The management of natural resources in Liberia comes with risks as well as opportunities. On the one hand, there is the opportunity for the country to use its natural endowments to attract investment and promote greater economic development. On the other hand, there is the increased risk of political and social instability caused by the mismanagement of natural resources.
Achieving sustainable and peaceful economic growth requires not just focusing on improving economic governance reforms and the state’s capacity to manage the national economy, but also on encouraging greater social cohesion and the local communities’ capacity to effectively manage changing local social, political and economic dynamics.
Today, the challenge facing Liberia’s government is therefore how to create an environment that can attract investment whilst minimising the risk of political and social instability.
The current trend supported by multilateral institutions is to improve the state’s capacity to more effectively manage the revenues generated from the natural resource endowment, for example by supporting anti-corruption reforms and improved management of fiscal budgets. Yet the process of helping state institutions to become more accountable and transparent, especially where the systems of oversight and internal controls are still very weak, will be extremely expensive and take many years.
Another challenge for Liberia is the vulnerability of private and institutional donor investment to co-option by members of the political and economic elite for their own socio-political and economic gains. This has led to the inefficient allocation of resources, thus undermining efforts to strengthen state institutions and in turn reducing the availability of funds to invest in basic services, such as healthcare, education and improved employment opportunities.
As a result, investment in Liberia’s natural resources is failing to trickle down sufficiently to the local population, resulting in rising inequalities. This has exacerbated existing local conflict risks, for example over land and ethnicity, and increased tensions with investors for failing to provide sufficient employment opportunities for local people. This in turn has increased instability and decreased the attractiveness of investing in the country.
Applying a peacebuilding approach to managing natural resources provides an alternative to the current trend. In order to create stability and improve the investment climate, greater focus needs to be given not only to economic governance reforms but also to improving social cohesion. By combining these efforts, for example through political inclusiveness, strengthening local economic governance structures and improving local capacity to engage more effectively with investors and state institutions, the government and international donors can increase the prospects for both greater stability and the sustainable management of Liberia’s natural resources.