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Breaking the Resource Curse: Concession Negotiation in Liberia

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Sub-Saharan Africa possesses some of the highest concentrations of minerals and natural resources. Yet, for all the mining and extraction, relatively precious few of the benefits trickle down to its citizens, with the majority of extraction destined for external markets. Liberia, under the stewardship of President Ellen Johnson Sirleaf, appears determined to buck that trend, given its renegotiation of concession contracts with corporate giants such as Firestone and ArcelorMittal. Liberia's restructuring can now serve as a blueprint for neighboring countries.

According to statistics, two thirds of the world's poorest people live in countries rich in natural resources. More often than not, resource wealth is linked to conflict, poverty and corruption -- ergo the label, 'resource curse'.

Liberia's trajectory vividly illustrated this phenomenon. In 2003, Liberia's fourteen-year conflict came to an end. Revenue Watch Institute compiled a report, "Getting a Better Deal for the Extractive Sector." According to the report, "The conflict ... resulted in the death of more than 300,000 people and injury to tens of thousands more. Hundreds of thousands became refugees. Institutions of governance and justice were destroyed. Warlords used Liberia as a base from which to smuggle diamonds, trade arms, launder money for global terrorist groups, and support criminal activities that destabilized the country, the region and beyond."

Now Liberia seems appears ready to change course. Shortly after assuming office in January 2006, President Ellen Johnson Sirleaf announced that her government would review all of the country's concession agreements in an effort to reduce poverty, spur economic growth and ensure Liberia's democracy.

Given that both Firestone and ArcelorMittal (rubber and steel companies, respectively) signed concession agreements in 2005, they were both subject to review by Liberia's Public Procurement and Concessions Commission.

Recently, the Open Society Institute hosted a forum. Panelist Raja Kaul, Chief Technical Advisor for the UNDP, began his commentary by posing a series of questions. Did Liberia get better terms when renegotiating with Firestone and ArcelorMittal? How were these goals achieved?

Yes indeed, Liberia emerged stronger from the renegotiation. Raja Kaul pointed to over thirty improvements -- among them stronger fiscal terms, increased employment opportunities for Liberian nationals, and more revenue for the government. Mr. Kaul credited the political will and leadership style of the government for the success. "Although there were differences in opinion," Mr. Kaul said, "the leader and ministers were able to find common ground." Liberia also benefited from external technical assistance.

Another panelist, Hon. O. Natty B. Davis, Liberia's Minister of State for Reconstruction and Development, was quick to point out that the peace process laid a framework of legitimacy so that the government was able to go back and secure renegotiation of contracts. At the same time, this process is relatively new and the Liberian government now has to deal with different corporate structures and cultures.

Ultimately, the government of Ellen Johnson Sirleaf must be commended for the courageous path of action chosen. It is up to the international community to bolster her efforts toward sustainable development.

NOTE: Please note that, for purposes of this OSI panel, Raja Kaul was speaking in his personal capacity, and not in affiliation with any organization, including the UNDP.