GANTA BORDER POST, SOURCE: ROBERT KIRK CROSS BORDER TRADE ASSESSMENT Learning Evaluation and Analysis Project (LEAP-II)

SEPTEMBER 2018

This publication was produced at the request of the United States Agency for International Development. It was prepared independently by International Development Group LLC (IDG), Robert Kirk. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

CONTENTS

EXECUTIVE SUMMARY 1 1. INTRODUCTION 4 2. CROSS BORDER TRADE IN AFRICA 4 INTRA-REGIONAL TRADE 4 INFORMAL CROSS BORDER TRADE 5 CROSS BORDER TRADE DATA 6 CROSS BORDER TRADERS 7 CHALLENGES IN FORMAL CROSS BORDER TRADE 8 3. CROSS BORDER TRADE IN LIBERIA 9 PRIMARY RESEARCH: SURVEY OF CROSS-BORDER TRADERS AT GANTA AND 15 WHO ARE THE CROSS-BORDER TRADERS? 16 UNDERSTANDING THE RATIONALE FOR CBT AND ICBT 17 TRADE VOLUMES AND COMMODITY COMPOSITION OF CBT 18 CHALLENGES FACED BY CROSS-BORDER TRADERS AS THEY ENGAGE WITH BORDER OFFICIALS AND MOVE GOODS ACROSS THE BORDER 20 GENDER AND CROSS BORDER TRADE 22 CASE STUDY: GANTA BORDER STATION LIBERIA-GUINEA 23 4. RECOMMENDATIONS 24 LIST OF REFERENCES 26

FIGURES Figure 1: Map of Liberia ...... 10 Figure 2: Liberia Doing Business 2018 ...... 11 Figure 3: Liberia Distance to the Frontier 2018 ...... 11 Figure 4: Liberia Rural Border Posts Monthly Imports and Duty Collection 2017 ...... 13 Figure 5: Liberia Revenue Authority Rural Bo Rural Border Posts Monthly Imports and Duty Collection 2017 ...... 13 Figure 6: Ganta Border Post Imports (cif) and Revenue Collected 2017 ...... 20

TABLES Table 1: Liberia Commodity Composition of Imports and Exports 2016-2017 ($ million) ...... 12 Table 2: Frequency of Cross Border Trading ...... 16 Table 3: Cross Border Trade Gender and Trader Category ...... 17 Table 4: Value of Cross Border Trade at Yekepa ...... 19 Table 5: Value of Cross Border Trade at Ganta ...... 19 Table 6: Number and Share of Unofficial Payments by Cross Border Traders ...... 21 Table 7: Cross Border Trade and Harassment ...... 22

ACRONYMS

ASYCUDA Automated System for Customs Data BM Building Markets CBT Cross-border trade DB Doing Business EAC East African Customs Union ECOWAS Economic Community of West African States FGD Focus group discussion GBV Gender-Based Violence GOL Government of Liberia ICBT Informal cross-border trade IGC International Growth Centre LPRC Liberian Petroleum Refinery Corporation LRA Liberia Revenue Authority LRD Liberian Dollar LSA Liberia Strategic Analysis MRU Mano River Union TKG The Khana Group UEMOA West African Economic and Monetary Union UN United Nations UNIFEM United Nations Development Fund for Women United States Agency for International USAID Development WFP World Food Programme

EXECUTIVE SUMMARY

INTRODUCTION Liberia and its Mano River Union (MRU) neighbors - Cote d’Ivoire, Guinea, and Sierra Leone - have committed to increasing regional integration and intra-regional trade. Against a background of political instability resulting in border closures and large-scale movements of people seeking to avoid the conflicts, intra-regional trade was suppressed. Over the past decade the restoration of political stability has encouraged the growth of cross-border trade (CBT). This has been facilitated by large scale investments in improved road infrastructure along the -Ganta/Yekepa corridor with Guinea. There has been increased migration, particularly young people, to several of Liberia’s border towns. While these developments have been reported in the press, the official trade statistics continue to show negligible trade between Liberia and the neighboring economies.

USAID/Liberia requested a diagnostic assessment on formal and informal trade flows between Liberia and its MRU neighbors. The major questions to be addressed from the assessment are as follows:

 Are cross-border traders, both formal and informal, part of an emerging regional value chain that links with the growth of businesses in the major commercial center - Monrovia?  How closely integrated are the border market sheds with the capital?  Do these cross-border traders represent an important source of domestic revenue that is not being realized because of informality and inefficiencies at the border?  How important is the cross-border trade for alleviating poverty and increasing food security?  What could the government do to reduce the trade costs for cross-border traders?

The assessment draws on existing studies of informal cross-border trade (ICBT) and a survey carried out in February-March 2018 at 13 borders in Liberia’s Nimba and Maryland Counties with Guinea and Cote d’Ivoire. This survey of more than 350 formal and informal cross border traders was completed under the Liberia Strategic Analysis (LSA) Activity. The survey also carried out 87 key informative interviews with a wide range of stakeholders involved either directly or indirectly with cross border trade and conducted nine focus group discussions.

The surveys and interviews collected information on the characteristics of the cross-border traders, identifying the products, and detailing their experiences in moving goods into and out of Liberia to the neighboring countries of Guinea and Cote d’Ivoire. The data collected from the interviews are used to shed light on the validity of assumptions regarding economic linkages, potential missing domestic revenue, and the importance of border trade for poverty alleviation and food security.

MAIN FINDINGS The movement of goods across Liberia’s land borders pre-dates the ‘formal’ boundaries. Longstanding incentives for CBT include: the existence of the same ethnic groups (including extended kinship networks) living on both sides of the border, a history of weak enforcement along long and porous borders, and regionally uncoordinated trade and other domestic policies resulting in large price differences.

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Liberia is a small low-income fragile economy dependent on rents from mineral and forestry exports for half of its GDP. Approximately 80 percent of the adult population is self-employed and most of the self- employed work in the informal sector. When this is separated by gender, nine out of ten women report being self-employed compared to seven out of ten men. The formal trade data show that imports are more than twice the value of exports, and 80 percent of imports originate from outside the MRU. Monrovia Freeport accounts for 75 percent of all imports.

Women accounted for 70 percent of all traders interviewed. This is consistent with earlier work which reported that women represented the majority of cross-border traders. The men engaged in CBT have significantly higher education levels, with almost two-thirds having at least completed secondary education, relative to women where two-thirds had only completed primary education. The LSA survey found increased trade and economic linkages across border between members of the same ethnic grouping. Virtually all of the interviewed traders (95 percent) either owned their own business or jointly with their spouse. Approximately half of all the traders crossed the border once a week with a further 25 percent crossing monthly. Less than 4 percent crossed either daily or several times a day. One noteworthy finding was the large share of traders (more than 40 percent) who had entered the business in the past five years. The large number of new entrants may indicate a relatively rapidly growing market.

Respondents identified the uncertain and depreciating exchange rate between the Liberian Dollar and the currencies of the neighboring economies as their most significant challenge. This indicates the importance of sound macroeconomic fundamentals to all aspects of the economy.

CBT represented the main income source for 86 percent of respondents. The median monthly income from CBT was $61 and $53 for female and male traders respectively. When this is disaggregated, there is a wide range with 40 percent of all traders earning more than $68 per month, and 42 percent earning less than $38 per month. In 2017 Liberia’s per capita GDP was $456, or approximately $38 per month. Households dependent on CBT come from the poorer groups in the country. The approximately 40 percent of respondents earning above the average may result from the interviews being limited to the Nimba and Maryland border areas.

Detailed trade and customs revenue data from the Liberia Revenue Authority, along with data from the Ganta and Yekepa borders show that the revenue collected was broadly constant throughout the year while imports values fluctuated substantially between the dry and rainy seasons.

Approximately 70 percent of formal CBT was in commercial transport, compared with less than half for informal trade. More than half of all ICBT used motorcycles to transport their goods across the border. Imports into Liberia accounted for the overwhelming share of CBT and although agricultural and food products dominated, consumer products (clothing, shoes, and electronic goods) were also present. In contrast, exports from Liberia were modest in size and limited to a narrow range of agricultural products. Almost all the imports into Liberia were sold in the neighboring border market shed, although a small share of the consumer products (clothes, cosmetics) were sent on to Monrovia.

Over 70 percent of cross-border traders admitted making informal payments to an official at the border. More than half of all the respondents made multiple payments. More than 60 percent of respondents reported financial extortion, followed by verbal and sexual abuse as the three main challenges faced by women cross-border traders. Threats of violence and monetary extortion were

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identified as widespread concerns. It is not easy for cross-border traders to lodge complaints to have grievances addressed.

RECOMMENDATIONS  The Government of Liberia (GOL) should recognize the important contribution of the informal business community as a national asset which contributes to economic well-being.

 The GOL should prioritize the development and adoption of a charter for cross-border traders. This will require all stakeholders – government, private traders, and civil society – to engage in a dialogue to develop the code of conduct with rights and responsibilities for all parties. This will contribute to ensuring information on the rules and regulations is publicly available.

 LRA should install ASYCUDA World at the land borders, upgrade the infrastructure, and install electronic data systems for all transactions with a direct link to the LRA Head Office in Monrovia. All staff training should include an integrity module.

 Introduce a simplified trade regime for small traders. Currently any individual importing less than $100 of goods is not required to complete customs formalities. Increasing the limit would exempt many more small traders and would encourage increased use of the official border posts with minimal impact on revenue.

 Commit to increasing Border Agency Coordination, through streamlining procedures, introducing risk assessment and joint inspections.

 Promote Cross-Border Collaboration at the bilateral, sub-regional (MRU) and regional level (ECOWAS).

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1. INTRODUCTION This diagnostic assessment focuses on the formal and informal trade flows between Liberia and its Mano River Union (MRU) neighbors, Cote d’Ivoire, Guinea, and Sierra Leone. The study identifies the key stakeholders involved in cross-border trade (CBT) and utilizes a new survey of formal and informal cross-border trade (ICBT) completed under the Liberia Strategic Analysis (LSA) activity.1 The report discusses Liberia’s cross-border trade in the context of broader complementary research on both formal and informal cross-border trade in Sub Saharan Africa, West Africa, and the MRU.

Small scale trade, both formal and informal, represent an important component of Liberia’s economy and plays a key role in providing sustainable livelihoods for a significant proportion of the lower income population. Most small-scale traders are female with their earnings from trading contribute more than a quarter of their total income. Using data from interviews with individual traders and officials involved in cross-border trade, the report identifies the socio-economic characteristics of the actors engaged in both CBT and ICBT, seeks to quantify the scale and type of products traded, and identify how the trade links to the Liberian economy. Through presenting a more nuanced understanding of Liberian cross- border traders, the report seeks to identify appropriate policies and regulatory responses that will support job creation and income generation for both large and small-scale traders.

Following the introduction, section 2 presents a brief overview of the literature on cross-border trade in Africa focusing on small-scale and informal trade. Section 3 discusses the characteristics of CBT in Liberia drawing on two earlier surveys (International Growth Center, IGC, 2015 and Building Markets, 2016) and the primary research carried out at the Ganta and Yekepa border posts and 11 other border crossings in February-March 2018. Section 4 concludes with a summary of the main policy and regulatory recommendations.

2. CROSS BORDER TRADE IN AFRICA

INTRA-REGIONAL TRADE The low level of officially recorded intra-African trade flows is often explained as stemming from historic trading relationships between Africa and the former colonial powers with the transport infrastructure prioritizing commodity and mineral exports outside the region. Following more than two decades of increasing regional integration throughout Sub Saharan Africa, intra-regional trade flows have increased but remain low relative to other parts of the world. This is considered to, at least partly, result from limited economic diversification as countries mainly export their agricultural commodities and mineral resources to the rest of the world. However, increasingly work has begun to focus on the extent to which the official trade data systematically under represent intra-regional trade because much of the cross-border trade takes place informally and is not officially recorded. Casual observation and

1 The Khana Group, 2018, Informal Cross-Border Trade Survey, Final Report prepared for USAID/Liberia under the Liberia Strategic Analysis Activity.

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discussions with small scale traders reveal that informal trade is both widespread and has a long tradition which precedes the colonial era.

Before the colonial era, boundaries were only loosely enforced, and people and livestock did not pass through formal border controls. At the Berlin conference of 1884 the colonial powers agreed to divide most of Africa among themselves and set the state boundaries2. While Liberia was already independent (since 1848), the neighboring countries of Sierra Leone, Guinea, and Cote d’Ivoire were colonized by Britain and France becoming independent in 1961, 1958, and 1960 respectively. These boundaries formed the basis for the national boundaries following independence and in West Africa, they remain in place. Informal cross-border trade is aided by the long and porous borders inherited from the colonial era; weak border enforcement; uncoordinated trade and other related policies among neighboring countries resulting in large price differences (for example, for fuel) that create significant incentives to move the products across the border; and the existence of ethnic and religious groups straddling both sides of the border. In many countries with no natural boundaries, it is infeasible to prevent unofficial crossings3.

INFORMAL CROSS BORDER TRADE Cross border trade is the sum of both informal and formal trade. Informal trade may refer to trade in illegal goods (for example, banned products) or the way in the which the goods are traded (through evading trade regulations and duties). While there is almost certainly a trade in illegal products (counterfeits, drugs, etc.) the primary focus of this report is on legal products which cross the border unrecorded. Informal trade may take place when the area around the formal border is unpoliced and reflects the traditional movement of livestock and crops within the region. This trade often predates the establishment of the formal border. Informal trade may also take place because traders wish to avoid declaring goods to save time and money by evading duties and taxes. Goods may be imported unofficially with goods destined for a third country being falsely declared as an import rather than as transit for transshipment. Further, a product may be imported legally into a country with lower duties and an efficient port and then transshipped unofficially to a neighboring country to evade their higher duties, quantitative restrictions, other non-tariff barriers, and onerous regulations.

Kinship networks are central to much ICBT, often providing security in the absence of official institutions. Little’s (2005) work in the Horn of Africa found extended kinship networks guaranteed the safety of livestock as they crossed from Ethiopia to Somalia and Kenya as part of the long-distance caravan trade. The kinship networks are characterized by deep bonds of trust, accepted codes of

2 The state boundaries were decided at the Berlin Conference and resulted in arbitrary boundaries cutting across long standing ethnic groupings. While the boundaries sometimes followed natural geographical divides (for example, a river), in many cases the boundary was defined by the degree of latitude. 3 For example, the main North South Highway connecting Lilongwe with Blantyre in Malawi partially crosses into Mozambique. On one side of the road shops and stalls are in Mozambique and on the side in Malawi. In the Horn of Africa where pastoral farming is widely practiced, herds of sheep and goats move relatively freely between Somalia, Ethiopia, and Djibouti.

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behavior, and effective enforcement arrangements. These enable trade to take place with limited documentation (or even no documentation) or official involvement (Fafchamps, 2004). Aker et al (2014) found no border price discontinuity in millet and cowpeas across the Niger-Nigeria border when the trade was between market of the same (Hausa) ethnicity. This contrasts with significant border effects between Hausa and non-Hausa markets, and also significant price differences within the same country between different ethnic regions.

Traders and businesses are assumed to choose informality because of the onerous costs of establishing and operating as a formal business. Kanbur (2009) and Djankov et al (2003) highlight the difficulties of complying with government regulations across countries and argue that this encourages many businesses to choose to not register and to trade informally.

Work on East Africa (Ackello-Oguta and Echesse, 1997), Nigeria (Hoffmann and Melly, 2015) and many other developing economies (for a survey see Golub, 2015) has consistently highlighted the importance of informal cross-border trade. Hoffmann and Melly conclude that, unrecorded trade along the key economic corridors between Nigeria and neighboring countries is several times larger than the officially recorded trade. They also note that the informal sector accounts for almost two thirds of Nigeria’s GDP. The sheer scale of the informal sector is explained as a rational response to the difficulties of participating in the formal economy.

CROSS BORDER TRADE DATA Collecting data on the volume, value, and composition of both formal and informal cross-border trade flows requires the analyst to use multiple approaches. The officially published trade data collected by the Liberia Revenue Authority (LRA) provides information on the value and type of products that were declared for import and export at the border. Each officially declared transaction provides information on the product, the value, and the quantity as well as the duty and taxes paid and the name of the importer. This approach will not capture any of the ICBT.

Border agencies with the responsibility for raising revenue generally record imports more accurately than exports. In light of this, many trade economists have used ‘mirror’ trade data as a proxy for estimating the extent of informal cross-border trade. This involves comparing the recorded imports of a country to recorded exports from a country. However, this assumes that the import data capture trade that was exported informally. In the case of cross-border informal trade, there is a high probability that both the exporting and the importing country will fail to record the transaction. Analyzing mirror trade data across Africa shows large discrepancies between the value of officially recorded imports from neighboring countries and the exporting country’s officially recorded exports. For example, in the East African Customs Union (EAC) where Tanzania has imposed restrictions on exporting maize the disparity between recorded imports and declared exports exceeded $100 million in 2016 (Tanzania, DTIS, 2018).

Perhaps the most common approach to estimating ICBT remains direct observation of trade activities at various border crossing points. The observer is tasked with counting the number of trucks, vehicles, bicycles, and people carrying loads pass through the border. However, in many cases, it will not be possible to verify the contents or value of the goods. Also, where the borders are porous with multiple informal crossings, collecting data at the official border crossing, with the cooperation of the border

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authorities, will not observe the ICBT using unofficial crossings. Further, unofficial trade may take place when the designated official border is closed.

Another approach is to interview informed traders and officials involved in cross-border trade. While some traders and officials may be reluctant to provide detailed information, this approach has been used widely. This involves experienced researchers interviewing diverse stakeholders then cross-checking and triangulating their responses. Interviewing all the stakeholders involved in CBT is key for understanding how ICBT and CBT takes place and for documenting what ‘really happens at the border’. The findings from participant interviews can stimulate ideas for advancing trade facilitation.

Generally, reviews of cross-border trade rely on a combination of official data, individual surveys, and interviews.

Officially intra-regional trade in West Africa accounts for 6 percent of total trade. When extractives (oil and minerals) are excluded intra-regional trade increases to between 7 and 11 percent. The low share of cross-border trade within West Africa reflects the relative lack of economic linkages and the absence of complementarities between the various production structures. More recently, this was exacerbated by border closures to limit the spread of the Ebola epidemic (2015). The low level of formally recorded trade also results from the failure of official statistics to capture accurately total trade flows because of unrecorded, or informal, trade and the incentive for traders to under-declare to minimize duty and tax payments.

CROSS BORDER TRADERS A recent report by the World Bank on trade in West Africa (Trading Against All Odds: Overcoming Obstacles to Regional Trade in West Africa, 2016) based on surveys with more than 1,100 cross-border traders in Liberia, Sierra Leone, and Guinea (carried out in July/August 2015), found that the poor and vulnerable were heavily involved with cross-border trade, and this was primarily informal trade. Further the majority of surveyed cross-border trader were women who, relative to male traders, earned less and were subjected to more verbal and physical harassment while engaged in trading. This finding is consistent with work on ICBT in the Great Lakes region and East Africa (Brenton4 et al, 2015). The World Bank West Africa report ranked the corruption of customs officers as the most important barrier faced by traders, reporting that virtually all small-scale traders were subject to some form of extortion. Robbery was also a significant risk which had affected more than half of all respondents.

Earlier work on cross-border traders in West Africa (Dejene5, 2001) identified the important role performed by women in increasing food security by trading food products from areas of surplus to areas

4 Brenton Paul, Elisa Gamberoni and Catherine Sear, editors, 2015, Women and Trade in Africa: Realizing the Potential, World Bank. 5 Dejene Yeshiareg (2001), Women’s Cross-Border Trade in West Africa, WIDTECH, Information Bulletin, DAI, Bethesda, Maryland.

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of deficit. The WIDTECH6 project collected information on the typology of traders, the commodities traded, organization of the trade, methods for acquiring market information, the business and social networks, and how trade patterns had changed. Women were heavily involved in trading local agricultural goods that had been processed in small-scale plants. The other products traded included palm oil, smoked and salted fish, and locally produced soaps. Later work by UNIFEM7 (2010) reported that women accounted for 70 percent of people involved in cross-border trade in Southern Africa. Surveys in West Africa found that each women trader employed one or two people and supported 3.2 children, in addition to a further 3 dependents who were neither their children or spouses. These women were mainly involved in moving goods across-border crossing points.

CHALLENGES IN FORMAL CROSS BORDER TRADE Large scale businesses and traders must engage in the formal sector, because the sheer scale of their activities means they are known to the authorities, and also because they have the resources, both financial and technical, to comply with onerous administrative procedures and to overcome logistical barriers. However, when the costs of doing business are high, some large formal enterprises will also engage in the informal economy. For example, large formal businesses may under declare their imports to evade duties and taxes.

For small businesses, the cost of importing and exporting formally is significant. Also, simply operating through formal channels can be very challenging and, in some cases could be prohibitive. For example, importing livestock and meat into Liberia requires a permit that can only be obtained from the Ministry of Agriculture in Monrovia. The customs officers estimated that this usually took one week to obtain. When the formal processes for clearing customs are slow, cumbersome, and expensive, traders have an incentive to under declare or even try and circumvent the border through using an informal crossing.

Informal trade also reflects the belief that government is failing to deliver valuable services in return for paying fees and taxes. This creates a vicious circle as reduced government revenues constrains the government from effectively discharging its regulatory responsibilities, including ensuring border posts are adequately funded with appropriate infrastructure. Poorly maintained equipment (for example, the one LRA vehicle at Ganta border post was unusable and had been awaiting repair for more than six months8), and demoralized personnel undermines service delivery at the border. Small scale informal cross-border traders are also more likely to try and remain informal in other aspects of their business by operating in unregulated locations and remaining untaxed.

6 A Women in Development Project funded by USAID. 7 Unleashing the Potential of Women in Informal Cross Border Traders to Transform Intra-African Trade. Available at http://www.unwomen.org/- /media/headquarters/media/publications/en/factsheetafricanwomentradersen.pdf?la=en&vs=944 Accessed August 2018. 8 As at December 2017.

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ICBT, which is based on either under declaration of the products being traded or non-declaration, creates a fertile environment for encouraging mismanagement and graft. Illegal payments aimed at smoothing the process become part of the routine revenue collected and shared by the border staff as they seek to supplement their official incomes. Once this becomes ‘standard practice’, it is difficult to eradicate. Money paid as cash bribes increases the costs of doing business while also reducing tax revenue to the government. Furthermore, informal trade takes place outside the national regulatory framework. There are no guarantees that the products are genuine (rather than counterfeit) or meet national health, safety, or environmental standards.

3. CROSS BORDER TRADE IN LIBERIA Liberia is a small low-income fragile economy dependent on rents from mineral and forestry exports for 50 percent of GDP, bordering Sierra Leone, Guinea, and Cote d’Ivoire (see Figure 1). Agriculture, forestry, and fishing account for slightly more than one third of GDP and includes the production of rice, cassava rubber, cocoa, and palm oil. Extractives account for 9 percent of GDP, manufacturing 7 percent, and services (which includes government services) 48 percent. With just over 41 percent of the total 4.7 million population under the age of 14 and 55 percent aged between 15-64, Liberia has a very high age dependency ratio (81.4 percent). Slightly more than a quarter of the total population live in the capital city, Monrovia.

In 2017, per capita GDP was $456 (at current prices). This is approximately 60 percent of the average for low-income countries, and 43 percent of the least developed countries (following the United Nations classification of $1,200). In 2014, 38.6 percent of the total population were living below the $1.90 a day (in 2011 price) poverty level. If the poverty level was increased to $3.20 and $5.30 a day, the poverty rate would increase to 73.8 and 93 percent respectively.

Approximately 80 percent of the adult population report being self-employed. When this is disaggregated by gender more than nine out of every ten women are self-employed compared to seven out of ten for men. In many cases, self-employed means working in the unregistered informal economy.

The indigenous Liberian population may be divided into four ethnic clusters based on linguistic and cultural characteristics (Ranard ed, 2005). All four of the ethnic clusters extend into all three neighboring countries. Further, political instability and unrest over the past three decades resulted in relatively large-scale movements of people from conflict zones including Liberia (throughout the 1990s), Sierra Leone, and Cote d’Ivoire (2002). The Liberian conflict through the 1990s displaced 700,000 people with the majority going to Ghana, Guinea, Cote d’Ivoire, and Sierra Leone.

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Figure 1: Map of Liberia

SOURCE: NATIONAL ONLINE PROJECT Agricultural production is largely low productivity subsistence farming. Large-scale commercial agriculture is concentrated on rubber and palm oil production using purpose-built infrastructure (including electricity and transport). The companies engaged in large scale agricultural production operate in fully serviced enclaves with limited linkages to the rest of the economy. The high cost of electricity results in most of the output being exported for processing overseas. Subsistence agriculture is locked in a low input, low productivity, and low-income equilibrium.

The Government of Liberia (GOL) is committed to improving the business enabling environment. Interviews with senior policymakers confirmed their willingness to engage in reforms that would encourage private investment. Improvements in infrastructure - including new roads, extensions to the power supply, increasing port efficiency, strengthening the delivery of essential social services such as education and health - while ensuring a stable and secure environment, require the Government to increase the scale of domestic revenue. The GOL commitment to increasing domestically generated revenue as a share of total government expenditure was supported by setting up the LRA in 2015. The campaign to encourage citizens to pay their taxes as a contribution to the development of the nation emphasizes the government’s provision of essential services while also streamlining and simplifying tax administration. Reducing the registration burden will encourage more informal sector businesses and traders to move into the formal sector.

The Doing Business (DB) rankings for Liberia (see Figures 2 and 3) highlight that trading across-borders, contract enforcement, property registration, accessing electricity, and obtaining construction permits are particularly challenging. In all these categories, Liberia falls into the bottom decile. When the same indicators are measured against global best practices (distance to the frontier) there is a large gap indicating significant potential for improvement. In aggregate, Liberia is ranked 172 out of 190 countries, and is over 55 points (out of 100) away from best practice. The cost of complying with all the procedures is 15.7 percent of gross national income. This is a clear disincentive to encouraging the formalization of small businesses.

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Figure 2: Liberia Doing Business 2018

Enforcing Contracts

Trading across Borders

Paying Taxes

Getting Credit

Registering Property

Getting Electricity

Dealing with Construction Permits

Starting a Business

0 20 40 60 80 100 120 140 160 180 200 Ranking out of 190 Countries

SOURCE: WORLD BANK DOING BUSINESS Figure 3: Liberia Distance to the Frontier 2018

Enforcing Contracts

Trading across Borders

Paying Taxes

Getting Credit

Registering Property

Getting Electricity

Dealing with Construction Permits

Starting a Business

0 102030405060708090100

SOURCE: WORLD BANK DOING BUSINESS Liberia’s exports are dominated by a small number of large firms, mainly concessionaires with few linkages to the rest of the economy, concentrated on natural resources (rubber and timber) and extractives (iron ore and gold). Table 1 shows the commodity composition of imports and exports. Virtually all the exports are sent outside the region from the two major ports of Monrovia and Buchanan. Liberian exports to the region account for less than 10 percent of total exports. Imports are much more diverse reflecting Liberia’s limited productive base. Imports from the Peoples Republic of China are larger than imports from West Africa. Liberia is dependent on importing all its fuel requirements, and a wide range of food items. The latter is imported from other West African states and neighboring countries. Imports are much larger than exports.

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TABLE 1: LIBERIA COMMODITY COMPOSITION OF IMPORTS AND EXPORTS 2016-2017 ($ MILLION)

EXPORT PRODUCTS 2016 2017 IMPORT PRODUCTS 2016 2017

Iron Ore 48.2 63.3 Food & Live Animals 268.0 267.5

Diamonds 28.7 32.8 Beverages & Tobacco 22.4 15.7

Gold 116.4 187.5 Crude Materials, Fuel 353.6 230.1

Natural Rubber 55.9 68.1 Animal and Veg. oil 23.2 24.4

Cocoa Beans 12.4 2.5 Chemicals 95.0 94.0

Coffee Beans 0.1 0.0 Manufactured Products 167.8 156.6

Other 17.6 34.6 Machinery & Transport Equipment 271.1 229.9

Total Exports 279.3 388.8 Total Imports 1,201.2 1,018.2

NOTE: FIGURES FOR 2017 ARE PRELIMINARY. SOURCE CENTRAL BANK OF LIBERIA, ANNUAL REPORT, 2017. The Middle East accounts for 52 percent of total exports, followed by Europe at 18.8 percent. Economic Community of West African States (ECOWAS) members accounted for 2.7 percent of exports in 2017, a decline from almost 17 percent the previous year. More than 90 percent of exports to ECOWAS were destined to the neighboring economies of Cote d’Ivoire, Guinea, and Sierra Leone. Almost a quarter, by value, of Liberia’s imports originate from Africa with virtually all of these originating from neighboring countries. Imports from the three neighbors accounted for 19.8 percent of total imports.

UN Comtrade mirror data9 showing exports to Liberia is available for Cote D’Ivoire (2015 only) and Guinea (2013-2015); however, there is no Comtrade data showing Sierra Leone exports to Liberia. These data show that Liberia imported $24 million from Cote d’Ivoire in 2015. Fuel imports accounted for 72.3 percent of the total, and soaps and detergents totaled 20 percent. Food and plastic products are shown as re-exports from Cote d’Ivoire. Recorded exports from Guinea to Liberia were much smaller at $4.3 million in 2013 and $1 million in 2014. Re-exports were listed as chemical (most likely soap and detergents), metals, machinery, and transport equipment.

The LRA (created in 2015) collects import and export trade data at the borders. For the major borders, including the Freeport of Monrovia10, Roberts International Airport, and the Liberian Petroleum

9 Mirror data usually refer to the process of using partner country import data on the basis that customs often underreport exports. It can also be used, albeit with some caution, as a proxy for imports by looking at partner country exports. In the case of Liberia caution is required when estimating as many goods are shown as exported to Liberia simply because they are shipped on a Liberian vessel, which is registered to Liberia as a ‘flag of convenience’. Further cross border transactions will be underestimated because of widespread unreported and undervalued cross border trade. See Liberia: Diagnostic Trade Integration Study Update: Leveraging Trade for Economic Diversification and Inclusive Growth, (2015), World Bank. 10 Monrovia Freeport accounts for 75 percent by value of Liberia’s total trade.

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Refinery Corporation (LPRC), which accounts for approximately 85 percent of total trade, the data are collected from the electronic customs declarations from ASYCUDA (Automated System for Customs Data) World. The remaining trade, through the land borders, is collected from manual declarations which are then compiled by the LRA head office. The LRA is committed to rolling out ASYCUDA World to all customs locations. The land borders include all the official customs border crossing points with Sierra Leone, Guinea, and Cote d’ Ivoire.

The LRA provided monthly trade and border tax collection data for 2017 for nine rural border posts. These included, Ganta, Bo Waterside, Butuo, Harper, Jorwah, Loquatuo, Mendicorma, Toe Town, and Yeala.

Figure 4: Liberia Rural Border Posts Monthly Imports and Duty Collection 2017

3,000,000 2,500,000 2,000,000 1,500,000 US $ 1,000,000 500,000 0

Month 2017

Duties Collected Imports

SOURCE: DERIVED FROM DATA RECEIVED FROM THE LIBERIA REVENUE AUTHORITY

NOTE: INCLUDES GANTA, BO WATERSIDE, BUTUO, HARPER, JORWAH, LOQUATUO, MENDICORMA, TOE TOWN & YEALA. Figure 5: Liberia Revenue Authority Rural Bo Rural Border Posts Monthly Imports and Duty Collection 2017

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

Ganta Bo-Waterside Butuo Harper Jorwah Loquatuo Mendicorma Toe Town Yeala

SOURCE: DERIVED FROM DATA RECEIVED FROM THE LIBERIA REVENUE AUTHORITY NOTE: US$ FOR IMPORTS CIF.

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As a small developing economy with long porous land borders, the GOL cannot seal its borders with its neighbors, nor can it influence regional exchange rates which will continue to create opportunities for arbitrage trade. High trade costs, whether through administrative and procedural hurdles, transport costs, or taxes and other payments, will continue to encourage businesses and sole traders to move goods by informal channels. If small traders cannot make or receive cross-border payments easily or at a low-cost, they will just follow the unregulated parallel market. The GOL will not be able to stop this trade. Indeed, attempts to restrict it will simply serve to increase trade costs with adverse effects on lower income consumers on both sides of the border.

Following the end of the conflicts in Liberia, Sierra Leone, and Cote d’Ivoire, the countries focused on recovery and committed to revitalizing the MRU and participating in ECOWAS. Historic cross-border trading flows were re-invigorated, and national governments and international cooperating partners identified the key role of cross-border trade in strengthening food security, providing livelihoods, and advancing economic development. Markets located close to Liberia’s borders with Cote d’Ivoire, Guinea, and Sierra Leone offer prime business locations for the import of vehicles, motorcycles, bicycles, fuel, miscellaneous manufactured products, and food products since difficult and expensive transport routes to their major cities (Monrovia, Freetown, Conakry) are more expensive than sourcing from a neighboring country. Border markets also have the potential to serve as a platform for the transit or storage of essential commodities. These border markets form the locus for the circulation of people and goods and services.

The World Food Programme (WFP, 2010) mapped cross-border food flows between Sierra Leone and Liberia for rice, gari (cassava flour), and palm oil, and assessed markets’ ability to underpin aggregate and household food security11. Notwithstanding the potential for Liberia to significantly increase food production, presently it remains a significant food deficit economy. The South Eastern counties of Liberia remain heavily dependent on imported rice from Cote d’Ivoire. Liberia is a major exporter of palm oil to Guinea. Sierra Leone has become a major supplier of gari and is emerging as a major source of supply for the Monrovia market. In the case of palm-oil and rice, the ban on exportation from Sierra Leone might have triggered the increase in informal trade for these products to the neighboring countries of Guinea and Liberia. Various ad hoc “bans on agricultural trade have not prevented substantial trade from continuing, although much if it is along informal routes.”

A pilot study by IGC (2015) selected 12 chiefdoms on Sierra Leone’s borders with Liberia and Guinea. These include both official and/or informal crossing points. They interviewed a random sample of more than 300 traders, community leaders, motor bike riders, and key informants. The IGC study revealed a flourishing cross-border trade (formal and informal) between Sierra Leone and its neighbors (Guinea and Liberia). This was largely attributed to the high tax rate, multiple arbitrary charges, loss of goods, informal tax payments, and bribes among others. The IGC study documented the social and economic

11 In Liberia (in May 2010) the WFP visited Bo Waterside, Foya, Voinhama, Ganta and .

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characteristics of the traders and their experiences of the border facilities, identified their rationale for remaining informal, and listed the traded products. These are summarized below:

TRADER CHARACTERISTICS Traders were almost equally split by gender (51 percent women); two thirds of all traders were over 35; and 50 percent had either no schooling or only primary school education.

BORDER SERVICES AND FACILITIES Only 15 percent of traders stated they were satisfied with the facilities at the border, almost half (48 percent) said they were dissatisfied. The major areas of dissatisfaction included toilet facilities (cleanliness or lack of facilities), water supply, and the roads network to and from the border. DRIVERS OF INFORMALITY Almost half of the traders (48 percent) stated they could not afford to pay the tax rate. Traders were also subjected to multiple arbitrary charges, multiple checkpoints along the access roads to the border which exposed them to informal payments, crime along the route, and sexual harassment. Several customs posts along the Liberia-Guinea and Liberia-Sierra Leone borders do not collect data on imports and exports, while other collect data manually. TRADED PRODUCTS The principal export from Sierra Leone is gari. Other agricultural commodities exported by Sierra Leone included kola nut, sweet potatoes, spices, and palm kernel. Liberia and Guinea exports to Sierra Leone included manufactured durable goods (transit from Monrovia and Conakry), cocoa, unshelled ground nut, dried pepper, pineapple suckers, beans, fresh tomatoes, bennie seeds, and onions.

PRIMARY RESEARCH: SURVEY OF CROSS-BORDER TRADERS AT GANTA AND YEKEPA The LSA (implemented by Social Impact) conducted a survey of small cross-border trade and ICBT in March 2018 (LSA, 2018). This assessment of CBT seeks to identify the economic and social characteristics of the traders, key drivers, major challenges, and quantify its economic and developmental importance to the Liberian economy.

The Khana Group (TKG) (subcontracted by LSA) conducted qualitative interviews at sixteen border crossings on the Liberia side of the borders with Guinea and Cote d’Ivoire. TKG also carried out 352 quantitative surveys, using a standard questionnaire, at sixteen formal and informal border crossing. The interviewers were present during official border opening hours over twelve days (in March 2018). The enumerators tried to interview every third person crossing the border into Liberia. The customs at Ganta and Yekepa provided data on the value of products imported for January and February 2018. The LRA provided monthly data on the value of imports and duty collected at the rural border posts.

The key research areas around cross-border trade include:

 Identifying the characteristics of the traders? Who are they? This includes understanding the demographic mix – gender, age, education level, economic background, and geographical location;

 Understanding their rationale for engaging in CBT, both formal trade and informal trade;

 Documenting the volume and value and type of products traded across the border; and

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 Understanding the challenges faced by cross-border traders as they engage with border officials and move goods across the border.

WHO ARE THE CROSS-BORDER TRADERS? GENDER AND MARITAL STATUS Women are active cross-border traders accounting for 70.5 percent of all the traders interviewed during the quantitative survey in March 2018. This finding is consistent with findings by the Building Markets survey (BM, 2015) where the majority of the Liberian respondents were female. The IGC survey of CBT (IGC, 2015) on the Sierra Leone-Liberia, and Sierra Leone-Guinea borders also found women represented accounted for marginally than half of all traders with approximately two thirds aged between 36-56. The Building Markets survey (which covered Liberia, Sierra Leone, and Guinea) reported 39 years as the mean age with almost three-quarters of respondents being married. A quarter of the sample were either single, divorced, or widowed. In the LSA-ICBT (LSA, 2018) survey, the median age of female and male traders was approximately 38 and 37 respectively.

EDUCATION The 2018 survey showed a clear gender disparity in education levels with 64 percent of men having at least secondary school education, compared to 28 percent for women. Further, only 13 percent of male traders had ‘non-formal’ education against 42 percent for women. Indeed, 67 percent of female traders had only completed primary schooling or had a non-formal education. This is consistent with the finding in the 2015 IGC survey where almost 80 percent of surveyed traders had completed primary schooling, had non-formal education or never attended school. The Building Markets survey (BM, 2015) which included traders in Monrovia found that almost two thirds of the Liberian respondents were literate, which was higher than the aggregate literacy rate. However, both the LSA and the IGC surveys which focused on border areas only with Sierra Leone, Guinea, and Cote d’Ivoire, report CBT, and specifically female CBT, with significantly lower levels of education.

ETHNIC GROUPS The survey (LSA, 2018) responses also found increased trade and linkages across- borders between members of the same ethnic grouping. The Mano, Grebo, and Gio ethnic groups in Nimba and Maryland accounted for 80 percent of the respondents. Virtually all the interviewed traders (95 percent) reported that their CBT business was owned either by themselves or jointly with their spouse. 48 percent of traders were members of a business association.

Table 2 shows the frequency with which the traders crossed the border. Almost half of all CBTs cross the border once a week, and a quarter cross once a month.

TABLE 2: FREQUENCY OF CROSS BORDER TRADING

FREQUENCY OF BORDER CROSSING NUMBER PERCENTAGE

Several Times a day 4 1.1

Once a day 8 2.3

Once a week 173 49.3

Twice a week 2 0.6

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Three times a week 1 0.3

Bi-weekly 34 9.7

Once a month 86 24.5

Every 2-3 months 43 12.3

Annually 1 0.3

Total 352 100.0

NOTE: DOES NOT ADD UP TO 100 BECAUSE OF ROUNDING SOURCE: DERIVED FROM QUANTITATIVE DATA, LSA, 2018 EXPERIENCE More than half of all traders have been engaged in cross-border trading for more than five years. The relatively high proportion of cross-border traders involved for five years or less indicates that the sector continues to attract new entrants and may indicate increased trade across the land borders.

UNDERSTANDING THE RATIONALE FOR CBT AND ICBT In the context of cross-border trade, LSA (2018) defined informality as those CBT who chose at some point to cross an unofficial border (not recognized by the LRA-border crossing point). A series of supplementary questions were aimed to identify the factors driving cross-border traders towards choosing to be informal. Interestingly the most significant challenge identified by all traders, regardless of size or formality, was the uncertain (and recently) unfavorable exchange rate between the Liberian dollar and currencies of neighboring economies, including the Guinean franc, Sierra Leone leone, and the West African CFA franc.

The LSA survey (2018) explicitly asked respondents which border crossing points they used to distinguish formal from informal crossing points. Table shows that in aggregate over 60 percent of cross- border traders were informal cross-border traders; however, when disaggregated by gender more than seven out of every ten male traders used informal borders.

TABLE 3: CROSS BORDER TRADE GENDER AND TRADER CATEGORY

FEMALE MALE TOTAL TRADER CATEGORY No. Percentage No. Percentage No. Percentage

Informal 147 59.3 73 70.2 220 62.5

Formal 101 40.7 31 29.8 132 37.5

Total Exports 248 100.0 104 100.0 352 100.0

SOURCE: LSA-ICBT QUANTITATIVE SURVEY 86 percent of all cross-border traders responded that they felt safe at the border. When respondents were asked if they knew of any traders who had been ‘abused or forced to pay money/goods while crossing the borders to do their CBT activities’, 29 percent said yes. It is worth noting that the majority (70 percent, with 1 percent choosing not to answer) stated no. Yet, when respondents were asked about their responses if they ever had a problem at the border, 55 percent of all cross-border traders stated they would ‘make an informal payment’, and 35 percent said, ‘they would negotiate with border

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officials’. In light of this, it seems that many of the respondents who stated they did not have a problem at the border were pre-empting such an outcome through their willingness to ‘negotiate’ and ‘make informal payments’.

Amongst all cross-border traders, there is a consensus that informal routes are less safe than the official border. More than 80 percent of formal traders consider the official border to be safer; however, 56 percent of informal cross-border traders have the same view. Approximately 40 percent of informal cross-border traders also report that the unofficial routes are more cumbersome to navigate (while 72 percent of formal traders consider informal routes more cumbersome). The decision to use unofficial crossing points is largely based on balancing safety issues against the uncertainty of experiencing harassment at the border resulting in ‘negotiation’ and ‘informal payments’ to officials.

Income from Cross Border Trade CBT represents the main source of income for 86 percent of respondents, as they were either the sole breadwinner or engaged jointly with their spouse. On average, each cross-border trader lived in a household of eight persons.

The median monthly household income for all the respondents in the LSA survey was $151 and $162 for the female and male traders respectively. The median monthly income from CBT was $61 and $53 for female and male traders respectively. Breaking down the income level for CBT reveals a wide range with 40 percent earning more than LRD 9,000 ($68) per month from engaging in CBT. This is significantly higher than the economy wide per capita income. However, 18 percent earn between LRD 5,000-9,000, and 42 percent earn less than LRD 5,000 ($38). In 2017 Liberia’s per capita GDP was $456 or approximately $38 per month. Over 40 percent of cross-border traders earned less than the per capita income from their trading activity.

The World Bank report on regional trade (World Bank, 2016) finds that households who dependent on CBT are part of the poorer section of the population. However, traders in border towns (Foya and Ganta) were found to be more profitable relative to traders operating solely within the domestic economy.

Notwithstanding the low-income levels of the poorest half of all the traders surveyed, 61.7 percent indicated that they were able to save money each month.

In the survey sample of 352 CBT respondents from two border areas in Nimba and Maryland counties, earnings from cross-border trading supported over 2,800 persons. While recognizing that the sample size is too small to use this figure to estimate the total number of Liberians who benefit from CBT, it illustrates the importance of CBT across the land borders to sustaining livelihoods and alleviating poverty. Although the sample was limited to trade flows around Nimba and Maryland, the quantitative survey results are consistent with the earlier IGC (2015) and Building Markets (2016) surveys that covered the Liberia-Guinea border and markets across Liberia respectively.

TRADE VOLUMES AND COMMODITY COMPOSITION OF CBT The LRA border posts in Ganta and Yekepa provided their records for the goods imported and exported for January and February 2018 (during the ‘dry season’). The LSA-ICBT Survey used the data from January and February to estimate average monthly data to derive lower and upper bounds of the

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estimated annual value of trade.12 Table 4 and Table 5 below show the estimated value of the cross- border trade at the Yekepa and Ganta border posts with data provided by the LRA officials stationed at the border. For both Yekepa and Ganta, it is apparent that Liberia is importing much more than they are exporting to Guinea. The lower bound estimate of $4.8m for imports through Ganta, based on adjusting officially recorded imports for January and February 2018, are significantly higher than the officially recorded data for 2017 of $ 3.9m. The duty collected at the Ganta border averaged 11.6 percent of the total value of imports.

TABLE 4: VALUE OF CROSS BORDER TRADE AT YEKEPA

RAINY SEASON TOTAL ANNUAL NON- MARKET (MAY-OCT) VALUE TYPE OF MARKET DRY TRADE DAY DAY SEASON (AVERAGE) (AVERAGE) Lower Upper (NOV-APR) Lower Upper Estimate Estimate Estimate Estimate

Imports 4,695 4,835 520,537 867,561 853,475 1,374,012 1,721,036

Exports 1,456 974 153,272 255,456 251,086 404,359 506,542

Total 6,152 5,809 673,810 1,123,017 1,104,561 1,778,371 2,227,578

SOURCE: DATA FROM LRA STAFF AT YEKEPA BORDER POST, LSA-ICBT SURVEY

NOTES: THERE ARE 158 NON-MARKET DAYS AND 26 MARKET DAYS THROUGH MAY-OCTOBER. THE LOWER BOUND ESTIMATE EQUALS THE SUM OF BOTH THE NON- MARKET DAY AND THE MARKET DAY VALUES MULTIPLIED BY 0.6. THE UPPER BOUND ESTIMATE IS CALCULATED IN THE SAME WAY EXCEPT THE MULTIPLIER IS 1.0. 2. IN THE DRY SEASON THERE ARE 155 NON-MARKET DAYS AND 26 MARKET DAYS, AND THE TOTAL IS THE SUM OF THE TWO.

TABLE 5: VALUE OF CROSS BORDER TRADE AT GANTA

RAINY SEASON TOTAL ANNUAL VALUE TYPE OF DAILY VALUE (MAY-OCT) DRY SEASON TRADE (AVERAGE) (NOV-APR) Lower Upper Lower Upper Estimate Estimate Estimate Estimate Imports 16,496 1,821,194 3,035,323 2,985,834 4,807,028 6,021,157

Exports 2,440 269,408 449,014 441,693 711,101 890,706

Total 18,937 2,090,602 3,484,337 3,427,527 5,518,129 6,911,864

SOURCE: DATA FROM LRA STAFF AT GANTA BORDER POST, LSA-ICBT SURVEY.

NOTES: THERE ARE 184 DAYS THROUGH MAY-OCTOBER. THE LOWER BOUND ESTIMATE EQUALS THE TOTAL NUMBER OF DAYS MULTIPLIED BY 0.6. THE UPPER BOUND ESTIMATE IS CALCULATED IN THE SAME WAY EXCEPT THE MULTIPLIER IS 1.0. 2. IN THE DRY SEASON THERE ARE 181 DAYS, AND THE TOTAL IS THE SUM OF THE TWO. Figure 6 shows the value of goods imported and the revenue collected each month through 2017. It is notable that the value of officially recorded imports increases substantially through May and June. May and June are the beginning of the rainy season and this is when cross-border traders indicate there is a downturn in trade. Further, the revenue raised on imports is strikingly constant throughout the year,

12 Based on their quantitative survey data, the 25th percentile of the ratio of CBT income during the rainy season relative to the dry season equals 0.6 and the 75th percentile equals 1.

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even as the value of imports fluctuates. A possible explanation for the apparent increase in imports during the beginning of the rainy season may be that LRA records the date when they are entered into the Head Office database for the trade statistics rather than the date the goods were cleared at the border. All the import transactions at the Ganta border post are recorded manually in a customs log which is transferred to the Head Office for recording purposes at a future date.

Figure 6: Ganta Border Post Imports (cif) and Revenue Collected 2017

1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 -

Duty Collected Imports CIF $

SOURCE: DERIVED FROM DATA RECEIVED FROM THE LIBERIA REVENUE AUTHORITY The Liberia-Cote d’Ivoire rice trade contributes to increasing food security in the South Eastern part of Liberia. The WFP report identifies the terms of trade between Liberia and Sierra Leone as a food access indicator as Liberia exports palm oil13 and cocoa in exchange for rice. The exchange rate between the Liberian dollar and the CFA franc determines the extent to which traders will import rice from Guinea. In Liberia, both the rice and cocoa trade is highly concentrated with three importers handling 75 percent of rice imports, although most of this trade is handled by the Freeport of Monrovia.

CHALLENGES FACED BY CROSS-BORDER TRADERS AS THEY ENGAGE WITH BORDER OFFICIALS AND MOVE GOODS ACROSS THE BORDER The interviews and questionnaires sought to understand in granular detail what takes place at the official border. Does the experience vary depending on the scale of the transaction and the ability of the trader to make payments? Are informal payments routine? Is there a gender dimension to the border experience with women facing additional challenges?

INFORMAL PAYMENTS TO FACILITATE CBT 71 percent of cross-border traders indicated they had made an informal payment (in either cash or goods) to an official at the border. Many of the

13 The WFP estimated the Ganta market handled 90,000 liters of palm oil per week.

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respondents indicated that they had made informal payments to multiple staff at the border. 85 percent of respondents admitted making unofficial payments to Customs Officers, 74 percent to immigration officers, 50 percent to police/military, 11 percent to health officials, and 8 percent to Marketing Association Agents.

The table below shows the responses of all cross-border traders to the question asking to whom they ‘usually made informal payments.’ Just over a quarter of all traders indicated they were not stopped and did not make informal payments, and this included both formal and informal traders. The remaining 70 percent were stopped, and more than half of all traders made at least two informal payments.

TABLE 6: NUMBER AND SHARE OF UNOFFICIAL PAYMENTS BY CROSS BORDER TRADERS

NO. OF CROSS- NUMBER OF INFORMAL PAYMENT BORDER TRADERS PERCENTAGE

None (not stopped) 101 28.7

One 69 19.6

Two 71 20.2

Three 75 21.3

Four 36 10.2

Total No. CBT Surveyed 352 100.0

SOURCE: DERIVED FROM LSA, 2018 MODE OF TRANSPORT Cross-border traders use multiple modes of transport for moving their goods across the border. Commercial transport, including buses, taxis, and trucks, was used by 70 percent of formal traders and 47 percent of informal traders. Motorcycles were more widely used by informal traders (56.4 percent) relative to formal traders (37.9 percent). Self-carrying and walking was used by a quarter of all informal traders and 18 percent of formal traders. This illustrates the modest scale of much of the trade. Approximately one in five informal traders used canoe transport to move their goods across the border, while less than one in ten formal traders used any form of river transport. None of the traders used draught animals and only one cross-border trader used a private vehicle (a private car).

Land transport prices in Liberia are high which limits the size of the market and results in large areas of the country where products are cheaper.

ACCESS TO FINANCIAL SERVICES Virtually all transactions are settled with cash. Less than a handful of traders surveyed used banking facilities or e-money. There is also very limited use of barter. This is consistent with the finding of the Building Markets (2016) survey. Cross-border traders purchase goods for cash and then sell them for cash. They reported that in Liberia 97 percent of transactions were settled for cash.

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GENDER AND CROSS BORDER TRADE “When you’re a woman and you’re passing, the officers will be holding you. They don’t even mind if you’re someone’s wife or not. Sometimes they intentionally detain young girls just to spend time with them.” - Women focus group discussion (FGD) participant

The UNIFEM report from Liberia (2010) reported that 37 percent of women engaged in informal trade in the sample had experienced gender-based violence (GBV), with 10 percent reporting some form of physical abuse, and 2 percent suffered sexual abuse. The LSA (2018) requested information on a wide range of gender specific concerns, including verbal, physical, and sexual abuse and threats of abuse. 70 percent of all cross-border traders (male and female) responded positively when asked ‘do women and men face similar challenges in the CBT business?’. When respondents were asked to list the three main challenges faced by women more than 60 percent of respondents stated ‘extortion of money’ followed by verbal abuse and sexual abuse. It is quite possible that while the challenge was identified as ‘extortion’ the underlying concern was the implicit threat of physical or sexual abuse. 13 traders reported that they had been subjected to sexual abuse while engaging in CBT. Approximately half of these assaults occurred in the neighboring country14. Threats of violence and monetary extortion remain widespread concerns. It is not easy for cross-border traders to lodge complaints to have their grievances addressed. West Africa (through ECOWAS and UEMOA) should consider adopting a Traders Charter. The qualitative interviews showed that many women avoid using formal routes because of sexual harassment by officials. In the quantitative survey, 9 percent of female informal cross-border traders used informal routes to avoid contact with border officials, whereas only 5.5 percent of male informal cross-border traders gave the same justification.

TABLE 7: CROSS BORDER TRADE AND HARASSMENT

NO. OF CROSS-BORDER PERCENTAGE TYPE OF HARASSMENT TRADERS

Verbal Abuse 64 61.8 Physical Abuse 46 45.1 Sexual Abuse 13 12.8 Monetary Extortion 55 53.9 Threats of Abuse 6 5.8 Other 3 2.9

SOURCE: DERIVED FROM LSA (2018)

NOTE: THIS ONLY INCLUDES THOSE RESPONDENTS WHO RESPONDED THAT THEY HAD BEEN SUBJECT TO HARASSMENT. MANY RESPONDENTS INDICATED THEY ARE BEEN SUBJECT TO MULTIPLE FORMS OF HARASSMENT, SO IT DOES NOT SUM TO 100 PERCENT.

14 Several participants in the FGD stated that Officials on the Ivorian and Guinean side of the border discriminated against Liberians. A Chatterman (someone who liaises with customs on behalf of an importer) stated, ‘Over there they only want somebody who can speak Kpelle or Mandingo’. They asked him why he was speaking English.

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CASE STUDY: GANTA BORDER STATION LIBERIA-GUINEA Ganta is a strategic location close to the Guinea border at the crossroads of Grand Gedeh, Bong, and Montserrado counties. It functions as a hub and transit point for people, services and goods. The African Development Bank (AfDB) Infrastructure and Inclusive growth study (2013) stated that Ganta serves as a transshipment point for goods coming from the West African interior and destined for Monrovia Freeport. The 2010 WFP food security survey stated that the Ganta wholesale market sold 90,000 liters of palm oil each week and 60 percent (54,000 liters) was destined for Guinea. There is a good quality two lane paved highway between Monrovia and Ganta.

At the Liberian Ganta border post, the LRA Manager estimated imports totaled two trucks per week. The trucks contained peanuts, cassava, bean, aniseed, potatoes, and cow skins. Interviews with key border officials at Ganta and the LSA 2018 quantitative survey appear to indicate that, while Ganta is certainly growing and has the potential to become a regional transit hub as goods move to Monrovia, the bulk of the cross-border trade is destined for sale in Ganta, , and neighboring areas. The number of cross-border traders who indicated they were moving their goods to Monrovia was negligible.

The Ganta customs post has two motor bikes and one car; however, the car requires repairing (and has not been usable for the past ten months). The Liberians have placed a Drug Enforcement Officer at the border. Individuals crossing the border are permitted to bring in $125 of goods for personal effects without making a declaration. Above that value, they are expected to declare. Many of the cross-border traders are importing less than this amount, particularly those that only cross once a week or more often. The larger traders tend to cross on a monthly or quarterly basis.

At the Guinea-Liberia border at Ganta, the Guinea customs officers confirmed15 that they do not check exports. For goods being imported, they require an import document and an invoice showing the value of the product(s). Imports from Liberia included milk, cornmeal, floor mats, and used clothes. Guinea exports rice, used goods, peanuts, beans, cassava, fertilizer, and hides/skins to Liberia. The Guinea Interview with a Shop/Restaurant Owner in Ganta

A female owner of a shop/restaurant has someone on staff who travels across the border on a motorbike twice a week (Monday and Thursday) on the market days exporting frozen food to Guinea. For her business, every second month, she imports 30 to 50 cattle. She complained about the deteriorating exchange rate for Liberian dollars. Even with the lower rate, it was more cost effective to purchase Heineken Beer from Guinea than to source it from Monrovia. As an experienced business-women, she did experience problems on the Liberia side of the border; however, she complained that Guinean customs had confiscated the skins from slaughtered livestock. It was apparent that it was more advantageous to trade across the border than to source goods from within Liberia because of domestic transportation costs.

15 Meeting on December 4, 2017 at the Guinea Customs Post, Ganta, with Captain Traore, Collector Customs; Brig. Cela, Assistant Chief; Moussa Massabe, Commerce; and Abe Camara, Quality Control, Commerce.

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customs officers also reported the transit of livestock from Mali to Liberia. They estimated two to three large trucks entering Guinea a month, and two trucks a week traveling to Liberia. They stated they placed a Controller at each of the other cross-border points to record the trade; however, they did not record ‘personal effects’ carried over by individual small traders. While there were no official customs brokers located at the border, specific individuals, referred to as a ‘Chatterman’, would liaise with customs on behalf of an importer.

4. RECOMMENDATIONS Informal trade and small-scale cross-border formal trade provide a livelihood for hundreds of thousands of Liberian households. They deliver goods and services to markets that are poorly served by formal structures and contribute to increasing regional food security.

Despite these significant economic benefits, the trade costs incurred by informal and small-scale traders have not received much attention by either the central government or the county administrations. Rural border posts have not been considered priorities for improving physical infrastructure, installing electronic data systems, and increasing staff training to improve efficiency. Indeed, investments in new infrastructure and computerized customs clearance through ASYCUDA World have yet to be rolled out at the rural border posts. Currently, all clearances at the rural border posts are manual and the LRA gives the staff a revenue target. In the absence of more accurate trade data, the revenue targets are largely estimates based on historic yields. The modest revenue collected at the rural border posts masks their economic importance to a significant percentage of the population residing in the border areas.

Specific recommendations include:

 The GOL should recognize the important contribution of the informal business community as a national asset which contributes to economic well-being. The government should view the individual small traders, retailers, distributors, stall owners, mobile phone card vendors, and small-scale transporters (often on mopeds or bicycle) as key economic partners in the commitment to deliver increased incomes and create sustainable jobs. Encouraging small informal businesses to register represents a first step towards encouraging formalization.

 The GOL should prioritize the development and adoption of a charter for cross-border traders. This will require all stakeholders, government, private traders, and civil society to engage in a dialogue to develop the code of conduct with rights and responsibilities for all parties. It should also involve a commitment to ensure all the procedures and regulations are widely available (in multiple languages). This recommendation builds on a successful initiative launched in Southern Africa (between Zambia and Malawi in 2013). Developing a public code of conduct responds to the need expressed by stakeholders, in the focus group discussions, for their treatment to be improved at the border. Many of the more serious complaints of harassment were leveled at officials from neighboring countries (Guinea and Cote d’Ivoire). At the outset, a Charter for Cross-Border Traders could be launched by the LRA; however, this should be extended to include both sides of the border and would ideally be adopted at the regional level by the MRU and ECOWAS. The Charter seeks to establish a fundamental set of rights and obligations for both trader and officials with the intent of improving behavior at the borders and over time promoting the gradual formalization of ICBT. The basic principles of the Charter include: no abuse or harassment, efficient

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processing and no discrimination, transparent duties, fees and taxes, no bribes, and clear documentary requirements.

Benefits of a Cross Border Traders Charter

 Introduces a credible complaint mechanism.  Highlights the importance of ensuring transparency at the borders by publicly specifying the information required for importing/exporting.  Has a clear focus on eliminating harassment, particularly Gender Based Violence.  Should include performance indicators to monitor progress and challenges.

The LRA has established a service charter and a code of conduct. However, this only applies to the LRA and not to all the other officials at the border. It is recommended this be extended to include a Cross-Border Traders Charter that will apply to all stakeholders at the border. This will contribute towards LRA’s goal of increasing revenue while also promoting trade facilitation.

 LRA should install ASYCUDA World at the land borders, upgrade the infrastructure, and installs electronic data systems for all transactions with a direct link to the LRA Head Office in Monrovia. This should include an expansion of the staff training program to ensure all border staff have integrity training.

 Introduce a simplified trade regime for small traders. Currently, any individual importing less than $100 of goods is not required to complete customs formalities. Increasing the limit to $150 or $200 would exempt many more small traders and would encourage increased use of the official border posts with minimal impact on revenue.

 Commit to increasing Border Agency Coordination, through streamlining procedures, introducing risk assessment (using the ASYCUDA World risk module), and joint inspections (specifically for products requiring SPS licenses).

 The Ministry of Finance and Development Planning promotes Cross-Border Collaboration at the bilateral, sub-regional (MRU) and regional level (ECOWAS) through, initially, preparing terms of reference for cross-border committees at the major land borders, to meet quarterly for information exchange with the aim of building confidence and moving towards harmonizing procedures and eliminating duplication and redundant practices.

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LIST OF REFERENCES African Development Bank, 2013, Liberia: Infrastructure and Inclusive Growth, Tunis.

Aker Jenny, M Klein, S. O’Connell and M. Yang (2014), Borders, Ethnicity and Trade, Journal of Development Economics, Vol. 107, pp.1-16.

Benjamin Nancy and A. A. Mbaye, eds.2012, The informal sector in francophone Africa: Firm size, productivity, and institutions, World Bank, Washington DC.

Brenton Paul, Nora Dihel, Mombert Hoppe, Carmine Soprano, 2014, Improving Behavior at Border to Promote Trade Formalization: The Charter for Cross-Border Traders, Africa Policy Note, No. 41, World Bank. Washington DC.

Fafchamps, Marcel, 2004, Market Institutions in Sub-Saharan Africa: Theory and Evidence, MIT Press, Cambridge, Massachusetts.

Golub Stephen and Ahmadou Mbaye, 2009, National Trade Policies and Smuggling in Africa: The Case of the Gambia and Senegal, World Development, Vol. 37 (3).

IGC, 2015, Pilot Survey on Cross Border Trade from Sierra Leone to other Mano River Union Countries, Working Paper, Center for Economic Research and Capacity Building, London.

Rochambeau Golvine de, 2017, The Trucking Industry and The Price of Commodities in Liberia,

The Khana Group, 2018, Informal Cross-Border Trade Survey: Final Report, prepared under the Liberia Strategic Analysis Activity

Walther Olivier 2015, Business, Brokers and Borders: The structure of West African Trade Networks, Journal of Development Studies, 2015.

World Bank, 2016, Trading Against All Odds: Overcoming Obstacles to Regional Trade in West Africa, Report No: ACS18878, Washington DC.

World Food Program, 2010, Cross Border Trade and Food Security, Liberia-Sierra-Leone, Rome.

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