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For Liberia, Natural Resources Are Blessings, Curses on Road to Democracy

October 31, 2011 at 12:00 AM EST
The West African nation of Liberia is rich is oil, diamonds and timber, but these natural resources have been both a blessing and a challenge for the fledgling democracy. Special correspondent Kira Kay reports.
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JUDY WOODRUFF: Now to another of our stories about Liberia.

The West African nation is rich in oil, diamonds, timber, and much more. That’s been both a blessing and a challenge for the fledgling democracy.

Special correspondent Kira Kay reports.

KIRA KAY: Flying above Liberia, it is easy to imagine the potential this lush and tropical land holds for resources development.

I’m traveling with Joseph Mathews, an executive with ArcelorMittal, the world’s largest steel company. He’s taking me to a Port of Buchanan, which ArcelorMittal has rebuilt to accommodate its shipping of iron ore just getting under way.

How long did it take you to get to this point?

JOSEPH MATHEWS, ArcelorMittal: Well, this was a long, drawn-out process. We actually came into Liberia in 2005. We started work on actually rehabilitating the rail and the port in 2007. The mining itself is fairly simple. It’s on the side of a mountain. You dig it out of the ground, and then it’s railed. The rail journey takes about six to eight hours.

KIRA KAY: Liberia was a major iron ore exporter back in the 1970s, but the industry collapsed during a succession of coups and civil wars.

JOSEPH MATHEWS: The infrastructure was completely destroyed. The skilled labor force was also nonexistent, because, even though in the past, there was quite a good skilled labor force, during the 20 years, people left to seek opportunities in other places, whether it’s in America or in Europe, and you had a country that essentially lost a generation.

KIRA KAY: But now ArcelorMittal aims to be exporting 15 million tons of ore a year by 2015. Liberia has received an up-front payment of $15 million. And according to Mathews, annual royalties alone will exceed that once operations are fully under way.

Liberia is now banking on these big revenues to build its prosperity and end reliance on foreign aid.

The country’s president, Ellen Johnson Sirleaf, says the transformation can be made within two decades.

ELLEN JOHNSON SIRLEAF, Liberian president: Liberia is natural resource-rich. We have minerals. We have agriculture. We have marine resources. If we discover oil, added to the other natural resources we have, that transformation is very possible.

KIRA KAY: Unequal access to the benefits of natural resources created societal rifts that led to war in Liberia. Diamonds and timber bankrolled warlord President Charles Taylor.

ELLEN JOHNSON SIRLEAF: Liberia’s experience, in a way, has been a resource curse. We have always had these natural resources. They just haven’t been used well for development of the people.

KIRA KAY: So when President Sirleaf came to power in 2006, her administration renegotiated contracts former governments had made with foreign investors, including the rubber giant Firestone, which for years had come under criticism for labor and environmental abuses.

The new contract obtained a better share of revenues and improvements in labor and safety standards for local workers. Today, rubber is being tapped around the country as Firestone and other international rubber companies expand their purchasing from local growers. Weigh stations are doing a brisk business.

How many people come per day here to bring you rubber?

MAN: We have a whole lot of customers. Some ride motorcycles to bring or two bags, do have — or 10 or 15 bags. We go for them day by day. Sometimes, we receive 15 to 20 customers. We used to buy rubber for $300 per ton. But now rubber is $2,040. So, it like their lives are improving.

KIRA KAY: Sirleaf’s government also renegotiated the ArcelorMittal agreement first signed in 2005.

JOSEPH MATHEWS: The new government didn’t like the idea that an agreement was signed just three months before the elections. So they wanted to review the agreement, which we readily agreed to, and they had some issues. And the issues were primarily around the pricing of the ore and the ownership of the rail and port. So, we were able to come to a conclusion on both those points.

KIRA KAY: But it is the prospect of offshore oil that might launch transformation here. Chevron has just started exploratory drilling in Liberia’s coastal waters.

KARL COTTRELL, Chevron Liberia: Our first exploration well will be drilled about 65 kilometers offshore the coast.

KIRA KAY: Country manager Karl Cottrell says Liberia is a country Chevron can do business with.

KARL COTTRELL: Effectively, you’re looking at the laws, the regulations, those type of fundamental rules. And Chevron does look at that. And we are encouraged that those foundations are being put in place by the current administration.

KIRA KAY: Despite the great excitement here, Cottrell is working to manage expectations.

KARL COTTRELL: First production in the best of cases is probably seven to 10 years from now. So it is a long-term mature — maturity project. The problem that you have is that people that are used to drilling water wells, which immediately start producing. So, yes, we have to explain to people how long the projects are.

KIRA KAY: Already, Liberia has attracted $16 billion in foreign direct investment, a staggering sum for a small, fragile nation.

So, in 2009, Liberia became the first African country to join the Extractive Industries Transparency Initiative. The EITI is an independent association that sets a global standard for reporting and reconciling resource revenues to police the payment of fees and taxes by companies and then ensure dollars aren’t siphoned off by corrupt government officials.

NEGBALEE WARNER, Extractive Industries Transparency Initiative: Give us the numbers. Let us know what is paid. Let us know what is received. If there is a gap between what is paid and what is received, we want to know why.

KIRA KAY: Negbalee Warner, the founding director of Liberia’s EITI office, says participation is mandatory for all international investors operating in Liberia.

JOSEPH MATHEWS: We have now reported now for three or for almost four years what we have paid the government. The government in turn reports what they have — they have received from us. And it is published and it’s transparent for everybody to see.

KIRA KAY: Knowing how much a company was supposed to pay or actually has paid is one thing. But enforcing it if they don’t is another. Does this government have the capacity to police these organizations?

NEGBALEE WARNER: I don’t think so. But I think it’s a part of the entire process of improving governance. What the EITI promises is not that government alone will solve the problem. Government is sitting at a table with civil society, with traditional leaders, with companies to discuss resource governance.

I mean, at every level, there is room for improvement, but now people are more sensitive to these discrete steps.

KIRA KAY: But signing on to a global resources initiative might not be enough to end the corruption that still permeates government here.

A new report by the watchdog organization Global Witness warns of the government’s inability to manage its oil sector and cites conflicts of interest between the national oil company and the investors it regulates. It also alleges that, in 2007, a Nigerian oil company arranged bribes to the Liberian legislature for passage of its contract. Chevron later acquired 70 percent of that concession, despite information about the payments being publicly available.

Chevron, an underwriter of NewsHour, says its engagement with the Liberian government has been made in accordance with all applicable legal and regulatory requirements and points to its extensive corporate responsibility program in Liberia, including this children’s ward it is funding at the country’s main hospital.

For Liberia to truly escape the resources curse, it will take more than fiscal oversight. The government must now also manage its assets in a way that includes, rather than marginalizes, its population.

Some local residents are watching warily, especially those living next door to a Malaysian company called Sime Darby that is cultivating over half-a-million acres of land, primarily for palm oil plantations.

MAN: How do you ensure that this country’s resources are going to be developed for Liberia?

KIRA KAY: Activist Alfred Brownell took me to a small village abutting the plantation where residents say this land is their ancestral home and not the government’s to give away.

The government’s deal with Sime Darby also includes the relocation of 25,000 people squatting in the area. And the U.S. State Department has identified the standoff as a potential security threat to the country.

MAN: People are angry. People are protesting. People are complaining because they are not seeing the value. And they’re asking questions. What’s going on? And government does not have the capacity to be able to explain what’s going to those people. So it means the potential for conflict in the future is going to come up.

KIRA KAY: Back at the Port of Buchanan, steel executive Joseph Mathews is more optimistic that Liberia is on the path to solving such challenges.

JOSEPH MATHEWS: The world is much different place than it was back in the ’60s and ’70s. I mean, today, when you sign an agreement, there’s expectations of transparency, of corporate governance. There are international organizations watching over transactions.

KIRA KAY: As Liberia rebuilds itself from 14 years of conflict, the country’s natural resources offer the hope of a wealth more widely shared among the four million people who live here — if the pitfalls that have plagued its neighbors and its own history can be escaped.

JUDY WOODRUFF: President Sirleaf faces a runoff Nov. 8 in her bid for a second term.

Kira Kay’s story is part of our partnership with the Bureau for International Reporting.