IPNews-Monrovia: Liberia’s Finance and Development Planning Minister, Samuel D. Tweah, Jr., has told ongoing 5th US-Africa Investment Forum policy, that Western countries, particularly the United States and other Industrialized countries needed to top on the continued fair-business climate created by many African countries to invest.
The Liberian Finance and Development Minister told the policy forum that US-Africa investment provides ample opportunities to share critical light on how US-AFRICA relations can potentially impact investment and other development outcomes in Africa.
The youthful Minister stated that the global pandemic which has taken almost 1 million lives and affected more than 32 million people, needs a global approach in dealing with difficulties encountered by low income communities.
In retrospect, Minister Samuel Tweah reminded the world that more than 75 years ago, a global crisis wreaked far more disastrous consequences, redefined the globe and availed an economic consensus which remain predominant today.
He said amid the impact of COVID-19 and the sheer possibility that its severity across continents could approximately alarm death rates and paralyze economies around the world, especially economies in Africa, the world appears to be hankering after a new kind of paradigm or global weltanschauung.
“World leaders, heads of international organizations, think-tanks, economists and policy experts are chattering loudly at various conferences, in various forums and discussion groups on the importance of framing a new and different economic consensus that can deliver results that might enable countries, particularly low income and developing countries, to better withstand the shocks from economic crises with orders of magnitude – significantly greater than the the Great Recession of 2008, or from global health pandemics whose impact might dwarf the impact of the Spanish Flu of 1918, which took more than 50 million lives and affected more than 500 million people.”
“While these discussions might seem like normal, perennial talk after a major crisis which will soon buckle under the weight of the business-as-usual paradigm, the discussions this time have a certain seriousness to them. One feature of this seriousness is the reality that more than half of the world’s population may now be acclimating itself to wearing face masks for the foreseeable future.” Minister Tweah told the Investment forum amid cheers from participants via zoom.
The Economic expert warned the world that amidst the continued face mask wear due to the coronavirus pandemic, it is time that the world work together in finding an end to easing hunger and salvation by increasing investment in poor countries, especially Africa that continues to open its door to fair trade deal.
“If anything, the wearing of face masks is a constant reminder that something is seriously amiss in our world, and as a consequence, something radical, more meaningful and more epochal has to give.” Tweah warned.
The Finance and Development Minister called on Dr. Ken Giami, Publisher and CEO of Africa Leadership Magazine, including other world leaders to wakeup to the new challenge of ensuring sustainable capital investment in Africa, if Africa will move away from its current state of underdevelopment and poverty.
Liberia’s Samuel D. Tweah: ” In 2014, the world witnessed an explosion of a different kind of pandemic, the Ebola Viral Disease, which had always been on the African continent but which had not not shown the particular virulence observed in the Mano River region of West Africa. Unlike COVID-19, the 2014 Ebola outbreak was confined to three countries:Liberia, Sierra Leone and Guinea. Billions of dollars in emergency assistance flowed to the three countries. The death toll from this Ebola epidemic stands at more than 11,200, about 37 percent the current death toll from COVID-19 in all of Africa. Despite this massive tragedy that was Ebola, the world largely saw Ebola as an African problem or a West African epidemic.”
“The three countries were largely left to their own devices in dealing with the economic aftershocks of Ebola. The Liberian economy plunged to a GDP growth rate of negative 2. 17 percent, recovery from which has been buffeted by subsequent macroeconomic headwinds and now by the Corona pandemic. While the three countries received billions in emergency assistance, their respective healthcare delivery systems remain unable to cope with any serious epidemic, and their respective economies have never received any serious Post-Ebola economic or investment stimulus to compensate for the impact from Ebola.”
“Barely six years after Ebola, the world is now staring the brink of a potential economic precipice and is hopefully groping toward a more serious thinking about framing a Post-COVID-19 Economic Consensus. This Fifth US-AFRCA INVESTMENT FORUM AND POLICY DIALOGUE avails a fresh opportunity to explore the horizons and possibilities of changing the investment and development trajectory in Sub-Saharan Africa.”
Tweah questioned Africa’s continued backwardness while other countries that fought greater wars, such as the War World I and II, including the Vietnam and Korean Wars were making tremendous strides in human capitol and sustained investment opportunities.
“In the last 75 since the end of the Second World War, momentous events have occurred and with them tremendous changes have been wrought in our world. We have seen the Vietnam and Korean Wars. We have seen the onset of the Cold War and its demise with the fall of the Berlin Wall in 1989 and the end of Soviet Communism,”
“We have seen Africa plunge into nearly two decades of conflict and violence for much of the 80’s and 90s under the aegis of brutal dictatorships, but we have also seen the continent climb from these maladies to the post-millennial era of democracy and economic growth, even if the growth has been sporadic in different regions, buffeted by macroeconomic instabilities . “
“During these decades, we have seen China rise from a per capita GDP of 185 US dollars in 1977, to a per capita GDP of nearly 10,000 US dollars in 2018, lifting more than 700 million people out of poverty in the last four decades, the greatest poverty alleviation feat in recorded history! We have also seen Latin America and the Caribbean move from a per capita GDP of about 1400 US dollar in 1977 to about 8500 US dollar in 2019.”
“Despite these seismic events and the changes they have engendered, Africa has changed very little. Per-Capita GDP in Sub-Saharan Africa moved from USD 462 in 1977 to a meager USD 1500 in 2019. This means Africa is presently where Latin America was more than 40 years ago. In the last four decades, Africa has made some progress but has remained in virtually the same place place.” Tweah stated.
However, the Liberian Finance and Development Minister, told World leaders that one of the underpinning issues of Africa’s underdevelopment is due to the lack of inflow of investment by powerful countries into Africa.
“An abundance of economic evidence and analyses have purported to show why Africa has not grown and developed as fast as or as much as other continents or regions, and why the continent remains at the bottom of the economic ladder. The reality emerging from all these analysis is that global investment capital has not flown into Africa in the way it has flown into other regions of the world.”
“In 1990, Nobel Laureate Robert Lucas explored reasons why capital has not flown to Africa or developing countries despite the huge potential for economic returns to those investments. This criticism has been dubbed the LUCAS PARADOX in neo-classical economic literature. Among economists, the predominant explanations for the LUCAS PARADOX revolves around the quality of institutional governance in Africa or developing countries.”
“There is no gainsaying the importance of institutional quality in the form of effective property rights, investment friendly policies and regulatory frameworks, strong anti-corruption governance and a stable and predictable policy environment. However, I argue that this lack of capital flows, which explains Africa’s lack of infrastructure development, without which the continent’s private sectors will be left in the lurch, cannot alone be explained by institutional factors of empirical studies.
For example, Sub-Saharan Africa’s share of Public Private Investment is the lowest in the world and is concentrated in four countries— South Africa, Nigeria, Kenya and Uganda. This fact may appear to suggest that these countries are the best on global indices of Government effectiveness, regulatory quality or anti-corruption. I can hear choruses across Africa saying ‘so true.’”
“What this means is that, the factors underpinning Sub-saharan Africa’s ability to attract global capital flows or PPPs may lie beyond empirical findings in economic papers and will require a complex array of approaches, among them undeniably the need for countries to continue to upgrade and improve their investment climates.” Tweah maintains.
He narrated that the most fundamental critique of the current economic or investment consensus is that while it has identified the lack of capital and investment flowing into Sub-Saharan Africa as a major culprit, enabling or catalyzing these these flows has not occupied a particularly high niche in the drive for global solutions.
“For example, Official Development Assistance, which should help solve this problem, has itself been puny relative to sub-Saharan Africa and has been spent in ways that do NOT solve the binding constraints for private investment on the continent. “
“In last 60 years, Africa has received a mere three percent of what is classified as Official Development Assistance, with assistance going to other regions of the world. So the first issue is this: to the extent ODA is supposed to untangle complexities for investment flows in Africa, the share of ODA going to Africa to achieve this purpose is insignificant.”
“More than USD 33 trillion in ODA has been spent in all regions of the world since 1960 and Africa has received only a paltry USD 1 trillion. The second problem is that this USD 1 trillion has been spent in a way that has not enhanced Africa’s ambition from private sector expansion.”
“So as we grapple for change and new answers to Africa’s investment challenges in the Post-COVID-19 era, we must begin to ask the fundamental and hard questions. First, why is the share of resources that should help Africa’s development so small relative to other regions of the world? If Development assistance is smaller, of course we should expect outcomes accruing to that development assistance to be equally smaller.”
“Today, we celebrate the South Korean economic miracle and take for granted the neoclassical model that may explain South Korea’s emergence. But we must not forget that in the 1950s South Korea alone received in development assistance, the total amount of assistance that went to the rest of the World. So here goes your institutional quality or neo-classical argument!” Tweah told the 5the US-Africa Investment forum.
He further recommended seven steps to leading Africa out of under development and investment attraction.
“This example is provided to show that development assistance is and can be an important complement to private investment, and in contexts such as sub-Saharan Africa where market and institutional imperfections abound, development assistance and private investment flows must move in tandem.”
“So the menu of options for Post-COVID-19 Social and Economic rethinking and paradigm redefining must be as rich and nuanced as it must be complex. I offer the following broad contours toward such a menu.”
“1. The challenge of private investment must assume center stage within Breton Woods multilateralism. The share of resources dedicated to resolving constraints to private sector investment must dramatically increase. This increase need not be at the expense of spending in the social sectors, which have seen the lion share of resources. This increase must occur on the backdrop that private sector led growth obviates the need for the large social sector spending we see under the current model, since the jobs that accrue from these expansions avail higher incomes.
2. We must begin to perceive Africa debt vulnerability as the immediate consequence arising from a combination of the inefficiencies in public infrastructure spending, from weaknesses in the bankability of large public investments, from the lack of private investment and from anemic and sporadic growth. The narrative around Africa’s debt crisis or challenges must change in favor of these more fundamental resources. In other words, if the ability to service debt is not enhanced, the stock of debt would become the problem. As such the stock itself may not necessarily be the problem. “
“The World Bank notes that total debt for Sub-Saharan Africa increased nearly 150 percent to 583 billion United States dollars between 2008 and 2018. As a share of GDP, total debt in sub-Saharan African increased from 40 percent of GDP to 59 percent in 2018. Liberia’s debt has risen from the debt waiver under the Highly Indebted Poor Countries Initiative in 2006 to now USD 1.5 billion or 46 percent of GDP. About USD 1 billion of this stock comes from multilateral concessional loans that were expected to solve private sector constraints. The reality is that this debt stock has become a problem limiting further borrowing because private sector bottlenecks constraining growth are still prevalent despite the concessional borrowing.
3. Countries must continue to work aggressively on improving the quality, stability and predictability of institutional governance. The Government of Liberia is planning a massive forum on business and investment climate to address major challenges and regulatory issues in Liberia’s investment climate. The aim is to rebrand Liberia as a top-notch for business and investment in the Post-COVID era. The conference will be under the auspices of the Supreme Court of Liberia and will aim to situate legal practitioners and judges at the center of efforts to reform the Liberian business and investment climate, considering that business climate issues often have serious judicial ramifications. The goal is to place Liberia is a premier destination for private investment.
4. Sub-Saharan Africa must continue to ramp up anti-corruption governance. Liberia has just ended a two day anti-corruption conference. The Conference is expected to present to President George Weah roadmap for improving anti-corruption governance in Liberia, building on lessons from the last decade of governance.
5. We must change the way we have delivered development assistance. The Paris Declaration on Aid Effectiveness, the Accra Agenda for Action and the Busam Accord have wonderful ambitions for ensuring development aid effectively complements private investment. But the evidence is that these big agenda items appear to have been overtaken by major events in the world since they were pronounced. Development assistance is still not being delivered optimally and we must return to these accords in the post-COVID era.
For example, the accords avail to developing countries a clear roadmap for improving the quality of institutional competence, governance or delivery in developing countries, through what is termed as ‘use of country systems’. Unfortunately, country systems are still largely not being used in a lot of countries and situations. This will have to change under the Post-COVID-19 Economic Consensus. Recently in Liberia, we launched a new aid and NGO policy to bring back the goal of the Paris Agenda into focus.
6. Governance on natural resource management in African countries must take on the challenge of value-addition in the extractive industries. In the last decade, the extractive industry transparency initiative has achieved greatly on availing transparency to the exploitation of natural resources in developing countries.
Despite this progress, the share of extractive value-added in extractive Gross Domestic Product remains small, as natural resource countries continue to remain net exporters of raw materials, which exposes countries to the vagaries of commodity price whirlwinds. Governance around natural resources must address the key challenge of economic diversification, which is a major driver of financial or macroeconomic instability on the continent.
Liberia remains a natural resource exporter and has improved extractive governance. We continue to work in this area to attract more investments. A massive oil palm sector is taking shape in Liberia with strong value added potential. Investments to add value to Liberian rubber are also happening with the Government working with stakeholders to achieve results in these areas.
7. The post-COVID-19 must place at the disposal of developing countries the ability to recover more sustainably from economic crises or from global health pandemics. Sustainable recovery means putting the right policies and the right incentives in place to drive sustainable economic growth.” Samuel Tweah advanced.
In agriculture for example, Tweah stated that ‘if banks continue to remain risk-averse and if Governments and multilateral partners are not able to develop de-risking mechanisms, African agriculture will continue to be largely subsistence. Some countries are making steady progress in the transformation of African agriculture but progress remains very slow compared to the potential for change. The role of global finance and investment in African agriculture can clearly be enhanced.
Another area for sustainable recovery and management Minister Tweah mentioned is in the area of climate of change and environmental protection. Sustainable recovery means giving forest communities less incentives to cut down trees for livelihood support by ensuring these communities access resources from Green Climate Funds or Carbon Credit markets. In many developing countries, significant complexities appear to prevent easier access to carbon credit markets that avail investment or development financing, while protecting and safeguarding our climate and bio-diversity. Serious Action is needed in all these area.
“Excellencies, Distinguished colleagues, the world is at a watershed moment in both the relations among nations and in the possibilities for delivering greater prosperity for the peoples of different regions. The Government of the United States has played an exemplary role in preserving world peace and upholding the economic consensus that issued from the Second World War. America can impart a new sense of mission to galvanizing a new consensus that will reverse Africa’s investment woes. The United States still enjoys the deepest bond with most African countries and I believe US-AFRICA diplomacy and relationship can situate African investment challenges at the top of the global agenda.”
“The financial crisis of 2008 that originated in the United States proved that the US remains the bastion of the global economic order. How does US investment and trade change the dynamics of African development? What should be done to unlock resources from American Pension Funds, for example, to close the African Infrastructure financing gap, which the African Development Bank has put at between 70 to 107 billion United States Dollars per year. Closing this financing gap should pre-occupy policy wonks and experts concerned about Africa’s transformation. US-AFRICA relationship should concerned itself with this development.”
“US Government’s Millennium Challenge Model is particularly critical to helping countries improve governance in exchange for receiving support for expanding the private sector. This models is seriously focused on private sector expansion and we look forward to seeing the next generation of transformation happening under the MCC. Liberia presently has an MCC compact addressing challenges in electricity and road sectors and is working to qualify for a second Compact.
USAID’s new vision of Journey to self reliance has essential elements of the MCC model, which looks to unlock private sector potential. Our partnership with the USAID will address key private sector challenges in the coming years.”
“US-Liberia relationship will play a key role in bending the arc of development in Liberia. Freed slaves from the United States established Liberia in 1847. Black Americans do not make much of this historical connection with Liberia for a variety of reasons. It is up to the Government of Liberia to exploit this rich history in building a vibrant tourism sector in the post-COVID-19 era. With COVID-19 all over the world, visitors and tourists from the Unites states to Liberia would no longer fear epidemics as they once did when the word Ebola was pronounced. US-Liberia investment dialogue should concentrate on these game changing dynamics beyond normal patterns that have defined Liberia’s relationship with the United States in the of the last 100 years. Our Government will explore these paths in the coming months and years.”
“Excellencies, there is no doubt that ENABLED INVESTMENT is the way forward. Left to neoclassical theories of incentive-compatibility and institutions, investments may NOT flow into Africa commensurate with the size of the continent’s development challenges. These Investment flows would have to be ENABLED by a combination of needed institutional reforms and other quasi-economic or diplomatic factors. The situation may differ form one country to the next but the consensus is unmistakable that the next century in Africa is the century of Private Investment.”
“I trust the dialogue at this year’s forum will do full justice the opportunities and challenges in the Africa investment landscape and provide a clear blueprint for transformative actions. ” Liberia’s Samuel Tweah concluded.
This year’s event is virtual because of a global pandemic that has taken almost 1 million lives and affected more than 32 million people.
2 thoughts on “Liberia’s Samuel D. Tweah, Jr., Raps on Investment Prospects at 5th US-AFRICA Investment Forum Policy; Advances Recommendation for growth in financial Market & Agriculture investment”
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