonies, which might have the effect of increased production. This initiative might encourage the public to consume more, and by extension, increase the consumption of local food.

If Liberian officials, including law and policy makers can begin to become real, accountable, transparent, and honest it might be difficult for agents and/or Liberia’s competitors to deceive and dictate Liberia’s policy, and by extension, our destiny.

2 COMMENTS

  1. Hey Comrade J.Nikita Zaza, no need to wait for “USAID to Support the Idea to Build A Tire Factory in Liberia”?? You and your socialists friends can show us the way to add value to Liberian latex!! All you have to do is get your comrades together, and borrow some money from Comrade Vladimir Putin (I’m sure he will give his comrades, interest-free loans!). Then, you guys can use that money to start a tire producing company in Liberia, and pay your Liberian employees U.S salary scale wages! How about that, Comrade?? Your country will be proud of you!

  2. Sr. Engineer, Geophysicist: Peter Curran (Yarkpajuwur N. Mator 2017-Independent Presidential Candidate)

    Who has the Know-Hows for doing such things? Liberian?
    Da book we le eat?

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