Enhancing Regulations of Services Trade in Liberia

ENHANCING REGULATION OF SERVICES TRADE IN LIBERIA A regulatory assessment of services trade & investment

DANIEL B OA K Y E Economist, GMFDR CLAIRE H O L LW E G Consultant, GTCDR MARK M A R V E Y Consultant MARTÍN M O L I N U E VO Consultant, GTCDR SEBASTIÁN SÁ EZ Senior Trade Economist, GTCDR

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CONTENTS ACKNOWLEDGMENTS EXECUTIVE SUMMARY

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01 INTRODUCTION

1

02 LIBERIA’S SERVICES TRADE PERFORMANCE & DETERMINANTS Services trade performance Non-regulatory determinants of services

7 9 14

03 GENERAL REGULATORY FRAMEWORK & INSTITUTIONAL SETTING Horizontal policies & regulations Governance & institutional setting on services trade

19 22 31

04 SECTORAL SERVICES: POLICIES & GOVERNANCE

43

Professional services: legal, accounting, & engineering 47 Distribution services: wholesale & retail 50 Financial services 52 Tourism 53 Other services: business services, construction, & education 55

05 CONCLUSION & POLICY RECOMMENDATIONS Reducing horizontal regulatory restrictions Improving governance & administrative practices Sectoral regulation Concluding remarks

APPENDIX REFERENCES

59 60 61 63 66

67 75

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ACKNOWLEDGMENTS This report is an Economic Sector Work produced by the GMFDR Department led by Daniel Boakye.

The report was written by Sebastian Saez, Martin Molinuevo, Claire Hollweg and Mark Marvey.

The report benefited from valuable comments and suggestions from Nora Dihel, Mombert Hoppe, Bertram Boie, Abimbola Adubi, and Tim Bulman from the World Bank, Patrick Hettinger from the African Development Bank, and Emilie Aner, Lina Kamara, and Marcus Hansen-Fure from the Swedish National Board of Trade. The report also benefited greatly from the discussions with government officials from the Ministry of Industry and Commerce. The report was edited

by David Anderson, and benefited from editing and design by Amir Fouad and Patrick Ibay.

The authors are also grateful to a long list of Liberian government officials, stakeholders, and other experts who provided valuable insights into the research of this report.

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EXECUTIVE SUMMARY

The rapid expansion of trade in services represents a major opportunity for developing countries. Services can support diversification exports, improve the overall competitiveness of the economy, and promote inclusive growth. International trade is no longer exclusively about goods crossing borders. Services such as professional and business services,1 financial services, transport, tourism, and telecommunications have become increasingly tradable, allowing for the emergence of new and improved export activities. Services trade has received little attention in policy and analytical work on Liberia’s trade regime.

Liberia’s current regulatory reforms and World Trade Organization (WTO) accession negotiations make information on services trade all the more necessary. Negotiations on trade and investment in services are often one of the main challenges of WTO accession, not least because of the broad range of services sectors and modes of supply covered in the discussion. Effective economic reforms require understanding the contribution of services trade to the economy, the sectors where it is performing satisfactorily, and those whose potential remains untapped. This information can also guide trade negotiations, suggesting priority areas for reform.

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This report assesses the regulatory regime that affects trade in services in Liberia. The study seeks to provide policy options for leveraging trade in services as a vehicle for export diversification and trade competitiveness as well as providing a strategic framework for negotiations under the WTO accession process. In particular the project serves the following objectives: To narrow information gaps by reviewing Liberia’s trade performance in services.

To assess Liberia’s policy and regulatory framework on services trade, especially in the context of the guidelines of the General Agreement on Trade in Services (GATS) and potential requests during accession negotiations. c. To evaluate the governance framework so as to identify administrative practices that introduce de facto restrictions on trade in services. d. To offer specific policy recommendations to enhance the regulatory environment for services trade and investment, including amendments to existing laws and regulations in services, and improving administrative practices in the implementation of such laws and regulation.

a. b.

In general, Liberia’s services sector is underdeveloped, which reduces the country’s competitiveness and impairs the development of further trade-oriented activities. Liberia’s services sector is next to agriculture in terms of employment generation. Within the services sector, retail distribution stands out as the main employer, accounting for more than half the employees in the country. At its current stage of economic development, the main role of the services sector is to offer key infrastructure services that support a wide range of economic activities, thus expanding business opportunities and increasing competitiveness. In particular, Liberia should focus on the further development of backbone services such as financial services, telecommunications, transport and logistics, and professional services.

Liberia’s exports of commercial services as a share of gross domestic product (GDP) are higher than what is expected given the country’s GDP per capita. This, together with the relative underdevelopment of the domestic services sector, suggests that a sizeable part of Liberia’s services sector is export-oriented. Liberia’s services exports are almost entirely dependent on travel and transport services, while the nation is dependent on the import of modern services, suggesting low development of the sector domestically.

Liberia’s formal horizontal policies and regulations provide for a largely open and nondiscriminatory environment for the services sector. The opening up to private and foreign participation in the economy has been one of the pillars of the reform process launched by the GOL after the end of the war. The GOL introduced or amended several major horizontal laws relevant to the services sectors, with a view to promoting a more conducive environment to private capitals.

This included reforms on the horizontal framework for foreign investment, employment, and taxation, as well as procedures for the registration and establishment of enterprises. On the other hand, part of Liberia’s open regulatory regime is also due to the absence of specific regulations and guidelines in some services sectors on cross-cutting issues. This lack of regulation

often impairs, rather than enhances, the business environment by reducing transparency and predictability of laws and regulations.

The main barrier to the development of the services sector currently lies in a poor governance framework. Many barriers to trade and investment in services stem from lack of clarity in the regulatory framework and discretionary administration of laws and regulations rather than from outright restrictions. Liberia’s weak governance practices result in a number of de facto restrictions on services trade during establishment as well as during the regular operation of its services. The main restrictions relate to the lack of transparency, because laws and regulations are not easily available and do not reflect accurately the actual administrative practices and the costs of widespread unofficial and illicit payments.

Some horizontal restrictions do remain in place. Horizontal regulatory restrictions, such as economic needs tests for foreign employees that limit the entry of foreign suppliers, scarcity of Liberian skills, and limitations on land ownership, continue to apply. These limitations may be justified on broader policy priorities; however, this opaque regime on foreign employment unnecessarily hampers the business environment by increasing discretionary powers of regulators and opaqueness in the regulatory framework, because companies are uncertain about the possibility of hiring foreign nationals. Alternative measures scheduled by other WTO members include general requirements that prescribe a maximum percentage of foreign employees in an established firm together with specific commitments to allow the temporary movement of key categories of services providers (managers, specialists, contractual services providers) could yield comparable results in term of promoting domestic employment and training, while providing for a more transparent and predictable regime. Greater transparency in the duration of labor permits would further enhance the business environment.

Sector-specific regulation and governance differ greatly in terms of openness and regulatory capacity. Some sectors, such as banking, are greatly liberalized and comparatively well regulated.

Others, such as professional services, feature strong restrictions or, such as distribution and tourism services, are still lacking a basic regulatory framework. Most sectors remain largely open to foreign as well as domestic investors. Although this allows for a competitive environment that can promote growth and private sector development, the lack of adequate regulation in some services creates obstacles to the expansion of the services sector.

The expansion of the concessions regime creates a parallel regulatory framework for larger investments that eclipses progress achieved in the business environment. Originally established to ensure that foreign investment in the extractive industries generated substantial positive ties with the Liberian economy and social environment, the regime has expanded into multiple other sectors, including transport and tourism. The conclusion of concession contracts in these sectors circumvents the guarantees for foreign investment offered by the Investment Act of 2010 and other laws and regulations.

EXECUTIVE SUMMARY

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The two main measures that Liberia should consider to improve governance of the services sector across the board are (1) the adoption of binding procedures for the regulation-making process and (2) the improvement of public access to existing business regulations, especially licensing procedures. A government-wide procedure for the development and adoption of regulation would help enhance transparency as well as increase regulatory capacity. Such a mechanism, complemented by a specific trade negotiations coordination unit, is particularly necessary in the context of WTO accession negotiations because they require the coordination of policies and regulations through a wide range of government ministries and agencies. Additionally, simplified public access to laws and regulations relating to licensing and the operation of services firms would complement the government’s current efforts to improve conditions for new businesses through a one-stop shop for company registration.

The report provides the following policy recommendations in specific services sectors, which may be considered in the context of the accession process: a. L E GA L S E R V I C E S A R E O N E O F L I B E R I A’S F E W M A J O R S E R V I C E S S E C TO R S C O M P L E T E LY

Regulations on the legal professional are unavailable and governance remains poor. The regulatory instruments relative to the sector are not readily available, and important gaps exist in the regulatory framework for the legal profession. To attract greater capacity in the legal profession, Liberia should consider a partial opening of the sector by establishing a domestic partnership requirement for foreign professionals and legal firms instead of a complete ban on all foreign lawyers. In addition, the institutional and regulatory framework for the legal profession should be strengthened.

C LO S E D TO F O R E I G N PA RT I C I PAT I O N A N D R E M A I N G R E AT LY U N D E R D E V E LO P E D .

b. ACC O U N TA N C Y P R OV I D E S A VA L U A B L E E X A M P L E O F R E G U L ATO RY A N D I N S T I T U T I O N A L P R O G R E S S , A LT H O U G H S O M E R E S T R I C T I O N S A R E L I K E LY TO R E C E I V E AT T E N T I O N D U R I N G

The institutional and regulatory framework for the sector has seen important progress, although standards still need to be developed and applied across the board. Some important restrictions remain, such as the mandatory quota on revenue sharing between foreign and domestic firms, which is likely to create challenges by trade partners.

In light of trade talks, Liberia should evaluate options for the negotiation of this measure, including transitional periods for its phase out or its replacement by less burdensome training requirements.

T R A D E N E G OT I AT I O N S .

c. D I S T R I B U T I O N S E RV I C E S , E S P E C I A L LY R E TA I L , A R E L I B E R I A’S L A R G E S T E M P LOY E R I N T H E S E RV I C E S S E C TO R . This area remains informal, heavily under-regulated, and of poor quality.

This affects mostly small and medium enterprises, which need to rely on imported inputs and equipment but lack the capacity to import large stocks on their own. Liberia should develop a regulatory framework for distribution services, including the laws and obligations of wholesalers and retailers, as well as consumer protection measures, including simplified procedures for consumer claims. The regulation should also clarify some of the restrictions affecting the distribution of certain products, including foodstuffs and construction materials.

d. T H E R E G U L AT I O N O F F I N A N C I A L S E RV I C E S D O E S N OT F E AT U R E M A J O R R E S T R I C T I O N S O N T R A D E A N D I N V E S T M E N T, B U T T H E C H A L L E N G E C E N T E R S O N T H E R E G U L AT I O N O F T H E

Insurance services are still governed by an outdated law that does not reflect current practice, and the institutional framework for insurance is virtually nonexistent.

The old insurance law features some nationality restrictions that do not seem to be applied in practice. Banking services, on the other hand, are closely regulated by the Central Bank and do not set out meaningful restrictions on services trade.

I N S U R A N C E S E C TO R .

e. TO U R I S M S TA N D S O U T A S A VA L U A B L E S E C TO R F O R S E R V I C E S E X P O RTS , B U T I T I S C U R R E N T LY N OT H I G H I N T H E N AT I O N ’S P O L I C Y P R I O R I T I E S , A S R E F L E C T E D BY T H E A B S E N C E

The sector’s main challenge, however, lies in the absence of a tourism policy that would identify and set out the main priorities and actions for Liberia’s tourism industry.

O F B A S I C R E G U L AT I O N O R E V E N M A I N P O L I C Y G U I D E L I N E S .

EXECUTIVE SUMMARY

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INTRODUCTION

Openness to international trade and investment has been crucial to Liberia’s postconflict reconstruction. Emerging from the civil war in 2003, with its gross domestic product (GDP) level equivalent to that of 1970, Liberia’s product multiplied fourfold in the following 10 years. The recovery has been largely driven by the opening of the country’s main industries to foreign investment. Foreign capital inflows have been directed mostly to Liberia’s natural resources, in particular to the extractive and agricultural industries. Substantial investment flows into the services sector, especially construction and telecommunications, have also been essential to the reconstruction of the country’s decimated infrastructure capacity. Exports have also expanded in the last 10 years, accounting for one-third of the GDP in 2012.

1 This comprises engineering, legal, accounting services, and offshore business processing and management services.

The rapid expansion of trade in services also represents a major opportunity for developing countries. Services can support diversification exports, improve the overall competitiveness of the economy, and promote inclusive growth. International trade is no longer exclusively about goods crossing borders. Services such as professional and business services,1 financial services, transport, tourism, and telecommunications have become increasingly tradable, allowing for the emergence of new and improved export activities. Services trade has received little attention in policy and analytical work on Liberia’s trade regime.

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Services are an important component of competitiveness in two respects. First, a country with a comparative advantage in tradable services can export them, thereby diversifying the economy and expanding the country’s exports. Second, services can be a strategic driver of competitiveness for the whole economy, because they are inputs for other economic activities’ exports. The services sector is intrinsically linked with the overall activity of an economy through value chains.

This includes both forward linkages—the contribution of a particular sector as an input to others sectors’ exports—and backward linkages—the contribution of all other sectors to a particular sector’s exports. These value chain linkages not only capture the full (direct and indirect) contribution of the services sector to a country’s exports, but also inform a comprehensive strategy to improve export competitiveness of both goods and services.

Liberia’s domestic liberalization policies have been pivotal in supporting the expansion of trade and investment in the services sector. In 2006 a new democratically elected government was sworn into office. The new administration set out to accompany the country’s economic recovery with various measures to further liberalization and promote greater private investment in the economy. The Investment Act of 2010 introduced the general principle of nondiscrimination between foreign and domestic firms. With the support of international organizations and donors, the Government of Liberia (GOL) streamlined administrative procedures for the registration of companies and created a specialized agency to formalize or register all enterprises, facilitating the establishment of foreign and domestic companies. Reforms in corporate taxation and in the incentives regime were introduced to promote foreign investment and boost employment.

Renewed involvement in the international community will strengthen Liberia’s position in international trade. As a step toward reengaging with the international trade policy community Liberia applied for membership to the World Trade Organization (WTO) in June 2007. WTO accession may bring a number of benefits to the nation. Membership will secure market access for Liberian’s exports on an equal footing with all other WTO members, and other nations may continue to offer preferential conditions to Liberia as a least-developed country (LDC). Liberia will also gain a voice and vote in the international organization, ensuring that its trade interests will be heard in multilateral discussions, and it will also be able to resort to formal dispute settlement procedures should it feel hampered by its trading partners’ not living up to their obligations.

Much of what Liberia stands to gain from WTO accession lies within its borders. By locking in liberalization measures in key industries, in particular in the services sector, Liberia will confirm its commitment to an open and enabling environment for foreign investment. Liberia’s services sector is still seriously underdeveloped, which not only limits the ability to export services, but also reduces the country’s competitiveness, as the whole economy faces costly and poor quality services in essential sectors such as telecommunications, banking, professional services, and transport and logistics. The General Agreement on Trade in Services (GATS) offers the opportunity to signal the ongoing reforms and Liberia’s openness in its policies to foreign investors.

In addition, by taking on the multiple WTO obligations on transparency, principles of domestic

regulation, and other governance aspects, Liberia will find an additional push for improving the domestic regulatory environment.

This regulatory assessment seeks to provide a broad review of the services sector in Liberia and evaluate its regulatory and institutional framework. In collaboration with the Ministry of Commerce and Industry of Liberia, this study attempts to bridge knowledge gaps on the services sector in Liberia, an area in which little analysis exists to date despite the challenges the country faces in WTO accession. The current analysis attempts to cover the main information requirements that trade negotiation on services will entail, by focusing on the main regulatory barriers to trade and investment in services in Liberia. It contemplates regulatory measures found at a horizontal level—that is, that apply across the board to all services sectors—as well as in selected services sectors. The selection of services covered by this analysis seeks to fill knowledge gaps in the relevant GOL institutions. In particular, following Liberia’s trade ministry requests, the study focuses on professional services, distribution services (wholesale and retail), banking, tourism, and business services. The regulatory assessment also focuses on the institutional framework and governance practice in the administration of the services sector. An expansion of this study to cover regulation of transport and logistics services is also being developed, and an assessment of the telecomm regulatory framework is also being launched.

This report is organized as follows. This first chapter summarizes the main findings of the report. The chapter section provides a quantitative outcome analysis of openness and growth, diversification, productivity, quality, and the determinants of services trade. It also provides a general overview of the main factors affecting the services sector in Liberia: skills, electronic infrastructure, and governance and regulatory framework. The third and fourth chapters take an in-depth look at the regulatory and governance framework for services trade and investment in Liberia. The third chapter focuses on horizontal regulation and the institutional framework.

It describes the main policies, laws, and regulations relevant to the services sector, as well as the general institutional setting and rule-making capacity relevant to services trade policy, including trade negotiations. The fourth chapter looks at the laws and regulations and institutions specifically for the selected services sectors. The final chapter summarizes the report’s main findings. It makes suggestions on policies and measures that Liberia could take to continue to attract investment in the services industry.

Liberia still faces a number of challenges to reap further benefits of international trade and foreign investments. The assessment of Liberia’s regulatory framework for services shows that, although some unwarranted restrictions on trade and investment in services are still in place, the main barriers to the development of the sector lies in a poor governance framework.

The regulatory improvements for the establishment of foreign companies are still hindered by numerous formal restrictions. Various policies and measures were introduced to improve the regulatory environment for foreign investment, including eliminating discriminatory treatment

01 LIBERIA’S SERVICES TRADE PERFORMANCE & DETERMINANTS

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against foreign investors, facilitating registration procedures, and introducing a general investment incentives regime. However, regulatory restrictions on foreign investment persist regarding both the establishment and the operation of services firms, in the form of economic needs tests for foreign employees, limitations on land ownership, and the widespread use of concession contracts.

The employment of foreigners, albeit guaranteed by the Investment Act, remains subject to a labor market test. This is a result of the liberianization policy applied by Ministry of Labour.

While the GOL can and should take advantage of the benefits from foreign investment in the services sector to promote capacity and employment of Liberian citizens, the current regime unnecessarily hampers the business environment by increasing opaqueness and discretionary powers. Alternative measures scheduled by other WTO members, including general requirements that prescribe a maximum percentage of foreign employees in established firms together with specific commitments to allow the temporary movement of key categories of services providers (managers, specialists, contractual services providers), could yield comparable results in terms of promoting domestic employment and training, while providing for a more transparent and predictable regime. Greater transparency in the duration of labor permits would further enhance the business environment. In addition, the GOL should evaluate whether better results could be achieved by promoting capacity building and knowledge transfer to Liberians through joint training between investors and domestic institutions.

The expansion of the concessions regime creates a parallel regulatory framework for large investments that eclipses the progress achieved in the business environment. Originally established to ensure that foreign investment in the extractive industries generated substantial positive links with the Liberian economy and social environment, the regime has expanded into multiple other sectors, including logistics and tourism. The conclusion of concession contracts circumvents the guarantees for foreign investment offered by the Investment Act of 2010 and other laws and regulations. The existence of this negotiated regime for large investments does not constitute a restriction per se to trade and investment, as it remains voluntary, but decreases transparency and alters the conditions of competition with investor-specific regimes. The GOL could consider establishing transparency procedures similar to those of the Extractive Industries Transparency Initiative (EITI) for investments in the services sectors governed by concession contracts, like it has been done with concessions on the extractive sector.

Many barriers to trade and investment in services stem from discretion in administration of laws and regulations rather than from outright restrictions. Foreign companies or individual services suppliers wishing to offer services within Liberia face the governance deficiencies during establishment as well as during the regular operation of their services, which results in de facto limitations. The main deficiencies relate to the lack of access to laws and regulations, and their broad language, because these instruments are not easily available and often do not reflect accurately the actual administrative practices—in part because secondary and legislation is often not enacted in timely fashion—and the costs of widespread unofficial payments. A broad effort

to collect and make publicly available all laws and regulations relevant to the services sector in one single repository accessible online would provide a major step in advancing transparency in the services sector. Greater transparency in regulation would reduce administrative discretion and opportunities for corruption.

Important institutional capacity constraints in the GOL limit its ability to design and implement effective policies on services trade and investment. As with many other Liberian ministries and regulatory agencies, the Ministry of Commerce and other institutions relevant to services trade suffer from weak institutional capacity because of shortages of skilled personnel and budgetary limitations. These conditions relate to major challenges that affect the Liberian society and economy as a whole that will not be easily or quickly overcome. However, some steps can be introduced in the framework of improving regulatory capacity. In particular, the gradual and staged establishment of clear, simple, and binding guidelines and procedures in the regulation-making process that incorporate good regulatory practices such as public dissemination, interagency coordination, stakeholder consultations, and regulatory efficiency would not only increase regulatory capacity by maximizing existing expertise in the GOL as well as in the private sector, but also improve transparency and legitimacy of regulation and administrative decisions.

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LIBERIA’S SERVICES TRADE PERFORMANCE & DETERMINANTS

The services sector is increasingly recognized as part and parcel of any trade strategy, both as a source of export diversification in its own right and as an input to manufacturing, mining, and other services production.3 Over the last two decades, trade in services—including telecommunications, banking, information technology (IT), and business process outsourcing (BPO)—has expanded rapidly and now accounts for more than a fifth of global trade flows. The participation of developing countries in world services exports has increased from 11% in 1990 to more than 21% in recent years.

2 Goswami, Mattoo, and Sáez (2012) and van der Marel (2012).

Because of its immaterial nature, international trade in services requires different forms of services delivery. It is helpful to begin by clarifying certain aspects of trade in services. Since many services transactions require face-to-face contact between the consumer and provider (despite the increased scope for electronic delivery), it is now standard to define trade in services more widely than trade in goods. Trade in services encompasses four modes of supply: mode 1, cross-border trade in services, is analogous to trade in goods and involves delivering services from one country to another; mode 2, consumption abroad, refers to consumers (e.g., tourists or students) traveling across borders; mode 3, commercial presence, occurs through the establishment of a commercial presence by the producer (e.g., a subsidiary or branch of a bank) in the country of the consumer; and mode 4, movement of natural persons, takes place when the producer (e.g., a mining engineer) travels across borders. Box 2.1 offers a more detailed explanation of the different modes of supply. One important implication of this wide definition of trade in services is that it incorporates the international movement of factors through foreign direct investment (FDI) and temporary labor mobility.

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Box 2.1 MODES OF SERVICES SUPPLY Because of the intangible nature of services, trade agreements generally recognize four modes of services, defined by (1) the origin of the service supplier and consumer and (2) the degree and type of territorial presence that they have at the moment the service is delivered.

It is important to have a common understanding of what each mode covers. To this end, further examples and explanations are given below.

C R O S S-B O R D E R S U P P LY International transport, the supply of a service through telecommunications or mail, and services embodied in exported goods (i.e., services supplied in or by a physical medium, such as a computer memory device or drawings) are all examples of crossborder supply, since the service supplier is not present within the territory of the member where the service is delivered.

C O N S U M P T I O N A B R OA D This mode of supply is often referred to as “movement of the consumer.” The essential feature of this mode is that the service is delivered outside the territory of the member making the commitment. Often the actual movement of the consumer is necessary as in tourism services. However, activities such as ship repair

abroad, where only the property of the consumer “moves” or is situated abroad, are also covered. Whatever the mode of supply, obligations and commitments under the agreement relate directly to the treatment of services and service suppliers. They only relate to service consumers insofar as services or service suppliers of other members are affected.

It should be Notesd that a member may only be able to impose restrictive measures affecting its own consumers, not those of other members, on activities taking place outside its jurisdiction. Limitations in the schedule of a member—if any—with respect to mode 2 on market access and/or on national treatment should relate only to measures affecting the consumers of that member, and not to measures affecting consumers of another member, in the territory of that member.

COMMERCIAL PRESENCE

This mode covers not only the presence of juridical persons in the strict legal sense, but also that of legal entities that share some of the same characteristics. It thus includes, inter alia, corporations, joint ventures, partnerships, and representative offices and branches.

P R E S E N C E O F N AT U R A L P E R S O N S This mode covers natural persons who are themselves service suppliers, as well as natural persons who are employees of service suppliers.

SUPPLIER PRESENCE

MODE

OTHER CRITERIA

Service supplier not present within the territory of the member

1 Cross-border trade

Service delivered within the territory of the member, from the territory of another member

2 Consumption abroad

Service delivered outside the territory of the member, in the territory of another member, to a service consumer of the member

3 Commercial presence

Service delivered within the territory of the member, through the commercial presence of the supplier

4 Presence of natural person

Service delivered within the territory of the member, with supplier present as a natural person

Service supplier present within the territory of the member

Source: WTO Secretariat 2001.

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The performance of the services sector depends on three main determinants: higher education, telecommunications, and the institutional and regulatory environment. Results from gravity models confirm that human capital and electronic infrastructure are key pillars to support the export of services (Lennon 2006; Lennon, Mirza, and Nicoletti 2009; Shingal 2010). The impact of higher education in services exports is even greater in developing countries. In addition, economic literature also suggests that the quality of institutions and regulation also have a positive effect on services exports (Lennon 2006; Kimura and Lee 2006). Case studies of developing countries that have succeeded in exporting services shows that the reduction of barriers to trade and investment contributes to the importance of the services sector and enhances export potential (Goswami, Mattoo, and Saez 2012).

Liberia’s services sector is next to agriculture in terms of generation of employment. A labor force survey conducted in 2010 by the International Labour Organization shows that, together, agriculture and services account for close to 95% of Liberian employment, distributed in nearly equal parts. Within the services sector, retail distribution stands out as the main employer, accounting for more than half the employees in the sector.4

Services trade performance How important is total and sectoral services trade with the world for Liberia?5 Historically, trade in services was thought to be nonexistent since most services sectors were considered nontradable, with the exception of transport and tourism services. This concept has massively changed over the last two decades because trade in services is increasing rapidly. Increased trade is observed in most traditional (such as transport and postal) and modern (business, telecommunications, and information and communication technology [ICT]) services. In this section we ask whether the size of the services export sector is reflective of the importance of services in the domestic economy, and we evaluate the changing sectoral composition of exports since 2004 in Liberia as well as their growth rates. We also consider the evolution of the trade balance in services exports.

Liberia’s exports of services as a share of GDP are higher than what is expected given the country’s GDP per capita. This, together with the relative underdevelopment of domestic services sector, suggests that a sizeable part of Liberia’s services sector is export-oriented. Services imports also remain high. This is in part expected given the greater demand for imports following the civil war, including services imports, and this ratio has fallen between the two periods (although so has the export ratio). In 2011, Liberia’s commercial services exports (total services excluding government services) were 24% of GDP, while imports were 17%. Most other regional peers seem to be “stuck” in their initial position. In addition, many of these countries are below their predicted levels of commercial services trade given their GDP per capita levels, particularly for commercial services exports (see figure 2.1).

3 Services trade confronts significant data constraints. In the case of LDCs such as Liberia, these constraints are particularly severe. The following analysis relies on the data available.

4 This section draws on Hollweg, Molinuevo, and Sáez (2013).

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Table 2.1 EMPLOYMENT IN LIBERIA

P R I M A RY

525,000

Crops and animals Forestry Fishing Mining Extraction

494,000 9,000 5,000 14,000 3,000

M A N U FAC T U R E S E RV I C E S

65,000 485,000

Repair of machinery Electricity Construction Civil engineering Vehicle trade and repair Wholesale trade Retail trade Land transport Warehousing Postal Accomodation Food services Making films Programming and broadcast Telecommunication Information service Financial service Real estate activities Legal and accounting Architecture Other professional Employment activity Security Office admin Public admin Education Health Residential care Social work Art and entertainment Libraries Sports Membership organization Computer repair Other personal service Household as employer Household own production Source: Labour Force Survey 2010.

6,000 2,000 25,000 2,000 7,000 2,000 261,000 22,000 1,000 1,000 1,000 27,000 1,000 2,000 1,000 1,000 11,000 1,000 2,000 1,000 1,000 1,000 19,000 4,000 7,000 40,000 12,000 2,000 3,000 1,000 1,000 1,000 4,000 1,000 6,000 1,000 4,000

Despite a decline during the financial crisis, Liberia has achieved substantial export growth in commercial services since 2004.

The great trade collapse observed in 2009 was not limited to goods trade but also affected services trade, as given by their complementarities. For example, imports of transport services dropped in accordance with the decline in goods imports. In Liberia, both commercial services exports and imports increased steadily between 2004 and 2008, despite having fallen as a share of GDP; that is, GDP has been growing faster in Liberia than the country’s services trade. For exports, the average annual growth rate between those years was 28% and for imports was 40%. But in 2009, both export and import levels dropped substantially in the wake of the financial crisis, and although exports had rebounded by 2011, imports remained below precrisis levels (see figure 2.2).

Liberia’s services export sector is largely dependent on travel and transport services. This sectoral export concentration can result in greater vulnerability to exogenous shocks, as demonstrated by the high impact of the 2008–2009 global financial crisis and global trade collapse. Between 2004 and 2008, exports of travel services grew from $59 million to $158 million, but the share in total commercial services remained steady at 85% on average.

In 2011, travel services were 64% and transport services were 36%. The importance of transport services exports may also partially capture transfers related to Liberia’s vessel registry.

Like most LDCs, Liberia is dependent on modern services imports, suggesting low development of the sector domestically.

Although tourism is an emerging sector, exports of services other than travel and transport are modest and show an increasingly negative balance (see figure 2.3), suggesting a low development of the sector domestically. These “modern” services include telecommunications, financial services, and IT-enabled business services such as BPO. Imports of modern services surpassed imports of travel and transport services in 2011 to represent 49% of services imports (see figure 2.4).

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Figure 2.1 SHARE OF EXPORTS AND IMPORTS OF COMMERCIAL SERVICES, GDP VS. GDP PER

CPV

0

CIV TGO MLI SEN GMB NER GHA GNB NGA BEN GIN BFA SLE

4

6

8

10

Log GDP per capita (current USD)

12

100 75 50

6

8

10

12

10

12

100

Log GDP per capita (current USD)

75

75 50 25

LBR

4

Services imports (% of GDP)

100

12

50

10

25

8

GMB

TGO SEN BEN CIV GNB GHA SLE MLI BFA NER GIN NGA

LBR NER TGO GNB MLI CIV GIN BFA GMB BENSENNGA GHA SLE

CPV

0

6

Log GDP per capita (current USD)

25

Services exports(% of GDP)

GMB SEN TGO GHA MLI BEN CIV SLE NER GNB GIN BFA NGA

CPV LBR

0

50 25

CPV LBR

4

Services imports (% of GDP)

2010-12

75

100

2005-07

0

Services exports (% of GDP)

CAPITA, 2005–2007 AND 2010–2012

4

6

8

Log GDP per capita (current USD)

Source: World Bank World Development Indicators.

Notes: Plot of exports and imports of commercial services as a share of GDP on the vertical axis against economic development of the country measured as GDP per capita on the horizontal axis for the period 2005–2007 and the period 2010–2012.

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Figure 2.2 COMMERCIAL SERVICES EXPORT AND IMPORT VALUES AND GROWTH RATES

2004–2011

0

Value (M, USD) 100 200 300

50 100 Growth (%)

400

800 200 400 600 Growth (%)

0

0

-50

0

Value (M, USD) 100 200 300

150

Imports

400

Exports

2004

2005 2006

2007

2008 2009

2010

2011

2004 Value

2005

2006 2007

2008

2009 2010

2011

Growth

Source: UNCTADStat, Data on Trade in Services, Trade structure, http://unctadstat.unctad.org.

Notes: Plot of the commercial services export (left panel) and import (right panel) values as solid lines on the left axis as well as their respective growth rates as bars on the right axis between 2004 and 2011.

Figure 2.3 SECTORAL SERVICES EXPORT VALUES AND SHARES, 2004–2011 Export share (%)

0

0

20

100

40

60

200

80

300

100

Export value (m, USD)

2004

2005

2006

2007

2008

2009

2010

2011

Travel

2004

Transport

2005

2006

2007

2008

2009

2010

2011

Other

Source: UNCTADstat, Data Center, http://unctadstat.unctad.org.

Notes: Plot of the export value in millions of U.S. dollars in the left panel and export share in the right panel of travel, transport, and other commercial services between 2004 and 2011.

02 LIBERIA’S SERVICES TRADE PERFORMANCE & DETERMINANTS

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Figure 2.4 SECTORAL SERVICES IMPORT VALUES AND SHARES Import share (%)

0

0

20

100

40

60

200

80

300

100

Import value (m, USD)

2004

2005

2006

2007

2008

2009

2010

2004

2011 Travel

Transport

2005

2006

2007

2008

2009

2010

2011

Other

Source: UNCTADstat, Data Center, http://unctadstat.unctad.org.

Notes: Plot of the import value in millions of U.S. dollars in the left panel and import share in the right panel of travel, transport, and other commercial services between 2004 and 2011.

Liberia exports more travel and transport services as a share of GDP than is expected given the country’s level of development. Other commercial services exports are also lower than expected when considered as a share of GDP and benchmarked against other countries of similar income level (figure 2.5).

Figure 2.5 TRANSPORT, TRAVEL, AND OTHER COMMERCIAL SERVICES EXPORTS IN GDP VS. GDP

PER CAPITA, 2010–2012

Source: World Bank, World Development Indicators.

Notes: Scatter plots of transport, travel, and other commercial services exports as a percentage of GDP against the log of GDP per capita in current U.S. dollars in 2010–2012 for all countries in the world

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

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Although the travel services sector is the only sector that has maintained a positive trade balance, transport services helped Liberia’s commercial services achieve a surplus in 2011. The trade balance evaluates whether a country is a net importer or net exporter, and in figure 2.5 we assess whether this is true for goods and services. Liberia posted a negative services trade balance driven almost entirely by government services, which includes funds related to technical assistance and other international aid offered to Liberia as support for the postwar reconstruction. Although travel services has maintained a positive balance (with the exception of 2010 and reaching a peak in 2011), the increase in transport services exports and decline in imports propelled Liberia’s net positive position in 2011. Transport services achieved a positive trade balance in 2011, recovering after the global trade collapse of 2008. However, commercial services other than travel and transport show increasing negative growth, from a negative $0.6 million to $128.5 million in 2011 , because Liberia’s services sector is not growing fast enough to accompany the country’s economic recovery. In particular, business services, which encompasses IT-enabled services related to business processing outsourcing, is heavily reliant on foreign supply.

Non-regulatory determinants of services In general, the determinants of services trade in Liberia show weak performance. The Human Development Index elaborated by the United Nations Development Programme (UNDP), which incorporates elements of education, skills, and governance, together with poverty, inequality, and other economic indicators, currently ranks Liberia in the 177th position in the world, out of 186 ranked economies. In its subregion, Liberia scores just above land-locked Burkina Faso, The Gambia, and Sierra Leone (figure 2.6). Although the human development index has been steadily improving since the end of the war and the start of democracy, much remains to be done even to catch up with other LDCs and the Sub-Saharan African average development index.

The level of education in the population, one of the main pillars of a services economy, remains one of the lowest in the world. The war impacted heavily, and for the long term, Liberia’s skills base, as an entire generation was deprived of the right to a quality education. It is estimated that as much as 80% of the country’s schools were destroyed (Liberian Ministry of Education 2007) resulting in 56% of girls and 39% of boys having never attended school (IDLO 2010). Regarding education, the Human Development Index ranks Liberia in position 174th in the world, out of 186 ranked economies (table 2.2). The indicators developed for the World Economic Forum also account for skills in the population, ranking Liberia number 122nd out of 144 economies evaluated. The low percentages of adult literacy, below the average for Sub-Saharan Africa, and the low rate of secondary enrollment are the main factors contributing to a poor education index.

Public schools have supported improvement in primary education, which is provided free of charge. However, the problem remains that a significant number of children withdraw from official education upon completion of the government-funded primary education years (IDLO 2010). This has resulted in the Liberian work force being predominantly illiterate or unskilled

02 LIBERIA’S SERVICES TRADE PERFORMANCE & DETERMINANTS

15

and lacking basic computer skills. This shortage of skills has an impact on the services industries, which tend to require more skilled labor than manufacturing industries, especially in modern export-oriented services.

Figure 2.6 HUMAN DEVELOPMENT PROGRESS IN WEST AFRICA

Table 2.2 HUMAN DEVELOPMENT, EDUCATION, AND IT INDICATORS IN WEST AFRICA HUMAN D E V E LO P M E N T

Country Name

Ghana Senegal The Gambia Côte d’Ivoire Liberia Sierra Leone Guinea Burkina Faso Sub-Saharan Africa

E D U C AT I O N

HDI Ranking

HDI Value

Education index

135 154 165 168 174 177 178 183 ..

0.558 0.47 0.439 0.432 0.388 0.359 0.355 0.343 0.475

0.596 0.402 0.328 0.347 0.429 0.326 0.249 0.196 ..

Source: UNDP Human Development Index, year 2012 or latest available.

Expected Years of Mean Years Schooling of Schooling (children) (adults)

11.4 8.2 8.7 6.5 10.5 7.3 8.8 6.9 10.7

7 4.5 2.8 4.2 3.9 3.3 1.6 1.3 ..

I N F O R M AT I O N T E C H N O LO GY

Adult Literacy

PCs

2010 Internet Users

67.3 49.7 50 56.2 60.8 42.1 41 28.7 63

1.1 2.3 3.6 1.8 .. ..

0.5 0.6 1.6

9.5 16 9.2 2.6 7 ..

1 1.4 11.3

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

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Governance is also perceived as generally poor, even within a region with major deficits in public administration. The World Bank’s Country Policy and Institutional Assessment rates countries against a set of 16 criteria grouped in four clusters: economic management, structural policies, policies for social inclusion and equity, and public sector management and institutions.

The public sector management and institutions cluster includes property rights and rule-based governance, quality of budgetary and financial management, efficiency of revenue mobilization, quality of public administration, and transparency, accountability, and corruption in the public sector. Liberia’s scores at the bottom of the region, together with Côte d’Ivoire and Guinea in the public governance ranking (figure 2.7). More worryingly, the perception has not improved in recent years. The different components of the indicator suggest that although the country’s revenue collection capacity performs comparatively well, indices for rule-based governance, quality of financial management, and quality of public administration are poor even compared with the nation’s neighbors.

The Liberia telecommunications sector, like most other infrastructure, was severely impacted by the civil war. Copper wire was looted during the war, which left little telecommunications infrastructure outside Monrovia. As a result of this and the low levels of literacy in the population, Liberia ranks among lowest in the region, below Burkina and Guinea, according to the World Economic Forum (WEF) infrastructure and digital content indicator. Rates of computer and internet participation are very low (figure 2.8). The World Bank and International Telecommunication Union estimated personal computer ownership in 2010 at just over 1% of the population, and just 7% of Liberians were estimated to have meaningful access to the internet (Kelly and Souter 2014).

Figure 2.7 GOVERNANCE IN WEST AFRICA Property Quality rights of bud- Efficiency & rule- getary & of revbased financial enue gover- manage- mobilizanance ment tion

Burkina Faso Côte d’Ivoire Gambia, The Ghana Guinea Liberia Senegal Sierra Leone

3.5 2.5 3 3.5 2 2.5 3.5 3

4.5 3 3.5 3.5 3 2.5 3.5 3.5

3.5 3.5 3.5 4 3 3.5 4 3

TransQuality parency, of public accountadminis- ability, & tration corruption

3.5 2.5 3 3.5 3 2.5 3.5 3

3.5 2.5 2 4 2 3 3.5 3

Figure 2.8 IT ENVIRONMENT IN WEST AFRICA Burkina Faso Côte d'Ivoire Gambia, The Ghana Guinea Liberia Senegal Sierra Leone Business use of IT

1.79

2.43

2.83

3.07

3.17

2.68

3.14

3.50

2.51

3.64

3.77

2.10

3.15

2.73

1.57

2.86

3.42 2.86 2.11

Skills

3.45 3.30

2.10

3.47 2.59

Infrastructure and digital content

Source: WEF, Networked Readiness Index 2013.

Notes: IT = information technology.

The country is striving to establish the necessary connectivity infrastructure. By 2012 Liberia was one of the few countries in the world that was not connected to international submarine optic fiber cables. Instead, the country relies on satellite communications for international connectivity, with prohibitive costs for data transmission, including access to the internet. Gaining access to the submarine cable was one of the GOL’s main priorities in its 2010 ICT strategy (Kelly and Souter 2014). After two failed attempts to secure private capital for the project by the GOL, a public-private partnership, the Cable Consortium of Liberia, was formed with support from international partners, including the World Bank. While the connection to the international submarine fiber-optic cable (the ACE cable) became officially operational in 2012, additional infrastructure needs have impaired reaping all the benefits from the cable connection.

Although this is a poor context for the development of a modern services sector at a global scale, Liberia remains in a promising position at the regional level. Most of Liberia’s neighbors face comparable challenges in terms of telecommunications infrastructure and skilled labor. Liberia’s education system benefits from old prestige, which is recognized by the WEF, ranking Liberia in the 56th position in the world in terms of quality of education. Although Ghana’s political stability and skilled population hold a strong advantage, Liberia’s fast economic growth, language (English), and sizeable diaspora can offer valuable opportunities for the services sector within and outside the country.

02 LIBERIA’S SERVICES TRADE PERFORMANCE & DETERMINANTS

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19

03

GENERAL REGULATORY FRAMEWORK & INSTITUTIONAL SETTING

International trade in services is governed entirely by domestic regulation. Unlike trade in goods, which is traditionally governed by border measures that regulate the entry of foreign merchandise, services are typically subject to a variety of internal regulations that govern establishment and operations for both domestic and foreign firms. Many services, especially sectors with significant network characteristics (such as telecommunications and transport services), confront market failures such as imperfect and asymmetric information, lack of competition, and natural barriers to entry. Regulations aim at preventing and correcting market failures and to ensure that noneconomic policy objectives are met.

Although regulations are necessary to foster efficient services markets and to pursue noneconomic policies, they can also act as restrictions to trade and investment in services. Regulations often fail to respect the basic principles of transparency and nondiscrimination—by imposing restrictions on foreign ownership, market access, and the operation of services providers, for example.

Regulatory measures can be considered trade restrictive when other regulatory alternatives exist that are equally effective in achieving the desired policy objective but less restrictive to trade in services. Regulatory quality depends not only on the regulation making process but also on regulatory institutions. Reform proposals may be unrealistic if the regulatory institutions do not have the capacity to evaluate the specific market conditions of the different services or lack the ability to adequately enforce laws and regulations.

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

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Regulatory policies are key determinants of economic performance. Extensive empirical evidence shows that services liberalization matters crucially for labor productivity and total factor productivity growth. Also, the ability to successfully export services producers depends on how well domestic (regulatory) institutions govern these open markets in terms of private sector development. Finally, the level of regulation of the services sector can help explain why the services sector of some counties thrives while it is relatively underdeveloped elsewhere.

Although the legal and regulatory framework has seen important improvement in recent years, the services sector remains heavily affected by poor governance practices. Table 3.1 offers a graphical snapshot of the incidence of restrictions on trade and investment in services of legal or regulatory origin and those stemming from de facto administrative practices. The values are based on the number of actual measures found at the horizontal and sectoral levels. The graphic depicts higher incidence of limitations in the different sectors by darker shading; absence of color suggests that no such limitations are found in that sector. The horizontal shading for each mode of supply sets the floor for sectoral limitations, because those horizontal restrictions are, by definition, found in all services sectors. Governance practices stand out as the main limitations to both cross-border trade in services and the establishment of a commercial presence.

Furthermore, although some sectors such as transport, professional services, and construction face particularly poor governance (depicted by the darker shading), most sectors suffer from practices that apply across the board. Notably, in both modes of supply administrative practices constitute the main limitation to market access as well as to the regular business operation once the services supplier is established in the market.

Regulatory and governance limitations affect more heavily investment in the services sector than cross-border trade. Although this is to be expected—services providers supplying services remotely, often through electronic means, are less exposed to Liberia’s regulatory and administrative context—it also highlights the need to improve the domestic institutional environment to attract investment in the service sector. For commercial presence, however, most service sectors do not show greater restrictiveness than that found at the horizontal level, which suggests that few sector-specific limitations are in place. Comparatively, regulatory measures appear as minor restrictions, both horizontally and on a sectoral basis. The following section offers an in-depth look at the horizontal policies and regulations, and chapter 4 provides greater detail on policies and institutional setting found for specific services sectors.

03 GENERAL REGULATORY FRAMEWORK & INSTITUTIONAL SETTING

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Table 3.1  DISTRIBUTION OF LIMITATIONS ON SERVICES TRADE AND INVESTMENT

CROSS-BORDER SERVICES

COMMERCIAL PRESENCE

Market Operation Access

Market Operation Access

RM

RM

1

2

AP

RM 1

2

AP

1

2

AP

RM 1

AP

2

H O R I ZO N TA L

Professional Business Postal and courier Telecom Audiovisual Construction Distribution Educational Environmental Insurance Banking Health and Social Tourism and Travel Recreational Transport Notess: Column subheadings are as follows: (RM) Regulatory Measures; (AP) Administrative Practices; (1) Quantitative; and (2) Qualitative. Number of measures, 0 to 10, shown by gradation of color. A higher incidence of limitations in the different sectors is shown by darker shading; absence of color suggests that no such limitations are found in that sector.

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

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Horizontal policies & regulations Liberia’s formal horizontal policies and regulations provide for a largely open and nondiscriminatory environment for the services sector. The opening up to private and foreign participation in the economy has been one of the pillars of the reform process launched by the GOL after the end of the war. The GOL introduced or amended several major horizontal laws relevant to the services sectors, with a view to promoting a more conducive environment to private capitals.

This included reforms on the horizontal framework for foreign investment, employment, and taxation, as well as procedures for the registration and establishment of enterprises. On the other hand, part of Liberia’s open regulatory regime is also due to the absence of specific regulations and guidelines in some services sectors on cross-cutting issues. This lack of regulation often impairs, rather than enhances, the business environment by reducing transparency and predictability of laws and regulations.

Horizontal laws and regulations refer to those measures that affect multiple services subsectors or the services sectors as a whole. The regulatory framework for services includes not only laws and regulations governing a particular sector but also measures that affect a wide range of sectors (“horizontal” measures). Regulations on tourism, for example, obviously affect services providers in the sector, but so do other laws and regulations, such as regulations on buying and selling foreign currency, laws on entry and stay of foreigners, and procedures related to the establishment of firms. Typically horizontal policies are not necessarily meant to regulate services industries, but they may focus on general policies or regulate a mode of supply that cuts across different services sectors. Measures at the horizontal level are hence those affecting all services industries.

Examples of horizontal measures not directly aimed at regulating international trade, but that imply horizontal restrictions on a mode of services supply, include the following:

›› ›› ›› ››

C R O S S-B O R D E R T R A D E : measures on transfer of funds, restrictions on access to foreign currency C O N S U M P T I O N A B R OA D :

exit visas for nationals, restrictions on access to foreign currency limitations on land ownership, restrictions on establishment of juridical persons, and domestic employment requirements for foreign companies P R E S E N C E O F I N D I V I D U A L S E RV I C E S S U P P L I E R S : visa requirements for foreigners, limitations on periods of stay.

COMMERCIAL PRESENCE:

CROSS-BORDER TRADE Liberia does not feature restrictions on cross-border trade in services. The regulation of cross-border services is inherently challenging because of the technical difficulties of controlling electronic traffic and the location of the services supplier, by definition, outside the country’s jurisdiction.

It is therefore rare to find restrictions on cross-border trade that affect all services sectors. Liberia is no exception, and indeed there are no general limitations on cross-border trade or consumption abroad. However, some sectoral limitations to the cross-border supplier do apply in some specific services sectors.

There are no impediments to payments abroad. Restrictions on the transfer of funds can be implemented to prevent capital flight, as a measure to support exchange rate controls, or as disincentives to the purchase of goods and services abroad. Independently of the underlying rationale, restrictions on the international transfer of funds undermine the ability of nonestablished suppliers to offer their services in a cross-border manner. No such restrictions are currently in place. The Investment Act of 2010 features guarantees for foreign investors to perform inward and outward transfers, including of capital, profits, dividends, and payments for foreign loans.

This provision, however, does not seem to cover regular payments abroad performed by Liberian citizens or companies or foreign-invested enterprises acquiring other cross-border services.

Some regulatory conditions on the transfer of funds apply for monitoring purposes. Regulation by the Central Bank of Liberia (CBL) of the transfer of foreign currency stipulates that every business concern or entity or individual wishing to make a foreign transfer of funds may do so without limitation as to the amount to be transferred, provided, however, that the amount to be transferred must have been in the entity’s bank account for not fewer than three banking days before the transfer. An individual who does not have a bank account will be allowed an over-the-counter transfer of up to $5,000 at a time, provided that there shall not be more than two over-the-counter transfers of up to $5,000 each within a 30-day period at any given bank (U.S. Department of State 2013). Although these conditions entail some limitations on the ability to make payments abroad, they are connected to policies for monitoring money laundering or for purposes of capital controls. In either case, and provided that these conditions are effectively applied to those ends, the measures appear not to entail restrictions on trade, at least until more formal and comprehensive monitoring procedures are put in place.

COMMERCIAL PRESENCE Liberia’s regulatory framework for investment is generally open and nondiscriminatory, but some regulatory barriers persist. In the last decade, the GOL has pursued an active policy of liberalization for the attraction of foreign investment. Various policies and measures were introduced to improve the regulatory environment for foreign investment, including eliminating discriminatory treatment against foreign investors, facilitating registration procedures, and introducing a general investment incentives regime. However, regulatory restrictions to foreign investment persist in terms of both the establishment and the operation of foreign services suppliers, in the form of limitations on land ownership and the employment of foreign personnel.

Investment act of 2010 The Investment Act of 2010 seeks to create a level playing field for foreign and domestic investors.

In 2010 the GOL introduced a new investment law, which repealed and replaced the Investment Incentives Act of 1973 and the National Investment Commission Act of 1979. The new investment law was directed to incorporating international best practices for the attraction of foreign investment. In particular, the law set out a general prohibition of discrimination against foreign investors, ensuring that domestic and foreign companies have the same rights regarding licensing

03 GENERAL REGULATORY FRAMEWORK & INSTITUTIONAL SETTING

23

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

24

or permits for conducting business and are subject to the same obligations, such as book-keeping requirements and taxation, as domestic firms. Importantly, the investment law provides that foreign investors may own, wholly or in partnership with Liberians, or control a business in any sector of the economy of the country, save for a few specific activities discussed below.

The law provides additional guarantees on the treatment of foreign investment. In line with international practices in investment protection treaties, the Investment Act of 2010 offers additional guarantees against expropriation, repatriation of capital, and access to courts and arbitration.

The provision against expropriation takes its inspiration from the disciplines of bilateral investment treaties and incorporates the main elements of those provisions, albeit with a slightly nuanced language. The law states that for an expropriation to take place, it must respond to a national interest or public purpose, be the least burdensome alternative to achieve that goal, be nondiscriminatory, occur in accordance to due process of law, and provide for a “fair and adequate compensation.� The law also offers foreign investors the ability to resort to international arbitration in case of a dispute with the government.

Liberians are given preference in some specific sectors of the economy. The investment law recognizes a set of sectoral exceptions to the general principle of nondiscrimination and sets out a list of economic activities with some preferential treatment for Liberians. Sixteen economic activities, most of them consumer-oriented services, are reserved to Liberian nationals: supply of sand, block making, peddling, travel agencies, making and sale of ice, tire repair shops, auto repair shops with investments of less than $550,000, shoe repair shops, gas stations, video clubs, operation of taxis, importation or sale of second-hand or used clothing, importation or sale of used cars (except authorized dealerships, which may deal in certified used vehicles of their make), distribution of locally manufactured products, and the retail sale of rice, cement, timber, and planks.

In addition, the law set asides additional sectors in which foreign investors may participate, provided that they invest a minimum of $500,000 or, if at least 25 percent of the company is owned by a Liberian partner, $300,000. These activities are the following: production and supply of stone and granite, ice manufacturing, commercial printing, cinemas, production of poultry and poultry products, bakeries, sale of pharmaceuticals, operation of heavy duty trucks, sale of animal and poultry feed, entertainment centers not connected with a hotel establishment, operation of water purification or bottling plants (specifically the production and sale of water in sachets), and advertising agencies, graphics, and commercial artists.

Although many of these activities seem specific consumer-oriented services that are not likely to be prime sectors for foreign investment, some restrictions may have greater implications in the economy. Chapter 4 will offer specific considerations of these reservations in the sections on distribution, tourism, and transport and logistics services.

03 GENERAL REGULATORY FRAMEWORK & INSTITUTIONAL SETTING

25

Land ownership Land ownership in Liberia is reserved to Liberian citizens, but foreigners can benefit from longterm leases. Article 22 of the Constitution of Liberia provides that “every person shall have the right to own property alone as well as in association with others; provided that only Liberian citizens shall have the right to own real property within the Republic.” Foreign “missionary, education and benevolent institutions” are allowed to own property provided that it is used for their altruist purposes. Foreign citizens or companies may not therefore own land for commercial purposes. Foreigners, however, can access land through leases. The Property Law allows foreigners, subject to certain conditions, to lease land for periods between 20 and 50 years, which can be renewed. In the case of concessions on undeveloped land, leases of up to 65 years may be available. Before construction and use of land is undertaken, foreign lessees must submit their plans for development of the land to the Ministry of Public Works for review and approval.

In terms of services trade policy, this regime amounts to a horizontal restriction. As such this limitation affects foreign services suppliers wishing to provide services in Liberia through the establishment of a company (commercial presence) or the presence of individual service suppliers, as reflected in table 3.2. Restrictions on land ownership are common in international trade agreements, and many countries have reserved such measures from their WTO obligations.

A new land policy is to expand land property rights, without altering the conditions for foreigners.

With a view to solving disputes and uncertainty over land tenure, the GOL has embarked on a broad reform of the land ownership regime. The Land Rights Policy of 2013 aims at establishing four categories of land rights and a cross-cutting subcategory called Protected Areas. The four categories are Public Land, Government Land, Private Land, and a new type of land ownership called Customary Land, meant to recognize and provide guarantees for the tenure of land by local

Table 3.1 FORMAL HORIZONTAL RESTRICTIONS TO SERVICES TRADE

MARKET ACCESS/ ESTABLISHMENT

Cross-border Consumption abroad Commercial presence Natural persons

OPERATION

9 6

11

14

16 17

11

14

16

Notes: The yellow square indicates where restrictions are applied and the numbers inside are as follows: (1) MFN restrictions; (2) M1: Local presence / M3: JV requirements; (3) M1: Link with local provider/M3: limitations on form of establishment; (4) Quantitative restrictions; (5) Geographic limitations; (6) Economic Needs Test; (7) Foreign equity limitations; (8) Authorization requirements; (9) Other (registration fees); (10) Quantitative restrictions; (11) Access to government contracts; (12) Residency and nationality requirements; (13) Price control; (14) Land ownership limitations; (15) Transfer of funds; (16) Limitations on foreign employees; (17) Incentives; and (18) Other

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

26

communities. The policy does not advocate for any changes in the access to land by foreigners, but it does recognize leases as an integral part of Liberia’s private land sector and stipulates that foreign citizens may obtain leases for a reasonable length of time (Land Rights Policy, section 7.7).

Incentives regime A tax incentives regime is available for specific industries, including several services sectors.

The Consolidated Tax Amendment Act of 2010 amended the Revenue Code of 2000 by introducing an incentives regime for investment in specific industries or meeting certain performance requirements. Incentives usually involve tax exemptions, especially in the import of goods.

Under the law, the services sectors that may qualify for a “special tax incentive� for up to five years include the following: Tourism, for investments on tourist resorts, hotels and cultural sites; hospitals and medical clinics; infrastructure investment on air, sea, rail, and road transport; ICT; banking in specific geographical areas; and waste management.

In addition, various primary industries can qualify for the incentives, as well as manufacturing activities that meet certain performance requirements, mainly in the form of local content requirements or export incentives. No such performance requirements are explicitly set out for investment in the services sectors. In addition, the law authorizes the Ministry of Finance to include other investment activities that may promote economic growth, beyond those listed above, as eligible for incentives.

Investment incentives are available for domestic and foreigners but require a higher threshold for foreign investors. Under the revised investment code, economically viable and strategically located investments up to $20 million are eligible for the incentives described below. Investments in excess of $20 million in priority areas are eligible for special incentive packages (NIC 2011).

The consolidated act also establishes that to qualify for the incentives the capital invested must be at least $1 million for foreign-owned businesses and at least $300,000 for businesses with 100 percent Liberian investment. Investments to establish a hospital or health clinic require a lower threshold of $50,000 for either category of investors. Nationality considerations are common in subsidies and incentives policies and indeed feature prominently as one of the most frequent horizontal restrictions scheduled in the GATS agreements. From a services trade policy perspective, this policy qualifies as discriminatory treatment that affects all services sectors, because they provide a preference (easier access to tax incentives and other subsidies) for domestic providers over foreign investors.

Other horizontal measures Liberia does not maintain horizontal measures on equity or capital requirements. Generally no applicable minimum capital requirement is in place, although an investment of $500,000 in defined strategic sectors is required to be eligible for incentives. No specific restrictions are

placed on the percentage of equity a foreign investor may own. However, according the investment authorities, the government looks favorably on partnerships between foreign investors and Liberians (NIC 2011).

Foreign suppliers can participate in government procurement bids. However, the Public Procurement and Concessions Act offers a margin of preference of about 15 to 25 percent in favor of nationals for the evaluation of both national and international bids for public contracts.

Some regulatory challenges go beyond WTO accession negotiations. The regulatory assessment conducted offers some insights on a wide range of aspects of the regulatory framework, some of which may not be directly involved in multilateral discussions. Although WTO disciplines focus largely on market access and national treatment for trade and investors, the benefits of WTO accession or, more broadly, services liberalization can be impaired by other policies and regulations that contribute to the business environment. Aspects such as exception regimes for foreign investment, conditions and procedures for the registration of companies, or the legal framework for corporate governance are as relevant as market access and national treatment policies. Although these policies in Liberia are generally oriented toward attracting foreign investments, deficits in transparency and access to information and outdated regulation limit the attractiveness of the investment environment.

C O N C E S S I O N S R E G I M E The concessions regime creates a parallel regulatory framework that applies to large foreign investments. The Public Procurement and Concessions Act of 2005 provides a broad scope of application to the concessions regime, for any investment larger than $10,000,000. Although this regime was designed to apply mainly to the primary sector, it may be applied to any large investment. Two foreign investments in the services sector have been established under the concessions regime: a hotel that uses a historic building and a port terminal.

This framework allows deviating from the general guarantees of the Investment Act of 2010. In principle, investors may opt for not seeking the additional benefits offered by the concessions regime and establish themselves under the general framework for foreign investment, although authorities have a preference for the use of the concessions. Under the concessions regime, the authorities enter into one-on-one negotiations with the investor, offering incentives or other support for investment projects deemed to have greater beneficial effects for Liberia’s economy, in terms of job creation, development of a new sector, and so on.

The negotiation of a concession allows going beyond the incentive regime featured in the Revenue Code. Additional incentives include greater reductions and longer periods for tax exemptions or special regimes such as a “flat fee” for the importation of any goods during a specific time period. Through the negotiation of concessional regimes, large foreign investment can gain incentives and other benefits that are not generally available to smaller investors. On the other hand, foreign investors involved in the concession agreements are not covered by the guarantees

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of the Investment Act. For instance, in most natural resource concession contracts, elements are included that relate a local employment clause requiring all unskilled labor to be Liberian, clauses that require concessionaires to achieve 70 percent Liberian management within 10 years, and provisions on out-grower schemes, training and employment of Liberia citizens, industry funding to government-run industry funds, and local procurement clauses (Kaplan et al. 2012).

The conclusion of a concession allows for great discretion to the authorities in the approval of large investments. This broad discretion of the Inter-Ministerial Concession Committee (IMCC) in awarding the concessions and the regulatory framework resulting therefrom creates further opacity in the framework for large foreign investments, including in the services sector.

The GOL has made important improvements to facilitate the registration of firms, but the procedures remain unclear. As a result of the strategy of the government to improve the business climate and attract FDI, the Ministry of Commerce in partnership with the Ministry of Foreign Affairs, the Ministry of Finance, the CBL, and the National Social Security and Welfare Corporation, in cooperation with international organizations, established the Liberian Business Registry (LBR). The LBR operates as a one-stop shop to formalize and register enterprises and provide information services to the public, in the exercise of delegated authority by different GOL ministries. All companies established in Liberia, whether foreign or domestic, must comply with registration. Entities incorporated overseas may branch out in Liberia, for which they must register an office or resident agent in Liberia (NIC 2011), but this does not apply to companies providing services through cross-border trade. The simplification of the registration procedures has reduced 26 steps originally needed to start a business to only a handful. The Doing Business indicator of the World Bank captures these changes (see figure B U S I N E S S R E G I S T R AT I O N

Figure 3.1 LIBERIA’S DOING BUSINESS RANKING

31 Starting a business 42 Paying taxes

144

Ease of doing business

86 Getting credit

129 Dealing with construction permits 142 Getting electricity; Trading across borders 147 Protecting investors 161 Resolving insolvency 165 Enforcing contracts 181 Registering property

Source: World Bank, Doing Business, 2013

3.1) and positions Liberia in the 31st position as the easiest place to register a business. However, procedures remain unclear as a result of lack of access to regulations and other administrative practices (see “Horizontal De Facto Restrictions” below).

Registration fees are based on the investor’s nationality, despite the general principle of nondiscrimination. Although Liberians companies pay about $50 for registration procedures, foreign establishments are charged more than 20 times as much. Registration has to be renewed annually with similar costs. Although this can be presumed to respond to a progressive scheme, for which smaller domestic companies are charged less than large multinationals, the regime penalizes smaller foreign investments, such as small and medium enterprises from Economic Community of West African States (ECOWAS) countries wishing to expand regionally. A regime based on objective criteria such as the company’s registered capital, regardless of the origin of the establishment, would be more consistent with the nondiscrimination principle recognized in the Investment Act of 2010.

C O R P O R AT E L E GA L F R A M E W O R K

The corporate law framework is outdated and lacks essential elements of corporate governance. The regulatory framework for all companies established in Liberia is set out in the Associations Law of 1976. The law applies to Liberian- as well as foreign-owned firms and does not set out per se any particular restriction on foreign investment.

However, the framework it provides lacks fundamental requirements of corporate governance regarding financial auditing and monitoring. The law does not require companies to present audited financial statements to shareholders annually, nor has it any mandatory requirement for companies to prepare and submit annual audited financial statements. Furthermore, the law does not prescribe any national or international accounting standard for financial reporting.

The Association Law is seriously inadequate in terms of defining the framework for corporate financial reporting and does not reflect current realities in Liberia and international standards (World Bank 2011a).

MOVEMENT OF INDIVIDUAL SERVICES SUPPLIERS Intracorporate transferees and contractual services suppliers linked to services companies face great limitations, including a labor market test. The Investment Act of 2010 provides general guarantees suggesting a relatively open regime in the employment of foreigners. Section 13 of the law indicates that “foreigners of any nationality may be employed in Liberia” and that investors have the right to employ any persons, “including foreign nationals.” Both references, however, are subject to the labor law and laws governing immigration. Also companies subject to concession contracts typically face limitations on their ability to employ foreign nationals as a result of the contract negotiations. Once immigration requirements, that is, visa and residency permits, have been cleared, foreigners wishing to be employed in a firm in Liberia must avail themselves of a work permit issued by the Ministry of Labour (Labour Law, Section 15 and 1507).

The Ministry of Labor benefits from great discretion in the issuance of a work permits, including through conducting a labor market test (reflected as an economic needs test in table 3.2). The Labour

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Law embraces the so-called Liberianization policy, which aims at promoting the employment of Liberians. Sections 75 and 1504 of the Liberian Labor Law, approved in July 2011, stipulates that the ministry shall not issue a work permit to a foreigner unless it is proven that there is no suitably qualified Liberian available to carry out the work required by the employer. Currently no decrees or ministerial regulation set out further guidance on the implementation of the policy.

The Ministry of Labor is considering issuing an implementing regulation, but as of July 2014 the interpretation and application of the Labor Law remains at the ministry’s understanding and evaluation on a case-by-case basis. In practice, the Ministry of Labor tends to grant work permits to intracorporate transferees and contractual services suppliers acting as experts or managerial personnel for periods of one or two years on a renewable basis but applies the economic needs test more severely for less qualified personnel. In addition, services suppliers requiring a work permit must pay a fee equivalent to $1,000 for the permit or its renewal.

In practice, independent services suppliers face fewer restrictions for short-term services. Although in principle even independent suppliers may be subject to the labor market test, the ministry’s difficulties in monitoring short-term contracts provides, as in most countries, for an open environment for these short-term services. Services providers must be able obtain at least a visitor visa, which is required for most nationalities outside ECOWAS. However, Section 6.1 of the Nationality Law appears to require a permit of residence for all aliens, which on its face includes temporary visitors even though in practice residence permits are issued only for stays longer than 90 days.

This requirement does not seem to reflect the current regulatory regime and should be updated (ABA 2009). Also, in the Labor Law a work permit is for required for any engagement in Liberia (Labor Law Section 1507 subsection 1 [1]), even short-term contracts of less than 90 days, but the fact that a residency permit is not required for stays shorter than 90 days adds an element of confusion, since in principle the residency permit is a precondition for obtaining a work permit.

This broad discretion of the GOL results in an economic needs tests for the employment of foreign nationals. The Liberianization policy also applies in the negotiation of concession contracts, which regularly include clauses establishing limitations on the employment of foreign personnel or demanding their phase out. In this context, the informal policy in the National Investment Commission is setting out numerical quotas for the employment of Liberians, including in managerial positions, with the goal of narrowing the quota with time, so as to increase opportunities for Liberians. Although the Ministry of Labour does not benefit from such a formal negotiating authority, the need for work permits subject to an economic needs test does offer the opportunity to engage in informal discussions with companies. These practices amount to economic needs tests affecting commercial presence and the presence of individual services suppliers.

Governance & institutional setting on services trade Many barriers to trade and investment in services stem from the discretionary administration of laws and regulations rather than from outright restrictions. The quality of institutions matters in the design of policies for the services sector (Goswami, Mattoo, and Sáez 2012). Studies on services exports based on bilateral trade confirm the importance of a transparent and efficient institutional environment (Grünfeld and Moxnes 2003; Lennon 2006; van der Marel 2012). The institutional capacity to design adequate policies, regulate different services sectors, and ensure compliance with laws and regulations is thus a key driver of success in the services sector. An assessment of the governance framework aims to identify shortcomings in the regulatory process and institutional setting that may undermine the functioning of the services market.

Liberia’s governance indicators generally point to a weak capacity to design and implement effective public policies. The perception of the GOL in implementing public policies is that it is low, even in comparison with its neighbors. Figures 3.2(a) and 3.2(b) depict key elements of Liberia’s governance framework in comparison to its neighbors (a) and following their development since the end of the civil war (b). The indicators cover four key elements that affect the public sector’s ability to regulate effectively: government effectiveness, regulatory quality, rule of law, and control of corruption.

Government effectiveness is perceived as particularly low. Liberia’s governmental effectiveness ranks just above the lowest 10 percent of all countries. Liberians’ perception of regulatory quality (the ability of the government to formulate and implement sound economic policies) is the lowest in the region. More worryingly, despite the GOL’s policies of liberalization and promotion of the private sector, regulatory quality has hardly seen any improvement since 2006, highlighting the GOL’s challenges in translating its policies into effective changes. The end of the war and the election of a democratic government raised high expectations, particularly in the control of corruption and the improvement of the rule of law. However, once the honeymoon period of the elected government was over, such expectations fell again, showing little progress since. Although the control of corruption is poor, it does not appear worse in Liberia than in its neighbors. The weak rule of law, which captures the quality of the enforcement of economic and noneconomic laws and regulations, remains in the lowest 20 percent of the world, below countries such as Burkina Faso, Ghana, Senegal, and Sierra Leone.

Many of the findings on this regulatory assessment help explain the general perception of Liberia’s governance. The review of regulation on trade and investment in services suggests that Liberia’s main deficiencies in the regulation of these sectors lie more in the discretionary application of general rules than formal limitations to trade and investment. In this context of regulatory unpredictability, agents perceive that rules can be applied selectively or bypassed in different circumstances. As a result, laws and regulations, even when well planned and designed, do not always seem binding, undermining the perception of the regulatory quality and rule of

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Figure 3.2  GOVERNANCE INDICATORS

a. Global ranks of West African countries (2012)

b. Liberia’s performance in the 2000s

Source: World Bank, Worldwide Governance Indicators.

law. In practice, this entails a limited capacity to regulate the market and direct the real economy.

HORIZONTAL DE FACTO RESTRICTIONS This poor governance framework results in various de facto restrictions to services trade. Table 3.3 identifies the main administrative practices that restrict services trade and investment in Liberia and the modes of services supply most affected by them. As can be expected, cross-border trade and consumption abroad are less vulnerable to governance deficiencies in the importing country (Liberia, in this case), because the production or consumption of the services takes places beyond its jurisdiction. Foreign companies or individual services suppliers wishing to offer services within Liberia, instead, face governance deficiencies during establishment as well as during regular operation of their services.

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Table 3.2  IMPACT OF HORIZONTAL ADMINISTRATIVE PRACTICES IN SERVICES TRADE

MARKET ACCESS/ ESTABLISHMENT

Cross-border Consumption abroad Commercial presence Natural persons

2

OPERATION 8

2

3

2

3

4

6

8

10 11

8

10

13 14 14

Notes: The yellow square indicates where restrictions are applied and the numbers inside are as follows: (1) No licenses being granted; (2) Requirements not publicly disclosed; (3) Unclear requirements; (4) Unofficial fees; (5) Inconsistent regulation; (6) Discriminatory application; (7) Burdensome procedures; (8) Other; (9) Requirements not publicly disclosed; (10) Unclear requirements; (11) Unofficial fees; (12) Inconsistent regulation; (13) Discriminatory application; (14) Deficient monitoring/enforcement; and (15) Other.

Administrative practices restrict both the establishment of suppliers and operation of the business.

Despite the improvements made by the GOL in procedures for company registration, numerous practices continue in place that hinder establishment of foreign and domestic companies.

Registration procedures, although speedy, remain uncertain. The procedure for registration requires in principle nothing but the submission of an application and basic documentation to receive the certificate of registration within a couple of days. However, the LBR retains some discretion in the procedure, as it evaluates the application and may recommend remedying certain information defects or deny it based on formal flaws in the presentation. The tariff fees are publicly available on the LBR website, but there are no clear indications of the formal requirements and the regulations governing the process, including the power of the institution to approve the applications. The completion of the application itself requires good understanding of the formalities or, more commonly, the advice from local experts. Stakeholders recount that parties who do not hire the services of such experts often experience setbacks in their application, either because the information is incorrect or because relevant staff fails to give it equal treatment with other applications. The LBR maintains discretion to waive or reduce fees, which adds to the opaqueness of the procedure. The lack of clear guidance in these procedures adds thus costs to the establishment, reducing the effects of the improved one-stop shop provided by LBR services.

Indeed, the lack of clear guidance in the procedures de facto introduces greater costs to business registration than the actual registration fees.

The issuance of sectoral licenses is generally opaque and more unpredictable than company registration. The degree of transparency and complexity varies greatly between the different agencies, but it is generally perceived that information on licensing is poor and ambiguous.

Licensing rules are often drafted in broad terms, which leaves ample discretionary margin for the authorities in the implementation of the procedures. The establishment of a company is generally also obstructed by multiple fees to be paid by the applicant, which are often not covered in the

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regulation. As a result, licensing procedures are generally costly and tend to take substantially longer than company registration.

Business operation is hindered by inconsistent or unpredictable enforcement of laws and regulations. Detailed regulation of issues such as labor conditions and sanitary requirements are usually nonexistent or broadly defined, which allows for great disparity in their application.

Enforcement of regulation often targets larger businesses, where foreign suppliers have greater participation, with a de facto discriminatory effect. This is particularly the case for the taxation regime. Larger companies, usually foreign, tend to be scrutinized more strictly than domestic ones, which increases perceptions of an uneven playing field for foreign investment, despite broader nondiscrimination policies.

The business environment remains burdened by the additional costs of illicit payments. Numerous economic actors point to the challenges of doing business in an environment where corruption is widespread, not only as a way of gaining special privileges or preferential treatment, but also to obtain treatment that is due by law. Informal fees expand from petty payments in regular administrative procedures such as obtaining simple documents or certificates to alleged illicit small fortunes involved in the negotiation of special concessions in large investment projects.

Investors may face unofficial fees not only at the time of establishment during procedures such as registration, issuance of land lease certificates, or licensing, but also during operations as a result of monitoring for compliance with regulatory standards. Low public sector salaries, lack of training and capacity, and inefficient and cumbersome regulations create incentives and opportunities for corruption across the public sector (Transparency International 2012).

The GOL has embarked on fighting corruption. Many policies enacted by the GOL have aimed at reducing corruption, which has translated into significant improvement in governance trends indicators. In Transparency International’s Corruption Perception Index, for instance, Liberia has climbed to the 83rd position (2013) from the 91st place in 2011 and the 137th in 2005. An important initiative to tackle corruption cases related to the growing multimillion industry dealing in Liberia’s natural resources has been the GOL involvement in EITI. The initiative originally focused on the public disclosure of all payments due to the government from concessions from the extractive industries, and coverage was later expanded to include concessions for agriculture and forestry. The GOL may consider applying the EITI procedures or a similar approach to all concessions, including those for services sectors. This would increase transparency in the application of the concessions regime in services.

INSTITUTIONAL FRAMEWORK This section examines the institutional and regulatory framework relevant to trade and investment in services in Liberia. It analyzes the national government’s broad institutional capacity to design, adopt, and implement regulations conducive to an efficient services market and compares

legal and regulatory procedures with internationally recognized principles of good governance and best regulatory practices.

As in most countries, policies related to trade and investment in services are covered by multiple institutions. Different ministries and agencies have jurisdiction over different sectors and modes of supply. For instance, the Ministry of Transport is charged with regulation of and oversight over the transport sector, and Liberia’s Telecommunications Authority is the regulatory body for telecoms. The mandates of the Ministry and Finance and the Ministry of Labour cut across all services sectors, as they relate to cross-border transfer of funds and the ability of persons to provide services in Liberia, respectively. Furthermore, the Ministry of Trade and the National Investment Commission have broad responsibility in relation to the services sector.

The Ministry of Commerce and Industry (MOCI) has a broad mandate on trade matters, including international negotiations. MOCI is the agency charged with developing standards for business practices, including distribution services, for which it is the main regulatory agencies. Importantly, MOCI is also leading Liberia’s international trade negotiations, including the WTO accession. In that role it acts as the coordinating agency for policies related to trade in goods and in services, and it could demand compliance with trade agreements by other relevant agencies.

MOCI’s capacity to formulate and implement effective trade policies is limited. The agency suffers from shortages in human and financial resources that prevent it from fulfilling its broad functions. Reflecting Liberia’s general shortage of skill personnel, MOCI’s human resources capacity is particularly critical. Of 265 employees, it is estimated that only one-third have a bachelor’s degree or above, and just above half of the staff with managerial and professionals duties have studied at university. Most staff is recruited fresh out of school or during their studies. Indeed, about one-fourth of MOCI’s personnel are currently undergraduate students.

The agency budget is poor, and salaries and benefits are regarded as being well below those of the private sector. However, the young age and high number of students in MOCI’s staff entails an opportunity for the agency to develop a team of trade experts who could lead trade policy making for the following decades. To that end, MOCI, in partnership with international donors, should ensure that its staff’s studies are complemented with specific courses and training related to trade policies and trade negotiations, in addition to offering benefits that retain those professionals at the institution.

The National Investment Commission (NIC) is the main institution concerned with foreign investments in Liberia. The NIC chairs the IMCC, which includes permanent committee members from the Ministries of State, Finance, Justice, and Planning and Economic Affairs, as well as other key stakeholder ministries and agencies. The NIC continues to be confronted by the lack of capacity, especially in the areas of contract negotiation and due diligence, in addition to problems of poor human resources and lack of equipment. The overarching mandate of the NIC is to promote

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Liberia’s many investment opportunities, attract and support the growth of value-added foreign direct investments, and advocate for and strengthen the domestic private sector. This mandate finds expression in Section 5 of the National Investment Commission’s Act of 2010. In practice, NIC’s main tasks relate to the negotiations and oversight of the concessions regime.

Rule-making process Standardized and transparent procedures improve the flow of information between agencies, increasing cooperation and enhancing knowledge in the regulatory process. A well-designed and coordinated regulatory process that ensures the smooth and transparent flow of information may help overcome resource limitations in small economies, especially low-income countries.

Consultations with private stakeholders also help build regulatory capacity, as government officials engage in substantive exchanges with knowledgeable industry representatives. Such exchanges are particularly important for rapidly expanding sectors, because the private sector is often better equipped than the state to attract domestic and international expertise, especially in developing countries.

A clear and open rule-making process can contribute to the improvement of the regulatory framework. Many developed and developing countries have introduced mandatory procedures or guidelines that govern the regulatory process itself, to make sure that government regulatory actions abide by general good governance standards. Different countries recognize different guiding principles on good regulatory practices, generally reflecting idiosyncratic regulatory conditions. For example, the member economies of the Asia-Pacific Economic Cooperation (APEC) and the Organisation for Economic Co-operation and Development (OECD) jointly prepared a checklist for regulatory reform (box 3.1), building on the 2005 OECD Principles for Regulatory Quality. In designing these procedures, however, the reforms should be balanced by the fact that excessive formal requirements on the exchange of information may tax an administration’s capacity, especially in small and low-income economies such as Liberia. These approaches seek an adequate regulatory framework that, at a minimum, incorporates the following elements:

›› ›› ›› ››

T R A N S PA R E N C Y : Regulatory action should be known within and outside government agencies; regulation should be simple, coherent, user friendly, and easily publicly available at all times.

S TA K E H O L D E R C O N S U LTAT I O N S : Links with the private sector should be an institutional component of the regulatory process.

AG E N C Y C O O R D I N AT I O N : Regulation should take place at the right level of government and benefit from relevant inputs, taking into account all relevant opinions.

E F F I C I E N C Y : Regulators should consider the full range of regulatory options and evaluate the impact of regulation.

Liberia’s regulatory process affects the governance environment. The lack of formal guidelines for the regulatory process leaves room for poor regulatory practices that do not contribute to a more transparent and predictable regulatory environment. Although most ministries and agencies do try to follow procedures that incorporate some elements of good regulatory practices,

Box 3.1 GOOD REGULATORY PRINCIPLES: EXCERPTS FROM THE APEC-OECD INTEGRATED CHECKLIST ON REGULATORY REFORM Regulatory reform refers to changes that improve regulatory quality to enhance the economic performance, cost-effectiveness, or legal quality of regulations and related government formalities.

A8.

To what extent are there effective inter-ministerial mechanisms for managing and coordinating regulatory reform and integrating competition and market openness considerations into regulatory management systems?

B8. To what extent have measures been taken to assure compliance with and enforcement of regulations?

C. COMPETITION POLICY C9.

A. HORIZONTAL DIMENSION

B. REGULATORY POLICY

A1. To what extent is there an integrated policy for regulatory reform that sets out principles dealing with regulatory, competition and market openness policies?

B2. Are the legal basis and the economic and social impacts of drafts of new regulations reviewed? What performance measurements are being envisaged for reviewing the economic and social impacts of new regulations?

A5.

To what extent has regulatory reform, including policies dealing with regulatory quality, competition and market openness, been encouraged and coordinated at all levels of government (e.g., Federal, state, local, supranational)?

B4. To what extent are rules, regulatory institutions, and the regulatory management process itself transparent, clear and predictable to users both inside and outside the government?

B5.

A6.

Are the policies, laws, regulations, practices, procedures and decision making transparent, consistent, comprehensible and accessible to users both inside and outside government, and to domestic as well as foreign parties?

And is effectiveness regularly assessed?

Source: OECD 2005.

Are there effective public consultation mechanisms and procedures including prior notification open to regulated parties and other stakeholders, nongovernmental organizations, the private sector, advisory bodies, accreditation bodies, standards-development organizations and other governments?

To what extent does the competition law apply broadly to all activities in the economy, including both goods and services, as well as to both public and private activities, except for those excluded?

C12. In the absence of a competition law, to what extent is there an effective framework or mechanism for deterring and addressing private anticompetitive conduct?

D. MARKET OPENNESS POLICIES D2. To what extent does the government promote approaches to regulation and its implementation that are tradefriendly and avoid unnecessary burdens on economic actors?

D8. To what extent are measures implemented in the countries accepted as being equivalent to domestic measures?

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their adoption remains partial and irregular, which fails to translate into an improvement of the regulatory system. It is frequent therefore that ministries and agencies act in advance on regulations, without publicizing their actions. Although consultations are often held with other agencies or the private sector, there is no regular practice of informing stakeholders, or any formal channel for doing so. As a result, regulations are adopted, or even come into force, without being announced, in some cases demanding immediate action by the regulated companies.

No government-wide principle governs the regulatory process. Some ministries have internal rules on the regulation-making procedures, but even in such cases observance tends to be loose, and actual practices differ substantially from the required standard. This general lack of government-wide standards offers great discretion to the different agencies in establishing a transparent and collaborative regulatory procedure or to deviate from such standards. A standard procedure on rule-making procedures, in the form of a binding guidance, would reduce discretion and promote good governance in the different ministries and regulatory agencies, greatly contributing to the improvement if the general regulatory framework in Liberia.

Transparency Lack of transparency is widely perceived as one of the main weakness of Liberia’s legal and regulatory framework. Difficulties in access to laws and regulations and lack of clarity about their substantial requirements hinder both the establishment and operation of services suppliers.

Laws and regulations are generally inaccessible, which brings uncertainty about the requirements business have to meet during establishment and later operation. Individual ministries and regulatory agencies do make an effort to publish information or laws and regulations relevant to their portfolio in their websites. For instance, the MOCI website offers laws, policies, and regulations and notices relevant to trade and industry for download, a total of 34 documents. The NIC includes basic information on taxation, land acquisition, labor, and shipping and customs, but no access to the actual legal instruments, except for a couple. The CBL provides generous access to policies, laws, and regulations relevant to the banking sector. Not all of these databases are equally comprehensive or up to date, largely because it remains up to each individual ministry to maintain their own website.

Some private initiative are also contributing to enhancing access to legislation. The Liberia Legal Information Institute is a nonprofit organization, which has set up, with support from international partners, an online portal for providing free access to Liberia’s legal information (www.liberlii.org). Liberlii provides comprehensive access to all major laws, executive orders, and even judicial decisions on all legal matters. These websites, although helpful, fail to provide comprehensive and reliable information on the substantial requirements for business operation, because they tend to offer limited resources or are infrequently updated. Laws and regulations from other ministries and agencies are generally available at the ministries themselves, and access to them is normally granted to any inquiring party. However, navigating the ministries, and

approaching the correct desks for information, requires considerable familiarity with Liberia’s administrative environment.

Most legal instruments remain general in scope and offer little specific information. This is particularly the case of official policy documents and many acts that require secondary legislation to complement then. Where such information is not available, the requirements remain ambiguous or vague, which leaves great discretionary power to the official, reducing transparency and likely increasing costs in the process.

Liberia lacks an effective official gazette that applies to records and/or encapsulates all laws and regulations promulgated. The entry into force of laws requires that they are published in a hand bill and archived. However, this requirement does not exist for secondary regulations.

Furthermore, publication does not ensure publicity, because its distribution is limited to a handful of government agencies and in many respects newspapers that are circulated only within the capital and do not reach a general audience. When it comes to regulation, many ministries and agencies strive to disseminate their regulations through their websites or other means at their disposal, but these attempts generally lack consistency and are made with varying degrees of effort by the different agencies. As a result, there is no unified and reliable repository of laws and regulations in Liberia.

Information technologies offer alternatives to increase transparency for the services sector.

Some countries, such as Cambodia and the Lao People’s Democratic Republic, are currently in the process of establishing Services Information Portals, aimed at having a central online information center that facilitates access to all regulation in the services sector, thus allowing services providers—and government officials—to gain a clear understanding of the regulatory framework that applies to the sector. Liberia could benefit from this experience by adoption of a similar IT solution to enhance access to regulations in the services sector. This kind of south-south cooperation would not be new: following the example of Lao PDR, Lesotho is in the process of establishing a trade information portal for trade in goods that makes use, at no additional cost, of the technology developed for Lao PDR. However, although these solutions offer a cost-effective means to improving transparency, the GOL must embark on a comprehensive stocktaking exercise to bring together all relevant laws and regulations and introduce guidelines to improve the regulatory process.

Stakeholder consultations Liberia is making significant progress in stakeholder consultations. With the support of international donors, notably the International Finance Corporation (IFC) and the Swedish International Development Cooperation Agency, the GOL and representatives of the private sector established in 2007 the Liberia Better Business Forum (LBBF) to bring together public and private sector views in policy making. The LBBF is a structured partnership that fosters dialogue between

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Figure 3.3  LIBERIA’S PUBLIC-PRIVATE DIALOGUE EVALUATION

Source: World Bank 2009.

the parties aimed at identifying, prioritizing, and resolving key constraints to the climate for investment and doing business. The LBBF operates through five issue-specific working groups composed of representatives of the public and private sectors: Corruption, Tax Rates and Procedures, Access to Finance, Access to Electricity, and Customs Rates and Procedures. The LBBF has ranked among the top performers in public-private dialogue promoted by the World Bank Group (figure 3.3) and is regarded by both the private sector and the GOL as a valuable initiative that has help in bringing improvement in the investment climate (Smith 2014). Both the public and private sectors have committed to strengthening the LBBR and continuing the dialogue.

Consultations remain limited to specific members and detached from the regular regulatory process. The LBBR discussions are limited to its membership, composed on the public sector side by ministers and deputy ministers of MOCI, the Ministry of Finance, and NIC. Private sector membership consists primarily of medium and large business owners, most of them of foreign origin, representatives from the universities, and business association presidents and their respective members. No major restrictions limit getting involved in a business association that may participate in the LBBF. However, nonmember businesses and other organization such as nongovernmental organizations are not involved in the dialogue, limiting the scope of the consultations to a self-selected group. The consultations take place at regular intervals with a set agenda, which is conducive to discussing forward-looking policies and initiatives but does not lend itself to addressing regulatory issues as they are being considered by the regulators.

The LBBF also lacks representatives from some services regulatory bodies such as the Ministry of Transport, Liberian Telecommunications Authority, and Ministry of Tourism.

The broad framework for public-private dialogue promoted by the LBBF should be complemented with open consultations on ongoing regulation. The different agencies should seek public consultation as part of the everyday regulatory process. Disclosing the regulatory issues as they are being considered by the ministries and agencies would allow all interested parties and not just a selected membership to comment and provide views on the regulation at hand. A formal mechanism for stakeholder consultations would enhance regulatory capacity by promoting greater exchanges between the regulators and private sector and help increase the transparency and legitimacy of the regulatory process.

Interagency coordination The ministries and agencies in the GOL favor interagency collaboration and generally welcome inputs from other ministries. Some ministries—especially ministries addressing horizontal issues— promote coordination with other agencies by occasionally inviting other relevant ministries to comment on the drafts they produce. This practice, however, is not a standard one, and different agencies remain free to decide when, and whether, any regulation under their consideration may benefit from inputs from other agencies. Where such invitations are extended, the scope of the involvement of the invited agency in the development of the regulation depends largely on the familiarity between the agencies and the willingness of the inviting ministry to share the regulatory task. Because of the largely ad hoc nature of the procedure, written records of the collaboration may or may not be kept.

Interagency coordination is particularly relevant in the wake of broad trade negotiations. For successful trade negotiations, particularly those touching a wide range of policy matters, such as WTO accession, information should flow back and forth between the trade ministry and the regulatory agency (figure 3.4). The regulatory agencies should first provide the trade ministry with a clear picture of the regulatory status quo on their specific sector, including current laws and regulations, policy goals, and the regulatory plan. MOCI should then articulate a services policy, including guidelines on potential international obligations, as part of a broader national trade policy. The policy can be enacted through the adoption of necessary changes in the regulation under the orbit of each relevant body. The trade ministry and other relevant ministries should have access to proposed new regulations at conception and at the draft stage to assess the impact on trade and its compliance with international trade agreements. An effective system for the design and implementation of trade policy would also offer an opportunity to rethink measures that unnecessarily limit trade and investment opportunities.

A more formal procedure would help establish greater interagency cooperation and support consistency in trade policy. In the GOL the ability to invite another institution to comment, and to consult with private parties, remains a discretionary decision on the part of the regulating institution. The absence of clear policies governing the regulatory process contributes to a patchy and ad hoc regulatory framework, which limits regulatory cooperation and hinders consistency. In the context of Liberia’s WTO accession negotiations, it can also lead to undertaking

03 GENERAL REGULATORY FRAMEWORK & INSTITUTIONAL SETTING

41

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

42

Figure 3.4  INFORMATION FLOW FOR SERVICES TRADE POLICY AND

REGULATION

Policy goal

REGULATORY AGENCY

Compliace and coordination with trade policy and international agreements

TRADE MINISTRY

Regulatory status quo Regulatory plan

TRADE MINISTRY

REGULATORY AGENCY

Trade policy Trade negotiation objectives and strategy

Proposed regulation

commitments that may not accurately reflect the country’s services policies, which can bring challenges in the implementation of the agreements. This institutional arrangement, initially oriented toward coordination for multilateral negotiations, could also set the basis for a later trade policy unit charged with promoting competitiveness and formulating policies to promote trade and investment.

Regulatory efficiency The informal procedures leave little room for considerations of efficiency in regulatory procedures. Regulation is efficient if it is well targeted to address the relevant problem and conducive to achieving the desired policy goal, promotes innovation and competition, and avoids erecting undesirable barriers to trade and investment. Regulatory measures should avoid imposing unnecessary burdens on society, consistent with achieving regulatory objectives, and minimize adverse impacts on citizens and businesses. With varying degrees of sophistication, many developed countries and some developing countries have established institutional and procedural mechanisms to try to achieve regulatory efficiency (Kirkpatrick and Zhang 2004; Ladegaard 2005; IFC 2009). At a minimum, these initiatives seek to promote the consideration of alternatives when introducing regulation, evaluating the different quantitative and qualitative benefits and costs each may entail. More complex systems require studies to assess the economic impact of laws and regulations, and their alternatives, as a mandatory step in the regulatory procedure (regulatory impact assessments). No such system currently exists in Liberia. Like other good regulatory practices, some agencies foster the consideration of regulatory alternatives and require a reasoned assessment of the options. However, the informality of the regulatory process means that the regulator conducts the substantive analysis of proposed regulation on a case-by-case basis.

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04

SECTORAL SERVICES: POLICIES & GOVERNANCE

Policies and governance across services sectors differ in terms of openness and regulatory capacity.

Some sectors, such as banking, are greatly liberalized and comparatively well regulated. Others, such as professional services, feature strong restrictions, and some, such as distribution services, are still lacking a basic regulatory framework. Most sectors remain largely open to foreign as well as domestic investors. Although this allows for a competitive environment that can promote growth and private sector development, the lack of adequate or absence of regulation may diminish the benefits of an open services regimes and can create obstacles to the expansion and investment of the services sector.

Except for audiovisual services, few sectors face quantitative restrictions. The most common measures found in the services sector are “qualitative” restrictions—measures that do not seek to establish a quantitative ceiling in the provision of services, but that otherwise set certain conditions that must be met before the supply of the services. When the conditions to be met are based on nationality or country of origin, such qualitative restrictions are inherently discriminatory and may constitute a de facto quantitative restriction; however, not all qualitative measures incorporate discriminatory requirements, but set conditions that apply to domestic and foreign providers alike. Examples of qualitative measures include residency requirements, restrictions on foreign employment, limitation on land ownership, and knowledge transfer requirements.

Quantitative restrictions, on the other hand, are meant specifically to limit the number of services providers that may be established in the country or in a certain area, the number of operations that they may perform, or the foreign equity participation in a services company or sector. Liberia’s sectoral policies feature few quantitative restrictions, mostly related to the provision of public services, such as postal services, telecoms (fixed line), and energy distributions.

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44

Most sectoral limitations set out conditions affecting the operation (or conduct) of businesses, except in professional services, where limitations on market access and establishment are numerous. Qualitative measures affecting establishment are found mostly for professional services in the form of qualification, nationality, and residency requirements. Restrictions stemming from administrative practices in specific services sectors add to the general poor governance environment affecting business in the country. Such de facto limitations are most noticeable in professional services, distribution, construction, insurance, and transport services. Overall, the sectors most affected by sectoral limitations are professional services, construction services, transport, and tourism, as reflected in figure 4.1. However, only professional services are subject to heavy regulatory restrictions, while most other sectors face limitations stemming from administrative practices rather than actual laws and regulations. Tables 4.1 and 4.2 offer additional details on the restrictions affecting the establishment (table 4.1) and operation (table 4.2) of each of these services sectors.

Figure 4.1  SECTORAL RESTRICTIONS ON INVESTMENT IN SERVICES SECTORS

POLICIES & GOVERNANCE

Table 4.1  MEASURES AFFECTING OPERATIONS OF SERVICES COMPANIES*

ADMINISTRATIVE PRACTICES

LEGAL AND REGULATORY MEASURES

Quantitative Professional Business Postal and courier Telecom Audiovisual Construction Distribution Educational Environmental Insurance Banking Health and Social Tourism Recreational Transport

Qualitative

4

7

12

20

24 25 26

22 18

20

15 19

16 6

24

26

20

26

20

26

20

25 26

16

8

20

8 18

23

25 26 27

Notes: The yellow square indicates where restrictions are applied and the numbers inside are as follows: (1) Numerical restrictions; (2) Screen/performance quotas; (3) Performance requirements (mandatory); (4) Numerical Restrictions; (5) Other; (6) Nationality/residency (senior personnel); (7) Residency requirements (services suppliers); (8) Restrictions on foreign employment;(9) Discriminatory taxation; (10) Access to subsidies; (11) Knowledge transfer; (12) Advertising limitations; (13) Rules on anticompetitive behavior; (14) Limitations on distribution channels; (15) Price Controls; (16) On transfer of funds; (17) Type of shares owned by foreigners; (18) Access to government contracts; (19) Other; (20) Outdated/lacking regulation; (21) Requirements not publicly disclosed; (22) Ambiguous/unclear requirements; (23) Unofficial fees; (24) Inconsistent regulation; (25) Discriminatory application; (26) Deficient enforcement; and (27) Other. *Operation regulations are also known as conduct regulations.

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Table 4.2  MEASURES AFFECTING ESTABLISHMENT OF INVESTMENTS IN SERVICES

ADMINISTRATIVE PRACTICES

REGULATORY MEASURES

Quantitative Professional Business services Postal and courier Telecoms Audiovisual Construction Distribution Educational Environmental Insurance Banking Health and Social Tourism Recreational Transport

Qualitative 10 11 12 13 14 15 16

1

20

22

12

1 1

2

19

2

7

7

12

22 19

2

22

12

1 4

19 17

12

19 20

22 23

12 12

23

Notes: The yellow square indicates where restrictions are applied and the numbers inside are as follows: (1) Monopoly/exclusive service suppliers; (2) Numerical restrictions; (3) Zoning/Geographical restrictions; (4) Limitations to foreign equity 1-50; (5) Limitations to foreign equity 50-99; (6) ENTs; (7) Authorization requirements; (8) JV requirements; (9) Other; (10) Licensing (qualifications); (11) Licensing (experience); (12) Nationality (for services supplier); (13) Residency (for services supplier); (14) Track record requirements; (15) Requirement to subscribe to association; (16) Domestic partner requirement; (17) Form of establishment; (18) Prohibition; (19) Minimum capital requirements; (20) Other; (21) No licenses or permits being granted; (22) Requirements not publicly disclosed; (23) Ambiguous/ unclear requirements; (24) Unofficial fees; (25) Inconsistent/unpredictable regulation; (26) Discriminatory application; (27) Burdensome administrative procedures; and (28) Other.

Professional services play a critical role in the functioning of modern economies. Accounting, for example, is a critical component in the infrastructure of a market economy. In addition to generating and processing information concerning the financial position and profitability of operations—essential for good financial management and accountability—accounting provides the foundation of a country’s fiscal system and plays a key role in corporate governance (Trolliet and Hegarty 2003). Effective law and justice systems are key structural pillars of sustainable development and poverty reduction (Cattaneo and Walkenhorst 2010). The engineering sector plays a vital role in the development and maintenance of a country’s physical infrastructure and is essential to the productivity and sustainability of other economic activities. The use of professional services is associated with higher labor productivity. In all six southern African countries documented in the World Bank Survey of Users of Professional Services, for instance, firms that used accounting, legal, and engineering services had higher average labor productivity than firms without professional services linkages (World Bank 2011b).

Despite their importance, professional services are Liberia’s most restrictive services sector and remain severely underdeveloped. Professional services, particularly legal and accounting services, are typically among the most restricted services to foreign participation for countries at all levels of development. The sector is commonly affected by nationality or residency limitations, domestic partnership requirements, or restrictions in the form of establishment (Borchert, Goottiz, and Mattoo 2012). In Liberia, legal and accounting services stand out as the most restrictive sectors, whereas architectural services and engineering are greatly liberalized. However, the major challenges of all professional services in Liberia are the capacity limitations and a poor governance and regulatory framework for the difference professions.

LEGAL SERVICES Legal services remain completely closed to foreign participation, including for the provision of services related to international law. Legal services are usually a sector of interest for liberalization for WTO members, but the depth of liberalization varies among members. The Liberian National Bar Association acts as the main regulating body. The legal profession in Liberia is regulated by the Judiciary Law of 1972 and different Rules of Court that govern the interaction between the legal professionals, their clients, and the Liberian courts. To practice law in Liberia, the professional must be a Liberian citizen, as set out in the Judiciary Law (para 17.1), hold a recognized title of in law, and must be inscribed in the Bar. About 365 lawyers are registered with the Liberia National Bar Association. Table 4.3 provides further details on regulatory restrictions in legal services. Although there is no express definition of the practice of law in Liberia, it is understood to cover not only access to domestic courts, but also the provision of legal opinions and the practice of alternate dispute resolution, such as arbitration and mediation. Unlike other

POLICIES & GOVERNANCE

Professional services: legal, accounting, & engineering

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Table 4.3 RESTRICTIONS AFFECTING PROFESSIONAL SERVICES

ESTABLISHMENT

RM Legal (domestic law) Legal (international law) Accounting, auditing Taxation services Architectural Engineering

OPERATION

P

RM

AP

2

4

7

11

13 14 15

18

2

4

7

11

13

15

18

2

3

5

7

8

12

14 15

18

2

3

5

7

8

12

14 15

18

2

7

15

18

2

7

15

18

Notes: Column subheadings are as follows: (RM) Regulatory Measures and (AP) Administrative Practices. The yellow square indicates where restrictions are applied and the numbers inside are as follows: (1) Numerical restrictions; (2) Licensing (qualifications); (3) Licensing (experience); (4) Nationality (for services supplier); (5) Residency (for services supplier); (6) Track record requirements; (7) Requirement to subscribe to association; (8) Domestic partner requirement; (9) Form of establishment; (10) Other; (11) Requirements not publicly disclosed; (12) Numerical restrictions; (13) Advertising limitations; (14) Limitations on Pricing; (15) Missing or outdated or missing regulations; (16) Requirements not publicly disclosed; (17) Ambiguous/unclear requirements; (18) Deficient enforcement; and (19) Other.

countries, the legal profession in Liberia does not recognize a difference between the practice of domestic law and international or foreign law. This entails that foreign professionals cannot provide any legal services in Liberia, and the practice remains limited to Liberian nationals. In practice, since some aspects of Liberian law are inspired by laws of the United States, occasionally foreign lawyers provide some degree of advice to multinational companies subject to an express disclaimer and are often involved in contract negotiations and drafting, but they are not free to establish themselves in the country or practice beyond the engagement with such clients.

Lawyers are not allowed to advertise in Liberia.

Beyond WTO accession negotiations, regulations affecting legal services are difficult to access, and governance remains poor. The regulatory instruments relative to the sector are not readily available, and the restrictions, such as the advertising limitations, are commonly known but their legal basis is not. Furthermore, important gaps exist in the regulatory framework for the legal profession, including a law on alternate dispute resolution, clear guidelines, and procedures in the enforcement of the Code of Ethics and continuing education requirements for legal professionals. This gap is the result of the weak regulatory capacity of the professional association and in general the poor conditions for the development of legal capacity in Liberia, where only one law school is in place and faces important challenges for the delivery of high-level education, including lack of access to legal resources and references.

Liberia’s legal services sector could benefit from greater exposure to international practices.

Although Liberia’s judicial system faces major structural challenges, numerous options may allow for gradual reform and improvement of the legal capacity and expansion of the sector in Liberia.

In fact, given the current conditions for education of legal professionals in Liberia as well as the

ACCOUNTING & TAXATION A new framework for accounting has set out limitations on foreign establishment, but improved governance and regulation are supporting the sector’s development. The regulatory framework for accounting is set out in the LICPA Act of 2011, which governs the functions of the Liberian Institute of Certified Public Accountants (LICPA). Like legal services, the accounting sector is one of the professional services activities that attract greater attention in WTO accession negotiations. The sector stands out with important restrictions on foreign participation in Liberia’s open regime. However, a program to enhance local capacity and improve the regulatory framework is in place with the support of international partners, which is leading to increased capacity and improved governance in the sector.

The LICPA Acts puts a strong focus on residency requirements and partnerships by foreign firms with Liberian accountants. The act provides a broad definition of accounting services, including matters relating to accounting, bookkeeping, and tax advice. The regulation for accounting does not focus on excluding foreign professionals and does not prescribe nationality requirements, but it does require, in addition to the adequate qualifications, residing in Liberia for at least three years before being able to be licensed as a public accountant in Liberia (Section 24, 5). The act also expressly recognizes the ability of Liberian certified accountants to partner with international networks of accounting firms but sets out a mandatory revenue distribution requirement for which the Liberian registered firm is to receive at least 35% of the revenue generated in Liberia as a result of the partnership (captured as “numerical restrictions” affecting the operation of accounting services in table 4.3).

From a trade policy perspective, these requirements amount to substantial restrictions on trade and investment in services. A three-year residency seriously limits the ability of foreign professionals to provide services in the Liberian market, thus limiting the pool of skills available in the sector. In addition, the revenue distribution requirement can be considered a quantitative measure on financial transactions for foreign firms operating in the country. As these types of quantitative restrictions tend to receive attract attention in trade negotiations, Liberia should

POLICIES & GOVERNANCE

services integration process in the context of ECOWAS, the requirement for Liberian nationality for lawyers is effectively limiting the development of the sector. Gradual reform of the existing regulatory framework, which may include alternative measures for nationality requirements and allowing foreign professionals to establish themselves in Liberia, could increase the capacity of the sector to address the demand of the Liberian private sector and prepare the country for a deeper regional integration, as greater skills and international practice are introduced in the market. To ensure greater spillovers, foreign firms established in Liberia, in partnership with local firms and lawyers and Liberian National Bar Association, may provide training or apprenticeship programs or partner with the School of Law of the University of Liberia to update curricula and expand coursework.

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be prepared for discussing options for this measure in the context of its WTO accession negotiations. Alternatives that Liberia may consider include a transitional period of its phase out, or its replacement by fewer training requirements by foreign accounting firms.

Despite these restrictions, the accounting sector in Liberia is growing and improving capacity and regulation. Although the accounting services market remains small in Liberia, with 40 registered accountants and 10 firms, it is growing, and some of the big four accounting companies are in the process of establishing an office in the country. This expansion is associated with the economic growth of the country and increasing foreign investment but also relates to the efforts of the regulatory agency to increase capacity in the sector. Indeed, in partnership with international donors, LICPA has been engaged in developing and updating curricula relevant to accounting in the universities, as well as designing, with the support of the Institute of Chartered Accountants of Ghana, a program for developing capacity and certifying public accountants in Liberia—a possibility that did not exist in the past. The cooperation also foresees adopting regulation on accounting standards, with the support of international organizations.

Distribution services: wholesale & retail Distribution services are Liberia’s largest employer in the services sector. A labor force survey conducted in 2010 recorded more than 250,000 Liberians working in retail services, which amounts to more than half of the population employed in services and around a quarter of all employed Liberians. The sector is dominated by self-employed and family businesses; 60% of retailers work alone. Retail services are mostly informal and are carried out more as a subsistence activity than a profession: According to the labor force survey conducted by the International Labour Organization, wages in retail, $36 per week, are among the lowest in Liberia.

Both wholesale and retail services are open to domestic and foreign suppliers, but restrictions apply to certain products. No general restrictions are in place on establishment of a business, which remains open to both foreign and domestic investors on an equal footing. Also, there appear to be no restrictions on cross-border retail. However, the Investment Act of 2010 sets aside the distribution of some specific products for Liberian-owned companies. These products include the following:

›› ›› ›› ›› ›› ››

RETAIL SALE OF RICE AND CEMENT RETAIL SALE OF TIMBER AND PLANKS RETAIL OF GASOLINE (GAS STATIONS) IMPORTATION OR SALE OF SECOND-HAND OR USED CLOTHING DISTRIBUTION IN LIBERIA OF LOCALLY MANUFACTURED PRODUCTS IMPORTATION AND SALE OF USED CARS (EXCEPT AUTHORIZED DEALERSHIPS FOR CARS OF THEIR OWN MAKE).

›› ›› ›› ›› ››

STONE AND GRANITE DRINKING WATER IN SACHETS ANIMAL AND POULTRY FEED BAKERY PRODUCTS PHARMACEUTICALS

The precise scope of these restrictions remains unclear, and practice differs from legal guidelines.

No decree or other secondary regulation implements the Investment Act, so the scope for some of these limitations is not clearly defined (e.g., it is not clear whether a minimum investment is required to engage in wholesale, retail, or either of them, for the listed goods). Even in those sectors that are more clearly defined, practices suggest otherwise that introduce additional uncertainty. The act refers to “retail sale of rice and cement” as activities reserved to Liberian nationals.

Nevertheless, rice can be found in supermarkets, some of which are owned by foreign nationals.

Similarly, cement can be bought at a chain of retail stores specializing in construction material, which is a foreign investment from India. In light of these practices, some policy makers consider that the limitation in nationality applies to wholesale distribution of rice, instead of retail as set out in the law. In general, it appears that most of the restrictions listed in the Investment Act are either not applied in practice or they are limited to small retail stores or individual sellers.

In general, the distribution sector remains heavily under-regulated, lacking laws on competition and consumer protection, and suffers from poor monitoring. Liberia lacks a competition policy, which has brought about concerns of unfair competition in the past, especially in the distribution of key commodities such as cement. Indeed, despite measures to open the cement market—historically a monopoly—some restrictions such as the need for import permits for cement and construction materials are still in place. For that reason, cement together with rice and gasoline have been historically subject to price controls. Further, the quality of goods distributed is undermined by the lack of regulation in the sector, namely, on consumer protection and standards, and by poor monitoring of the existing regulations. Liberia’s Commercial Code introduces general rules of liability and implied warranties for all commercial contracts, but those rules lack specificity with the regard to the distribution and, especially, retail sector, setting out consumers’ rights, retailers’ obligations and strict liability, and redress procedures. The poor regulatory framework adds to the weak capacity to develop and monitor the application of health and safety standards.

POLICIES & GOVERNANCE

In addition, a few products can be distributed only by foreign companies if the investment meets a certain threshold ($500,000) or has at least 25% Liberian ownership (for foreign investment above $300,000). This regime applies to the distribution of the following:

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Financial services INSURANCE Liberia’s regulatory framework for insurance remains severely underdeveloped. Insurance services are a key component of a country’s financial services sector and, as such, an important component the economic growth. Recent efforts by the CBL to enhance the regulatory framework for the insurance sector have focused on the control of the capitalization requirement and relicensing of insurance companies established in Liberia. The sector has seen some growth, with the first foreign (Nigerian) insurance companies established in Liberia in 2013, and another one (Ghanaian) in the process of establishment in 2014, which are in addition to the 17 domestic insurers. The market for insurance focuses heavily on the automotive sector, although it is believed that a large share of vehicles do not comply with the mandatory insurance. The main regulatory framework for insurance is set out in the Insurance Law of 1973. Recognizing that the law is inadequate, the CBL, with the support of the FIRST Initiative, drafted a new bill in 2010 and several prudential regulations for the insurance sector. As of May 2014, the Liberia National Insurance Act is not in force, because it is yet to be submitted to the legislature for enactment into law. As a result, the sector continues to be governed by the outdated law of 1973. The insurance law of 1973 permits the establishment of foreign insurance companies in the form of branches but for incorporated entities requires that they be controlled by Liberian citizens. However, it is unclear whether these limitations are applied in practice. On the regulatory side, the Insurance Law of 1973 does not set out adequate measurement principles and disclosure requirements with respect to the financial statements of insurance companies in Liberia. Insurance companies are not required to comply with any national or international accounting standards in financial reporting. Furthermore, the 1973 law does not require insurance companies to publish their quarterly and annual financial reports, which seriously limits the availability of significant information of public interest (World Bank 2011a). More importantly, the institutional framework for the regulation of the insurance sector requires important improvements in capacity as well as greater legal and institutional support. The enactment of the bill for the Liberian National Insurance Act and its implementation by a revamped regulatory body are needed for a solid expansion of the insurance sector.

BANKING Liberia’s banking sector is stable, based on an open and nondiscriminatory policy. The banking sector is governed by the CBL under the framework of the Banking Law (Financial Institutions Act) of 1999. The Banking Law does not set out differential conditions for domestic and foreign financial institutions and allows any person who may meet the technical and legal requirements to be a licensed financial institution. There are nine licensed and operating banks. All banks established in Liberia are foreign owned and controlled, with the exception of the Liberian Bank for Development and Investment, in which foreign participation falls short of 50%, and the Liberian state holds an 18% equity share. The law does seemingly allow for foreign banks to

The CBL is taking steps to expand the financial sector, but important infrastructure, institutional, and regulatory challenges remain. The banking sector in Liberia remains sound and adequately capitalized to absorb shocks. However, operating costs associated with poor infrastructure, especially electricity and the relatively high level of nonperforming loans, still pose serious challenges to the sector (IMF 2012). With the support of IFC, the CBL has been improving regulation to establish a collateral registry and a more robust credit reference system. A Collateral Registry has been set up, and its launch is scheduled for the third week of June 2014. The CBL will undertake a self-assessment of its compliance with the new Basel Core Principles, with a view to aligning its frameworks and practices with international standards, taking into consideration the specific circumstances of the Liberian and regional experiences (IMF 2012). It is recognized that the CBL’s personnel is generally knowledgeable and adequately staffed, at least in comparison with other government agencies, but some CBL’s policies have been questioned as going beyond its mandate.

Tourism Tourism is Liberia’s services sector with the greatest growth potential in the short to medium term. This is also the case due to the current low base of the sector. The years of strife during the civil war entailed the loss of the tourism industry in Liberia, which until recently has struggled to resume. Liberia’s first cruise ship of the postwar period, the National Geographic Explorer, docked in Monrovia in 2012 with 150 passengers on board, which may be have been largest group of tourists to visit the country since the 1970s. In recent years, tourism services have been expanding with investment in new and renovated hotels and the opening of travel agencies. The growth of the sector is mostly linked to expats based in Liberia or to Liberians living abroad and coming back to the country for visits.

The regulatory and institutional framework for the tourism sector is virtually nonexistent. Despite its great potential, tourism has seemingly been left out of policy priorities. The policy and regulatory body in charge of the sector is the Bureau of Tourism, which is part of the Ministry of Information, Cultural Affairs and Tourism. The bureau employs about 20 persons in total. No national policy or strategy for the tourism sector is in force. A draft strategy has been prepared by the bureau, but it is yet to receive any official endorsement or even become public. As a result,

POLICIES & GOVERNANCE

establish as domestically established institutions or as branches, for which they are required to appoint a legal representative domiciled in Liberia. However, all foreign banks in the country are locally incorporated, and the extent to which the authorization for foreign branches is effective is unclear. In the banking sector, some restrictions apply also on the nationality and residency of managers and governors. It remains unclear, however, whether this restriction stems from the horizontal practices by the Ministry of Labour or from sector-specific regulation.

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Table 4.4 RESTRICTIONS AFFECTING TOURISM

ESTABLISHMENT

RM Hotels (3–5 stars) Hotels (1–3 stars, guesthouses) Travel agencies Tour operators

OPERATION

AP

RM

AP 14 15

4* 4** 4*

19

14 15 8

14 14

Notes: Column subheadings are as follows: (RM) Regulatory Measures and (AP) Administrative Practices. The yellow square indicates where restrictions are applied and the numbers inside are as follows: (1) Numerical restrictions; (2) Licensing (qualifications); (3) Licensing (experience); (4) Nationality (for services supplier); (5) Residency (for services supplier); (6) Track record requirements; (7) Requirement to subscribe to association; (8) Domestic partner requirement; (9) Form of establishment; (10) Other; (11) Requirements not publicly disclosed; (12) Numerical restrictions; (13) Advertising limitations; (14) Missing or outdated or missing regulations; (15) Requirements not publicly disclosed; (16) Ambiguous/unclear requirements; (17) Unofficial fees; (18) Other; and (19) No restrictions. *Not applied in practice. **Suggested for future regulation.

no policy or regulatory guidelines apply to the tourism sector. The sector is mostly governed by the general framework, including the law on investment and the incentives framework. A few references specific to the tourism sector can be found in general laws:

›› ››

I N V E S T M E N T AC T O F 2 010 : Travel agencies are listed as a sector reserved exclusively for Liberians. However, regulators consider that this restriction is not applied in practice, and that some travel agencies are indeed owned by foreigners through partnership with Liberians.

R E V E N U E C O D E O F 2010 : “Tourism carried out through tourist resorts, hotels and cultural sites” is listed as one of the sectors eligible for the special incentives scheme.

Some restrictions apply, and others may be introduced in the future. No major regulatory restrictions affect the tourism industry today, but, indeed, foreign participation is welcomed as a step to expand the sector. The only restriction is the abovementioned nationality limitation, which may de facto operate more like a partnership requirement. However, some policy makers consider that the adoption of a tourism policy and regulatory framework would allow introducing further limitations. Speculations on possible restrictions that may be applied relate mostly to nationality limitations for operators, car rental agencies, or smaller accommodation services, such as guesthouses, bed-and-breakfasts, and one- or two-star hotels. There is also a registration requirement for all business involved in the tourism sector, although regulators acknowledge that many operators are not aware of this requirement. The registration process is meant to check for compliance with industry standards, but in practice it operates mostly as a source of revenue for the ministry.

The sector suffers severely from lack of adequate regulatory standards. The main task of the Bureau of Tourism is controlling the observance of standards, which is done through the annual

Other services: business services, construction, & education Most services are not subject to sector-specific regulation and are therefore governed by the open general regime on services trade and investment. No specific laws and regulations govern the condition of establishment of business services or construction, educational, and audiovisual services, but some of these sectors are partially affected by other policies and disciplines. To begin, to the extent that there is not specific regulation, they are subject to the regime set out in the investment law and other general disciplines and thus see no major restrictions to trade and investment in those sectors. Similarly, the general restrictions on the employment of foreign personnel also apply to these sectors.

Business services are generally open, but some restrictions are found in the investment law and side regulations. “Business services” includes a broad range of services mostly oriented toward other businesses. They include (1) computer-related services, (2) research and development services, (3) real estate services, (4) rental and leasing services of vehicles or equipment, and (5) a residual category of “other business services” that lists 20 different services, including advertising, management consulting, services incidental to other industries, and printing and publishing. Most business services are usually unregulated, although some of them, such as real estate services, may be subject to registration or licensing requirements. Liberia does not feature specific regulation of any of these business services, and as such these services are open to establishment by Liberians and foreign alike or may be provided cross-border. The Investment Law, however, reserves some specific business services to Liberian nationals, namely, advertising, repair of shoes, tires and automobiles, and printing services (table 4.5). Some restrictions are also applied as a matter of practice, such as vehicle rental, which authorities reserve to Liberian nationals. Services related to energy distribution are affected by of the monopoly in the sector, via the state-owned Liberia Electricity Corporation. The investment law also reserves the establishment of cinemas to Liberians, which falls under audiovisual services.

The growth of business services in Liberia remains constrained by the shortage of skills and poor infrastructure in telecommunications and energy. Some of the activities that make up business

POLICIES & GOVERNANCE

inspection and registration renewal (and fee collection). However, no national standards are set for hotels or restaurants, and the ministry relies on regional (ECOWAS) guidelines, but in practice it lacks capacity to enforce them. In practice, inspectors are guided by an informal checklist, which includes presence of a telephone and television in rooms, wall-to-wall carpeting, uniformed staff, and similar amenities to establish the category of the hotel. Monitoring for hygiene and safety standards is done with the inspector’s best knowledge, although they are not trained in such areas. Cooperation with other specialized agencies on heath standards does not take place, and each agency tends to perform its own monitoring.

04 SECTORAL SERVICES:

55

ENHANCING REGULATION SERVICES TRADE IN LIBERIA

56

Table 4.5 RESTRICTIONS AFFECTING BUSINESS SERVICES, CONSTRUCTION, EDUCATION, AND

AUDIOVISUAL

ESTABLISHMENT

OPERATION

RM Computer services Research and development Real estate services Rental and Leasing “Other business services” (except: Advertising Services incidental to energy Shoe repair Printing and publishing) Construction services Education services Audiovisual services

AP

RM

AP 19 19 19

4 19 4

14

1 4 4 2

14

2

10 4

16

14 14

Notes: Column subheadings are as follows: (RM) Regulatory Measures and (AP) Administrative Practices. The yellow square indicates where restrictions are applied and the numbers inside are as follows: (RM) Regulatory Measures and (AP) Administrative Practices. The yellow square indicates where restrictions are applied and the numbers inside are as follows: (1) Monopoly; (2) Licensing (qualifications); (3) Licensing (experience); (4) Nationality (for services supplier); (5) Residency (for services supplier); (6) Track record requirements; (7) Requirement to subscribe to association; (8) Domestic partner requirement; (9) Form of establishment; (10) Other; (11) Requirements not publicly disclosed; (12) Numerical restrictions; (13) Advertising limitations; (14) Missing or outdated or missing regulations; (15) Requirements not publicly disclosed; (16) Ambiguous/unclear requirements; (17) Unofficial fees; (18) Other; and (19) No Restrictions.

services have become valuable niches for services exports by developing countries and even LDCs. In particular, business services encompasses a wide range of IT services, such as network installation and maintenance, software development, and system integration, and IT-enabled services, that is, back-office operations performed or delivered through IT channels, usually referred to as BPO services. In recent years, numerous developing and low-income countries have become successful exporters of such IT-related business services. The cases of India and the Philippines are well-known examples of global exporters of business services, but African countries such as Ghana, Kenya, and Nigeria as well have become solid exporters within their region. Successful provision of IT-related business services depends critically on the availability and quality of human resources (Engman 2010) and the existence of competitive telecommunication markets, especially for broadband services (Sudan et al. 2010). Other IT services, such as database services and network operation, also depend heavily on reliable and efficient energy. In Liberia the recent economic growth is promoting the emergence of a dynamic IT-related business services sector, which is competing against regional firms for business in Liberia. However, the sector still faces major supply-side constraints in the main determinants of business services exports to become a regional player. In particular, the shortage of general skills is limiting the development of even those areas that require less technical knowledge, such as network installation and maintenance.

There are no specific limitations on construction services, which is subject to the general regulations on investment and employment. In contrast to other professions in Liberia, no nationality requirements are in place for engineers, and anyone who has attained the necessary training and certification from any recognized institution can practice or engage in engineering upon obtaining a license from the Ministry of Public Works. Similarly, no particular restrictions are in place as to the establishment of foreign construction firms, and the domestic market is dominated by foreign companies, especially Chinese, Lebanese, and Nigerian. In Liberia the Ministry of Public Works is responsible for the regulation and licensing of engineers and the certification of construction works. No examination requirement is required for foreign engineers, and standards for construction are poor and badly implemented. Regulation is generally restricted to fee collection because no monitoring mechanisms are in place to track unauthorized practices.

Private education is also generally unrestricted but suffers from weak standards and monitoring.

The sector is broadly regulated by the Education Law, with no major restrictions—or indeed regulatory standards. In recent years universities and schools in Liberia have expanded, mostly through private initiatives. It is estimated that about 60% of Liberian high school students attend private institutions, mainly religious-affiliated. However, it is considered that the Commission on Higher Education is failing to provide policy guidelines for establishing higher learning institutions, as well as in coordinating, monitoring, evaluating, and accrediting the institutions.

POLICIES & GOVERNANCE

In addition, high prices of electronic equipment, due not only to a limit market size but also to customs and transport costs, limit the competitiveness of the sector.

04 SECTORAL SERVICES:

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59

05

CONCLUSION & POLICY RECOMMENDATIONS

Services have been an essential component of Liberia’s economic growth in the last decade and should remain the priority as key inputs to other sectors of the economy. Growth in the services sector, in particular backbone services, such as financial services, telecoms, and transport and logistics, has supported the expansion of the economy as a whole and allowed for growth in other export-oriented activities, including agribusiness and mining. The further development of these key sectors, which are still severely underdeveloped, should remain Liberia’s priority policy regarding trade and investment in services. Liberia’s growing reliance on the import of “modern” services, including financial, telecoms, and professional and other business services, further confirms the need for the development of a strong services sector in Liberia.

Liberia’s accession to the WTO offers an opportunity to address key improvements in the regulatory and institutional framework for services to advance in that priority. Also WTO accession could attract new foreign operators that could support the modernization and expansion of the services sector in general by increasing quality, variety, and lowering costs. However, engaging in demanding multilateral negotiations demands not only the establishment of efficient institutional procedures, but also the improvement of the effectiveness of Liberia’s trade policies. Liberia should strive to ensure that its open policies and the efforts put into WTO accession are not undermined by deficient administrative practices and lack of clarity in its regulatory framework.

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Reducing horizontal regulatory restrictions The regulatory regime for trade and investment in services in Liberia is generally open and nondiscriminatory, which should facilitate trade negotiations. In recent years, Liberia has advanced in improving the conditions for business, both domestic and foreign alike, and removing discriminatory measures against foreign suppliers. With a view to attracting foreign companies, the GOL introduced in 2010 the Investment Act and an amendment to the Revenue Code, eliminating general restrictions on foreign investment and establishing an incentives scheme. This general framework provides an open regime for the establishment of foreign services suppliers. Similarly, no major limitations apply to services provided cross-border. This suggests that Liberia’s legal framework is generally in line, at least on horizontal regulations, with the WTO’s main obligations on services trade. From this perspective, Liberia’s main challenge vis-à-vis WTO services disciplines relates to the need to develop or update the regulatory framework in many services sectors. Ideally the GOL should define the policies they wish to adopt with regard to those sectors before WTO negotiations advance into those areas.

Some horizontal restrictions remain in place. Some horizontal regulatory restrictions, however, such as labor market tests (e.g., economic needs tests for foreign employees) and limitations on land ownership, continue to apply. These limitations may be justified on broader policy priorities, and indeed many countries, including OECD members, have listed similar reservations in their trade agreements, including in their WTO commitments. The GOL should take account of those cases when negotiating their own agreements so as to gain flexibility for its measures.

While labor market tests pursue legitimate policies, alternative measures are available to achieve those goals with greater advantages from a policy and practical perspective. Policies to promote domestic employment and transfer of skills from foreign investments are common across countries at all levels of development. However, measures more transparent and predictable than the ones currently applied by the GOL can help achieve those goals, while further contributing to a more business-friendly environment. Although the actual impact of these restrictions varies on a caseby-case basis, labor market tests are considered among the most restrictive measures to foreign trade and investment, largely because they offer great discretionary power to the implementing authorities, which introduces opaque procedures and reduces predictability. In the case of Liberia’s labor market test, this is further accentuated by the fact that the Ministry of Labour retains additional discretion in deciding the duration of work permits of foreign employees, which does not follow any available regulatory guidelines. Although it can be considered that the elimination of discriminatory policies in the labor market may bring about the greatest benefits in the long run, it is unlikely that multilateral trade negotiations will impinge on this area. However, to achieve similar goals of domestic employment, but with a view to improving transparency, various WTO members, including several Latin American countries, have inscribed in their current schedule of commitments a requirement that prescribes a maximum percentage of foreign employees in domestic firms. In Chile, for example, foreign employees may not exceed 15 percent

Greater transparency in the duration of labor permits would further enhance the business environment. Labor permits for foreigners are not only subject to economic needs test but also lack clear guidelines as to their duration. Practice at the Ministry of Labour is to grant labor permits for one to two years, although longer permits may be granted to managerial and highly qualified staff. An incentive for the authorities to grant shorter permits lies in the fees, which are collected every time a work permit is issued. However, no regulations set out these procedures, and the assessment in done on a case-by-case basis, often involving some degree of negotiation with the investor. An unpredictable framework affects the business environment and creates further opportunities for corrupt practices. The adoption of clear regulatory guidelines, setting out the different types of foreign employees and their maximum period of employment, and the extension of permits for the maximum duration of the contract would enhance conditions for establishment, while allowing the GOL to maintain the policies of promotion of Liberian labor. Furthermore, the conditions and periods of stay of foreign services suppliers is commonly addressed in WTO accession negotiations. Liberia should consider establishing a clear policy on these key matters in advance to discussing them with the WTO membership.

Improving governance & administrative practices From a broader perspective, Liberia’s main limitations to trade and investment in services relate to challenges in governance and poor administrative practice. Although the GOL has made great progress in reducing regulatory barriers to services trade and investment, the institutional framework has yet to make similar progress. The role of institutions in economic development is well established (Acemoglu et al. 2001). In the case of trade in services institutions play a more significant role in the development of services sectors for three reasons: informational problems are more acute in many intermediation and knowledge-based services, the nature of a monopoly or oligopoly is a feature of the “locational” services, and relationship-specific investments must be made by both consumers and suppliers in customized services. Liberia’s institutional deficiencies increase transactions costs, limiting opportunities for the establishment and expansion of services providers. This burdens especially small and medium enterprises, who lack the human and financial resources to address the barriers they face directly with government officials, as is common for larger investments.

RECOMMENDATIONS

of the total staff employed in the country, except for companies of fewer than 25 employees. At the same time, this commitment has been complemented by a market access commitment for the temporary movement of specific services providers categories such as managers, specialists, and contractual services providers. This measure offers greater predictability because services suppliers may decide in advance how that may use this flexibility, and it has reduced the burden on the authorities who need to control for labor market tests while achieving the same policy goals of promoting domestic employment. The GOL should also promote the establishment of joint education and training programs between investors and domestic institutions.

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The main limitations in governance relate to the lack of access to clear regulatory guidelines, which reduces transparency and hampers the business environment. Access to regulation in Liberia remains a challenge even for government officials directly involved in their implementation, which results in regulatory measures being communicated informally to the public and even between government agencies. This further increases discretion in the application of regulatory measures and gives room for unwarranted restrictions to trade and investment. Two policies can help improve this framework: (1) the gradual establishment of simple, clear, and binding government-wide regulatory procedures and (2) the improvement of access to existing business regulations, especially licensing procedures.

Binding, government-wide, procedures for the development and adoption of regulation will support a sound regulation-making framework. A binding guideline, with simple standard procedures for the development and adoption of secondary regulation, will increase transparency, regulatory capacity, and confidence among stakeholders. Such guidelines should reflect best practices in regulation making, incorporating steps relating to disclosure of regulatory goals, stakeholder consultations, interagency coordination, and evaluation of regulatory efficiency.

Liberia may partner with the donor community in the gradual implementation of such a procedure, benefiting from its partners expertise and support.

Liberia’s WTO accession negotiations add further challenges in the development of economic regulation, which will require additional regulatory coordination. Although government-wide guidelines would offer the best results in expanding regulatory capacity and increasing transparency across the board, the need to coordinate regulation-making procedures is even greater when it comes to economic regulation. WTO disciplines span multiple economic sectors and touch upon the mandates of a wide range of government agencies. Obligations on services trade and investment will need to be implemented by multiple ministries and agencies, ranging from the Ministry of Transport, to the Ministry of Information, Cultural Affairs and Tourism, Liberia Telecommunication Authority, CBL, and even professional associations. The effective coordination of the policies of all these institutions is a necessary step for the successful negotiation and later implementation of WTO obligations.

The experience of some LDCs that recently acceded to WTO may be provide useful lessons. The cases of Cambodia and Lao PDR, for example, suggest that a strong coordination unit that can unify the different regulatory approaches and organize the policies of these institutions is an efficient institutional solution to lead the process of WTO accession. Such a coordination agency can be embedded within the trade ministry or be established at interministerial level, but it should in any case enjoy explicit support from the political leadership. As Liberia enters into more intensive negotiations for WTO accession, the GOL should reinforce the small trade ministry team charged with WTO accession with greater resources in terms of human resources and political support. A strengthened trade negotiations team should at the very least be supported by an express mandate to other ministries and agencies to contribute with policy and regulatory

Further public access to existing legal instruments is necessary to increase transparency and predictability of business regulation. The GOL has also made progress in facilitating the establishment of businesses by introducing a one-stop shop for company registration. However, most economic activities require additional licenses or permits to operate, which are available only at the specific ministry or agency that issues them. Information regarding the conditions of such requirements is only found at the agencies, which require in-person inquiries multiple times.

The establishment of an online repository with all laws and regulations relevant to the services sector, including licensing and operations requirements, would provide a major step in advancing transparency and the business environment in the services sector, complementing the progress already made with the simplification of company registration procedures.

Secondary legislation should be enacted to clarify the terms of the main laws. Liberia’s legal framework is overly general and should be complemented with secondary regulation. Most administrative practices relate directly to the implementation of framework laws, such as the investment act, the revenue code, or the labor law, which are broad in nature. An adequate implementation of this legal framework would require the enactment of secondary regulation that defines and gives specific meaning to their terms. Additional regulatory activity is further needed in various specific services sectors, setting out standards and providing clear guidance in the conditions of establishment of operation.

Sectoral regulation Sector-specific regulation is generally underdeveloped or nonexistent, and institutional capacity is weak. However, some services sectors, such as banking and accounting services, have seen greater regulatory progress in recent years. Among the reviewed sectors (which does not include telecoms and transport and logistics) professional services appears as the only services sector subject to heavy regulatory barriers, mainly in the form of nationality limitations or domestic partnership requirements, in particular in legal and accountancy services. In general, a review of specific services sectors confirms that administrative practices, rather than regulatory measures, are the main obstacles to the expansion of services in Liberia.

Particular measures that the GOL should consider in specific services include the following points:

››

L E GA L S E RV I C E S I S O N E O F L I B E R I A’S F E W M A J O R S E RV I C E S S E C TO R S C O M P L E T E LY C LO S E D

To a t t r a c t grea t e r c a p a c i t y, L i b e r i a m a y c o n s i d e r a p artial and gradual o p e ning o f the se c t o r. A mo n g a v a i l a b l e o p t i o n s t o co n s ide r, the e s tab lis hing o f a do me s tic TO F O R E I G N PA RT I C I PAT I O N A N D R E M A I N S G R E AT LY U N D E R D E V E LO P E D .

RECOMMENDATIONS

information not only for the existing regulations, but also as additional ones are being considered.

Also, a dissemination strategy of the implication of WTO accession needs to be put in place.

05 CONCLUSION & POLICY

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ENHANCING REGULATION SERVICES TRADE IN LIBERIA

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p a r t n e r s h i p re q u i re m e n t f o r f o re i g n p ro f e s s i o n a l s a n d l e g a l f i r m s , i n s t e a d o f a co m p l e t e b an to all fo re ign law ye rs , c o uld b e me ntio ne d. Othe r possible o p t i o n s i n cl ude re quire me nts fo r fo re ign firms to p ro v ide o p p o rtu n ities f or p ro fe s s i o n a l gro w th s uc h as training, inte rns hip s , o r fo rmal jo int progr ams w i t h d o m e s t i c a n d f o re i g n e d u c a t i o n a l i n s t i t u t i o n s a i m i n g a t i n c re a s i n g c a p a c i t y i n L i b e r i a ’ s l e g a l p ro f e s s i o n . O t h e r c o u n t r i e s p ro v i d e f o r a s e p ar a t i o n o f t h e p ro f e s s i o n a m o n g s p e c i f i c l e g a l s e r v i c e s , s o m e o f w h i c h m a y b e re s e r v e d t o d o m e s t i c l a w y e r s w h i l e o t h e r s a d m i t c o m p e t i t i o n f ro m f o re i g n p ro f e s s i o n a l s . T h i s s e p a r a t i o n c o m m o n l y re s e r v e s t h e a p p l i c a t i o n o f d o m e s t i c l a w b e fo re natio nal c o urts to do me s tic law ye rs , w hile the pr actice o f i n t e r n a t i o n a l l a w t h ro u g h a r b i t r a t i o n o r a d v i c e o n i n t e r n a t i o n a l l a w o r t h i rd - c o u n t r y l a w s o r i n t e r n a t i o n a l c o n t r a c t s m a y b e d o n e i n c o m p e t i t i o n w i t h f o re i g n l a w y e r s . G re a t e r c o m p e t i t i o n i n t h e s e c t o r c o u l d f o s t e r t h e d e v e l o p m e n t o f t h e l e g a l s e c t o r b y i n c re a s i n g c a p a c i t y a n d e x p a n d i n g t h e o ff e r o f l e g a l s e r v i c e s a v a i l a b l e i n L i b e r i a , a n d i t w o u l d b e n e f i t d o m e s t i c companies involved in international trade and contracts. In addition, the i n s t i t u t i o n a l f r a m e w o r k f o r t h e re g u l a t i o n o f t h e l e g a l p ro f e s s i o n s h o u l d b e s t re n g t h e n e d , a n d re g u l a t o r y s t a n d a rd s f o r q u a l i t y, s u c h a s c o n t i n u i n g e d u c a t i o n re quire me nts and an e ffe c tiv e c o de o f e thic s , s ho uld b e adopted.

››

ACC O U N TA N C Y P R OV I D E S A VA L U A B L E E X A M P L E O F R E G U L ATO RY A N D I N S T I T U T I O N A L P R O G R E S S , A LT H O U G H S O M E R E S T R I C T I O N S A R E L I K E LY TO R E C E I V E AT T E N T I O N D U R I N G

Lib e ria’s p artne rs hip w ith inte rnatio nal do nor s f or th e i m p ro v e m e n t o f t h e a c c o u n t i n g s e c t o r i s re s u l t i n g i n i n c re a s i n g c a p a c i t y, b o t h f o re i g n a n d d o m e s t i c , i n t h e s e c t o r. T h e i n s t i t u t i o n a l a n d re g u l a t o r y fr a m e w o r k fo r the s e c to r has s e e n imp o rtant p ro gre s s , altho ugh standards s t i l l n e e d t o b e de v e lo p e d and ap p lie d ac ro s s the b o ard. Furthe rm ore, some re g u l a t o r y re s t r i c t i o n s i n t h e s e c t o r a re l i k e l y t o a t t r a c t a t t e n t i o n d u r i n g W TO a cc e s s io n ne go tiatio ns , in p artic ular the c urre nt mandato ry q uota on re v e n u e s h a re . Lib e ria s ho uld c o ns ide r o p tio ns fo r the ne go tiatio n of these re s t r i c t i o n s , inc luding trans itio nal p e rio ds fo r its p has e o ut, o r its replacem e n t b y l e s s b u rd e n s o m e t r a i n i n g re q u i re m e n t s d e p e n d i n g o n t h e p o l i c y o b j e ct i v e p u rs ue d.

T R A D E N E G OT I AT I O N S .

››

D I S T R I B U T I O N S E RV I C E S A R E L I B E R I A’S L A R G E S T E M P LOY E R I N T H E S E RV I C E S S E C TO R , B U T T H E S E C TO R R E M A I N S I N F O R M A L , H E AV I LY U N D E R R E G U L AT E D , A N D O F LOW Q U A L I T Y.

W h o l e s a l e a nd re tail dis trib utio n s e rv ic e s are c harac te rize d b y the gen er al l a c k o f i n f o r m a t i o n o n re g u l a t i o n s a n d t h e i r p o o r m o n i t o r i n g a n d i m p l e m e n t a t i o n . The quality o f dis trib utio n s e rv ic e s is lo w, e s p e c ially in ter ms of q u a l i t y a n d s afe ty o f go o ds and the re late d s e rv ic e s (s c he dule s o f deliver y, maintenance warranties, etc.). This affects mostly Liberian small and medium

››

R E G U L AT I O N O F F I N A N C I A L S E RV I C E S D O E S N OT F E AT U R E M A J O R R E S T R I C T I O N S TO T R A D E A N D I N V E S T M E N T, B U T T H E C H A L L E N G E L I E S I N T H E R E G U L AT I O N O F T H E I N S U R A N C E S E C TO R . T h e C B L h a s re ce n t l y m a d e i m p ortant e ffo rts in ado p ting re gulatio n of insurance services, but the sector is still governed by an outdated law t h a t d o es n ot re fl e c t cu r re n t p r a c t i c e . F urthe rmo re , the fo rmal ins titutio nal framework for insurance is virtually nonexistent. The old insurance law f e a t u res n a t io n a l i t y re s t r i ct i o n s t h a t d o no t s e e m to b e ap p lie d in p rac tic e .

B a n ki n g se rv i c e s , o n t h e o t h e r h a n d , a re c lo s e ly re gulate d b y the C BL and d o n ot se t ou t m e a n i n g fu l re s t r i c t i o n s to s e rv ic e s trade .

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TO U R I S M S TA N D S O U T A S A VA L U A B L E S E C TO R F O R S E RV I C E S E X P O RTS , B U T I T H A S C U R R E N T LY FA L L E N O U TS I D E T H E S P OT L I G H T O F P O L I C Y P R I O R I T I E S , A S R E F L E C T E D BY T H E

Although tourism a s a s e c t o r g e n e r a l l y w e l c o m e s f o re i g n p a r t i c i p a t i o n , s p e c i f i c re s t r i c t i o n s re ma i n i n t h e I n v e s t m e n t Ac t , a n d o t h ers may b e intro duc e d as additio nal regulation is enacted. The sector ’s main challenge, however, lies in the absence of a t o u ri sm p o l i cy t h a t w o u l d i d e n t i fy and s e t o ut the main p rio ritie s and a c t i on s f or t he t o u r i s m i n d u s t r y i n L i b e ria.

A B S E N C E O F B A S I C R E G U L AT I O N O R E V E N M A I N P O L I C Y G U I D E L I N E S .

RECOMMENDATIONS

e n t erp ri ses, w h i c h n e e d t o re l y o n i m p orte d inp uts and e quip me nt b ut lac k t h e c a p a c i t y t o i m p o r t l a rg e s t o c k s o n t h e i r o w n . L i b e r i a l a c k s a c o m p e t it i o n po l i c y, w h i c h h a s b ro u g h t a b o u t co nc e rns o f unfair c o mp e titio n in the d i st ri but i o n s e ct o r i n t h e p a s t . L i b e r i a sho uld de v e lo p in the me dium te rm a general regulatory framework for distribution services, including the laws a n d obl i ga t i o n s o f w h o l e s a l e r s a n d re t a ile rs , as w e ll as c o ns ume r p ro te c tio n measures, including simplified procedures for consumer claims. The regulation of distribution services should also clarify some of the restrictions set out in t h e I n v e st me n t Act , a s w e l l a s e s t a b l i s h c le ar guide line s in the dis trib utio n of key c o mmo d i t i e s , i n cl u d i n g fo o d s t u ff and c o ns truc tio n mate rials . In the c o n t e x t o f W TO a c c e s s i o n , a c a re f u l a s s e s s m e n t o f t h e c u r re n t l i m i t a t i o n s a n d t h e n ee d t o s ch e d u l e t h e m s h o u l d b e c o ns ide re d.

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Concluding remarks In general, Liberia’s services sector is underdeveloped, which reduces the country’s competitiveness and impairs the development of further trade-oriented activities. At its current stage of economic development, the main role of the services sector is to offer key infrastructure services that support a wide range of economic activities, thus expanding business opportunities and increasing competitiveness. In particular, Liberia should focus on the further development of backbone services such as financial services, telecommunications, transport and logistics, and professional services.

From a regulatory perspective, Liberia’s main policy to foster the development of the services sector should focus on improving governance surrounding the current open regime. Accession to the WTO provides an opportunity to showcase the open and nondiscriminatory policies toward foreign participation that Liberia has adopted in recent years. However, for this open regime to materialize into further investments and the expansion of the services sector, it needs to be complemented with a transparent and effective institutional framework. The two main measures that Liberia should consider to improve governance of the services sector are the following: The gradual adoption of simple binding procedures for the regulation-making process. A government-wide procedure for the development and adoption of regulation would help enhance transparency as well as increase regulatory capacity. Such a mechanism, complemented by a specific trade negotiations coordination unit, is particularly necessary in the context of WTO accession negotiations because they require the coordination of policies and regulations through a wide range of government ministries and agencies.

The improvement of public access to existing business regulations, especially licensing procedures. Simplified public access to laws and regulations relating to licensing and the operation of services firms would complement the government’s current efforts to improve conditions for new businesses through a one-stop shop for company registration and will increase transparency and provide confidence to stakeholders.

Trade and investment in services are already an essential component of Liberia’s economic recovery. Important challenges remain in strengthening governance in the services sector, as well as in improving skills availability and telecommunication. Significant progress will need to be made on this front to reap the greater benefits of a modern services sector and expand Liberia’s services exports. As Liberia’s dynamic population and leadership have demonstrated great willingness to take on major challenges in recent years, the region should expect the emergence of a determined player in trade and investment in services.

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APPENDIX

SERVICES SECTORS & SUBSECTORS

1 BUSINESS SERVICES

A Professional services

1 2 3 4 5 6 7 8 9 10

B Computer and related services

1

Legal services Accounting, auditing, and bookkeeping services Taxation services Architectural services Engineering services Integrated engineering services Urban planning and landscape architectural services Medical and dental services Veterinary services Services provided by midwives, nurses, physiotherapists, and paramedical personnel 11 Other

2 3 4 5

Consultancy services related to the installation of computer hardware Software implementation services Data processing services Database services Other

C Research and development services

1 2 3

R&D services on natural sciences R&D services on social sciences and humanities Interdisciplinary R&D services

D Real estate services

1 2

Involving own or leased property On a fee or contract basis

E Rental/leasing services without operators

1 2 3 4 5

Relating to ships Relating to aircraft Relating to other transport equipment Relating to other machinery and equipment Other

F Other business services

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Advertising services Market research and public opinion polling services Management consulting services Services related to management consulting Technical testing and analysis services Services incidental to agriculture, hunting, and forestry Services incidental to fishing Services incidental to mining Services incidental to manufacturing Services incidental to energy distribution Placement and supply services of personnel Investigation and security Related scientific and technical consulting services Maintenance and repair of equipment (not including maritime vessels, aircraft, or other transport equipment) Building-cleaning services Photographic services Packaging services Printing, publishing Convention services Other

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2 COMMUNICATION SERVICES

A Postal services B Courier services C Telecommunication services

D Audiovisual services

Voice telephone services Packet-switched data transmission services Circuit-switched data transmission services Telex services Telegraph services Facsimile services Private leased circuit services Electronic mail Voice mail Online information and data base retrieval Electronic data interchange (EDI) Enhanced/value-added facsimile services, including store and forward, store and retrieve 13 Code and protocol conversion 14 Online information and/or data processing (including transaction processing) 15 Other

1 2 3 4 5 6 7 8 9 10 11 12

1 2 3 4 5 6

E Other

3 CONSTRUCTION AND RELATED ENGINEERING SERVICES

A General construction work for buildings B General construction work for civil engineering C Installation and assembly work D Building completion and finishing work E Other

Motion picture and video tape production and distribution services Motion picture projection services Radio and television services Radio and television transmission services Sound recording Other

DISTRIBUTION SERVICES

A Commission agents’ services B Wholesale trade services C Retailing services D Franchising E Other

5 EDUCATIONAL SERVICES

A Primary education services B Secondary education services C Higher education services D Adult education E Other education services

6 ENVIRONMENTAL SERVICES

A Sewage services B Refuse disposal services C Sanitation and similar services D Other

SECTORS & SUBSECTORS

4

APPENDIX A SERVICES

69

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7 FINANCIAL SERVICES

A All insurance and insurance-related services

1 2 3 4

Life, accident, and health insurance services Non–life insurance services Reinsurance and retrocession Services auxiliary to insurance (including broking and agency services)

B Banking and other financial services (excluding insurance)

1

Acceptance of deposits and other repayable funds from the public Lending of all types, including, inter alia, consumer credit, mortgage credit, factoring, and financing of commercial transaction Financial leasing All payment and money transmission services Guarantees and commitments Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise, the following: (a) money market instruments (checks, bills, certificate of deposits, etc.), (b) foreign exchange, (c) derivative products including but not limited to futures and options, (d) exchange rate and interest rate instruments including products such as swaps, forward rate agreements, etc., (e) transferable securities, (f) other negotiable instruments and financial assets including bullion Participation in issues of all kinds of securities, including underwriting and placement as agent (whether publicly or privately) and provision of services related to such issues Money brokering Asset management, such as cash or portfolio management, all forms of collective investment management, pension fund management, custodial depository, and trust services Settlement and clearing services for financial assets including securities, derivative products, and other negotiable instruments Advisory and other auxiliary financial services on all the activities listed in Article 1B of MTN.TNC/W/50, including credit reference and analysis, investment and portfolio research and advice, and advice on acquisitions and on corporate restructuring and strategy Provision and transfer of financial information, and financial data processing and related software by providers of other financial services

2 3 4 5 6

7 8 9 10 11

12

C Other

HEALTH-RELATED AND SOCIAL SERVICES (OTHER THAN THOSE LISTED UNDER 1.A.H–J)

A Hospital services B Other human health services C Social services D Other

9 TOURISM AND TRAVEL-RELATED SERVICES

A Hotels and restaurants (including catering) B Travel agencies and tour operators services C Tourist guides services D Other

10 RECREATIONAL, CULTURAL AND SPORTING SERVICES (OTHER THAN AUDIOVISUAL SERVICES)

A Entertainment services (including theater, live bands, and circus services) B News agency services C Libraries, archives, museums, and other cultural services D Sporting and other recreational services E Other

SECTORS & SUBSECTORS

8

APPENDIX A SERVICES

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11 TRANSPORT SERVICES

A Maritime transport services

1 2 3 4 5 6

Passenger transportation Freight transportation Rental of vessels with crew Maintenance and repair of vessels Pushing and towing services Supporting services for maritime transport

B Internal waterways transport

1 2 3 4 5 6

Passenger transportation Freight transportation Rental of vessels with crew Maintenance and repair of vessels Pushing and towing services Supporting services for internal waterway transport

C Air transport services

1 2 3 4 5

Passenger transportation Freight transportation Rental of aircraft with crew Maintenance and repair of aircraft Supporting services for air transport

B Rail transport services

1 2 3 4 5

Passenger transportation Freight transportation Pushing and towing services Maintenance and repair of rail transport equipment Supporting services for rail transport services

C Road transport services

1 2 3 4 5

Passenger transportation Freight transportation Rental of commercial vehicles with operator Maintenance and repair of road transport equipment Supporting services for road transport services

D Pipeline transport

1 2

Transportation of fuels Transportation of other goods

E Services auxiliary to all modes of transport

1 2 3 4

Cargo-handling services Storage and warehouse services Freight transport agency services Other

A Space transport

F Other transport services

OTHER SERVICES NOT INCLUDED ELSEWHERE Source: WTO (Services Sectoral Classification List, WTO Document MTN.GNS/W/120).

SECTORS & SUBSECTORS

12

APPENDIX A SERVICES

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