-U.S. Department of State 2024 Investment Climate Report Reveals
By Jerromie S. Walters
Liberia’s investment climate remains fraught with challenges that deter foreign direct investment (FDI) and complicate the business landscape for both local and international entrepreneurs. Despite the country’s vast natural resources and potential for economic growth, a combination of bureaucratic hurdles, corruption, and a lack of transparency continues to undermine investor confidence.
According to U.S. Department of State’s Investment Climate Statement on Liberia, the government does little to encourage investment while Business leaders report the government’s reluctance to engage in meaningful dialogue regarding new investments and policies, particularly those aimed at addressing critical issues like climate change.
The U.S. Department of State’s Investment Climate Statements help U.S. companies make informed business decisions by providing up-to-date information on the investment climates of more than 165 countries and economies. They are prepared by economic officers stationed in posts around the world and analyze a variety of economies that are current or potential markets for U.S. businesses of all sizes.
The statement, which was released on Tuesday, September 10, 2024, indicates that meetings with government representatives often require the offering of bribes, creating an environment where ethical business practices are overshadowed by a culture of graft. “In practice, the government does little to encourage investment in Liberia. Business leaders report it is difficult to meet with government representatives to discuss new investment or policies to address climate change unless bribes are offered.”
It emphasized that legal and regulatory framework governing investments in Liberia is weak and inconsistent, further complicating the landscape for potential foreign investors. The report points to the lack of transparency in contract awards and the prevalence of corruption serve as significant deterrents. Liberia’s economy was severely damaged by more than a decade of civil wars that ended in 2003 and has been slowly recovering, but Liberia has yet to attain pre-war levels of economic development, and corrupt misgovernance continues to hinder growth, investment, and job creation. The West African nation’s largely commodities-based economy relies heavily on imports even for most basic needs like fuel, clothing, and rice – Liberia’s most important staple food. Liberia’s GDP ranks among the lowest in the world, but the economy grew by 4.7 percent in 2023 and is projected to grow by 5.3 percent in 2024, according to the World Bank.
Howbeit, the U.S. 2024 Liberia’s Business Climate statementstates that government decisions impacting the business sector often prioritize political cronyism over considerations that would enhance the investment climate. This has resulted in a scenario where businesses that operate outside the legal framework can thrive, provided they align with the right political interests.
“A weak legal and regulatory framework, lack of transparency in contract awards, and widespread corruption also deter foreign direct investment. Government officials view foreign investors as opportunities for short-term graft, rather than as partners in creating long-term growth for the benefit of the country. Government decisions affecting the business sector is driven more by political cronyism than investment climate considerations.”
The statement says many government officials view foreign investors not as partners in fostering sustainable economic growth, but rather as opportunities for short-term financial gain. This perspective hinders the establishment of a collaborative environment that is essential for long-term development. “Many businesses find it easy to operate illegally if the right political interests are being paid, whereas those that try to follow the rules at best find that they receive little if any assistance from government agencies, and at worst are targeted by government officials seeking direct or indirect bribes or other unofficial payments.“
Conversely, it indicates that those who strive to adhere to regulations find themselves at a disadvantage, receiving little support from government agencies and, in some cases, facing harassment from officials seeking bribes or other unofficial payments. Moreover, the U.S. 2024 Liberia’s Business Climate report reveals that the 2010 Investment Act also poses significant barriers to foreign investors, including those from the United States. This legislation restricts market access in certain economic sectors, limiting opportunities for foreign ownership and establishment.
According to the statement, such restrictions not only diminish the attractiveness of Liberia as an investment destination but also hinder the country’s potential for economic diversification and growth. “The 2010 Investment Act restricts market access for foreign investors, including U.S. investors, in certain economic sectors or industries,” it indicates. Meanwhile, in its summary, the report indicates, “Low human development indicators, expensive and unreliable electricity, poor roads, a lack of reliable internet access (especially outside urban areas), and pervasive government corruption constrain investment and development.”
It continues, “Most of Liberia lacks reliable power. There are ongoing efforts to expand access to electricity through an extension from the Mount Coffee Hydropower Plant, connection to the West Africa Power Pool, and other internationally supported energy projects. Public understanding of corruption in the public sector is high, as indicated by Liberia’s poor showing in Transparency International’s 2023 Corruption Perceptions Index, where Liberia dropped three places from 142 in 2022 to 145 out of 180 countries in 2023. Low public trust in the banking sector and lack of access to business financing results in most cash being held outside of banks.” On OUTWARD INVESTMENT, the report says the number government neither promotes nor incentivizes outward investment but it does not restrict Liberian citizens from investing abroad.
Bilateral Investment and Taxation Treaties:
Liberia has bilateral investment treaties (BITs) with France, Germany, and Switzerland. It also signed a BIT with the United Arab Emirates in 2019 and with the Belgium-Luxembourg Economic Union in 1985 but neither has entered into force. The report says Liberia enjoys preferential access to the U.S. market under the Generalized System of Preference (GSP) and the African Growth and Opportunity Act (AGOA).
“Liberia and the United States do not have a bilateral taxation treaty, but the two countries have had a treaty exempting shipping and aircraft earnings from double taxation since 1982. Liberia has a bilateral tax treaty with Germany. It has also signed bilateral tax treaties with the United Arab Emirates and the Kingdom of Morocco, but those treaties have yet to be ratified by the Liberian legislature. Liberia has initiated negotiations on a bilateral tax treaty with Qatar.”
REAL PROPERTY:
Liberian law protects property rights and interests but with weak enforcement mechanisms. “Long-term” mortgages or construction loans of up to 10 years are only available through the Liberia Bank for Development and Investment. Only Liberians may own land, with the limited exception provided in Article 22(c) of the Constitution that non-citizen missionary, educational, and other benevolent institutions shall have the right to own property if that property is used for the purposes for which acquired. Property no longer so used reverts to the Government of Liberia.
Other foreigners and non-resident investors may acquire land on leases, which ordinarily run for 25 to 50 years. Liberian law provides for no official waiver mechanisms for limitations on foreign land ownership. The Liberia Land Authority (LLA), is a one-stop-shop for all land-related matters. Although the LLA encourages property owners to identify and register land titles, it does not have systemic enforcement programs. The LLA estimates that less than 25 percent of the country’s total land is formally registered. Conflicting land ownership records are common.
Investors sometimes experience costly and complex land dispute issues, even after concluding agreements with the government. The Land Rights Act, enacted in 2018, was designed to resolve historical land disputes that have caused conflict and communal strife in the past.
