Liberia must boost capacity to manage natural resource revenue

Sierra Leone Telegraph: 20 March 2013:

Liberia is on the verge of becoming a prosperous nation, following decades of poverty and political instability. But it will have to quickly develop its capacity to manage the billions of dollars forecast from mineral export earnings.

That was the keynote message from a seminar, held Monday, 18 March 2013, in the country’s capital Monrovia, where participants heard that revenue from iron ore exports – added to earnings from crude oil, will in the next decade significantly increase its GDP.

These new revenue streams would have to be effectively and efficiently managed by those in power, if the country is to reap the benefits through economic development.

The seminar – ‘Managing Natural Resource Revenue in Liberia: Opportunities and Challenges’, was organized by the International Monetary Fund (IMF), in collaboration with the International Growth Centre (IGC) and Liberia’s Ministry of Finance.

The event brought together more than 100 participants including senior government policy-makers, international experts in the field of natural resource management, legislators, private sector representatives, as well as development partners and civil society organizations.

Time to build capacity

“We recognize that over the next four or five years, we will have more iron ore and we may well have oil coming on stream,” Deputy Minister of Lands, Mines, and Energy Sam Russ told the seminar.

“We have the time to build capacity. We have to start bringing in people with expertise to help us.”

Deputy Finance Minister for Revenue – James Kollie, said Liberia’s chosen resource revenue management regime, should reflect the country’s capacity to implement it.

Kollie noted that Liberia had established a natural resource tax unit within the Finance Ministry, and was working with the IMF and others to train personnel.

Acting Finance Minister – Sebastian Muah, told the seminar that Liberia was about to go down a path that the country had not travelled before.

“If we must do it right, we have to have all the relevant information, so our decisions are done properly,” he said.

Muah stated it would take years to advance the agenda of managing natural resource revenue effectively. “We need resources, we need people, and we need all of these coming together to get us there.”

Other countries’ experience

The seminar also heard that Liberia can learn from a wealth of experience of other countries, as it seeks to better manage the revenues from its abundant natural resources.

Speakers at the event cited the track records of nearby and neighbouring countries such as Ghana, which have adopted new policies to handle revenues from natural resources.

IMF mission chief for Liberia – Catherine McAuliffe, said that natural resource revenues could bring to Liberia – faster reconstruction, development and poverty reduction, and could help the country’s transition to a middle-income economy by 2030.

“With such abundant natural resource potential, Liberia is poised to receive significant foreign investment in its natural resources. However, there are also risks, unless resources are properly managed,” McAuliffe said.

Spend or save

Several important decisions would need to be made ahead of large-scale resource flows coming on stream, including tax policy decisions and raising revenues through a variety of tax instruments, McAuliffe stated.

Decisions would also need to be taken on managing resource revenues, especially government’s decision as to whether to spend or save for future generations; and through all this – ensuring transparency.

The consensus of most speakers at the seminar is clear:

– resource revenue management in Liberia is still at an early stage, with the possible start of oil production still several years away

– at this early stage, the emphasis should lie on engaging the public, framing expectations, and building constituencies to support the tasks ahead

– A resource revenue management strategy is inextricably linked to other broad issues in Liberia’s development and should be embedded into overall economic management.

– Other countries have track records in pursuing the different resource revenue management strategies – Liberia can learn from decades of experience in other places

– Part of revenue management means getting revenue in the first place by optimizing the taxation of resource extraction

– There are other sources of revenue besides oil – most notably iron ore -that could also fit into a resource revenue management strategy

– Capacity should be built to manage resource revenue and, more importantly, expenditure. The stakes are high enough for Liberia to import the needed capacity on a short-term basis, while setting up local bodies to shadow and eventually replace the contractors

– Rules, institutions, and transparency are vital for effective citizen monitoring and for the attraction and retention of profitable and responsible companies. These companies would pay taxes, employ Liberians, and ultimately be a source of prosperity long after the resources have been exhausted.

The chilling message, amid hope of a prosperous Liberia is that if those governing the country fail to put in place a concerted and co-ordinated strategy to harness and manage the country’s vast natural resource, Liberians will forever remain poor.


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