Towards Inclusive Growth and Economic Diversification Hon. Boima S. Kamara Minister of Finance & Development Planning January 10, 2016
Economic Outlook: Current Economic Situation Economic Diversification: Adopting Export-Driven Industrial Policy for the 21 st Century Interventions and action plans
Current Economic Situation
14% 12% 12.7% 10% 8% 6% 8.2% 6.0% 5.1% 6.1% 7.4% 8.2% 8.7% 5.9% 8.3% GDP growth required to achieve Vision 2030 6.8% 7.2% 4% 3.2% 2% 0% 0.7% 0.3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-0.5% 2016 2017-2% Sources: MFDP, IMF Article IV & ECF Reports (revised growth estimate as of Nov. 2016: https://www.imf.org/en/news/articles/2016/11/02/pr164 79-Liberia-IMF-Staff-Completes-Combined-Fifth-Sixth- Review-Mission).
25.00 20.00 15.00 Percent of Real GDP Growth Impact of Ebola Virus Disease 10.00 5.00 Price decline for key exports: Iron ore, 0.00-5.00 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 rubber, gold etc. -10.00 UNMIL Drawdown is -15.00 peculiar to Liberia -20.00-25.00 Liberia Ivory Coast Ghana Guinea Nigeria Sierra Leone Source: MFDP, IMF
Average annual GDP growth, 2005-2013 Mining has historically driven growth but not necessarily inclusive job creation Workers in Main Economic Sectors versus Average Annual Real GDP Growth by Sector, 2005-2013 80% 70% 60% Mining & Utilities Liberia s growth being driven by mining, which generates very few jobs. 50% 40% 30% 20% 10% 0% Construction Government Transport Manufacturing Commerce Agriculture grew 2.8% on average per year 2005-2013, but accounts for about 50% of workforce. Manufacturing, which is also labour-intensive, only grew 3.6%. Agriculture 0 100 200 300 400 500 600 Number of workers, thousands Sources: IMF, Government of Liberia, Labour Force Survey (2010)
Adopting Export-Driven Industrial Policy for the 21 st Century
Operationalize LATA Support Manufacturing Support value addition in agriculture (through financing, public goods, market access) Strategic investment, both domestic & foreign, in value chains + downstream processed goods Expand electricity distribution Link creative financing for MSMEs + commerciallyviable businesses Attract more FDI in manufacturing Invest in Infrastructure Link farmers to the final consumer Connect businesses to the grid Urban planning and sanitation Improve land administration
which complement the development of non-extractive value chains to capitalize on infrastructure improvements P Sime Darby Oil Palm Concession S C V F P A Aquaculture Hubs P R C F P R V S R Cassava Hubs Marine Fish Hubs Oil Palm Areas Rubber Processing Clusters Rice & Vegetable Hubs F A Prime Cocoa Areas Source: NIC, MFDP A R V P EPO Oil Palm Concession A R C P Golden Veroleum Oil Palm Concession S P P R A P F R C V A S MOPP Oil Palm Concession Key value chains Agriculture: Rice, cocoa, oil palm Agri processing: Rubber processing Aquaculture Manufacturing Key interventions Attracting strategic investors Creating the right enabling conditions: Regulatory frameworks, trade facilitation, business support, transport services, growth financing Development of the Monrovia industrial park as base for agro-processing and light manufacturing
Completed Primary Roads: Cotton Tree-Buchanan: 80km Kakata-Bong Mines: 35km Gbarnga-Ganta-Guinea Border: 68.8km Roads to be completed by the end of 2017: Redlight-Gbarnga: 176km Ganta-Yekepa: 71.6km Harper-Karloken: 50km Marshall Road: 21.5km Roads likely to have visible work by late 2017: Gbarnga-Salayea: 81km Karloken-Fishtown: 80km (+16km to Ivorian border) Ganta-Tappita: 101km (partially funded) Roads with concrete funding conversations: Zwedru-Fishtown: 118km Sanniquellie-Luogatuo: ca. 50km Existing paved road Roads with on-going or completed feasibility studies: Salayea-Mendicorma: 193km (completed) Tappita-Zwedru: ca. 115km (on-going) Buchanan-Greenville-Pleebo: ca. 346km (tendering) Urban Roads (primarily in Monrovia): Around Monrovia: ca. 230km (by 2017) Voinjema: ca. 2.5km Counties with rehabilitated farm to market roads Rehabilitated/Constructed water points
Road access will be complemented by more affordable and reliable electricity to reduce cost of doing business Bomi Corridor Cote d Ivoire, Liberia, Sierra Leone, Guinea (CLSG) Project Mt. Coffee Hydro Plant Monrovia Consolidation MONROVIA India ExIm (Ganta, Gbarnga, Zorzor) HFO 2 HFO 3 RIA Corridor Kakata Corridor Source: Presidents Delivery Unit
and the rebuilding of ports will further facilitate domestic & regional trade by 2017 Freeport of Monrovia Fuel Unloading Facility Mesurado Fishing Pier Roberts International Airport Airport Terminal Construction Runway Upgrade MONROVIA Ports of Buchanan & Greenville Upgrade of Equipment Source: Presidents Delivery Unit
GoL is accelerating project delivery to ensure tangible change by 2017 & beyond Energy Electrifying the country 700% increase in current available (15MWs to 118MW) Increase the number of connected homes and businesses from 32,000 to 53,000 Roads to market Ports Education Health Connecting the country 400 km of newly paved & rehabilitated roads 500km of new roads funded and already being built Better road maintenance and management so potholes are dealt with fast Opening up for global business Improve Roberts International Airport, attracting more investors to Liberia Upgrade Buchanan and Greenville ports to reduce transport costs and create local employment High quality teachers looking after the next generation Remove ghost and untrained teachers. Only pay teachers who are actually teaching Assess teachers based on whether the children they teach can read and do maths Put a trained maths and science teacher in at least 10% of schools Healthcare services reaching the majority of the population Scale up of health workforce program to provide services across the country Upgrade of JFK & Redemption hospitals
Immediate and short term interventions provides temporary relief in the business environment No Intervention Objectives 1 Amended section 16 of the Liberia revenue code Incentivize private sector development for local & foreign investors, especially in agriculture, agro-processing, & manufacturing & incentivize 2 Provided tax amnesty on penalty and interest payments Provided space for businesses to expand 3 Renewed Executive Order 64 To attract additional investment in agriculture through duty exemptions on farming and agriculture equipment 4 Implementing fiscal rule prioritizing purchase of domestically milled rice 5 Adopted & Implementing ECOWAS CET Improve competitiveness of domestic rice millers and production Increase in Liberia s trade volume and revenue through Liberalized trading within West Africa
Medium to long term Fiscal interventions needed to provide sustainable support to the business environment No Intervention Objective 1 Financing /Guarantee to agriculture subsector 2 Guarantee to Liberian SMEs Commence value addition in rubber subsector To improve service delivery to GoL.
Expanding financial services and credit is cardinal to supporting new business initiatives along the value addition and supply chains N o Intervention 1 Launched Financial Sector Development & Implementation Plan 2 Launched the Digital Financial Services (DFS) Working Group Objectives To deepen the financial sector, strengthen financial controls, and increase access to finance To encourage collaboration among the different players in accelerating the development of the DFS ecosystem in Liberia To provide an important foundation for the development of digital financial services, which will modernize the financial sector and lower transaction costs, particularly in rural areas,
No Intervention 3. Establishment and Modernization of Rural Financial Institutions (RFIs) Objective To provide basic financial services in the rural parts of the country, particularly transfer services, including payment of civil servant salaries
Access to credit... No Intervention Objective 1. Reduction in Reserve Requirement ratio for foreign currency (mainly USD) To increase banks ability to transact in in United States Dollars. 2. Establishment of a credit reference system (CRS) To increase access to credit, extended the coverage, improved the scope And enhance the operating efficiency of rural financial institutions in extending credit to SMEs Set up a web-based Collateral Registry, a web-based system that allows lenders To all allow lenders determine any prior security interests or establish their security interests over movable assets pledged as collateral To help to eliminate the principal barriers and constraints to private sector lending and access to capital
No Intervention Objective 4. Established a AML/CFT Unit within the Regulation and Supervision Department To ensure a safe and sound financial sector as well as to strengthen the AML/CFT Regime, To demonstrate the ability of an effective AML/CFT arrangement to conform to the standards of international best practices, 5 Periodic publication of extremely bad debtors. delinquent borrowers To adequately strengthen and build examiners expertise in the area of AML/CFT, strengthening the foundation for correspondent bank relationships To weed out bad creditors and enhance the credit worthiness of performing creditors.
Effective and Robust AML/CFT and illicit Financial Flow Remains a Top priority for Liberia Authority: Country s Interventions No Intervention 1 Three Frameworks put in Place: A. Legal & Regulatory Framework (Enacted 7 pieces of AML/CFT laws in 2012 Three legislations related to terrorism and its financing has been passed by Lower House in 2016 and awaiting concurrence by Senate; Issued 5 AML/CFT related regulations (2013 & 2016) & 1 circular in 2016 Objective Combat money laundering/terrorist financing (LM/TF) and other financial crimes consistent with FATF standard Establish legal & regulation instruments to combat ML/TF (criminalize ML/TF & other predicate offenses to ML, Deny criminals from using proceeds of crimes, Obligate financial institutions to take preventative measures, Track, penalize and minimize illicit financial flows, etc.
Establishment of efficient institutions remains cardinal to the fight against illicit financial flows... No Intervention B. Institutional Framework Established FIU 2013 Identified law enforcement authorities, Objective Establish institutions to track, investigate, prosecute, penalize and minimize ML/CT & illicit financial flows, etc. Identified regulatory authorities, and other competent authorities Established Financial Crime Working Group (FCWG) in 2016 To ensure coordination, cooperation and collaboration among law enforcement agencies.
Implementation of the AML/CFT framework is continuous priority of the Government of Liberia... No Intervention 1. C. Implementation Framework The FIU has: Issued regulations, Commenced receiving and analysis of Suspicious Transactions Report (STRs) and Cash Transactions Reports (CTRs) Objective To enhance robust implementation of AML/CFT related laws and regulations To deny criminals from accessing our domestic financial system as well as regional and international financial system Begun disseminating analyzed reports to law enforcement agencies (LEAs) for further investigations Jointly conducted joint on-site examination with CBL for 5 out of 9 commercial banks 2 The GoL has increased budget support to FIU To enhance the operational and technically efficiency of the FIU