Creating Jobs, Promoting Employment, and Ensuring A Sustainable Livelihood for Every Liberian

Liberty Party, Old Road, Sinkor, Liberia

First Published September 12, 2011

Charles W. Brumskine: Standard Bearer

Franklin O. Siakor:Vice Standard Bearer

 

Understanding the Unemployment Situation in Liberia

Poverty in Liberia is increasing and there are more Liberians who are poor now than at the time this government was inaugurated and the Poverty Reduction Strategy was launched. Unemployment has remained steady at 82% since 2008. Moreover, inflation is taking away our buying power as the prices of basic commodities continue to rise at an alarming rate.

Sources of Jobs and Livelihood in the Liberian Economy and Potential for Growth

There were only 144,645 formal sector jobs available in 2010 for a workforce estimated at 816,997.  More than half (53%) of those jobs were in the agriculture and forestry sector (27%) and with the government (26%). Another 19% came from social and community services provided by churches, NGOs, and other non-profit organizations. Mining activities provided only 1% of jobs. And regardless of the commitments made by Mittal Steel, China Union, and BHP Billiton job growth in iron ore mining will not be as robust and the projected numbers of new opportunities will not be realized. Because Liberia is a commodity-based economy with limited domestic market and high production cost, the areas showing the most significant potential for rising or  stable prices well into 2020 are coffee, rice, logs, and sawnwood; and value-added agroprocessing.

Liberty Party’s Plan to Create Jobs, Promote Full Employment, and Improve Livelihoods

A 12-point plan is proposed in two broad areas: i) expand public sector employment, ii) develop and expand the private sector while reducing the presence

of government in the economy.

Summary

The demographic skew of the population is largely towards productive age groups. Education and job creation will continue to be either a top priority, or a

source of instability, well into the future.

Introduction

In continuation of our effort to let the Liberian people know precisely how we plan to deal with the problems facing our country, we are pleased to present today our policy on jobs-creation. As you will recall, we began this process with the presentation of our policy on national reconciliation which was followed by our policy on fighting corruption. True national reconciliation and minimizing public corruption are two of the issues upon which the long term peace and stability of our country rests, but ones which the Sirleaf Administration has demonstrated an inability to tackle. The other issue that is critical to the future of our country is the subject of our policy paper today – job creation.

With unemployment at 82% and many of our young people nearing the point of hopelessness and desperation, the issue of the lack of jobs, decent or otherwise, and the poverty that this engenders is a lurking threat to the peace and stability of our country. So, today we present to you Liberty Party’s plan for job-creation, full employment promotion, and creation of sustainable livelihood opportunities.

The most important question before us as a nation now is: how do we change our country in a way that the benefits of peace and development are spread widely and are brought within the reach of all of our people, starting with this generation of Liberians and going forward. Considering our relatively young population, access to education opportunities and to jobs will continue to be a top priority of government or will remain a potential source of instability and conflict well into the future.

While other issues are important to the rebuilding of our country, nothing will define this generation more than how we have learned from the civil war and recovered from it. We will be judged not by how well we learn the lessons of our civil war, but how well we built a foundation upon which the next generation can continue to build a society that is just and equitable, with opportunities for every Liberian to improve his or her life; and to thrive.

Understanding the Unemployment Situation in Liberia

About six years ago, Liberia celebrated the inauguration of the Sirleaf Administration with much hope that the inaugural ceremonies marked the end to our collective suffering and years of conflict and threats of instability; and the beginning of a new era of shared prosperity and empowerment. That hope has not been realized. To fully understand the situation we face, let us take a look at the economic situation since the inauguration of 2006, not from our words or from political rhetoric, but from an analysis of the administration’s own records, reports and other published information.

After nearly six years of the Sirleaf Administration and enormous flow of foreign aid into the country, the majority of Liberians continue to face unprecedented hardships. Each day is a desperate struggle for survival: sixty-four percent of Liberians (about 2 out of every 3) still cannot afford to feed themselves and their families adequately; 48% of Liberians (almost half) live in extreme poverty.

An analysis of the Unity-Party Government published statistics, show that poverty in Liberia is increasing and there are more Liberians who are poor now than at the time this government was inaugurated and the Poverty Reduction Strategy was launched. Moreover, inflation is taking away our buying power as the prices of basic commodities continue to rise at an alarming rate. The average price of a bag of rice, for example, went up by approximately US$10 -US$15 over the past six years. In general, food prices went up by 9%1. The exchange rate jumped from about L$ 36:1 US$ to L$72.5:1 US$ as the country struggled with huge trade imbalances—importing far (up to 5 times) more than our exports.

Unemployment remains at 82% since 2008; meaning that the UP government’s policies have failed to create jobs and have had little or no impact on the unemployment situation. In the face of this, the public workforce was reduced by 10,000 jobs–from an estimated 48,000 in 2008 to 38,000 through the “downsizing” and “rightsizing” exercise.

Figure 1, below using data taken from the Central Bank of Liberia’s Annual Reports, shows that unemployment remained steady at the same level over the past three years.

job creation snip 1

Unemployed Liberians engage largely in informal sector activities to meet livelihood needs; but they have also been struggling to establish formal sector business activities. Liberians registered 6,137 businesses in 2009.

This is 87% of all business registrations. The number of Liberians engaged in the informal sector grew by 43%–from 470,000 to 672,000 from 2006 to 2010; according to the Central Bank of Liberia. The formal private sector created only 43,710 new jobs growing by only 21% over the same period. The public sector “downsized” by shedding 36% of its jobs.

The economy grew by an average of only 7.4% while government revenue grew by 361% from 2006 to 2010. While superficially the increase in government revenue would be lauded as good fiscal performance, the net effect is that government is taking an increasingly larger share of the available income. By 2010, this amounted to 38% of GDP;but government is not creating jobs.

In public procurement, the one area where the Unity Party Government has absolute discretionary authority, most of the significant business opportunities with government go to non-Liberian nationals. Even those business opportunities that were traditionally for Liberians, as prescribed by the Liberianization Policy, are now engaged in by foreigners. Liberians are being systematically excluded from or pushed out of the more lucrative areas of the economy by the Government’s business policy.

This creates a situation where poor performance of the private sector (except for rental properties, entertainment, and communications), lackluster growth in the economy, and the marginalization of Liberian businesses lead to poor job growth and weak demand for goods and services throughout the economy. At this rate, only a negligible dent can be made on job creation with the high number of new entrants into the job market is taken into consideration. Like the Tubman administration, the Sirleaf Administration’s primary job creation policy has been to rely on the extractive industries.

Furthermore, the “open door” business policies are hostile to emerging informal sector initiatives—effectively crowding Liberians into marginally profitable sectors of the economy without any support mechanism to encourage their growth into formal sector small and medium enterprises. Lastly, the demographic skew of the population is largely towards productive age groups. Therefore, education and job creation will continue to be either a top priority, or a source of instability, well into the future.

Sources of Jobs in the Liberian Economy and Potential for Growth

But what are the sources of jobs and livelihood in the formal sector of the Liberian economy and what is the potential for expansion of those industries and sectors over the short, medium, and long-term? There were only 144,645 formal sector jobs available in 2010 for a workforce estimated at 816,997.

Figure 2 on the next page shows that more than half (53%) of those jobs were in the agriculture and forestry sector (27%) and with the government (26%). Another 19% came from social and community services provided by churches, NGOs, and other nonprofit organizations. General merchandise and trade provided 5% but is largely underreported because the informal sector activities are not taken into account. The rest (23%) were service industries that support the major job providers.

Mining activities provided only 1% of jobs. And regardless of the commitments made by Mittal Steel, China Union, and BHP Billiton job growth in iron ore mining will not be as robust and the projected numbers will not be realized. This is partly because the quality and diversity in skill mix needed for the mining industry does not currently exist among Liberian job-seekers and the outlook for iron ore prices on the world market will not justify massive investment in training and expansion of production over the medium term.

job creation snip 2

In figure 3 on the next page, we show the World Bank’s forecast of prices of commodities produced in Liberia, those where there is a comparative advantage on the world market, and those where there is significant local production that can provide sustainable livelihood for small farmers. The forecast starts from current prices as of June 2010 (except gold which is August 2011 actual price) and extends for 10 years to 2020.

Because Liberia is a commodity-based economy with limited domestic market and high production cost, the potential profitability for manufacturing ventures that are not directlylinked to agriculture and forestry products processing is very slim. Therefore, manufacturing (other than agro-processing) is not deemed a significant potential job creator.

The commodities showing the most significant potential for rising or stable prices well into 2020 (in red in Figure 3) are cocoa, coffee, rice, logs, oranges, and sawnwood. Reducing rice imports remains a perennial challenge. Rice made up 25% of Liberia’s food imports and 7.9 percent of all imports—US$58.43 million in 2010. Palm oil prices while currently at high levels will drop. Natural rubber (NR) price potential is closely linked to crude oil prices on the world market—the higher oil price, the more attractive NR is. And since 2001 prices have moved upward; but the forecast is that prices will remain high relative to the 1990s but further decline should be expected from 2012 to 2020.

job creation snip 3

Political instability (and the UN embargo) in Liberia and La Cote D’Ivoire contributed to a tight situation and price gains for African logs and sawnwood in the early to mid 2000s. Active buying by China and India also pushed up the prices. Nevertheless, the tropical timber products market remains vague and highly unpredictable because no transparent price discovery mechanism exists. Virtually all transactions are bilateral and government involvement in bilateral negotiations will be critical to creating and sustaining favorable prices going forward. The return to stability in Liberia and La Cote D’Ivoire will increase the supply and likely lower the prices of African logs and sawnwood.

Nevertheless, jobs created in the agricultural and forestry sector are likely to be lowpaying and rural-based. Most of the benefits will accrue to the owners of the commercial ventures and to small farmers in the form of better farmgate prices and more sustainable livelihood opportunities. More than half of the labor pool now reside in urban areas and are less likely to be drawn back to rural areas for these jobs. Until the roads, communication, and basic infrastructure expand; and until agro-processing ventures are established and scaled up, the demand for urban-based jobs will continue to outstrip supply well into the future.

Liberty Party’s Plan to Create Jobs, Promote Full Employment, and Improve Livelihoods

In view of the foregoing, most of the short to medium term potential for job-creation is in the public sector and the agricultural sector. Liberty Party’s job-creation plan seeks to broaden opportunities to bring more people into the formal sector or to enable them to create their own employment. Over the long term, leveraging our location in the region and emerging relationships with Asian nations, coupled with reduction in regulatory burdens, will spur investments from both foreign investors and the Diaspora. The major components of a Liberty Party Government’s job-creation policy are therefore as follow

A) Expand the Public Sector (short to medium term measures to create 215,000 employment opportunities)

1) Invest in labor intensive infrastructure rehabilitation and development in partnership with the private sector and NGOs. Goal: 100,000 jobs over 3 years (30,000 targeted to former combatants drawn into non-lethal AFL engineering brigades)

2) Establish a Student Service Corp to draw high school graduates and college students into community service. Goal: 3,000 service/teaching/mentoring-type opportunities over 3 years

3) Establish youth-empowerment programs in partenship with the private sector and NGO’s, by providing cost sharing contribution from GOL and other partners, to

provide non-formal education for out-of-school youth, teach basic literacy, numeracy, life and business skills, and promote public-private partnerships in workforce development. Goal: 100,000 opportunities with stipends over 3 years.

4) Expand the education sector with more formal and informal teaching and trianing opportunities for school-age children, adult learners, and vocation and technical education. Goal: 12,000 new teaching opportunities.

5) Leverage public procurement for goods and services to give priority to Liberianowned businesses, build the domestic entreprenurial class, and attract talented

Liberians in the Diaspora. Goal: US$57.5 million per year in public procurement/supply opportunities that can help to capitalize Liberian business for re-investment in the economy.

6) Engage commercial banks with the view of establishing a fund for extending business loans to Liberians, assisting Liberians to play a more meaningful role in the retail sector of our economy. This fund will be guaranteed by the GOL and supervised by a small business institute (SBI) to be established by a Liberty Party Government. Goal: empower Liberians to play leading role in the country’s economy.

7) Change the resident/work Permit Laws, granting residency and the authority to work to business owners for longer periods than are provided for under our current law. Depending on the nature and amount of the investment, non-Liberians will be granted resident/work permits for periods ranging between five to twenty years. And those non-Liberians who have lived in Liberia for more than twenty years, they will be grandfathered into the longer resident/work permit period, without regard to the nature and amount of investment. Goal: encourage substantial investments in the non-extractive industries thus creating additional employment opportunities for Liberians.

B) Private Sector Development and Expansion (medium to long-term measures that will put the private sector in the lead in job creation)

1) Reform the banking system and expand insurance industry

          i) Reduce the legal bottlenecks to foreclosure actions on non-performing loans; introducing new legal instruments and, in partnership with the banking institutions, information sharing mechanism on creditworthiness of potential borrowers. Goal: reduce the risk to bank lending and the ratio of nonperforming loans to total loans from 10.3% to 5% in five years;

         ii) Reduce the excess liquidity of the banking system by offering partial guarantees to encourage more commercial agriculture loans across the board.

        iii) Establish a microfinance regulatory and supervisory framework, introducing microfinance institutions (MFI) to receive limited deposit-taking in rural areas

supported with deposit guarantees (up to L$25,000.00 per depositor). This will, (a) reduce the geographical distance between small and potential savers, especially those in the informal sector, and “banks”; (b) eliminate the bureaucracy involved in transacting business with banks, and (c) increase confidence that their deposits are secured. MFIs, as an outreach approach, will ensure that more small savings come into the formal business environment. Goal: increase access to banking and financial services throughout the country, ensuring that the national economy under a Liberty Party Government will benefit from the accumulation of capital which banks can lend to productive commercial ventures, thereby creating more employment opportunities for Liberians.

       iv) Introduce community-based micro-insurance schemes to reduce the risks of adverse health, accident, and death to those in the informal sector in exchange for regular premium payments matched to the current family out of pocket expenses on health care and burial. Currently, 92% of our workforce has no insurance coverage. Goal: increase the coverage and access to insurance and reduce the risks for illness and death to families so they can spend more time engaged in productive economic activities.

2) Re-capitalize the Agriculture and Cooperative Development Bank with significant private interest and control to finance commercial ventures in the agriculture sector with public guarantees. Goal: raise the portfolio of new loans going to the agriculture sector from 4% of total bank loans to at least 40% in 5 years; giving priority to rice, rubber, logs/sawnwood, oil palm and agro-processing ventures.

3) Re-capitalize the National Housing and Savings Bank with significant private interest and control to finance low and medium-cost, and commercial housing, ventures. Goal: 25,000 new housing units financed over 5 years.

4) Stimulate broad growth in the economy through reduction in the regulatory burden (business registration, import/export document processing, pre-payment of withholding tax); open service delivery opportunities and market competition in areas currently dominated by public corporations (energy, IT, communications, urban water and sanitation, produce buying and exports), and engage all major existing concessionaires in the iron ore, timber, agricultural and rubber industries to provide full government support in ensuring that their projects are fully operational by the end of 2013. Goal: reduce government’s overall presence in the economy and ratio of revenue to GDP from 38% to 25% over six years.

5) Aggressively lead bilateral trade negotiations to open new export markets while seeking to develop the manufacturing sector of our economy. A major shortcoming in managing our natural resources has been a failure to make them more valuable to our country by producing semi-finished or finished products. Another short-coming is the absence of set-asides and preferential treatment for subcontracting of Liberian-owned businesses/domestic suppliers, in the negotiation of mineral development and concession agreements, to build a more sustainable link to the local economy. This means that we derive less value by selling our natural resources for cheap, repurchase the finished products at higher prices, and fail to integrate other Liberian industries with these extractive industries. Goal: maximize the benefits that accrue to the country from the exploitation of our natural resources; and cut overall trade deficit by one-half from US$517 million in 2010 to US$258 million in 6 years. This will concurrently reduce the exchange rate between the L$ and the $US and the inflationary pressures contributing to high prices.

Conclusion

That the issue of jobs, and of other opportunities for individual progress, is critical to the peace and stability of our country cannot be in dispute. Also, it has to be common knowledge by now that a dispropotionate reliance on the extractive industries for job creation is a failed policy from the past that cannot continue. The new jobs-creation vision for our country has to be one that promotes a diversified economy, empower the Liberian enteupreneur, and add value to our raw materials. This is the direction of our job-cration plan. Liberty Party’s job-creation plan is designed with that outlook and will take our country in that direction.

We estimate that the plan as outlined in this paper will create approximately 215,000 employment opportunities in the formal sector over the next six years, bringing relief to Liberians while we expand and diversify the economy over the medium and long term. Many of these opportunities do not require donor support; though we will seek their collaboration. These policy measures can take effect almost immediately. Some will require assessments and negotiations; which a Liberty Party Government will do aggressively.

A Liberty Party Government will work aggresively to grow the Liberian economy, empower the Liberian entrepreneur, and provide jobs for the Liberian people.

THIS IS OUR SOLEMN PLEDGE!

 

i Ministry of Planning and Economic Affairs 2008

ii Central Bank of Liberia, National Economic Development Reports 2003 to 2006

iii Ministry of Commerce and Industry, Annual Report 2009

iv Central Bank of Liberia, Annual Report 2010

v World Bank, Economic Policy and Prospects Group, Commodity Prices and Price Forecast in Current US Dollars

vi UNCTAD, INFO COMM; Market Information In the Commodities Area

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