Report No. 78343-LR Document of The World Bank FOR OFFICIAL USE ONLY LIBERIA JOINT IDA-IMF STAFF ADVISORY NOTE ON THE SECOND POVERTY REDUCTION STRATEGY June 17, 2013 Poverty Reduction and Economic Management 3 Country Department AFCW1 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 1 INTERNATIONAL MONETARY FUND AND INTERNATIONAL DEVELOPMENT ASSOCIATION LIBERIA POVERTY REDUCTION STRATEGY PAPER—JOINT STAFF ADVISORY NOTE Prepared by the Staffs of the International Monetary Fund (IMF) and the International Development Association (IDA) Approved by Seán Nolan and Chris Lane (IMF) and Yusupha Crookes (IDA) June 17, 2013 I. OVERVIEW 1. This Joint Staff Advisory Note reviews the Second Poverty Reduction Strategy (PRSII), “Agenda for Transformation 2013–2017,� which followed the completion of the First Poverty Reduction Strategy, “Lift Liberia,� covering the 2008-2012 period. The strategy is aligned with the “National Vision 2030: Liberia Rising,� which sets out the government’s long term social and economic development objectives, including the goal to achieve middle-income status within the next twenty years. To sustain the gains achieved during the first PRS, the Agenda for Transformation (AfT) seeks to address the constraints to inclusive growth and to increase income, create wealth and enhance inclusiveness to bring about a more equal and just society. Reducing poverty is seen as being key not only with income growth and human development objectives, but also with equality, peace and security. 2. The AfT sets out a comprehensive growth and poverty reduction strategy. The formulation of the strategy benefited from an independent review of the lessons learned from the implementation of the first PRS and a retrospective analysis of Liberia’s past, and is also informed by diagnostics and studies and sector strategies that have been discussed with stakeholders through extensive consultations at various levels. The AfT maintains the key strategic pillars outlined in the first PRS, including: (a) Peace, Justice, Security and the Rule of Law, (b) Economic Transformation, (c) Human Development, and (d) Governance and Public Institutions. A fifth pillar was added to address several cross-cutting issues including: gender equality, youth empowerment, child protection, disability, environment, HIV/AIDS, human rights and labor and employment. Capacity development is mainstreamed in all four pillars. 2 3. The AfT’s formulation was based on an extensive participatory approach. Twenty- five sector working groups (SWGs), led by the Government and development partners with participation from civil society organizations and other stakeholders carried out the analysis and formulation of sector strategies and plans, with a focus on results and capacity development. The process benefited from synergies and complementarities between sectors, a shared understanding of the challenges and opportunities within sectors, and linkages across sectors. The strategy was extensively discussed with the population at numerous consultations held at the district, county, and national levels, as well as with Liberian diaspora communities overseas. These consultations were carried out in tandem with those for the National Vision 2030. The President convened a national conference (Gbarnga Declaration) during December 11–12, 2012 to launch the National Vision and the Agenda for Transformation. Staffs commend the thorough participatory process that led to the formulation of the AfT. II. POVERTY DIAGNOSIS 4. The analysis of poverty in the AfT could have included more up-to-date information that reflect the dynamics of poverty in Liberia. The poverty analysis is informed by the 2008 Housing and Population Census that defines poverty based on the Unmet Basic Needs (UBN) approach and the asset deficiency approach. The UBN approach concluded that poverty was relatively higher in rural areas compared to urban areas and was widespread in Rivercess, Grand Cru, Gbarpolu and Rivergee counties. While the AfT makes reference to the poverty analysis drawn from several surveys and studies, it does not discuss the progress made in reducing poverty during the first PRS. Lack of access to infrastructure, the high rate of unemployment and under-employment, and lack of access to education and health services are other key elements of the poverty profile that deserve further consideration. 5. The results of the Core Welfare Indicator Questionnaire (CWIQ) conducted in 2007 and 2010 provide more in-depth analysis and dynamic dimension of poverty during the first PRS. Poverty in Liberia has declined from 64 percent (2007) to 56 percent (2010), mostly the result of a reduction in the rural areas (contrasted with little reduction in urban areas). Overall poverty rates and inequality increased for the greater Monrovia area, reflecting the increasing urbanization trend in the country. In the rural areas, although the poverty rate fell significantly, inequality declined only marginally. Liberians, in general, perceived improvements in their poverty and welfare status between the two periods (2007 and 2010). Other factors that are strongly correlated to consumption and poverty include the size of households, levels of education for household heads, quality of education, gender, employment, assets and access to services (education, health, and water). These findings suggest that in addition to a growth strategy, Liberia needs social policies targeting poor households. Looking ahead, staffs encourage the government to ensure timely implementation of the Household Income Expenditure Survey (HIES) to provide critical data for the estimation of the National Accounts benchmark, the revision of the National Consumer Price Index (NCPI), and more accurate profiles of the poor and vulnerable populations in both rural and urban areas. 3 III. THE INCLUSIVE GROWTH AND POVERTY REDUCTION AGENDA 6. A major challenge for the Liberian government is to ensure a broad-based growth strategy—moving away from previous growth strategies that depended mainly on the mining and resource sectors of the economy. Liberia is a major recipient of foreign direct investment (FDI) with an estimated US$1.3 billion over the last seven years focusing in the mining, forestry, and oil sectors. While it is expected that these investments will boost growth and generate nearly 100,000 jobs, their spillovers to the rest of the economy is expected to be limited. Rubber is the only concession sector so far employing domestic labor on a significant base. 7. Proper management of natural resource revenues is critical to support the government’s development agenda. Liberia has started collecting revenues from the mining sector as well as one-off payments from non-traditional sectors such as petroleum. Given the high potential from these sectors, managing natural resources revenues effectively once projects become operational is essential to avoid boom-bust cycles (i.e., spending vis-à-vis saving for future generations) and to channel government revenues towards high-yield public investment projects such as energy, roads, and ports and other priority areas such as education and health rather than towards non-productive investments or generalized consumption subsidies. 8. To facilitate economic transformation, the AfT addresses some of the binding constraints to inclusive economic growth. These constraints include weak infrastructure (especially energy and roads), limited access to finance for micro, small and medium enterprises (MSME), coordination failures hindering new export activities, and weak and unclear property rights. Other factors that constrain inclusive growth include low-levels of human development, high administrative and regulatory costs, and instability and security risks. To reduce the constraints to growth, the strategy acknowledges the need for major investment in infrastructure (energy, roads, ports, and information and communication technology), human development, and institutions to strengthen governance and accountability, and to improve security. These investments should improve agricultural productivity, help create a vibrant and dynamic private sector (especially MSMEs), and promote diversification of what is essentially a natural resource- based economy. Staffs concur that these constraints could be reduced through effective implementation of the AfT. 9. Broader base economic growth is beginning to take place. While economic activity has been driven recently by the mining sector, non-mining GDP growth is projected to pick up in 2013 and in the medium term supported by stronger activity in the construction and services sectors. The expected increase in construction reflects the scaling up of infrastructure investment, particularly with the construction of roads, the rehabilitation of the hydropower plant and the construction of new energy facilities, the rehabilitation of port facilities which will contribute to improved access to markets and to public services, lower energy cost, and better connect Liberia with the rest of the world. 4 A. Macroeconomic and Fiscal Frameworks 10. The AfT appropriately emphasizes the critical importance of scaling up public investment in critical areas to spur broad based inclusive economic growth. The baseline AfT assumes average annual real GDP growth of about 6.6 percent during 2012/13–2016/17, broadly in line with the targets contained in the IMF Extended Credit Facility (ECF) program, with inflation remaining at an average of 5 percent over the five year period, and relative exchange rate stability. On average, the AfT is targeting higher growth rates of about 8.5 percent to help achieve middle-income status by 2030. Achieving and maintaining the baseline growth, however, will be challenging, as it requires significant levels of investments and addressing the bottlenecks to public investment. Total investment under the baseline scenario in the AfT is estimated at about $600 million (including about US$170 million in public investment) or equivalent to about an average of 8 percent of GDP per year. The ECF-program assumes slightly higher investment levels (US$200 million per year) over the same period as it assumes lower public sector capital productivity. The AfT’s projected public investment level is substantially higher than actual public investment of about $50 million per year in recent years. The current low level of investment reflects in part serious capacity constraints to implementing investment projects. Staffs recommend that that the first Annual Progress Report (APR) of the AfT discuss progress in improving project implementation. 11. Significant financing is needed to meet the AfT objectives but the sources of funding are not yet fully identified. The costing exercise for the AfT assumed a total financing need of about $3.5 billion. Liberia’s own domestic resources are expected to cover about 11 percent of the AfT financing needs. Disbursement of existing loans and planned new borrowing account for about 18 percent of AfT financing needs; budget support grants and approved grants for the hydropower plant account for close to 11 percent of the total financing. The remainder of the AfT financing (about $2.1 billion or nearly 60 percent of the total financing requirement over the five-year period) is expected to be filled by donors in the form of borrowing and grants. In this context, staffs encourage the Government to prioritize AfT projects and ensure their alignment with sector policies. Staffs also urge the Government to incorporate new donor support on- budget as well as strengthen donor coordination to ensure alignment of their support with the AfT priorities. 12. More needs to be done to improve budget execution and to mobilize domestic resources for the AfT, despite recent reform progress. In order to avoid excess dependence on concessions revenues and external assistance, the Government is strengthening revenue collection through accelerating the reforms of tax administration. Enforcement of the much improved tax regime for the mining sector has been strengthened and the Petroleum Act is being modernized ahead of the potential large revenue inflows. Strengthening the tax policy unit at the Ministry of Finance that is responsible for coordinating tax policies across government ministries and agencies to avoid negotiating separate tax terms in concession agreements is also critical. The transition toward the Liberia Revenue Authority (LRA) is also being planned. Furthermore, 5 the Government is making good progress on PFM reform and has introduced some fiscal rules to contain current spending. However, budget execution remains weak, as evidenced by significant delays in the execution of infrastructure projects. Staffs commend the Government on the introduction of new fiscal rules including limiting the reallocation of capital spending to recurrent spending and keeping current spending constant in nominal terms in order to create fiscal space for scaling up infrastructure spending. Staffs also recommend that the Government continues rationalizing current expenditure that accounts for nearly 90 percent of the Government’s budget; particularly, more political will is required to control recent increases in discretionary special allowances for senior officials. 13. The AfT assumes a responsible borrowing strategy. The Government is committed to maintaining debt sustainability, as evidenced by the introduction of debt rules under the PFM Act and regulations. It ensures that all borrowing is for public investment only, that total debt stock does not exceed 60 percent of previous calendar year’s GDP and that a Debt Sustainability Analysis is carried out prior to acquiring new borrowing to ensure compliance with the rules governing the contracting of external debt and the efficient use of resource. Staffs welcome such rules guiding the borrowing process and support the authorities’ commitment to a forward- looking medium term debt strategy consistent with the AfT. They urge the authorities to closely consult with staffs on any new external borrowing on non-concessional terms, and to ensure that all external loans follow the procedures of the Debt Management Committee. 14. Achieving the AfT objectives also depends critically on improving the execution of public investment projects. Legal, institutional and managerial bottlenecks hamper selection and implementation of public investment projects, including weaknesses in prioritizing high- return projects, conducting feasibility and pre-feasibility studies, monitoring the project investment cycle, and coordinating efforts of the Ministry of Finance (MoF) and implementing ministries. Staff welcomes the recent introduction of the Project Management Office at the Ministry of Finance to provide technical assistance to implementing ministries to strengthen the project investment cycle ensuring that projects have feasibility and pre-feasibility studies. Close coordination between the PMO and the Liberian Development Alliance secretariat could also contribute to addressing institutional and managerial bottlenecks, improving the project selection process, prioritizing high-return projects and aligning them with the AfT. Staff commends recent steps to ensure that procurement plans for all public sector projects are in place before the start of the fiscal year. Project execution could also benefit from broadening the list of construction companies to include non-resident firms and pre-qualifying them; limiting the number of projects allocated to a single contractor; and pooling similar small projects. 15. The AfT recognizes the challenges associated with implementing monetary policy in a highly dollarized economy. The Central Bank of Liberia plans to continue its focus on maintaining price stability, as well as strengthening the banking system. Given that monetary policy in Liberia plays a limited role in the management of the economy, staffs agree with the authorities that targeting exchange rate stability is appropriate. The financial sector policies 6 during the last two years continue to focus on improving access to credit and reducing vulnerabilities. Given the AfT’s focus on improving access to sustainable financing for underserved sectors, including medium, small and micro enterprises (MSMEs), such initiatives could be further elaborated in a comprehensive Financial Sector Development Strategy that identifies challenges and opportunities. B. Peace, Justice, Security and Rule of Law 16. The AfT aims to create an atmosphere of peaceful co-existence based on reconciliation and conflict resolution and providing security, access to justice, and rule of law to all Liberians. Staffs agree that a focus on these issues is critical to enhancing social development and economic opportunities, and reduces the risks of reverting to conflict and violence. The Government recognizes that education, fair distribution of wealth, and equitable and secure access to land and to natural resource benefits are important priorities for achieving this goal. However, Staffs note that it may be more useful to directly relate actions under this pillar including, measures to increase transparency, inclusiveness and accountability with regard to the provisioning of security and justice services and natural resource investment. 17. The AFT lays out ambitious goals to consolidate gains in the security sector, and to continue to professionalize the security forces while expanding access to justice. It aims to produce viable and professional security forces, an independent, transparent and credible judiciary, and accessible justice services, while minimizing societal tensions. To achieve this goal, the AfT lays out ambitious plans for strengthening institutions, but does not elaborate how the sustainability and viability of these institutions would be maintained within the fiscal and political context. The AfT aims to increase personnel, raise salaries, broaden the presence of police through regional security hubs, and expand community policing to address insecurities caused by political tension, ethnic conflicts, violent crimes, land disputes and border conflicts, especially after UNMIL’s phased draw-down which began in 2012. Staffs strongly recommend that security sector strengthening include efforts to rationalize the forces and their functions, including combining and downsizing duplicative forces, where appropriate, to improve operational effectiveness and address weaknesses in governance and management. 18. The judiciary sector aims to expand related infrastructure, increase personnel and capacity to provide credible justice services throughout the country, while improving financial management practices. However, there has been no clear analysis of the cost implications of such efforts, or how to address the sustainability implications of expanding judicial infrastructure in remote areas of the country. Additional questions arise regarding the relationship of expanded courts to local governments, as well as other local dispute resolution services. As in the security sector, there is need for clearer priorities regarding the types of services that will be most necessary based on the types of disputes that are most prevalent, and the role of the judiciary relative to other dispute resolution mechanisms. 7 19. The AFT rightly focuses on expanding access to justice, especially for vulnerable groups. This will be done through several measures including revisions to the legal framework, expanded legal services, reduction in case backlog, clarification of the relationship between state and non-state justice, and expansion of dispute and conflict resolution services. These efforts will need to build on a clearer understanding of the multiplicity of approaches for resolving disputes and addressing legal issues, some of which overlap. Experience has shown that citizens employ a variety of services depending on the responsiveness to their justice needs and on the credibility of those services. Interventions should build on a solid understanding of these needs in order to prioritize resources and enhance credibility. C. Economic Transformation 20. The AfT correctly identifies the infrastructure gaps that need to be addressed to transform and diversify the Liberian economy. The main priorities include investing in energy, roads and bridges, sea and air ports, water and sanitation, telecommunications, and affordable housing to increase power production and distribution, expand access to piped water and sewer systems, improve access to markets and public services and improve access to affordable housing to vulnerable, low income families. 21. The energy strategy correctly identifies goals and priority actions but falls short on an electricity tariff setting methodology for end users and measures to address the limited capacity of the Liberia Electricity Cooperation (LEC) to provide energy services. Staffs concur with the need for increased access to renewable energy services and affordable power for community and economic transformation through expanding the supply of electricity, transmission and distribution networks. However, although necessary, it is not sufficient of itself to achieve the stated objectives. Specifically, the AfT needs to articulate a cost recovery tariff strategy that weighs fiscal revenue against the cost of electricity generated from Mt. Coffee Hydropower and the heavy fuel oil (HFO) and technical losses in energy distribution. Further, sustainable development of the sector will also require that LEC improve its operational and financial performance to provide quality services to its existing customers in a sustainable manner. 22. The transport strategy draws heavily on the 2011/12 Transport Master Plan; however, infrastructure investments and operations could be better prioritized. Staffs note that the Transport Master Plan is now outdated and requires revision. Given the significant amount of financing and capacity required to implement the transport strategy, further prioritization of transport infrastructure is warranted, with an emphasis on the core road network, especially the major primary roads. To meet the massive infrastructure needs (roads, ports, rails) in Liberia, the Government is considering leveraging the provisioning of infrastructure services through concession contracts, as well as the use of Public-Private Partnerships (PPP) as an alternative financing mechanism. Staffs concur with the approach; however, Staffs note that the absence of a regulatory framework for concessions and PPPs as well as inadequate capacity to 8 identify, negotiate and manage concession contracts and PPP transactions will only lead to challenges that could undermine progress in the delivery of infrastructure services as well as could create contingent liabilities for the Government. 23. The AfT places heavy emphasis on improving the productivity in areas of agriculture that are expected to be the main sources of growth, employment, and poverty reduction over the medium-to-long-term. In agriculture, the AfT focuses on increasing production of domestic food crops (rice and cassava) and export-oriented tree crops including rubber, oil palm, and cocoa. In this context, staffs encourage the Government to place greater emphasis on developing institutional capacity within the sector to ensure that the goals articulated in the Agricultural Strategy are achieved. In the tree crops sub-sector, staffs note that large-scale replanting programs are urgently needed to avoid a decline of revenue from exports as there has been no substantial replanting of rubber, oil palm and cocoa during the last twenty- five years. An estimated 37,000 fishers and processors are currently employed in Liberia’s fisheries sector (about 61 percent of whom are Liberian and 60 percent are female). To increase the impact on employment and income from fisheries, staffs recommend that the Government develop basic capacity for governance in the fisheries sector, enforce compliance with fisheries law and regulations, and encourage private investment to add more local value to fish products. 24. Staffs note that the forestry sector has underperformed and the sector’s governance currently requires serious attention. Forest-based farming systems cover the largest proportions of the country. The sector plays a critical role in promoting and maintaining peace and stability and has potential for substantial employment generation and poverty alleviation for rural communities and forest dwellers. Recent developments in the forestry sector indicate that the original gains from the forestry reform have been eroded and the National Forest Management Strategy of 2007 is now largely obsolete and has no bearing on the emerging issues that affect forest management, conservation and governance. Going forward, staffs recommend that the Government take actions to improve governance in the forestry sector including: (a) continuing the moratorium on the issuance of private use permits (PUPs) and extending this to include the issuance of further Community Forestry Management Areas (CFMAs); (b) refraining from tendering more forest concessions of any type until issues are resolved; (c) strengthening sector governance; (d) updating the National Forest Management Strategy; (e) developing and promoting the domestic market for forestry products and linkages to regional markets, and strengthening the current information base for decision-making in the forest sector; and (f) implementing a conservation strategy that goes beyond the protected areas system to encompass mineral, agricultural, forest concessions, and community forests. 25. In the AfT, the Government places strategic priority on strengthening land administration as a basis for sustainable land governance and reform. Building the land tenure framework in Liberia is essential to redressing land-related grievances that have fuelled conflict in the past. The staffs welcome this focus, as a necessary foundation for investments, for land markets, and for tax elements that bring revenue to the country. In addition, staffs encourage 9 the Government to strengthen informal conflict resolution capacities and mechanisms by replicating the Alternative Dispute Resolution (ADR) mechanism supported by the Norwegian Refugee Council (NRC) that was successfully piloted by Land Commission. 26. The AfT envisages a private sector that is driven and developed by expansion of import substitution and exports. However, linkages between concessions and the domestic private sector, especially MSMEs, need to be strengthened to increase employment and improve the efficiency of MSMEs. Staffs concur with the need for industrial development to increase value added, but suggests that the initial focus be on the development of primary production for export (rice, coffee and cocoa). Addressing key constraints, such as infrastructure, access to finance and improving farming methods, and enterprise/management training, will enhance primary production by MSMEs. Staffs encourage the Government to focus on strategic interventions that will close value chain gaps and reduce the costs of production and transport. 27. The AfT focuses on greater transparency and efficiency in the management of natural resources to avoid the resource curses. The agriculture, forestry, and mining sectors will be the main drivers of growth in Liberia over the short- and medium-term. However and all too often, significant natural-resource led growth is accompanied by the “curses� of corruption, greater income inequality, socio-political marginalization, and poverty that ultimately lead to conflict and violence. As a remedy, the AfT seeks to put in place an administrative structure for effective management and monitoring of natural resource concessions and plans to create a savings pool to be funded from natural resource revenues. Staffs concur with the approach, but note that the roles and responsibilities of ministries and agencies involved in negotiating, granting, and monitoring natural resource concessions need to be clarified to avoid overlap and conflict of interests. Further, their capacity and inter-agency coordination need to be strengthened to ensure effective monitoring. D. Human Development 28. The strategy rightfully acknowledges the importance of education for inclusive growth. It seeks to ensure access to high-quality basic education and to secondary education and training opportunities. This is expected to help close the gap between skills and labor market demands. It is also important that efficiency in resource utilization be improved, and that the gender and geographical local dimensions of education be considered. As the educational barriers have changed over time and cultural norms place fewer constraints on girls to attend school, the gender gap in elementary school enrollment is closing. Despite the positive trend, fewer females complete high school or tertiary levels than their male counterparts due to early marriage and/or pregnancy and financial difficulties. In the staffs’ view, a long-term strategic goal for education should also include increased enrollment and retention for all students, particularly female students. Staffs also urge that the AfT address the educational disadvantage facing students from rural areas through expanding the capacity of rural schools and by providing financial incentives. 10 29. The AfT provides a clear overview of both the significant challenges facing the health sector, and the government’s strategy to improve the health and social welfare status of the population on an equitable basis. The strategy is detailed in the National Health and Social Welfare Policy and Plan 2011–2021 (NHSWPP), which addresses several core issues, including: improving access and utilization of health services; making health and social welfare services more responsive; and ensuring that health is accessible for the entire population. Priority interventions are evidence-based, and underpinned by comprehensive and detailed analyses. Staffs note that while the proposed targets are ambitious, they have strong Government ownership and significant donor support. Given that the sector depends heavily on donors to achieve the country’s positive health outcomes, the AfT needs to address the long-term sustainability of health financing and the strategy for the transition from donor dependence. 30. The inclusion of Social Protection under the Human Development pillar of the AfT recognizes that equity in access to opportunity is important for inclusive growth. The National Social Protection Policy and Strategy has clarified the government's objectives for such programming and outlined key interventions toward this end. The focus on the building of systems and improved coordination between ministries and agencies and existing interventions is a good first step in establishing a national social protection safety net. Importantly, the AfT priority interventions for social protection highlight the need for a range of programs that allow households to transition between different types of support (for example, from cash or food transfers to micro-credit) depending on their unique needs. Staffs recommend that the implementation of the AfT focus on synergies between the social protection sub-pillar and the youth development and empowerment cross-cutting issue. E. Governance and Public Institutions 31. In keeping with the previous PRS, the AfT reiterates the government’s commitment to rebuilding transparent, effective and accountable public institutions. Notably, the AfT is candid in acknowledging that reforms have lagged due to capacity constraints and weak commitment by key actors. The AfT identified critical priority areas including civil service reform, decentralization, public financial management and transparency, and land use and tenure. Staffs note that a number of efforts are already underway in these areas. Going forward, they urge the Government to focus on completing ongoing reforms and ensuring their entrenchment into current operations in a sustainable way. 32. The creation of an independent, accountable, merit-based and performance- oriented civil service is an important element of the government’s agenda. Nevertheless, reforms have been slow in many of these areas. In spite of numerous attempts, payroll cleaning and pay reforms have not advanced; there is no clear career track, and recruitment and promotion remain ad hoc. Staffs notes the urgent need to strengthen payroll management and control and to reform civil service management to strengthen the technical and managerial capacities needed for the execution of the government’s development agenda. 11 33. The AfT acknowledges that decentralization is a long-term undertaking but notes its role in reducing social fragility and improving reconciliation. The Government will focus its efforts to de-concentrate services to the local level as a step towards strengthening state legitimacy, sharing the peace dividends, and improving development outcomes. In this context, staffs urge the Government to adopt a gradual approach to decentralization by setting realistic goals and sequencing and prioritizing the de-concentrated services taking into account resource and capacity constraints. Staffs also suggest that the Government address issues, such as the passage of the Local Government Act, harmonization of overlapping boundaries, development of a robust fiscal decentralization policy, and the strengthening of county administrations. 34. Despite progress in strengthening public financial management, much remains to be done to enhance financial transparency and accountability. A public financial management (PFM) law enacted in 2009 and enabling regulations are helping to further strengthen budget preparation, execution and reporting. Moreover, an Integrated Financial Management Information System (IFMIS) was introduced in the Ministry of Finance in July 2011 and subsequently rolled out to eight other line ministries and agencies in 2012. The use of the IFMIS is expected to improve commitment control and fiscal reporting. Going forward, staffs urge the Government to accelerate efforts to strengthen budget execution, in particular capital spending, improve financial transparency and accountability through timely publication of the annual budget execution reports, completing the external audit of the consolidated government financial statements and regular submission of financial statements by key state-owned enterprises. F. Cross-Cutting Issues 35. A large number of cross cutting issues are being addressed by the AfT to increase inclusiveness. These include gender equality, youth empowerment, child protection, disability, environment, HIV/AIDS, human rights and labor and employment. Given the limited available resource and capacity, effort to address these issues could be diluted. Staffs suggest that the Government be selective in addressing these issues, focusing on critical ones in priority sectors such as gender parity in primary education, youth empowerment through training and improved access to pre and post natal care. IV. IMPLEMENTATION, MONITORING AND EVALUATION AND RISKS 36. The AfT establishes the Liberia Development Alliance (LDA), a framework for coordination of all stakeholders in support for its implementation. The LDA, which replaces the Liberia Reconstruction and Development Committee (LRDC) is comprised of a steering committee and a Secretariat which is responsible for high-level coordination of AfT activities. The Steering Committee, chaired by the President of Liberia, is comprised of stakeholders which include the cabinet members, the private sector, development partners, and Community Service Organizations. The LDA Steering Committee will harness the efforts of the various stakeholders and provide overall policy direction to guide AfT implementation. The Secretariat will manage 12 the day-to-day activities related to coordination with ministries and agencies, and monitoring and reporting of AfT implementation. Staffs commend the government’s efforts in this regard but note that greater attention is required to ensure the inclusive participation from all stakeholders. 37. The AfT is complemented by a monitoring and evaluation (M&E) framework to track implementation progress. To strike a balance between development results and the deliverables that are important for accountability and monitoring, the M&E framework is designed around results-based management principles for strengthening country systems. The framework is comprehensive and links to the budget and planning processes. However, the role of county administrations is understated despite their roles in data collection. Looking ahead, the Government will need to strengthen the institutional capacity of the national statistics system, comprising the national statistical agency (Liberia Institute of Statistics and Geo-Information Services) and ministries and agencies to improve quality, reliability and coverage of statistics. 38. The AfT is a results-focused strategy; however, staffs have some concerns about outcome indicators with respect to their numbers, baselines and targets, and quality. There are too many outcome indicators in the results framework to effectively monitor the AfT given the weaknesses of country systems. To date, many of the indicators do not have baselines and targets, and their quality is not consistent with SMART (specific, measurable, attributable, reliable and time-bound) indicators. Data collection is currently infrequent and based mostly on costly surveys funded externally. Staffs recommend that the authorities streamline the results framework by reducing the number of outcome indicators and revising them to ensure consistency with SMART principles. There is need to provide baselines, targets, and disaggregating by sex, youth and region, and include demand-side accountability indicators. 39. Implementation of the AfT entails several risks. Staffs identified key risks that the Government will likely face in the implementation of the AfT. These risks are associated with financing, capacity, security and political risks. Given a large financing gap implies, funding required for the investment program envisaged in the AfT will be insufficient, thus affecting the achievement of the results set out in the AfT. Weak absorptive capacity due to weak procurement planning and limited procurement capacity could slow the capital budget execution and delay the impact of the AfT on economic growth and people’s lives. Failure to fill in the gaps associated with the UNMIL drawdown could focus government’s energy and attention on security issues and derail the implementation of the AfT in other areas. Finally, upcoming elections in 2014 and 2017 may further delays the implementation due to elections campaigns. V. CONCLUSION AND ISSUES FOR DISCUSSIONS 40. The AfT presents a comprehensive, credible medium-term development strategy for inclusive growth and poverty reduction. However, the AfT’s public investment programs aimed at removing constraints to inclusive growth is ambitious given the weak implementation capacity and large financing gap. The staffs propose areas for further improvement of the AfT 13 including: (i) developing detailed and prioritized public investment programs and their costing; and (ii) elaborating a comprehensive financial sector development strategy; (iii) elaborating how the sustainability and viability of the peace and security institutions would be maintained within the fiscal and political context; (iv) specifying the measures to address the educational disadvantage facing students from rural areas; (v) strengthening the results framework by aligning the indicators with the expected outcomes and reducing the number of outcomes and intermediate indicators in view of weak statistical capacity; and (vi) strengthening the institutional capacity of the national statistics system and ministries and agencies to improve quality, reliability and coverage of statistics. Staffs also recommend immediate actions to be carried out including: (i) accelerating the Household Income Expenditure Survey (HIES) to provide critical data for estimation of national accounts, inflation and poverty; (ii) increasing fiscal space to finance priority investments, through improving the execution of the capital budget, rationalizing expenditure, and strengthening revenue collection; (iii) strengthening governance in the fisheries and forestry sectors; (iv) reforming civil service management to strengthen the technical and managerial capacity needed for the execution of the AfT; and (v) addressing outstanding issues related to decentralization such as the passage of the Local Government Act, harmonization of overlapping boundaries, development of a robust fiscal decentralization policy, and the strengthening of county administrations. Finally, Staffs highlight issues that could be further elaborated in the first APR including: (i) the proposed fiscal functions to be decentralized, the timeframe, and the required institutional framework required at the county level; and (ii) priority areas to be strengthened before PPPs are launched. 14 REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 i TABLE OF CONTENTS Letter from the President……………………………………………………………………….viii Table of Contents ...............................................................................................................................................i   Figures….. ..........................................................................................................................................................v   Tables…………...............................................................................................................................................vii   Acronyms ..........................................................................................................................................................xii   Executive Summary .......................................................................................................................................xvi   SECTION I: History, Current Context, and the National Vision ..........................................................1   Chapter 1. From Recovery to Inclusive Growth and Wealth Creation ..................................................1   1.1   Introduction ................................................................................................................................... 1   1.2   Historical Issues Around Growth and Inequality In Liberia .............................................. 2   1.3   Achievements of the Recovery Phase—the Foundations for Inclusive Growth ............ 3   1.4   Remaining Binding Constraints to Growth ............................................................................ 5   Chapter 2. Liberia RISING 2030—Achieving Middle Income Status .................................................9   2.1   Introduction ................................................................................................................................... 9   2.2   The National Vision of Middle Income in the Context of Liberia .................................... 9   2.3   The Path to Middle – Income Status...................................................................................... 10   Chapter 3. Geography, Population, Demographics and Poverty.......................................................... 15   3.1   Introduction ................................................................................................................................. 15   3.2   Geography ................................................................................................................................... 15   3.3   Population and demographics ................................................................................................. 16   3.4   Demographic Projections ......................................................................................................... 18   3.5   Dimensions of Poverty in Liberia .......................................................................................... 21   3.6.   Other Dimensions of Poverty .................................................................................................. 23   Chapter 4. External Environment: Opportunities and Challenges ...................................................... 25   ii REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 4.1    Introduction ................................................................................................................................ 25   4.2.    Opportunities FROM the External Environment ............................................................... 25   4.3.    Challenges Posed by the External Environment ................................................................ 27   SECTION II: Medium – Term Growth and Development Strategy .................................................. 29   CHAPTER 5. Developing Liberia’s Growth Strategy—Method and Process ................................ 29   5.1   Introduction ................................................................................................................................. 29   5.2   The National Vision: Liberia RISING 2030......................................................................... 29   5.3   Medium-Term Growth and Development Strategy (AfT)— Development Process . 30   CHAPTER 6. Experiences and Lessons Learned From the Lift Liberia PRS ................................. 34   6.1   Introduction ................................................................................................................................. 34   6.2   Summary of Lessons Learned from the Lift Liberia PRS ................................................. 34   6.3   Implications for the Agenda for Transformation ................................................................ 35   CHAPTER 7. Objectives and Structure of the Agenda for Transformation .................................. 38   7.1 Introduction .................................................................................................................................. 38   7.2   Objectives of the Agenda for Transformation ..................................................................... 38   7.3   The Structure of the Agenda for Transformation................................................................ 41   CHAPTER 8. Pillar I—Peace, Security and Rule of Law ................................................................... 43   8.1   Security ........................................................................................................................................ 44   8.2   Peace and Reconciliation ......................................................................................................... 48   8.3   Justice and Rule of Law ........................................................................................................... 50   8.4   Judicial Reform .......................................................................................................................... 52   8.5   Capacity Development Needs and Opportunities for Security Sector ........................... 54   CHAPTER 9. Pillar II—Economic Transformation .............................................................................. 57   9.1. Private Sector Development .......................................................................................................... 61   9.2   Macroeconomic Issues.............................................................................................................. 66   9.3   Infrastructure............................................................................................................................... 69   9.4   Agriculture and Food Security ................................................................................................ 76   9.5   Forestry—Development and Protection ............................................................................... 78   9.6   Mineral Development and Management............................................................................... 81   9.7 Capacity development Needs and Opportunities for Economic Transformation Sectors .......................................................................................................................................... 82   CHAPTER 10. Pillar III—Human Development .................................................................................... 90   10.1   Education ..................................................................................................................................... 91   REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 iii 10.2   Health and Social Welfare ....................................................................................................... 93   10.3   Social Protection ........................................................................................................................ 96   10.4   Water, Sanitation and Hygiene (WASH).............................................................................. 98   10.5   Implications of the Human Development Strategy for Other Pillars............................100   10.6   Capacity Development Needs and Opportunities for Human Development ..............101   CHAPTER 11. Pillar IV—Governance and Public Institutions . .................................................... 106   11.1   Political Governance ...............................................................................................................107   11.2   Public Sector Modernization And Reform .........................................................................110   11.3   Economic Governance ............................................................................................................112   11.4   Capacity Development Needs and Opportunities for Enhanced Governance ............119   Chapter 12. PILLAR V—Cross-Cutting Issues .................................................................................. 125   12.1   Gender Equality .......................................................................................................................126   12.2. Child Protection.........................................................................................................................128   12.3   Persons with Disabilities ........................................................................................................130   12.4 Youth Empowerment ...............................................................................................................132   12.5 The Environment .....................................................................................................................134   12.6 HIV and AIDS ...........................................................................................................................136   12.7   Human Rights ...........................................................................................................................138   12.8   Labor and Employment ..........................................................................................................139   12.9   Capacity Development Needs and Opportunities for enhanced Cross-cutting Strategies ...................................................................................................................................141   12.10   Cross-Cutting Issues and the Strategy Pillars ....................................................................146   12.11   Conclusion .................................................................................................................................151   Chapter 13. Costing of the AfT ................................................................................................................ 152   13.1    Introduction ..............................................................................................................................152   13.2   Approach, Methodology, Assumptions...............................................................................152   13.3 Summary of AfT Costs ............................................................................................................153   13.4 Costing of Priority Interventions ...........................................................................................155   Chapter 14. Macroeconomic Policy Framework .................................................................................. 164   14.1   World Economic Outlook ......................................................................................................164   14.2   African Economic Outlook ....................................................................................................164   14.3   Liberian Economic Overview ...............................................................................................165   14.4   Sources of Growth in Liberia ................................................................................................170   iv REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 14.5   Potential Risks ..........................................................................................................................171   14.6   Government Finances .............................................................................................................172   14.7   Government Borrowing and Fiscal Rules ..........................................................................174   Chapter 15. Implementation Strategy ..................................................................................................... 175   15.1   Organizations Leading AfT Implementation .....................................................................175   15.2   The New Deal for Engagement in Fragile States ..............................................................176   15.3   Institutional Framework for Implementing the AfT.........................................................177   Chapter 16. Monitoring and Evaluation Strategy ................................................................................. 179   16.1   PRS I M&E Experience: Key Challenges and Lessons ................................................179   16.2   Policy Framework and Guiding Principles of an Enhanced M&E Strategy ..............181   16.3   Objectives of an Integrated Results-focused M&E Strategy ..........................................182   16.4   Links Between MTEF/Budget and AfT Monitoring ........................................................183   16.5   Scope and Design of the Integrated M&E System ...........................................................184   16.6   Main Content and Function of the Monitoring Plan ........................................................186   16.7   Geographical and Stakeholder Aspects ...............................................................................187   16.8   Evaluation Aspects ..................................................................................................................187   16.9   The M&E Institutional Arrangements and Roles .............................................................187   16.10   Institutional Framework: Roles and Responsibilities ......................................................188   16.11   Progress Reporting, Reviews, and Communication Strategies ......................................192   16.12   Utilization, Communication, and Dissemination Strategy..............................................193   ChAPTER 17. Risks and Mitigation Strategies .................................................................................... 194   17.1   Mitigation Strategies ...............................................................................................................197   FIGURES Figure 1.1: Key Events in History and Real GDP ......................................................................................3   Lack of access roads and bridges reduces competitiveness of otherwise potentially attractive sectors ..................................................................................................................................................................8   Figure 3.1: Counties in Liberia and the Spatial Distribution of Population, 2008 .......................... 16   Figure 3.2: Percentage of Households with Essential Assets Deficiency by County ..................... 23   Figure 5.1: Relationship Among the Planning Tools ............................................................................ 30   Figure 5.2: Results Framework for the Agenda for Transformation.................................................. 32   Figure 12.1: Cross-cutting Issues: Special Poverty Problems ............................................................ 126   Figure 12.2: Cross-cutting Issues and the Growth and Development Pillars .................................. 150   REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 v Figure 12.3: Categories of Cross-cutting Issues and Nature of Interactions: Human and Non- human Issues ................................................................................................................................................. 150   Figure 13.0: AfT Investments in US$ Millions ..................................................................................... 154   Figure14.1 Values of Net Exports ........................................................................................................... 168   Figure 15.1: Pillar Alignment with the New Deal PSGs ...................................................................... 176   Figure 16.1 Integrated Aft-MTEF-NCDS Monitoring and Planning ................................................ 183   Figure16.2. The Results Chain for Liberia ............................................................................................ 184   Figure 16.3: Overview of the Integrated M&E System ....................................................................... 185   vi REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 TABLES Table 1.1:    Remaining Constraints to Growth: Diagnostics Matrix .......................................................7   Table 2.1: Countries that Crossed into Middle-Income, 2000–2011 ................................................. 10   Table 2.2: Liberia, LICs, and Countries that Crossed to Middle Income ......................................... 12   Table 3.1: Population Trends in Liberia, 1962–2008 (census statistics)........................................... 16   Table 3.2: Select Demographic Features of Liberia by County .......................................................... 17   Table 3.4: Total Population under Three Different Fertility Scenarios, 2008-2038 ....................... 18   Table 3.5: Working-age Population under Three Different Fertility Scenarios, 2008–2038 ...... 19   Table 3.6: Educational Sector Indicators under Medium Fertility Scenario, 2008–2038 ............. 19   Table 3.7: Health Sector Indicators under Medium Fertility Scenario, 2008–2038 ....................... 20   Table: 3.3: Distribution of Poor Population by County ......................................................................... 22   Table 8.1: Sector Goals for Peace and Security....................................................................................... 44   Table 8.2: Goals, Strategic Objectives and Outcomes for Peace and Security Sectors by 2017 .. 55   Table 9.1: Economic Transformation Pillar Results Chain ................................................................... 59   Table 9.2: Sector Goals for Economic Transformation ......................................................................... 60   Table 9.3: Summary Matrix for Economic Transformation ................................................................. 83   Table 10.1: Sector Goals for Human Development ................................................................................ 90   Table 10.2: Goals, Objectives and Outcome Indicators for HD Sectors ......................................... 102   Table 11.2: Goals, Objectives and Outcome Indicators for Governance Sector ............................ 120   Table 12.1: Goals for Cross-Cutting Issues ............................................................................................ 125   Table 12.2: Summary Matrix for Cross-Cutting Issues ....................................................................... 143   Table 12.3: Summary Matrix of Cross-Cutting Issues and Growth and Development Pillars... 146   Table 13.0: AfT costs in millions of United States Dollars ................................................................ 153   Table 13.1: Costs of Priority Interventions of Pillar I .......................................................................... 156   Table 13.2 Costs of Priority Interventions for the Economic Transformation Pillar ................... 158   Table 13.3: Costs of Priority Interventions for the Human Development Pillar ............................ 160   Table 13.4: Costs of Priority Interventions for the Governance Pillar ............................................. 161   Table 13.5: Costs of Priority Interventions for the Cross Cutting Issues Pillar .............................. 161   Table 14.1: Overall Economic Activity Expected During the First MTEF and the AfT Period . 166   Table 14.2: Expected Inflation Rates ....................................................................................................... 167   Table 14.3: The Values of Exports and Imports Forecasted over the PRS Period ......................... 168   Table 14.4: Full Balance of Payments Data ........................................................................................... 169   REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 vii Table 14.5: Overall Estimated Revenue Over Time ............................................................................. 173   Table 15.1: New Deal FOCUS and TRUST Principles ....................................................................... 177   Table 16. 1: Medium-Term Budget Framework Plan .......................................................................... 186   Table 16.2: Framework Roles and Responsibilities ............................................................................. 188   Table 17.1: Summary of Main Risks and Mitigation Measures......................................................... 199   viii REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 LETTER FROM THE PRESIDENT This development strategy, the Agenda for Transformation (AfT), is an important step toward fulfilling our government’s commitment to lift Liberians out of poverty to prosperity. The Agenda for Transformation, our medium term development strategy, is a major paradigm shift in the history of Liberia’s development. Over the past several years, our national development agenda has been confronted by unforeseen circumstances which have required us to think harder, develop new ideas, and take deliberate actions. The Lift Liberia Poverty Reduction Strategy, spanning 2008-2011, placed Liberia on the path of recovery. Under this strategy, we have seen big, tangible gains in the areas of peace, national security, stability and infrastructure development, among others. The onus is now on all of us to consolidate these gains, extend the impact to ordinary citizens in our towns and villages and situate the country on the path of economic transformation and inclusive growth. This is what the Agenda for Transformation is all about. The Agenda for Transformation was developed through a country-wide participatory process involving consultations in 154 districts of Liberia. Students, youth leaders, business communities, women’s organizations, persons with disabilities, religious and traditional leaders, farmers, teachers, health workers, and local community opinion leaders participated in these district-level discussions. During these consultations, Liberians appreciated the bottom to top approach of national development planning and spoke to rebuilding Liberia on the foundation of equality and respect for individual rights and dignity. Liberians expressed their aspirations for a reconciled society, in which each Liberian can access quality education, basic health care, and critical infrastructure, all of which would help Liberia achieve a higher standard of living. This Agenda prioritizes the expectations and aspirations of our people expressed at those county-wide consultative meetings. Throughout this Agenda, we focus on creating more jobs, building infrastructure, generating energy, and improving the quality of life by spreading the benefits of growth to all our citizens. We prioritize the provision of basic skills to our young REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 ix people to enhance their productivity for nation- and state-building. We pursue national healing and reconciliation and an open, transparent, and accountable democracy that will ensure political stability. The Agenda for Transformation in itself will not—in the next five-year timeframe—be able to achieve all that Liberia is poised to do. Instead, it is the first step toward achieving the goals set out in Liberia RISING 2030, Liberia’s long-term vision of socio-economic and political transformation and development. The Agenda sets out specific goals and objectives that Liberia must achieve in the next five years, moving toward a more prosperous and inclusive society. The Agenda for Transformation is consistent with the principles of the Paris Declaration, the Accra Agenda for Action and the New Deal for Engagement in Fragile States. While it represents an essential step in our nation’s long-term development, the Agenda is meaningless if it is not backed by concerted actions. This is not just another document to be placed on the mantelpiece; it must be seen as a living framework for meeting Liberians’ expectations for social and economic development, sustained and accelerated growth. The challenge is to ensure that expectations arising from the consultations are met in a timely and comprehensive manner. The call for a combined effort of government, civil society, private sector, and the Liberian citizenry has never been louder. Failure to deliver on the expectations contained in this Agenda is not an option. Our success depends on consistent planning, effective coordination, robust implementation, prudent and efficient use of resources, and most importantly, a collective will to succeed. The Liberian Government, for its part, remains committed to making the reforms required to fulfill our people’s vision for development: attracting foreign investment to create more jobs, promoting balanced growth countrywide. As a Government, our sincere thanks go to all the participants in the Agenda’s preparation: local county officials, civil society organizations, private sector actors, legislators, and all ministries, agencies, and commissions, especially the Ministry of Planning and Economic Affairs. x REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 Finally, we thank our development partners, who provided both financial and technical support to the entire process. In implementing this Agenda, we look forward to their continued collaboration to achieve the objective of transforming Liberia. I call on all Liberians, both in the country and in the Diaspora, to seize the opportunities the Agenda provides to make our collective dream a reality. Ellen Johnson Sirleaf President, Republic of Liberia REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 xi ACRONYMS ABE Alternative Basic Education ADA African Development Aid AFL Armed Forces of Liberia AfT Agenda for Transformation AGOA Africa Growth and Opportunities Act BPHS Basic Package of Health Services BRC Business Reform Committee CBL Central Bank of Liberia CSA Civil Service Agency DoD Department of Defense ECCD Early Child Care and Development ECOWAS Economic Community of West African States EPA Environmental Protection Agency FCPF Forest Carbon Partnership Facility FDA Forestry Development Authority FDI Foreign Direct Investment GAC General Auditing Commission GBV Gender-based Violence GC Governance Commission GDP Gross Domestic Product GNI Gross National Income GoL Government of Liberia GSA General Services Agency HFO Heavy Fuel Oil HIPC Highly Indebted Poor Countries Initiative ICT Information and Communications Technology IFC International Finance Corporation IMF International Monetary Fund INHRC Independent National Human Rights Commission KWH Kilowatt Hour LACC Liberian Anti-Corruption Commission LC Land Commission xii REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 LD Liberian Dollar LDA Liberia Development Alliance LDHS Liberia Demographic and Health Survey LEC Liberia Electricity Corporation LEITI Liberia Extractive Industries Transparency Initiative LGS Liberian Geological Survey LIC Low-income Country LIPA Liberia Institute of Public Administration LISGIS Liberia Institute for Statistics and Geo-Information Services LNP Liberia National Police LTA Liberia Telecommunications Authority LTC Liberia Telecommunications Corporation LWSC Liberia Water and Sewer Corporation MACs Ministries, Agencies and Commissions M&E Monitoring and Evaluation MCC Monrovia City Corporation MDA Mineral Development Agreement MDG Millennium Development Goals MIA Ministry of Internal Affairs MoCI Ministry of Commerce and Industry MoE Ministry of Education MoF Ministry of Finance MoGD Ministry of Gender and Development MoHSW Ministry of Health and Social Welfare MoJ Ministry of Justice MoL Ministry of Labor MoT Ministry of Transport MOU Memorandum of Understanding MoYS Ministry of Youth and Sports MLME Ministry of Lands, Mines and Energy MoPEA Ministry of Planning and Economic Affairs MoPT Ministry of Post and Telecommunications MPW Ministry of Public Works MSMESs Micro, Small and Medium Enterprises MTEF Medium-term Economic Framework REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 xiii MW Megawatt NACP National Aids Control Program NCHE National Commission for Higher Education NCD National Commission on Disabilities NCDS National Capacity Development Strategy NGO Non-governmental Organization NHPP National Health Policy and Plan NIC National Investment Commission NIDFO National Industrial Development Financing Organization NOCAL National Oil Company of Liberia NPA National Port Authority NSC National Security Council NSL National Standards Laboratory NTA National Transit Authority NWRSB National Water Resource and Sanitation Board OVC Orphans and Other Vulnerable Children PFM Public Financial Management PLWHA People Living with HIV and AIDS PMTCT Prevention of Mother-to-Child Transmission PPCA Public Procurement and Concessions Act PPCC Public Procurement and Concessions Commission PPP Public-Private Partnerships PRS Poverty Reduction Strategy PSIP Public Sector Investment Plan PWD Persons with Disabilities PTA Parent Teacher Association SEZ Special Economic Zones SMEs Small and Medium Enterprises SOE State-Owned Enterprises SWG Sector-Working Group TOKTEN Transfer of Knowledge Through Expatriate Nationals TRC Truth and Reconciliation Commission TTI Teacher Training Institutes TVET Technical and Vocational Education and Training UNDP United Nations Development Programme xiv REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 UNMIL United Nations Mission in Liberia WAPP West Africa Power Pool WASH Water, Sanitation and Hygiene REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 xv EXECUTIVE SUMMARY The Agenda for Transformation (AfT) is the Government of Liberia’s five-year development strategy. It follows the three–year (2008-2011) Lift Liberia Poverty Reduction Strategy (PRS), which transitioned Liberia from post-conflict emergency reconstruction to economic recovery. The AfT will not deliver transformation by the end of the next five years. . Rather, it is the first step toward achieving the goals set out in Liberia RISING 2030, Liberia’s long-term vision of socio-economic transformation and development. The AfT articulates precise goals and objectives and corresponding interventions that move Liberia closer toward structural economic transformation, prosperity and inclusive growth. Ultimately, the success of the AfT will entail making hard choices and taking deliberate and bold steps to ensure that resources are directed towards priority areas and interventions. Aid resources are particularly important in this regard, since AfT financing will rely heavily on funding from development partners. It is expected that aid flows to the AfT will be consistent with the Paris Declaration, the Accra Agenda for Action and the New Deal for Engagement in Fragile States. The structure of the AfT is as follows: Chapters 1 and 2 highlight the history from which Liberia has emerged, the work that has been done in the reconstruction phase, and the vision of where Liberia is heading. Chapter 3 presents an overview of the geography, population, and poverty in Liberia. Chapter 4 discusses the global and regional trends and the potential opportunities and risks that they pose to Liberia’s development agenda. Chapter 5 outlines the process of developing this strategy; its relation to other strategic plans, including Vision 2030; and the collaborative process from which it emerged. Chapter 6 looks at the accomplishments and lessons learned from the predecessor strategy to the AfT, the first PRS of Liberia. Informed by the lessons of the past, Chapter 6 also outlines key principles that are internalized in the AfT and in its strategic choices. Chapter 7 describes the objectives and the structure of the AfT. Chapters 8 through 12 constitute the main strategy itself. They describe the specific goals and objectives across five pillars that Liberia plans to achieve in the next five years, and the binding constraints to growth that need to be unlocked. Chapters 13 and 14 discuss the costing of the priority interventions in the AfT, the macroeconomic policy framework and implementation strategy, respectively. Chapter 15 discusses its monitoring and evaluation (M&E) framework, and Chapter 16 concludes with a description of the risks to realization of the strategy, and plans to mitigate those risks. xvi REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 SECTION I: HISTORY, CURRENT CONTEXT, AND THE NATIONAL VISION CHAPTER 1. FROM RECOVERY TO INCLUSIVE GROWTH AND WEALTH CREATION 1.1 INTRODUCTION Liberia is certainly on the rise. Since 2003, the country has enjoyed peace, two democratic elections, and nearly a decade of economic recovery. During this time, the Government of Liberia (GoL) and Development Partners (DPs) have remained committed to strengthening recovery and reconstruction and to translating the benefits of peace to ordinary Liberians. Several short- and medium-term development plans have since been implemented. The GoL’s 150-Day Action Plan of 2006 provided the first glimmer of hope to war-battered Liberians that the newly democratically elected government would protect basic rights and restore vital social services. The 150-Day Action Plan and subsequent plans were a precursor to subsequent plans, such as the Interim Poverty Reduction Strategy of 2007 and the complete Lift Liberia Poverty Reduction Strategy of 2008–2011. These strategies and plans provided stimulus to an already struggling and weak economy, strengthened the rule of law and significantly improved the national security environment, widened the reach and impact of government services, especially in healthcare and education, rehabilitated some infrastructure and generally reduced the punishing burden of poverty for many Liberians. Today’s images of crops growing in replanted fields; traders hawking wares in the bustling markets of Monrovia; cars immobilized by thick traffic snarls; uniform-clad children rushing to school—are clear, visible signs that economic recovery has taken hold. However, descent into conflict occasioned far more significant damage to infrastructure and institutions than the gains from the period of recovery have been able to resolve. The path from recovery to prosperity demands a greater quantity of public investment than has been possible so far. By United Nation’s Human Development Index, Liberia still remains one of the poorest countries in the world. Significant stretches of the already struggling rural agrarian economy is cut off from urban Liberia during the raining season due to inaccessible, impassable primary roads. Despite sustained GDP growth in the recovery period, unemployment remains high, especially among the country’s youthful population. Many of these challenges require more long-term strategic interventions which the Government of Liberia now aims to deliver through the Agenda for Transformation. Thus the AfT now effectively becomes the roadmap to take Liberia from recovery toward middle income country status by 2030. This chapter reviews the historical issues of growth and inequality that fueled the conflict in Liberia. It then discusses the progress that Liberia has made in establishing the foundations for more inclusive REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 1 growth during its recovery and reconstruction phase with the help of the Lift Liberia PRS. It further summarizes the binding constraints to inclusive growth and wealth creation that remain to be addressed by the AfT. 1.2 HISTORICAL ISSUES AROUND GROWTH AND INEQUALITY IN LIBERIA By 2013, Liberia will have crossed the 10-year milestone within which post-conflict countries face an omnipresent threat (50 percent chance) of relapsing into violent conflict.1 To permanently move beyond that threat, Liberia’s growth and development must be seen to be widely shared, with its benefits spread across the population. Liberia is determined not to repeat the mistakes of its past, when income inequality and socio-political marginalization fueled a brutal conflict that shook the nation for 14 years. In the decades preceding the start of instability in the late 1970s, Liberia’s growth record was remarkable. The country had grown at an average rate of more than 7 percent annually during 1955–1975. By 1980, Liberia’s gross domestic product (GDP) per capita peaked at US$1,765 (purchasing power parity, constant terms), bringing the country close to the middle-income threshold. Despite eight years of strong growth since the peace settlement, today’s average level of GDP per capita is only US$310—still well below that historical peak. However, that early growth had been driven by a number of isolated sectors. By the early 1970s, iron ore accounted for more than half of Liberia’s export earnings; rubber and other cash crops accounted for 15 percent of all value added.2 While this growth delivered results on top-line statistics, it also masked serious problems of poverty and inequality in much of the country. In 1970, less than 20 percent of the labor force was employed in the formal modern sector, while 74 percent was employed in low-productivity agriculture. Concessions employed only 7 percent of workers, despite their large share in GDP and exports. Wage inequalities across the sectors were stark: in 1974, per capita GDP in the agricultural economy was less than US$120 per year, compared to almost US$900 in the cash-crop economy and an estimated US$2,500 in the concessions sector.3 A mere 3.9 percent of the population controlled more than 60 percent of income, and a large share of the benefits from enclave sectors was repatriated by foreign investors. Human capital levels were extremely low, with only 25 percent of the labor force (above age 15) literate. The average level of educational achievement in the country as a whole was only 1.3 years. By the 1970s, the GoL was trying to counteract these trends, but the efforts were too little, too late. With the global decline in commodity prices during the late 1970s, expected revenue flows from natural resource rents failed to materialize, and the government’s fiscal position deteriorated. Liberia began a long-term economic decline, which was exacerbated by a subsequent military coup and ultimately outright civil conflict (Figure 1.1). Following the signing of the 2003 peace agreement, the country has grown steadily and boasts significant opportunities for growth, with well-managed reactivation of the iron ore and cash crop sectors and prospects for the discovery of commercial quantities of oil. The prospect of Liberia reaching middle-income status is becoming a reality once again. 1 World Bank, ‘Crisis Impact: Fragile and Conflict-Affected Countries Face Greater Risks.’ http://go.worldbank.org/3DUSQ99Y30. 2 http://www.liberianembassyus.org/index.php?page=about-liberia. 3 World Bank, 2012. Liberia - Inclusive growth diagnostics. Washington D.C. - The World Bank. http://documents.worldbank.org/curated/en/2012/02/16575286 2 REPUBLIC OF LIBERIA AGENDA FOR TRANSFORMATION: STEPS TOWARDS LIBERIA RISING 2030 Figure 1.1: Key Events in History and Real GDP !"#$%&'()#*+)#,-./0#1+)2/# CD(0;/1#$(:;-0>1#EFGH# 34567#8+/19#1%22//8/8#&:#!"# %,0+1+)I#(I(+)1<#@-/#I-2J<"# $-;&/0<# *@-/#/B/2%/<(<#&:# /)