Liberian Production and Export of Rubber and Economic Growth - Term Paper Example

Liberian production and export of rubber and economic growth Liberia has previously faced over 25 years of civil unrest and economic mismanagement. Over 270,000 of the population were killed, and over 500,000 were forced to flee their homes as either internally displaced persons or refugees in neighboring countries. This resulted to a drastic drop in agricultural production and eventual closure of the agricultural oriented industries. As a result the entire economy dropped with a big margin and rubber production almost came to a standstill. Families were shattered; entire communities uprooted; social, political, economic and governance systems got destroyed. Economic and productive activities collapsed as looting and vandalism became the norm. GDP and GNP fell by over 90% in less than two decades (Radalach). This was reversed by the inception of Ellen Johnson Sir leaf as the President in January 2006.Since then the country has been in peace and great achievements have been made in the economic recovery especially in the agricultural sector, mining industries, infrastructural growth and education among others. Agriculture has been the biggest sector in the economy of Liberia with rubber being the main cash crop for export. The current government has introduced policies to foster peace, launch reconstruction and development, and build strong systems for governance and democracy. (Daft) The most important issues for Liberia’s continued growth and prosperity and unity for peace is through the establishment of the foundation for rapid, inclusive, and sustainable economic growth. The government has established the implementation of policies plan aimed at both political stability and inclusive economic recovery that are mutually reinforcing, and that to sustain development over time, it has embarked on rebuilding institutions and physical infrastructure and invest in human capacity through strong health and education programs. Its initial strategy following the inauguration was articulated in its “First 150-Day Action Plan,” describing the steps that both the government and the donor community would participate in during the period from January and June 2006. This was coupled with the development of an Interim Poverty Reduction Strategy, this was finalized in 2007 and its purpose was to cover the period from late 2006 through mid-2008. The government is furthering this by working on the modalities of poverty reduction strategies that covered the period between 2008 and 2010. All three of these strategies are organized around a framework with four basic pillars. • Expanding peace and security. • Revitalizing economic activity • Strengthening governance and the rule of law • Rebuilding infrastructure and providing basic services The governments financial situation and limited personnel been has increased the governments need for the international support since the international community would play a big role in Liberia’s reconstruction through resource mobilization and manpower for the growth of the country. As a result the government at an early stage has introduced mechanism to closely monitor the donor activities. The new Liberian government is working on a different model that ensures effective coordination and consistent approaches both between the government and the donors and across government agencies. It is establishing a structure in which the decisions are made by a small group, chaired by the government rather than a donor that could execute decisions more quickly and easily. It also wants an administrative structure that is consistent with the substantive structure of growth and development of agriculture and other pillars of the economy. The government is working to involve the entire population so that the country’s population is involved in the employment of youths to avoid the return of Liberia’s conflict as a result of political and economic exclusion of large segments of society that characterized the countries previous unrests. Land and property rights of Liberians have been liberalized. The growth of infrastructure has been identified as one of the most important factors that increases the rate of development in a country and stimulates equitable growth in agriculture, natural resource development, downstream processing and manufacturing. Connecting farmers to markets, creating jobs, opening concession areas, reducing farming costs, effective delivery on basic health and education services and reduction of population pressure are the main activities of the government of Liberia. Roads are important in reducing rural poverty, as they allow rural consumers to buy goods more cheaply and open new markets and economic opportunities for farmers and other rural producers. They also help create jobs directly through construction and indirectly. They are central to reducing costs for agricultural products such as rubber, oil palm .In keeping production costs low for labor-intensive production of rubber and other agricultural products that Liberians would develop in the coming years, including agro-processing, horticulture, furniture, rubber products, jewelry, and other products. Strong road network will enable a more inclusive decentralized governance structure with stronger local governments that can deliver services and attract skilled personnel. Liberian government is pushing very hard to begin the construction, with some success having been realized through donors. Key issue for this government in beginning to rebuild roads is to create systems that ensure the maintenance and repair costs can be adequately recovered over time, such as through sinking fund and other mechanisms. Ports which are as important as roads have been practiced for construction to provide connection between Liberian markets and the rest of the world. Other infrastructure such as electricity and water are being worked on to improve the agricultural production of rubber and other agricultural products. Natural resource management has been one of the Liberia’s priorities for the growth of the economic sectors. Natural resource-based activities and related downstream activities provide significant revenues for the government and job opportunities for the majority of the population of Liberia which is a critical step towards poverty reduction. The government has established that recovery in this area will ensure equitable economic opportunities for all Liberians, and will reduce overdependence on other sectors that risks undermining the incentives for manufacturing, processing and producing industries .The government is shifting away from the old model of centralized plantation agriculture to small scale producers with the realization that it is the small scale farmers that provide the bulk of agricultural production in the country and holds the country’s ability to be food secured and through encouraging the smallholder production throughout-grower production schemes or encouraging smallholder, rubber, palm oil, coffee and cocoa production. By the farmers moving in this direction is critical to creating jobs and building a more inclusive rural economy. Growth of rubber production in Liberia has enabled farmers to become self employed and independent economically. This has in turn created a favorable business environment due to the incomes earned by the farmers. The establishment of a business environment has kept production costs low and does not inhibit production of capital goods and the creation of a climate for investment in manufacturing in services and in processing that has further created employment to the population. (Bank) The government of Liberia has created a smooth customs clearance and port facilitation which are particularly crucial for exportation of rubber and other agricultural produce. The government of Liberia has revised its outdated tax and investment codes in ways that balance the need for revenues with the need for economic efficiency, vibrant private sector growth, and competitiveness. The government is working on the modalities to shift away from import duties and towards a consumption tax, probably a value-added tax and is working on a much appropriate tax structure to put in place, tax holidays and special tax treatment to the producers and exporters of rubber. (Ronald) The government is working on the modalities to supply the farmers with free input such as machineries to help in land preparation, fertilizers and labor which will in turn increase the production of rubber and thus the increased production in agriculture. Essentially this government has been successful in establishing labor intensive exports of rubber for the few years since the establishment restoration of democracy and good governance. There is also an establishment of an enclave for producers where they can compete on world markets. Thus the Liberian government is developing over a medium term one or more well functioning export processing zones to be successful in manufacturing rubber and other exports. Rubber production in Liberia has contributed immensely to the development of education for the entire population that had spent more time at war than in a classroom. Liberia has rebuild its education together with training programs to provide the majority of the population with the much needed knowledge for economic growth .Under the current government the foreign exchange earnings from rubber has been invested in various sectors of the economy. Although there has been challenges in the improvement of education, but the government is already off to a strong start by re-opening schools and substantially increasing school enrollments. (Wheeler) References Bank, World. “African Countries Emerging from Civil Strife .” World Bank Report on Developing Nations (2010): pp.12-104. Daft, R. World Economic Status. New York: Routeledge Publishers, 2008. Radalach, S. The Reemerging Liberia,New Paradigms in Development. London : Oxford Printing Press, 2006. Ronald, P. “Why Poorest Counntries are failing.” Journal of Advanced Management (2011): pp.34-98. Wheeler, A. Open Society for General Finamcial Support. Chicago: Macmillan Printing Press, 2010. Read More