The impact of poor infrastructure on poverty reduction in post
conflict countries: the case of Liberia
Tom Kaydor/ 12 June 2014
I.
Introduction
This case study is on
the Republic of Liberia, Africa’s first independent republic, located on the
west coast of Africa. The country maintained an aristocratic republican
democracy for 133 unbroken years (Sawyer 1991), but later slipped into a
devastating 14 years civil war, which ended in August 2003. The war killed
about 250,000 people of the country’s four million population, and damaged key
infrastructure and basic social services including homes, electricity,
education, health and water facilities, bridges, roads, air and sea ports, and
telecommunication (UN in Liberia 2013). Peace and security have been restored
to Liberia, following a transitional government instituted by the Accra Peace
Accord, and the holding of free, fair and transparent elections in 2005 (CPA
2003). The first post war elections brought Madam Ellen Johnson Sirleaf, first
African female head of state and government, to power (UNSG Report 2006).
Although, with the
support of the international community and bilateral partners, the government
endeavors to restore Liberia to its pre-war status, efforts to reconstruct the
country, create access to basic services, and reduce poverty are challenged by
the huge infrastructure deficit caused by the civil war (UN in Liberia 2013). Liberia’s current poverty rate is 74.6 per
cent in rural areas, 47.7 per cent in urban sectors, and 61.5 per cent average
at the national level (LISGIS 2008). The estimated cost of reviving the
country’s damaged transport, water and energy infrastructure is about 2.5b USD,
at a time the country’s current national budget is 557m (MOF 2014).
This case study argues
that government’s strive to reduce poverty is stagnated by poor infrastructure,
which creates limited access to basic social services, and impedes economic growth
and development. It is assumed that if the country’s damaged infrastructure-transport,
electricity and water systems-is restored, it will increase access to basic
services like water, health and education, spur economic growth and might
ultimately reduce poverty. The Problem-Oriented Method (Monash University
Library nd.) is used to identify and analyse existing infrastructural problems,
and suggests plausible solutions to resolve them. This case study is limited to
the impact of poor transportation, and the lack of electricity and pipe born
water on poverty reduction in Liberia. It concludes that the government needs
to either use one or a combination of three options: the unbalanced growth and
big push concepts or borrow low interest rate loans to address its
infrastructural deficit.
II.
Problem definition
Moteff et al. (2004)
define infrastructure as ‘basic facilities, services, and installations needed
for the functioning of a society’ (p. 1). Without the basic infrastructure, a
given society will not function properly. All developed countries have basic
infrastructure in place. Most developing countries that have made significant
gains in growth and development have also invested in basic infrastructure as a
fulcrum for growth and development. Prior to the civil war, Liberia experienced
economic growth. Majority of the
population had access to good transport system, electricity, pipe born water,
and quality health and education systems. These facilities and services were
destroyed by the war. Therefore Liberia is amongst the 104 states categorized
under the Multidimensional Poverty Index (MPI), where about 1.56b people live
in multidimensional poverty (HDR 2013). It is part of the states with the
highest percentages of MPI, ranking 84 per cent behind Ethiopia with 87 per
cent, and leading Mozambique and Sierra Leone with 79 per cent, and 77 per cent
respectively (HDI 2013). Despite this alarming poverty picture, the HDI (2013)
labels Liberia as one of fourteen countries that have recorded human development
gains of more than two per cent annually since 2000. Most of the low HDI states
fall in Africa, where many are emerging from long periods of civil conflicts.
In spite of this steady progress towards recovery, poverty is widespread and
majority of the citizens lack access to basic services in these countries.
III.
Poor infrastructure as a challenge to poverty reduction
Poor transport system
Good transport system
is the lynchpin in all developed countries.
Developing countries need to therefore improve their transport systems
to increase access to basic services, and spur economic growth and development,
thereby reducing poverty (Moteff et al. 2004). However, Liberia’s transport system
is poor. Major roads linking rural parts of the country are in a deplorable
state. About 51.3 per cent of rural inhabitants are gravely affected by the
lack of roads (MPW 2013). According to
the Liberia Prioritized Infrastructure Development Programme (2012), about USD 1.2b
is required to connect Liberia’s 15 counties capitals (p. 14). The poor
transport system hinders access to basic services like schools and health. For instance, health indicators show that
mortality rate in rural areas is 84 per every 1000 births compared to urban
areas where mortality stands at 68 per every 1000 births. Also, maternal
mortality is estimated at 994 per 100,000, and under age five mortality is 110
per 1000 births (LDHS 2007; UN One Programme 2013). Most of these maternal and
under five mortality rates occur in the rural communities where health
facilities and personnel are scarce due to limited access.
Like the health
sector, access to quality education is hampered by poor transport system. For
example, the Liberia Education Sector Plan (2009) calls for compulsory
nine-year basic education, comprising six years of government funded free
primary, and three years of junior secondary education completion. Despite this
laudable education initiative, majority of rural residents and the urban poor
cannot send their children to school due to limited public schools, and the
lack of adequate trained teachers in the few existing facilities (UNICEF
Liberia 2013). Most Liberian schools are operated by religious institutions or
private individuals whose objective is to maximize profit. The current net
enrolment in primary school stands at 34 per cent, and grade six completion
rate in the entire country is 35 per cent (UN in Liberia 2013). This implies
that about 65 per cent of the children in the country are out of school.
Amongst these are children who enrol, but dropout due to lack of uniforms, fees,
tuition and other basic education materials.
Besides road transport, sea transport is also affected
by the war. The Liberian port industry is administered and operated by the
National Port Authority (NPA) in keeping with its statutory responsibilities to
plan, manage and develop public seaports in Liberia. The Authority manages four
ports, namely, the Freeport of Monrovia, the Port of Buchanan, the Port of
Greenville, and the Port of Harper (NPA Master Plan 2014). All these ports were
destroyed during the civil conflict. The Freeport of Monrovia is the largest
and most important of Liberia’s four ports. It currently services more than 65
per cent of international trade, followed by the Port of Buchanan, which presently
handles 30 per cent of trade (NPA Annual Report 2013). The ports’
infrastructure are being rehabilitated, but this requires significant capital
investment. A total of USD 99m is required to rehabilitate all four ports (NPA
2013). Limited operation of these sea ports undermines sea transport and
international trade.
Poor
transport system does not only impeded access to health and education services.
It also undermines economic recovery, growth and development in post conflict
Liberia by placing constraints on the movement of goods and services (Ministry
of Commerce and Industry 2014). The rural residents in the country live mostly
on subsistence farming, and some produce cash crops for trade and commerce. Farmers,
75 per cent of the total population, produce goods for consumption and trade
their surplus to get basic necessities unavailable locally (Ministry of
Agriculture 2013). Due to the absence of farm to market roads, these rural
farmers cannot easily transport goods and services from villages and towns to
markets. Most of the goods therefore get spoilt due to the lack of preservation
facilities. This hinders increased productivity. The urban poor, for their
part, live in slum communities where they are entrapped in hunger, poverty and
disease as cheaper food products cannot be found on the local markets.
Presently, Liberians living below one USD a day are about 63 per cent, and the
population living in extreme poverty stands at 47.9 per cent (LISGIS 2007).
Rice, Liberia’s staple food, is mainly imported from Asia, and costs USD 50 for
50kg on the local market. Majority of the poor therefore cannot afford to feed
themselves and families.
Lack of safe drinking water
The limited access to
safe drinking water is the second problem faced by residents in Liberia (LWSC
2014). Access to piped water fell from 15 per cent of the population in 1986 to
less than three per cent in 2008 (LISGIS 2008). Project Liberia (2013)
indicates that one in four Liberians has access to safe drinking water. Despite
the low record of water and sanitation deliverables under Liberia’s
reconstruction process, there are some positive outcomes showing improvement.
The Ministry of Health and Social Welfare (MOHSW 2011, p. 6-7 citied in IMF
2012 Liberia Country Report) indicates that the share of households with access
to clean water increased from 67 to 75 per cent between 2007 and 2009. However,
wide disparities exist between urban and rural households. Clean and safe
drinking water is mostly obtained from hand pumps and bold holds. Access to
sanitary toilet facilities rose from 39 per cent to 50 per cent nationwide,
with improvement in rural as well as urban areas (CWIQ 2010, p.120-1 cited in
IMF 2012 Country Report). In spite of these improvements, the WHO Country
Office in Liberia (2013) reports that half of all Liberians lack access to
toilet facilities; hence they either defecate up streams and in open areas. It
further informs that outbreaks of water borne diseases, like cholera, occur
regularly, and that as many as one in five deaths in Liberia are blamed on
water and sanitation problems.
Lack of Electricity
The lack of
electricity is the third challenge that undermines government’s effort to
reduce poverty (GOL 2013). Liberia has limited energy output. For example, the
pre war 170 megawatt power generation capacity and national grid were
completely destroyed during the civil war; hence a little over 0.1 per cent of
households has access to public electricity (LISGIS 2008). This power
generation capacity is obtained from diesel generators that produce a little
more than two megawatts per million people. It costs USD 0.77 to generate one
per kilowatt hour electricity (LEC 2012). This cost is exceptionally high (AICD
Diagnostic Report 2010). Power tariff of 0.63 per kilowatt hour is about three
times the average for Africa, which is very high by global standards (MLME
2013). Rehabilitation of the country’s singular dam, the Mount Coffee Hydro
Plant, is estimated at USD 207m (MOF 2012). However, due to the lack of
resources, government has been unable to refurbish the dam since the cessation
of the civil conflict. Notwithstanding, the European Central Bank (ECB),
Germany and Norway have provided grants of USD 65m, 32m and 75m respectively in
2013. The government has committed USD 45m to compliment the grants, and carry
out the reconstruction of the dam, which is expected to be completed by
December 2015 (MOF 2014).
The lack of
electricity affects the operation of concessionaires and the overall national
productive capacity of Liberia. The
country has attracted over 16 billion USD in foreign direct investment (Liberia
NIC 2014). The FDI is intended to
restore Liberia’s economy to its pre-war status, and set the stage for economic
growth and development. The investment attempts to also increase employment
directly and indirectly. The anticipated employment will boost households’
income, and foster other economic opportunities through private sector
development. Unfortunately, due to the
lack of electricity, majority of the concessionaires have not begun full scale
operations to yield the needed resources and employment envisaged in the
concession agreements. Concessions that are currently operational in the country
face enormous transaction costs due to lack of electricity. Delayed operation
retard anticipated employment of some part of the labour force (see annex 1 for
expected employment), and the resulting unemployment, mainly amongst the
country’s growing young population, increases socio-political tensions (UNSRSG
Report 2013). These tensions have become
a key security concern because demonstrations, riots and political agitation
amongst young people could undermine the fragile peace and relapse the country
into another round of civil conflict (President Sirleaf State of Nation Address
2014).
IV.
The way forward
Even though the
challenges discussed above still persist, the government is committed to
rebuilding the country, grow its economy and ultimately reduce poverty. It has implemented
poverty reduction strategy (PRS) one and two between 2006 and 2012 (IMF Country
Report 2013), and aspires to make Liberia a middle income country by 2030
(Liberia Rising Vision 2030 2013). This vision was set to be achieved in the
1980s, when the country was one of the highest income countries in Africa. In
the 1960s, Liberia was on par with Japan’s GDP, though the country grew without
development (Clower 1966). The country is
presently one of 35 low-income countries (LICs) in the world, and one of 26
Sub-Saharan African poor countries (World Bank Report 2010). One key factor
challenging this ambitious aspiration of becoming a middle income country is
the huge infrastructure deficit. Hence,
the government needs to use either the unbalanced growth concept, the big push
philosophy (Hirschman 1958, Kirschna et al. 2005, & Rosenstein-Roden 1943)
or low interest loan option to invest in infrastructural development. This
might salvage the poor infrastructural challenge, restore basic services, and
eventually reduce poverty.
The unbalanced growth concept
Due to the lack of
resources in the less developed countries, there is need for the government of
Liberia to use the unbalanced growth theory, whereby it could create imbalances
in the system as the best strategy for growth (Hirschman 1958). This means that
the little available funding should be used efficiently in strategic sectors
(transport, electricity and water) that might lead to a rippling effect in the
economy. Investment should be made in these projects because they have the
greatest total number of linkages to induce growth and industrialisation, and
lead to poverty reduction (Krishna et al 2005). Although the strategic
investment of resources in infrastructure seem the best model, substantive
investment in this sector is difficult to achieve due to the lack of financial
resources. For instance, Liberia’s real GDP is USD 1233; its GDP per capital is
USD 328, and the present growth rate is 8.5 per cent (MOF 2014). Despite this impressive
growth rate, the country has consecutively experienced budget deficits in three
years. Therefore, reliance on this option as the singular approach to
addressing the infrastructural deficit might not yield the desired results.
The big push concept
Giving the lack of adequate
national resources to mitigate Liberia’s infrastructural deficit, the
government should consider the ‘big push’ option (Rosenstein-Roden’s 1957). The
idea behind the big push theory is that a country cannot do anything until it
can do everything. Outlined by Paul Rosenstein-Rodan (1957), this theory argues
that even the simplest activity requires a network of other activities and that
individual firms cannot organise such a large network, so the state or some
other giant agency must step in. With this background, it might be impossible
for the government alone, given its current financial status, to restore the
country’s damaged infrastructure. Also, private investors will not maximize the
desired profits amidst the infrastructure challenge, yet they do not want to
risk their capital in public infrastructural. That infrastructure and social
services are considered public goods (Gans et al. 2013), private consider
investment in such public facilities a government’s responsibility. However, as
some ground speed is required for the aircraft to airborne, certain critical
amount of resources need to be allocated for development activities in Liberia.
Therefore, the government, private investor and donors’ need to invest in the
restoration of transportation, water and energy resources. Concessions could
invest some of part of their expected royalties to government in the
infrastructural sector. Because no piecemeal allocation in an economy can move
on the path of economic development, investment in social overhead capitol is
necessary for economic development. With economic growth and development,
government can allocate more resources to basic social services, and reduce
poverty (Haynes 2008).
Low interest loans
Borrowing of loans is the third option available to the government to
mitigate its infrastructural shortfall. Loans could be taken from the World
Bank and IMF, and friendly governments to undertake the needed infrastructural
projects in the transport, water and electricity sectors. However, the WB and
IMF may not be disposed to giving loans to Liberia because they and other
partners waived USD 4b debt in 2010 (IMF 2010), and placed a moratorium on the
country’s borrowing. However, other bilateral partners could lend Liberia
interest free loan that might enable the government develop its national
infrastructure, which is very critical to the overall economic growth and the
improvement of the people’s lives. One of such avenues for interest free or low
interest loans is the China-Africa loan facility (FOCAC 2012). In 2006, China’s
grant assistance, interest free and preferential loans to Africa increased
astronomically. In addition, since 2009, China has remained Africa’s largest
trading partner. In 2013, trade between China and Africa reached USD 210b,
unmatched by previous times (Xinhua Global Times 2014). China has expanded
cooperation in investment and financing by providing USD 20b of credit line to
African countries (FOCAC 2012). Specifically, the China Union has invested USD
2.6b in the Iron Ore mining sector in Liberia (NIC 2012). Liberia supports the
‘One China Policy’. The government should therefore take advantage of the
cordial bilateral relationship and get Chinese low interest rate loan to fund
part of its infrastructural projects.
Additionally, the Liberian government could utilize the Tokyo
International Conference on Africa Development (TICAD) process to fund part of its
infrastructural projects. The TICAD underscores South-South cooperation, and
promotes the development of trade and investment between Asia and Africa (TICAD
V Report 2013). It recognizes that infrastructure development, including road
networks, energy, and access to safe drinking water, is critical to economic
integration, trade and investment promotion, and poverty
reduction in Africa. Therefore, the Medium to Long Term Strategic Framework
(MLTSF) of the TICAD process forms the basis for a coherent strategic approach
to the development of infrastructure in Africa. Giving the strong bilateral
relationship between Liberia and Japan, the government could also lobby for
more funding to complement other funding modalities, and address its
infrastructural challenges.
V.
Conclusion
This paper argues that poor infrastructure inhibits economic growth,
hinders access to basic social services, and undermines government efforts to
reduce poverty in post-conflict Liberia. It points out that prior to the 14
years civil war, Liberia experienced economic growth, and the residents had
increased access to basic services. It is therefore plausible that if the
country restores good infrastructure (transport, electricity and water
systems), it might experience economic growth and development as was in the
pre-war status. This might increase accessed to social services and ultimately reduce
poverty. To achieve this, the Liberian government needs to either use one or a
combination of three options to address its infrastructural deficit. First, it
could utilize the unbalanced growth concept by investing its limited resources
in the infrastructural sector as a driver to spur economic growth and
development. Second, the government could engage in a joint government, private
sector and donor partnership to address the infrastructure challenge and
restore basic social services through a ‘big push’ option. Last, it could
borrow interest free or low interest rate loans under the China Africa
Partnership loan facility, and from the TICAD arrangement to fund some of the
country’s infrastructural projects. To better coordinate this process and
ensure implementation success, the government needs to constitute an
inter-ministerial or inter-agency coordinating task force that will adopt the
appropriate methodology, and coordinate stake holders in addressing the country’s
protracted infrastructure dearth.
About the Author
Thomas Kaydor is Representative of the College of Asia
and the Pacific (CAP), Member of the CAP Board, and Member of the Permanent
Representative Council (PRC) of PARSA. Mr Kaydor, a Liberian, is a postgraduate
student at the Crawford School of Economics and Government, ANU, reading Master
of Public Policy, and Master of Diplomacy. He holds M.A (High Distinction) in
International Relations, University of Liberia, where he served as President of
the Postgraduate Students Association; and B.A (Magna Cum Laude) in Political
Science, the University of Liberia. He also holds a Diploma in Management and
Development of NGOs, Galilee College,
Israel; Certificate in Human
Rights & Results Based Management, UN System Staff College, Turin, Italy,
and Postgraduate Diploma in Diplomacy and Negotiation, Islamabad Foreign
Service Academy, Pakistan.
He served as Assistant Minister for Africa, Asia and
the Pacific, Ministry of Foreign Affairs, Republic of Liberia, and coordinated
Liberia’s diplomatic relations with all Afro Asian and the Pacific states. He
was also UN Coordination Services Adviser, UNDP Ethiopia; and UN Coordination
Analyst, UNDP Liberia. He provided effective coordination support to the UN
Country Teams, promoting UN reform, Joint Programming, Delivering as One, et
al. He was Chief of Office Staff, Liberian National Legislature; Field
Supervisor, USAID Social-Reintegration Programme; Psychosocial Officer, World
Vision International; and Part-Time Instructor, University of Liberia, and the AME University, Liberia.
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Profile:
Thomas Kaydor