Taken for a ride

The credit crisis and market downturn brought on by those ‘greedy’ (read unregulated) Wall Street bankers and exacerbated by President Bush and the Republicans’ inability to tie their own shoelaces is all that’s being talked about on the 24 hour news channels. One would be forgiven for thinking that the world is teetering on the brink of a financial apocalypse. This may indeed be the case but there’s no sign of that here yet, at least not for the country’s politicians.

While their American counterparts sift through an undoubtedly riveting 400-page economic bailout plan, Christmas has come early for Liberia’s Senators and Members of Congress. The world’s biggest producer of steel and probably Liberia’s largest private investor, Arcelor Mittal, generously donated 100 brand new 4x4 pick-up trucks to the government last month. Forget for a moment that the cost of this gesture of goodwill is a drop in the ocean compared to Arcelor’s $1.5 billion investment in the country to date. Roads in many rural areas are practically impassable during the rainy season and these trucks could be used to expand the coverage of ministries (e.g. those for education or agriculture), clinics, hospitals and the county police departments thus improving the Liberian government’s ability to serve its people.

Unfortunately however, the vehicles have not been used for any of the above purposes. Instead they have been driven out of the grounds of the Executive Mansion by 100 members of the National Legislature. This makes the trucks effectively a gift to each of Liberia’s politicians from a private company - the same company that has secured the rights to tap into one of the world’s largest deposits of iron-ore (a valuable mineral due to the fact that it is a key ingredient of steel).

This behaviour obviously stinks pretty highly of corruption. The Legislature has the power to take action if big investors fail to abide by national laws or pay their taxes and are also the ones responsible for making sure that Liberia is getting a fair deal from any contracts signed. This is especially important with extractive industries like mining. The minerals deposited underneath Liberian soil are effectively money in the bank for the country. It can decide to ‘withdraw’ these deposits at any time but they are not renewable resources. Once they’ve been removed they’re gone for good and, when they eventually get up to speed, Arcelor will have the ability to dig them up and ship them out at quite a pace. I’m sure they have negotiated a good deal with the Liberian government, especially given the risks associated with investing in a country that’s only 5 years out of civil war. But are they paying a ‘fair’ amount for the rights compared to the profit they will make out of them?

Extractive industries have high incentives to bribe government officials, especially the ones who are directly responsible for decisions on whether or not they are granted the right to extract vast amounts of the country’s natural wealth. It’s a lot cheaper to bribe a handful of key people than it is to compete with other companies and pay the market price for the goods they want. And what’s the best way to make sure that none of the other lawmakers kick up a fuss? That’s right. Just bribe them all by an equal amount (cue 100 shiny off-road vehicles).

To its credit, the Liberian press has picked up on the story and made it the talk of the town in Monrovia, at least for a week or so. In the company’s defence there are conflicting reports as to whether or not the intention was for these vehicles to end up in the hands of individual politicians. Some are suggesting that the donation was actually made to the Executive i.e. the President, and it was she who decided to pass them on to 100 Members of Congress and the Senate. That’s not exactly comforting news though. The other job of the Legislature is to keep tabs on the president and they are likely to take a more relaxed approach to this task after receiving a nice new car from her.