The deals look great on paper. A large mining, energy or agriculture investor pulls into an impoverished country offering cash, jobs, schools, and clinics. There is a ribbon-cutting ceremony where the President of the country and the Chief Executive of the company beam for the cameras, native dancers perform, and a long list of benefits are read out to the grateful populace.
Fast forward a few years however and the picture never looks as good as that day when the media caravan rolled into town.
In the developing country I am most familiar with, Liberia, that caravan has been rolling on a pretty consistent basis during the first term of President Ellen Johnson Sirleaf. Communities throughout Liberia have seen the CEOs of iron ore, palm-oil, rubber, and more recently oil companies pull up in their Land Cruisers — or descend in their helicopters — only to disappear once the ink is dry on the contract.
Thankfully researchers have followed up on some of these deals and the news is not always good. In a just published report entitled “Smell- No- Taste: The Impact of Foreign Direct Investment in Liberia,” researchers from the Center of International Conflict Resolution at Columbia University concluded that FDI deals in Liberia just aren’t working the way they were supposed to and are sowing the seeds for future conflict.
Here are the five main conclusions from the report:
1. The marginalization of indigenous communities during concession negotiations and project implementation has resulted in high tensions around a number of FDI projects. This tension has occasionally led to violence and other forms of social unrest, which could feasibly lead to conditions that might threaten peace in the country.
2. Compensation rates for loss of land and crops are outdated, low and inconsistently applied across concessions. Unless directly hired by the concessionaire, members of PACs (Project Affected Communities) experience little improvement to living standards as a result of FDI. In some cases, the shift in land use priorities are producing enhanced food insecurity for PACs.
3. Job creation and industrial economic diversification are challenged by the structural characteristics of the sectors, low human capacity levels and high energy costs. While FDI has produced jobs, they have so far not been of a scale that addresses the extremely high unemployment rate in the country, and it is difficult to imagine how this will change even when the projects become fully operational.
4. Government corruption and financial mismanagement have compromised the good intentions of concessionaire-financed Social Development Funds (SDFs) and contributed to a rising mood of distrust and hostility regarding some concessions.
5. Institutions lack the full ability to effectively monitor compliance of concession agreements and penalize infringements. A rush to sign new deals and fast track economic growth has overwhelmed the government’s ability to ensure that concessionaires act responsibly and are subjected to sound oversight.
There are certainly no quick fixes for issue of improving governance or reducing corruption but NGOs on the ground can do a better job of monitoring the situation and bringing issues like these to the attention of the media and to international human rights and humanitarian groups.
In Liberia most of the national media is in the capital Monrovia and they simply don’t have the funds to travel out to investigate the concession areas where abuses might be occurring or where promises are not being kept.
Assisting in building capacity for local watchdogs will be much more effective in the long-run than reports from foreign academics, but this report is certainly a useful and hard-hitting start to what hopefully will be an on-going process of discovery and reportage.