Lessons from foreign investments in Liberia

Improvement of the concession policy

  1. The Treasury’s intake from the concession sector should be increased.


In spite of the some time 50 – 50 ownership structure, one cannot speak of equal sharing between the concessionaires and the Government of the benefits of the enterprises undertaken. For various reasons, the Liberian Treasury has never received 50% of the net proceeds of the venture in those cases where it should.

The following example may illustrate this conclusion: Since the start of the very profitable iron ore mining operations in the Nimba Mountains in 1963, LAMCO has never paid one cent in corporate income taxes. Gross profits in the 1963-1977 period amounted to nearly US $ 240 million (US $ 238 million to be precise) of which the Government of Liberia – the owner of 50% of the capital stock of this company, only received US $ 54 million. Another US $ 21 million was received as royalties, most of which was after the 1974 revision of the concession agreement. Thus, Government income from LAMCO totaled US $ 75 million. The share of the foreign partners holding the other 50% of the capital stock amounted to US $ 161 million in the same period.

The US partner in the LAMCO Joint Venture – Libeth – also earned more from the mining operations than the Government of Liberia. It reported US $ 102 million as gross profits in ths period. US $ 36.5 million of which was paid to the Liberian Treasury as corporate income taxes, the remaining US $ 65.5 million being the share of the Bethelehem Steel Company, the parent company of Libeth.

For the above reasons it is first recommended that all double counting in tax deductable items, even if approved by the National Legislature or the President of the country, should be immediately revoked. Secondly, that long term income tax exemptions as well as duty free privileges should be eliminated. Thirdly, that all concession agreements should include a pricing arrangement  since the fixing of the selling price forms the basis of profit calculations and consequently of the Treasury’s income. The pricing arrangements to be included should protect the financial interests of both Liberia and of the foreign investors. Fourthly, that all regular payments of concession holders to the Liberian Treasury such as rental payments, stumpage fees, e.g. should be tied to an index only after these payments have been standardized in conformity with recommendation 1 above. This index may be based on the rate of inflation, the terms of trade and/or the monetary fluctuations of the US dollar (legal tender in Liberia).

The Government of Liberia should realize that in many cases the desire to make profits is not the only or main motivation of foreigners willing to invest in Liberia. Many of them are, above all, interested in a guaranteed supply of certain raw materials1. Liberia should carefully and skillfully exploit this need of foreign companies.


  1. The services of legal experts should be employed in order to modernize the concession agreements and to correct omissions.


1 Examples: the US owners of rubber plantations, the US as well as German steel producers behind the iron ore companies and numerous logging companies. Nowadays, the Indian-owned Mittal Steel Corporation is another example. The fast developing economies of India and China need huge amounts of steel, which cannot be produced based on locally available iron ore. This is the main reason why Mittal Steel is interested to investigate the possibility to re-open the Nimba ore mines once successfully exploited by the LAMCO Joint Venture.

Improvement of
concession policy



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