Palm oil or fool’s gold?

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Liberian Vice President Joseph Boakai planting Sime Darby's first oil palm seedling at Matambo Estate, Grand Cape Mount County as investors look on.

 

In the past year, Liberia has granted concessionary rights for 1.5 million hectares to land-hungry oil palm producers.  To put things into perspective, this is 3.7 million acres, close to 4 times the first land grant concession made to Firestone nearly 80 years ago in 1924. Unlike the Firestone deal however, these concessions are being granted to several different companies –big names like Golden Agri-Resources from Indonesia, Equatorial Palm Oil from the UK, and Sime Darby from Malaysia- and the holdings are spread throughout Liberia’s poorest counties. The geographic diversification is a good thing, maybe one of the few good things, about these agreements. The leeward counties need something, anything, to boost development there.

On the other hand –and this is where the new concession agreements have gone retro to imitate the Firestone deal, 90% or more of whatever is produced is being produced for export. And these exports are not going out as finished products but as raw material to provide energy for other countries. Let’s ignore for this blog the fact that Liberia is facing very real problems for its own energy needs since only small portions of Monrovia and Buchanan are electrified –and this at very expensive rates that only few can afford. For now, let’s look at what raw material exports can do to boost Liberian development.

Back in 1721, the Prime Minister of England, Sir Robert Walpole, bemoaned the sorry state of his country’s economic development and the fact that as a wool exporter, the country did not have the basis for economic growth that it was exporting to Flemish wool merchants who then produced textiles to sell back to England. “It is evident,” he noted, “that nothing so much contributes to promote the public well-being as the exportation of manufactured foods and the importation of foreign raw materials.”  During his 21-year tenure as Chancellor of the Exchequer, Walpole is credited with having prompted England’s economic development by ensuring that its colonies –including America- remained as producers of primary raw materials for the home country, banning these colonies from advanced manufacturing activities for high value-added products that England did not want the competition for. Through his efforts and with royal favor, England was able to develop its economy in just a few decades.

Three hundred years later, Liberia seeks to place itself on the development path but is, instead, positioning itself to be a producer of raw materials that will boost the well being and prosperity of others. Because not only will we only be producing the biofuels that will reduce energy costs for other countries, we do not have a single industrial production factory that will ensure that our own energy costs will be reduced. Furthermore, important multipliers that could make us competitive for any kind of industrial renaissance –lower energy costs, increased sophistication of the labor force, for example, will not result from these investments.

The packaging around the new ‘investments’ glitters as fool’s gold. “Chevron to spend $1 billion every month”; “Sime Darby to create 35,000 jobs”; “Buchanan Renewables to provide lighting for 500,000 homes”. Fool’s gold. Chevron is spending that money to explore for oil and if even a fraction of that is spent inside Liberia, we will be lucky. And the jobs that Sime Darby will provide? Unskilled laborer jobs that won’t even be realized until the company goes into full production in 2023. Since they export the bulk of the rubber wood chips that they are producing, I sincerely wonder if any of the 500,000 homes that Buchanan Renewables will light up are even in Liberia.

The Firestone agreement has been re-negotiated several times over the past 8 decades, most recently in 2009. We’re trying to get it right but in our hunger for development, we have to be careful that what we sign away is not pouring concrete around the feet of our own under-development.

The State of Food Insecurity in the World

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Surplus & Scarcity…a Liberian tale

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Liberian traditional rice kitchen used for elevated storage of unprocessed grain

This week the Acting Minister of Commerce of Liberia announced that there is a surplus of imported rice in the country. He also warned importers and traders that the Government of Liberia will be monitoring to ensure that this rice is not trans-shipped out of the country –that it remains for sale to Liberian consumers.
In April 2011, the Minister of Agriculture was concerned about possible food shortages due to global price hikes in petrol and cereals. The “hunger” and food insecurity will hit Liberia as early as September this year. So the surplus of imported rice, already in our warehouses, is good news for Liberian consumers. Ensuring that it won’t disappear from the markets is also…good news.
But I think about a fictitious Liberian farmer that we can call Flomo. He too has a surplus of rice to be harvested and has been storing it in his make-shift kitchen since January. His family has been eating the rice they grew but the 40 bags that he has stored is way more than they can eat before the next harvest. He could sell it but the price he would get for it is very low. Besides, where would he sell it? The nearest town is a $1000 LD ($1 US = $70 LD) pehn-pehn (motorbike taxi) ride away. He would be very lucky to get even $1000 for one bag of his rice which is all that he can carry on the back of the pehn-pehn. And then he would have to mill it so it would be in edible state. Another $200 per bag. Maybe he’ll keep his stock as seed rice for next year, but how would he plant that much rice by himself? And he really needs the cash too. Three of his children are in Kakata to go to school. They live with his sister and their fees are due soon. Last year, he was lucky that a buyer had come along and bought 20 bags from him; only half of what he’d had but it had been enough to pay his children’s fees. How he wishes a buyer would come along this time. Even for $700 a bag, he’d be willing to sell his rice. Even for $500.
So the good news is that the imported food will be sold in Liberia so Liberians won’t go hungry. Some farmers in Thailand or Vietnam are sending their children to school because Liberia has bought their rice instead of its own Liberian grown rice. For Flomo and other Liberian farmers, this good news is not so good.

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