How China fits in the Industrialization Drive of Liberia

By Amjad M. Nyei

The recent State visit (November 1-5, 2015) of President Ellen Johnson Sirleaf to the Peoples’ Republic of China (PRC) epitomized and reaffirmed

the depth and scope of the strong bilateral relationship between Liberia and China. During that visit both President Sirleaf and her Chinese counterpart Chairman Xi Jin Ping reaffirmed their commitments and mutual support to advancing the national development agenda of Liberia. China was once again assured that Liberia firmly believes and remains committed to the “One China Policy”.

To further seal the two countries’ commitment to the already solid relationship, three major agreements were signed- Economic and Technical Cooperation Agreement for bilateral aid worth approximately $ USD47.35 million, Agreement on Mutual Visa Exemption for Diplomatic Passport Holders from both Countries and Agreement on Maritime Program and Ship Registry.

A very important note taken from the meeting between the two leaders is President Sirleaf’s clarion call to China for the latter’s assistance in economic diversification and value addition to Liberia two main exports; namely iron ore and rubber. The Post Ebola Economic and Recovery Plan of Liberia focuses on, education, agriculture and infrastructure. The remaining 2 years of the administration could make a significant difference with its plan for industrialization and a manufacturing base economy with help from our dear and great friend China.

To spur industrialization- a key factor to sustain economy in poor countries- is to develop infrastructure including electricity and road network. Like most African countries, Liberia is poorly under-industrialized because of weak infrastructure and this drives up the cost of making things. The African Development Bank found in 2010 that electricity, a large cost for most manufacturers cost three times more on average in Africa than it does in South Asia.

As the engagement between Liberia and China on jump-starting industrialization begins, evidenced by the proposal from Wuhan Steel, a majority owner in China Union Investment Ltd, equal committed cooperation with China and other developing partners must be payed to electrifying the whole country.

Certainly China is sincerely committed to the development agenda of Liberia through its tangible development assistance programs. However, Liberia should be aware of this famous and instructive quote from the great Chinese philosopher, Confucius: “Rather teach a man to fish than give him fish” (shou ren yi yu bu ru yi yu). China’s economy itself is struggling as numerous jobs are already threatened due poor growth. It has been predicted that China’s growth rate for this year would go below the normal 6.5%. This is not very pleasant news for countries receiving Chinese aid and investments, as their economies could equally suffer the shock. Therefore learning how to fish rather than receiving fish is certainly a way forward for Liberia.

The effect of the ‘Dutch Disease’ primarily because of the heavy reliance on iron ore and rubber exports continue to undermine other important sectors, and this is proving perniciously terrible to the Liberian economy. Liberia’s Finance and Development Planning Minister Amara Konneh is quoted: “Liberia is struggling with the two back bones of its economy- iron ore and rubber. The commodities price shock has affected these two commodities to the extent that if we do not take action now to work with the rubber and mining sectors, the economy will have a problem”. This caution from the country’s economic architect points to the need of diverting economic dependency from raw material export to opening up other sector such as industrialization and if you will, large scale agriculture for domestic and international markets. Liberia already has great potential in crop farming because of the climate and fertile soil.

Ethiopia and South Africa for example have strategically managed their separate cooperation with China in a fashion that has accommodated out sourcing from China. Chinese factories- shoes and textile have set up manufacturing bases in Ethiopia which are attending to markets in Africa and the other nearby regions. Addis Ababa, dubbed historically as the “diplomatic capital” of Africa continues to benefit from Chinese investments in numerous sectors, including real estate and construction. Africa has also benefitted as a whole by the construction of a new and giant edifice of the African Union headquarters by the Chinese. China’s generosity seems endless and is changing the face of Africa. In September this year, Ethiopia inaugurated a light rail metro in its capital with 85% of the $USD 475 million used for the project being secured from the Export-Import Bank of China. Not surprisingly, however, South Africa being a BRICS member state is tapping on its relations with China for value addition in the former’s mining sector, notably in steel processing.

Meanwhile, the future of Liberia-China relation remains promising and very cordial for a win-win scenario for both countries. The move toward industrialization and economic diversification is imperative to Post Ebola recovery of Liberia, and China stands as an indispensable partner to such industrialization given its current role in the Liberian economy.