Liberia has longstanding historical ties to the United States that persist today in the form of familial relationships and robust diplomatic engagement. U.S. companies are welcome in Liberia, and retailers routinely seek opportunities to stock American-made goods. In practice, however, the government does much to discourage investors and investment. Some business leaders report it is difficult even to meet with government representatives to discuss new investment or policies damaging to the business climate. A weak legal and regulatory framework, lack of transparency in contract awards, and widespread corruption inhibit foreign direct investment. Investors are often treated as opportunities for graft, and government decisions affecting the business sector are driven more by political cronyism than investment climate considerations. Many businesses find it easy to operate illegally if the right political interests are being paid, whereas those that try to follow the rules receive little if any assistance from government agencies.
Top market challenges U.S. companies are likely to experience include: 1) widespread poverty resulting in low purchasing power, 2) high tariffs and inconsistent tax administration, 3) poor physical infrastructure, 4) a weak judicial system, and 5) widespread corruption. These systemic challenges could be addressed through sustained and inclusive economic development, comprehensive review and harmonization of the tax system aimed at attracting investments, increased investment in physical infrastructure, a strengthened judicial system, strong political will to fight corruption, and strong political support for Liberia’s integrity institutions such as the Liberia Anti-Corruption Commission (LACC) and Financial Intelligence Unit.
Other potentially significant challenges for investors include opaque procedures for obtaining clear title to property, lack of adequate legal protection for contracts, the prevalence of single-source contracts in violation of public procurement laws, limited awareness and enforcement of intellectual property rights (IPR), and poor physical infrastructure are significant challenges for investors. The Freeport of Monrovia is the country’s main external trade gateway, but high port-handling fees, inadequate infrastructure, bribery, and administrative delays encourage some importers to use the ports of neighboring countries including the port in Conakry, Guinea, and transport overland to Liberia. Liberia has one commercial court with limited capacity and the laws relating to contracts and procurements can be inconsistent and poorly enforced. Appeals to Liberia’s Supreme Court are common, and businesses and contacts consistently report that bribes throughout the court system are used to prevent cases from moving forward, or to influence the outcome. Foreign investors report that corruption is most pervasive in government procurements, contract and concession awards, customs and taxation systems, regulatory systems, performance requirements, and government payments systems. Multinational firms often report having to pay fees to government agencies or government officials that were not stipulated in investment agreements. Because of corruption, fiscal mismanagement, or other constraints, the government is often late or in default in paying its bills to private suppliers – a factor businesses and investors should consider when estimating revenue flows and risks. Business models that do not rely on regular government payments for their success should be considered.
Local entrepreneurs rank access to finance as a top challenge for the private sector, followed by legal and regulatory frameworks, and logistical constraints. The Investment Act of 2010 prohibits or restricts market access for foreign investors, including U.S. investors, in certain economic sectors or industries. See further detail in the Investment Statement under the topic, “Limits on Foreign Control and Right to Private Ownership and Establishment.” In a bid to stabilize its budget processes and build technical capacity, the IMF is supporting the government’s implementation of the Extended Credit Facility (ECF) approved in 2019.