Banking on Liberia's Future
Publication Date: January 26, 2011 - 10:51pm
By: Thompson Ayodele*

The growth of the palm oil industry in Liberia is a textbook case of how
developing countries can harness trade, capital formation and technology to rise from poverty to prosperity. Policymakers must understand what is at stake to keep Liberia's advancement on track.

Recently, Equatorial Palm Oil, a London-based company that concentrates its activities in Liberia, announced it has completed a major palm oil processing mill. This is a significant step in the ongoing development of Liberia's palm oil sector.

The mill, located about 160 km southeast of Monrovia, was designed by Modipalm Engineering Sdn Bhd, a Malaysian manufacturer of palm oil mills.

The announcement of the mill's completion follows just a few months after the Liberian government announced US$1.6 billion in direct foreign investment from Golden-Agric Resources in Liberia's palm oil sector. This was among the single largest agriculture investments in Liberian history.

All of this activity validates Liberia's development strategy, one that
embraces foreign investment and capital formation to bring badly needed resources and industrial capacity to boost Liberian productivity. The resultant jobs boom as Liberia's palm oil industry has grown is extraordinary. There are now over 220,000 smallholders of palm oil land in Liberia, earning enviable incomes. The recent investment by Golden-Agric Resources will help create an additional 35,000 new jobs. It is expected the new processing mill will add more.

It's also a validation of the policies pursued by World Bank executives
just a generation ago. Beginning in the 1970s, the World Bank extended loans to Liberia's nascent palm oil entrepreneurs in an effort to kick-start plantation-scale agriculture. The loans were helpful to
resuscitate Liberia's palm oil industry. But that beneficial process is
being challenged by missteps at the World Bank and other Western-based environmentalist organizations.

The Bank's mission is poverty alleviation. It thus has long believed that
loans to support agric-business enterprises were a smart bet. Emerging
agric-business in the developing world would provide jobs, but many have beneficial spillover effects as well. These include the ability to trade in global markets, attract foreign investment, and enable badly needed technology transfer that would boost food yields and enhance economic growth.

All of that has been realized in Liberia, a previously war-torn country
that is becoming one of the jewels of Africa. The palm oil industry has
been a vital engine for lifting poor Liberians out of poverty.

But recently the World Bank has harbored second thoughts about palm oil.

At the behest of environmental organizations in the Western World, it
initiated a suspension and review of its lending practices to palm oil
projects around the world. The green NGOs wrongly believe that palm oil development harms wildlife and leads to deforestation.

While deforestation is a problem in countries such as my native Nigeria,
the destruction of forests is happening in regions where there is no palm oil development. The forest depletion in Liberia and other African
countries is generally due to the poor's reliance on firewood for fuel.
Indeed, countries such as Malaysia, where half the nation's forests are
preserved, demonstrate there need be no tension between palm oil
development and ecological health.

The Bank's suspension of palm oil funding undermines its historical
mandate of poverty alleviation through agricultural development in the
developing world. This marks a worrisome evolution of the Bank's
priorities. It is moving away from fostering wealth creation and toward
extending a regime of environmental regulation dictated by vested
interests. Such an evolution should not be seen as friendly to the
developing world.

It's ironic the Bank is making a U-turn at a time when other African
countries are capitalizing on palm oil to grow their economies. The
International Fund for Agricultural Development (IFAD) recently announced a US$50 million loan to Uganda's booming palm sector. This loan provides direct benefits to more than 136,000 Ugandan families and local businesses. The IFAD rightly sees palm oil investment as crucial for economic development; the World Bank would be well-served to follow this agency's example.

The World Bank has issued updated guidelines with respect to palm oil
plantation agriculture. A new framework is expected to be submitted to the World Bank Group's Management Board for its approval by March 2011 and the Bank is currently hearing from public stakeholders.

If the Bank extends its suspension, it would hurt Liberia's access and
availability to an important food source. It would also have long-term
consequences for Liberia's broader development as it would be particularly harmful towards small farmers and landholders, a significant portion of Liberia's rising middle class of consumers. It's not too late for the Bank to put people and progress first ahead of narrow Western political interests.

*Thompson Ayodele is director of Initiative for Public Policy Analysis, a
public policy think-tank based in Nigeria