Photo from this blog.
The Liberian government recently submitted an act to the National Legislature to ammend the Investment Incentive Act of 1973, according to this article in The Analyst. The Act is better known as the Liberianization policy. Since being expanded in 1983, the policy forbids foreigners from becoming involved in 26 businesses. These businesses, which I bet Liberians would consider “small small” businesses, include petrol distribution, cement and rice distribution (note that distribution is different than importing), woodwork shops, beauty salons, taxi driving, selling ice, selling ice cream, and selling water in plastic bags.
The government wants to amend the policy because it has been ineffective and scares off foreign investment. I couldn’t agree more.
I did some research on the Liberianization policy for my undergraduate political science thesis. After conversations with a number of Lebanese and Liberians in 2005, it became clear that the policy was poorly enforced. Moreover it is not clear to me if the policy has ever had real government support. In 1983, the same year the policy was expanded, former president Samuel Doe said in a speech that “at a time when the government was striving to attract foreign investors to Liberia, the Liberianization decision aroused serious doubt about Liberia’s open-door policy and free enterprise system and brough adverse effects on business transaction in the country.” (If you are interested in reading my thesis, email me and I can send you an electronic copy. My email is shelbygrossman@gmail.com.)
The idea behind the Liberianization policy is good. It aims to promote Liberian entrepreneurship by giving Liberians a competitive advantage in certain small parts of the economy. But in practice, the impact has been minimal. As President Sirleaf is quoted saying in the article: “Just restricting certain lines of businesses, mostly petty businesses to Liberians and not doing the other things that are necessary, meaning giving them access to capital, giving them access to market, technology; helping them to improve their management skills; when those things are lacking, what we found resulted was that Liberians simply fronted for others.”
Just as important, the policy scares off foreign investment, as it is perceived as being more draconian than it actually is.
A populist Analyst editorial, however, comes down on the other side of this issue. The editorial claims the government “has sufficiently sipped the vodka of globalization” and that they are under the thumb of “powerful external investors and traders,” aka foreigners. I understand the reluctance among Liberians to trust their government with any proposal that appears to favor foreigners. Historically these proposals have hurt Liberians. But amending the Liberianization policy could encourage transparent foreign investment, resulting in jobs for Liberians and significant government tax revenue that could be used to provide social services.
While doing research for my thesis I was never able to find a copy of the original Investment Incentive Act, or the revised version. Does anyone know if there is an electronic copy circulating anywhere?
I found this blog exploring Africa oriented blogs.
No country has become a power of any kind, by implementing neoliberal policy.
Regards.
Renegade Eye,
Thanks for your comment. I don’t know if your assertion is true, but either way I’m not advocating neoliberal policies. I’m simply advocating that the government do away with a policy that isn’t enforced and scares off foreign investors that could provide needed jobs.
I’m in favor of other strategies that might help better level the playing field for Liberians. One idea I’ve heard thrown around is a subsidized apprenticeship or internship program for recent Liberian university graduates at a large, well-run, and well-established company in Liberia–Liberian owned or foreign owned. This could give recent grads exposure to business strategies that work in Liberia that they may not have learned about in the classroom.
Cheers,
Shelby
Very interesting Shelby. The variety of issues you deal with is very impressive.
‘Liberianization’ was embraced by the Tolbert Administration as the Liberian version of ‘Africanization’ of highly-qualified manpower, predominantly in foreign-owned companies. Many African governments adopted this policy, following the self-reliance goals of the early 1970s. But – even more important – President Tolbert used this Liberianization policy as part of the system of political patronage and nepotisme which rewarded his allies and supporters and kept him in power. For more details I refer to ‘The Open Door Policy of Liberia – An Economic History of Modern Liberia’ (1983), pp. 366-370(available online – see my blog, October 26, 2007).
Your posting renewed my interest in the subject and I will be very happy to receive an electronic version of your thesis.
All the best,
Fred