Viewing cable 09MONROVIA289
Title: LIBERIA: RUBBER SECTOR OVERVIEW

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09MONROVIA2892009-04-28 08:01:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Monrovia
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UNCLAS SECTION 01 OF 06 MONROVIA 000289 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ELAB EINV PHUM PGOV LI
SUBJECT: LIBERIA: RUBBER SECTOR OVERVIEW 
 
REF: A. MONROVIA 271 
     ¶B. MONROVIA 251 
     ¶C. MONROVIA 82 
     ¶D. 08 MONROVIA 1003 
     ¶E. 08 MONROVIA 880 
     ¶F. 08 MONROVIA 242 
     ¶G. 07 MONROVIA 547 
 
¶1.  (U) SUMMARY:  Liberia's rubber sector provides 5.5% of 
its economic output, 85% of its exports and work for an 
estimated 50,000 Liberians.  Roughly 40% of Liberia's rubber 
comes from small, Liberian-owned farms, with the remainder 
produced on large foreign-owned concessions.  There has been 
little new planting since war broke out in the 1980s; most 
farms and concessions are dilapidated and full of older, 
unproductive trees.  Revitalizing the rubber sector will take 
years and producers face challenges from theft, land disputes 
and access to finance.  Foreign-owned concessions have been 
the first to invest in large-scale replanting, but many 
concessions are just recently reverting to private management 
as the government seeks to renegotiate new terms on old 
concession agreements.  Paragraphs 11-29 provide details on 
current foreign-owned concessions (Note: this information is 
business proprietary for U.S. Government use only.  End 
note).  Problems on GOL-managed plantations will be reported 
septel.  END SUMMARY. 
 
Background on Liberia Rubber Sector 
----------------------------------- 
 
¶2.  (U) According to IMF figures, global natural rubber 
production in 2006 was 9.2 million tons of which just over 
100,000 tons (or roughly 1%) came from Liberian exports. 
Central Bank of Liberia data suggest that rubber production 
contributed 5.5% to Liberia's GDP in 2008 (down from 8% in 
2006).  Rubber still dominates Liberian exports, accounting 
for over 86% of total exports by value in 2008 (down from 95% 
in 2006).  Initial figures for the value of rubber exports in 
2008 are approximately $220 million.  In December 2008, the 
IMF revised estimates for 2009 exports down to $135 million. 
According to the Ministry of Agriculture (MOA), there are an 
estimated 200,000 hectares of planted rubber in Liberia, 
roughly 40% on current or former concessions and 60% on 
smallholder farms.  The sector provides employment for about 
40-50,000 Liberians. 
 
Small Farms Struggle 
-------------------- 
 
¶3.  (U) Years of conflict have taken a toll on rubber farms. 
Many were occupied during the war by combatants and 
"slaughter tapped" with little regard to sustainable 
management.  There has been only limited organized replanting 
since the 1980s and most trees are past the normal productive 
life (25-30 years).  Small farmers are now slowly planting 
new trees, often in partnership with larger plantations and 
processing facilities that provide seedlings in return for 
raw rubber supply.  As part of its program to use rubberwood 
chips from old trees to fuel a new 35MW power plant north of 
Monrovia, Canadian firm Buchanan Renewables is also providing 
new seedlings and other assistance to those farmers who sell 
their older, unproductive to the firm (ref C).  But until new 
trees begin to produce (usually at least 7 years), growth in 
rubber output will be weak, and the quality and quantity of 
production may continue to fall at a time when prices are 
also dropping. 
 
¶4.  (U) Most Liberian rubber farmers sell unprocessed rubber 
to brokers or directly to buying stations managed by one of 
the firms capable of processing the rubber for export.  Until 
2007, there were only two processing facilities operating in 
Liberia: Firestone and the Liberia Agriculture Company (LAC). 
 Deputy Minister of Agriculture James Logan told Econoff 
April 21 that the addition of processing plants at the 
relatively small Morris American Rubber Company (MARCO) in 
Margibi County and two stand-alone processing centers in Bong 
County (Weala restarted in 2007 and Lee Group opened in 2009) 
has recently created a glut of processing capacity. 
 
¶5.  (U) Expansion of small farms remains constrained by land 
disputes and a lack of access to capital.  Leaders of the 
Rubber Planters Association of Liberia (RPAL) tell us the 
 
MONROVIA 00000289  002 OF 006 
 
 
long period between planting and production for rubber makes 
access to financing impossible.  Liberian banks are generally 
unwilling to loan for terms longer than two years while 
revenues from newly planted trees start flowing several years 
later.  Those farmers looking to expand are also finding it 
challenging to reassert control over farms that have been 
abandoned - and often occupied - during the civil conflict. 
 
¶6.  (U) Crime is also a threat.  Illicit tapping to steal raw 
rubber has been a major contributor to lawlessness on many 
plantations and small farms, particularly when the price of 
rubber was high.  In November 2008, in an attempt to protect 
local processors and discourage rubber theft, the GOL banned 
the export of unprocessed rubber and authorized rubber 
purchases only from licensed agents (ref D).  The ban was 
targeted at the large number of unlicensed brokers who 
provided a market for stolen rubber, and to stop the flow of 
unprocessed rubber across the border to Cote d'Ivoire for 
processing.  However, in response to complaints from rubber 
producers in the southeast where no processing facility 
exists (and in the context of lower prices that discouraged 
stealing), the GOL suspended the ban in March, 2009. 
 
Rubber Alliance slow to perform 
------------------------------- 
 
¶7.  (U) In 2007, the MOA, RPAL, Firestone and USAID signed a 
Memorandum of Understanding (MOU) to set up a Rubber Alliance 
with the purpose of creating commercial opportunities to 
increase smallholder incomes from rubber production and 
"intercropping" of other agricultural products on farms and 
plantations.  The Alliance failed to initiate any programs 
due to the lack of reliable data on sector needs and weak 
leadership from the MOA.  In early 2009, the Alliance was 
re-activated with an expanded representation from other 
plantations, and USAID funded a consultant to draft a Rubber 
Sector Master Plan.  The plan is expected to be completed in 
October. 
 
Plantation concessions revised 
------------------------------ 
 
¶8.  (U) Because only Liberians can own land, foreign 
investors in the rubber sector operate on government-licensed 
plantations.  The GOL grants concessions in return for 
development commitments, social and employment undertakings, 
and the payment of land rent, taxes and duties.  The GOL 
currently negotiates the terms and condition of each 
concession agreement separately, a time-consuming process 
that has created inconsistencies and opportunities for 
corruption.  The revised Liberia Revenue Code currently 
before the legislature includes standard provisions for 
investments between $1m and $20m that would apply to rubber 
concessions.  These would standardize and expedite the 
concession process and be granted without legislative 
approval. 
 
¶9.  (U) The GOL amended its concession agreement with 
Firestone in 2008 (ref F) and that agreement now serves as a 
model for other agricultural concession negotiations (and 
re-negotiations) currently underway.  The GOL has focused on 
five priorities during concessions negotiations: 
 
-- standardized agreements in accordance with Liberian law 
(particularly tax and revenue codes); 
 
-- commitment to smallholder development within and adjacent 
to the concession area; 
 
-- contributions to Community Development Funds; 
 
-- a 'margin of preference' for Liberian firms and majority 
Liberian management; and 
 
-- detailed terms and conditions for social infrastructure 
and development. 
 
¶10.  (U) The MOA has also proposed standard language that 
would require that concessionaires contribute 1% of the value 
of all rubber exports to fund the development of the rubber 
sector in Liberia. 
 
 
MONROVIA 00000289  003 OF 006 
 
 
¶11.  (U) The following paragraphs provide updated information 
on current rubber concessions in Liberia.  (Note: this 
information is business proprietary for U.S. Government use 
only.  End note). 
 
Firestone Natural Rubber Liberia 
(Margibi County) 
-------------------------------- 
 
¶12.  (SBU) Firestone's plantation in Harbel is the world's 
largest contiguous rubber-producing estate at 118,000 acres, 
77,000 of which are currently in production.  Firestone 
signed a 36-year amended concession agreement in 2008 (ref F) 
and has commenced its largest replanting investment since the 
end of World War II.  In addition to the rubber it produces 
on the estate, Firestone buys 75 million pounds of 
unprocessed rubber from private producers each year.  The 
plantation employs roughly 9,500 workers, about 7,000 of whom 
are full time.  The firm provides schooling to 17,000 
children at 26 schools, along with two clinics and a new, 
modern hospital.  Firestone recently completed a $5m water 
treatment project and a factory to process rubberwood for 
export, the first of its kind in Liberia. 
 
¶13.  (SBU) Firestone exports just over 60% of Liberia's total 
rubber exports and supplies roughly 15% of parent company 
Bridgestone's (Japan) input.  Firestone uses all solid rubber 
exports at its plants in North and South Carolina and sells 
condensed latex on the open market.  Despite having the most 
comprehensive social development projects in the country, the 
company is often the target of union and environmental groups 
due to its size and history in Liberia. 
 
Liberia Agriculture Company 
(Grand Bassa County) 
--------------------------- 
 
¶14.  (SBU) LAC's concession is larger (300,000 acres) than 
Firestone's but there are fewer acres under production 
(32,000).  The GOL and LAC concluded an MOU in December 2007 
that ratified the plantation's development plan and included 
provisions for 7,500 acres of smallholder farms supported by 
LAC, along with increased housing, schools, clinics, and 
water sanitation.  The MOU forms the basis for ongoing 
negotiations for a formal amended concession agreement that 
would be based on the new Firestone agreement. 
 
¶15.  (SBU) LAC was originally concessioned to Uniroyal but is 
now 100% owned by the Belgian Societe Financiere Des 
Caoutchoucs (SocFin), which also has ties to Salala and Weala 
(see below).  Because of its size, land rights have been an 
ongoing source of tension between LAC and surrounding 
residents, and opposition Liberty Party leader Charles 
Brumskine of Grand Bassa has been one of the loudest 
opposition voices to the LAC agreement.  In late 2007, LAC's 
Belgian plantation manager was shot dead, apparently by local 
residents unhappy over the company's GOL-approved expansion 
plan. 
 
Salala Rubber Plantation 
(Margibi County) 
------------------------ 
 
¶16.  (SBU) Salala's concession dates from the 1960s and 
covers 21,000 acres of which 7,000 are planted.  However, 
many trees are old and unproductive.  The plantation is owned 
and operated by Salala Rubber Corporation (SRC), the product 
of a merger in July 2007 of a stand-alone rubber processing 
factory (Weala Rubber company) and the Salala rubber 
plantation. 
 
¶17.  (SBU) SRC is 90% owned by Agrifinal N.V. (Belgium), and 
Intercultures (Luxembourg), a subsidiary of SocFin, the same 
company that owns LAC.  Salala is managed by SocFin 
Consultant Services, an affiliate of SocFin.  SRC received a 
$10 million, 11-year loan from the IFC in 2008 to finance 
rehabilitation of the plantation.  The loan is IFC's largest 
agribusiness investment in Liberia. 
 
Cavalla Rubber Plantation 
(Maryland County) 
------------------------- 
 
MONROVIA 00000289  004 OF 006 
 
 
 
¶18.  (SBU) The Cavalla concession covers 20,000 acres, of 
which 15,000 are planted, mostly with older, unproductive 
trees.  Cavalla is jointly owned by the GOL and Salala Rubber 
Investments Ltd (SRI) of the UK and managed since November 
2007 by SRI.  SRI broke ground in February 2009 on a new 
rubber processing plant on Cavalla and has settled salary 
arrears to be able to lay off 600 workers.  The GOL has been 
negotiating since 2007 with SRI and Bakrie Sumatra 
Plantations (BSP) of Indonesia to sell its 50% share in the 
plantation. 
 
¶19.  (SBU) Cavalla belonged to Firestone from the 1920s to 
1984 when it was turned over to the Cavalla Rubber 
Corporation (CRC), a 50/50 joint venture between the GOL and 
Societe Internationale de Plantations et de Finance (SIPEF) 
of Belgium.  The war forced SIPEF out of Liberia in 1990, and 
the plantation was abandoned until former President Charles 
Taylor installed Agrocom under the management of Harrison 
Karnwea (now at Cocopa) in 1997, and later GINOL from 
2000-2003 when MODEL forces occupied the concession.  After 
the war ended, Cavalla passed first to the Maryland County 
Legislative Caucus, then in 2005 to Liberian firm Agro 
Management, and later to the Pleebo Rubber Corporation.  In 
2006, after labor unrest over unpaid salaries, the GOL (with 
UNMIL assistance) repossessed the plantation.  The RPAL 
assumed interim management from May 2006 to November 2007, 
when SRI purchased SIPEF's 50% share and took over private 
management under the original CRC name.  In early 2008, SRI 
sold a portion to Cote d'Ivoire-based Internationale De 
Plantation D'Heveast (SIPH) of France, and repaired the road 
to the border to facilitate exports of raw rubber to the Cote 
d'Ivoire for processing. 
 
Cocopa Rubber Plantation 
(Nimba County) 
------------------------ 
 
¶20.  (SBU) Cocopa is owned by the Liberia Company (LIBCO), an 
American firm originally owned by Pan Am and Delta Sea Lines 
in the 1950s when LIBCO managed Liberia's port, airport, and 
regional Pan Am operations.  Cocopa began as a cocoa 
plantation but shifted to rubber as being more profitable and 
suitable for the climate.  The original concession is 175,000 
acres but only 25,000 are planted, and only 7,000 acres are 
still in production.  Cocopa has replanted 2,000 new acres of 
trees since 2002 and has plans to plant 400 acres per year. 
The GOL reaffirmed in 2007 LIBCO's concession agreement 
through 2029 based on a stipulation to renegotiate terms in 
2009, and LIBCO is pursuing another round of OPIC financing. 
Cocopa does not have a processing plant, and sells most of 
its rubber to Firestone. 
 
¶21.  (SBU) After OPIC-supported expansion in the 1980s, 
government forces looking for Charles Taylor ransacked Cocopa 
in 1990, and the plantation was occupied from 1990-95 by 
Taylor-allied Nimba Rubber Company.  In 1996, LIBCO's 
American manager, Charles Trippe, installed Taylor associate 
Roland Massaquoi as manager, who later ran against Ellen 
Johnson Sirleaf in the 2005 presidential race.  After the 
election, the GOL sought to take over the plantation and 
install an interim management team.  Trippe objected and the 
Embassy weighed in with President Sirleaf.  Eventually the 
Supreme Court ordered the Ministry of Agriculture to remove 
the GOL interim management and return Cocopa to LIBCO.  A 
deal was struck between the GOL and LIBCO at the February 
2007 Liberia Investment Conference in Washington.  LIBCO 
arranged for LAC management to temporarily operate the 
plantation before reinstalling independent management under 
Harrison Karnwea (former Cavalla plantation manager and Nimba 
County Superintendent) in 2008.  In July 2008, a rubber thief 
died while in custody of Cocopa security, igniting a series 
of violent incidents at the plantation.  In February 2009, 
Cocopa dismissed 30 contract security forces who set up 
roadblocks around the plantation in response until disbursed 
by UNMIL and local government officials. 
 
Sinoe Rubber Plantation 
(Sinoe County) 
----------------------- 
 
¶22.  (SBU) Sinoe is the largest rubber concession in Liberia, 
 
MONROVIA 00000289  005 OF 006 
 
 
covering over 600,000 acres, 50,000 acres planted at peak, 
much of which are now past their productive cycle.  Sinoe was 
the site of fierce fighting during the war, and has been 
largely unmanaged and ungoverned since.  Housing and other 
social infrastructure are vandalized and dilapidated. 
Ownership and management of the plantation remains under 
dispute (septel will provide further analysis on Sinoe's 
situation). 
 
¶23.  (SBU) The original 80-year Sinoe Concession was 
concluded in 1953 with German-owned African Fruits Company 
(AFC).  In 1973, AFC sold to Ernest Dennis who supposedly 
(this is currently contested in Liberian courts) sold to 
Mesurado Plantation Industries.  In 1983, MPI leased to 
GOL-owned Sinoe Rubber Corporation for 20 years.  MODEL 
forces occupied the plantation during the war, and after the 
war, former fighters led by Leon Worjlah ("White Flower") 
took control of the plantation through a local association 
called the Citizen's Welfare Committee (CWC) which "taxed" 
locals for access to the plantation.  In June 2008, local 
citizens demanded removal of the CWC, and after a series of 
clashes, the local caucus and Superintendent dislodged "White 
Flower" and banned the CWC.  Local authorities have since 
attempted to install their own management (the Sinoe Trust) 
but the MOA has blocked the Sinoe Trust and insisted on 
appointing a rival management team.  By early 2009, neither 
IMT had established control.  In March 2009, the GOL asked 
management from MARCO (see below) to temporarily take over 
management but to date there is no agreement on a new IMT. 
 
¶24.  (SBU) Meanwhile, in August 2005 the MOA issued a 
document confirming Monsurado's ownership of the plantation, 
but the ruling did not have attestation of the Ministries of 
Finance or Justice.  In 2007, the MOJ told the UN the 
plantation was owned by the Tolbert family.  The GOL asked 
UNMIL to take control in 2007 so that an interim management 
team could be installed, but the UN requested that the GOL 
commit in an MOU that the plantation would not simply be 
turned over to another GOL-appointed IMT without any 
accountability for financial management and local community 
development.  The GOL apparently does not want to be seen 
reclaiming the plantation from the combatants to hand over to 
the Tolberts, a prominent Americo-Liberian family.  So for 
now, the UN won't go in, the GOL won't push the issue, and 
the plantation remains neglected.  The press reported in 
April 2009 that the Tolbert family had filed for an official 
court ruling on the plantation's ownership. 
 
Gutherie Rubber Plantation 
(Bomi and Grand Cape Mount Counties) 
------------------------------------ 
 
¶25.  (SBU) Gutherie plantation totals 300,000 acres, of which 
roughly 22,000 are planted.  Mismanagement by a succession of 
GOL-appointed IMTs produced periodic violent flare-ups, most 
recently in March 2009.  There has been no new planting or 
investment in infrastructure since prior to the war.  Most 
tappers carry out slaughter-tapping of trees and sell the 
latex to Firestone for quick cash.  Those schools and health 
services that exist are provided primarily by NGOs.  The 
Malaysian firm Sime Darby (which acquired the Gutherie 
Company - the original concession holder) expressed interest 
in 2007 for a revised concession agreement.  Discussions were 
unproductive for almost two years until the resignation of 
Agriculture Minister Toe and worker unrest in March 2009 
cleared the logjam on negotiations.  The MOA and National 
Investment Commission say an agreement with Sime Darby is 
likely by May, 2009. 
 
¶26.  (SBU) Gutherie was originally concessioned to B.F. 
Goodrich in 1957.  Goodrich pulled out of Liberia after the 
1980 coup and the GOL then contracted with Gutherie Rubber 
Company (Malaysia) to manage the concession from 1981-2000. 
In 2000 Charles Taylor took control of the plantation and 
installed an interim management team.  After the war, LURD 
ex-combatants occupied the plantation and the National 
Transitional Government of Liberia gave operations to the 
General Resource Corporation chaired by Ghazi Bazi until 
September 2005, followed by Agro Resources Corporation in 
early 2006.  In August 2006, UNMIL took control of security 
and the GOL installed an IMT led by the RPAL.  In January 
2008 workers demanded higher payments and services and forced 
 
MONROVIA 00000289  006 OF 006 
 
 
the RPAL out, after which the GOL appointed a new IMT that 
reported directly to the MOA.  Allegations of gross 
mismanagement and corruption under the MOA-appointed IMT led 
to violence on the plantation in 2009 and contributed to the 
resignation of Agriculture Minister Christopher Toe in March 
(ref B). 
 
Decoris Plantation 
(Maryland County) 
------------------ 
 
¶27.  (SBU) Decoris was previously a government-owned 
20,000-acre oil palm plantation financed partly by the 
African Development Bank.  There has been no consistent 
management of the plantation since 1993.  The GOL opened bids 
for the plantation in April 2009.  Reportedly BSP and SIPH 
(also with interest in Cavalla) were among the bidders on 
what the GOL hopes will be a joint rubber and oil palm 
concession. 
 
Morris American Rubber Corporation 
(Montserrado County) 
---------------------------------- 
 
¶28.  (SBU) MARCO is the largest Liberian-owned operational 
rubber farm, with 10,000 acres of land, 6,000 of which are 
planted.  The farm is owned by Bill Morris and managed by 
former RPAL Director, Keith Jubah.  MARCO previously sold 
unprocessed rubber to Firestone but recently completed 
construction of a $2.5 million processing facility, financed 
by the Liberian Bank for Development Investment (LBDI) and 
guaranteed by the IFC.  The farm employs 400 workers and is 
also the site of construction of a 35MW rubberwood-chip 
fueled power plant by Buchanan Renewables (ref C). 
 
Lee Rubber Group Processing Factory 
(Bong County) 
----------------------------------- 
 
¶29.  (SBU) Singapore-based Lee Rubber Group completed 
construction of a $50 million rubber processing facility in 
the Salala district of Bong County in January 2009.  The 
facility does not yet have any plantation land but is in 
discussions with the GOL to acquire a nearby concession area. 
 Lee Group has pledged to create more value-added products at 
its facility (including chairs and slippers) rather than 
exporting only block and liquid latex. 
 
 
ROBINSON