2010

Contents PageAcknowledgements iii Summary ivList of Acronyms vi1. Introduction 1

Indices2. Human Development Index 23. Democracy Index 44. Ibrahim Index 75. Fragility Index 96. Corruption Perception Index 117. Ease of Doing Business Index 138. Country Policy and Institutional Assessment Index (CPIA) 15

Initiatives9. Kimberly Process 1810. West African Resource Watch 20

11. Conclusion 2312. References 24

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This report was prepared by Adusei Jumah, UNDP Economic Advisor in Freetown. The author is grateful to Michael von der Schulenburg for initiating the project and for constructive comments on earlier drafts. Appreciation also goes to Ensa Koroma for informative inputs and Ahmed Ibrahim Yansaneh for research assistance, to Gérald Audaz, Herbert Mcleod, Steven Ursino and John Weeks for useful comments on earlier drafts. The author would welcome any comments or suggestions by contacting him through his e-mail address: adusei.jumah@undp.org

This document should not be reported as representing the views of the UNDP. The views expressed in this document are those of the author and do not necessarily represent those of the UNDP or UNDP policy.

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Summary:

The paper “Sierra Leone as Seen through International Economic and Social Indicators” is a publication of UNDP in Sierra Leone and forms part of a number of regular subjective reports that will be issued by various UN agencies as part of the UN Country Team’s efforts to stimulate the national debate around key social and development issues. UNDP plans to issue an up-date of this paper every year as a means of monitoring progress made in changing the international perceptions and image of Sierra Leone.

The objectives of the paper are threefold: o to raise awareness within the Government and development community on how the

political, social and economic performance of Sierra Leone is seen by international indices and initiatives;

o to provide some initial guidance to the Sierra Leonean government and donor community on how to improve a number of key indicators and help design respective programmes and other interventions to improve the county’s international image;

o to encourage the government and the international development community to improve data collection and dissemination of economic, social and political indicators for Sierra Leone that would better reflect a better and more correct picture of the situation and recent developments in the country.

The paper reviews seven international indices and two initiatives as assessment tools to gauge Sierra Leone’s economic, social and political performance. All those indices rank countries according to different criteria. Not surprising for one of the poorest countries that has only recently emerged from civil war, Sierra Leone finds itself at the bottom parts of all the indices and initiatives that have been reviewed in this report. However, the overall trend shows encouraging signs of net improvements in the international rankings of Sierra Leone:

UNDP’s Human Devel opment Index (HDI) shows only a slight improvement in the global rankings over the last three years: whilst it ranked last in the 2007 and 2008 reports, it has now moved three steps up; Niger and Afghanistan are now occupying the two last places. By itself this would not be an achievement. However, the slow progress in the ranking is largely due to the progress made in many other countries. The UN Country Team (UNCT) feels that this is also a result of chronically insufficient statistics in Sierra Leone. Under Programme 12 of the Joint UN Vision, UN agencies will work together to improve Sierra Leone’s statistics. The 2008 Sierra Leone Demographic and Health Survey was only a beginning.

Economist Intelligent Unit’s Democracy Index reflects a net improvement in the global ranking of Sierra Leone from having improved its rankings from 121st in 2006 to 112th in 2008 out of 167 countries surveyed. However, the EIU came to a surprising conclusion that the improvements in the rankings also indicated a shift in the country’s democracy, from an authoritarian regime in 2006 to a democratic (hybrid) regime in 2008. This conclusion would most likely not be shared by most international observers and the UNCT has approach the Economist accordingly.

The Mo Ibrahim Index which assesses good governance performance in 53 sub-Saharan countries has also shown a net improvement in Sierra Leone’s attainment. The country now ranks 30th on the index, i.e., six places up since 2007. Sierra Leone could improve its rankings further on the Ibrahim Index by working hard to enhance its performance on especially, the Human Development category.

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The Fragility Index keeps account of each country on both effectiveness and legitimacy in security, political, economic and social performance dimensions and by so doing ranks countries in the order of their fragility. Although Sierra Leone is believed to be one of the very few countries in Africa with demonstrable prospects for good governance and the peaceful settlements of disputes, the country lags behind in meeting all but the 6 th Goal Millennium Development Goal, i.e., combat HIV/AIDS, malaria and other diseases. Thus, the debate on whether or not Sierra Leone is a fragile state is inconclusive.

The Corruption Perception Index (CPI) scores for Sierra Leone have not been encouraging over the years. More recently, however, the many anti-corruption initiatives taken by the new Government to rectify the state of affairs are materializing. These initiatives include, among other things, the independent status granted to the Anti-Corruption Commission. Consequently, the CPI scores for Sierra Leone improved in the past year, moving the country from rank 158 in 2008 to rank 146 in 2009 out of 180 countries. A key indicator of success will be the effectiveness of government management of its natural resources.

The Ease of Doing Business Index for Sierra Leone has shown a positive trend for the past two years. Starting a business in Sierra Leone has increasingly become less cumbersome, owing to government increased effort to address issues surrounding the business environment in the country including business climate reforms. Thus, Sierra Leone was ranked as the easiest place to start a business in West Africa according to the 2008 World Bank Country Policy and Institutional Assessment (CPIA) report.

The World Bank Country Policy and Institutional Assessment (WB/CPIA) is a diagnostic tool that is intended to capture the quality of a country’s policies and institutional arrangements. According to the 2009 CPIA report, Sierra Leone’s main strength lies in economic management and more so in macroeconomic management. This has enabled the country to weather the effects of the ongoing financial crisis more effectively, in comparison to other countries worldwide.

The Kimberley Process (KP) Certification Scheme is a practical approach to prevent illicit diamonds from entering the legitimate diamond trade. Although this Certification Scheme still has some ambiguities that undermine its effectiveness, it has immensely reduced the market for conflict diamonds, thus increasing the revenues of poor governments. For instance, about $150 million worth of diamonds were legally exported from Sierra Leone in 2009, compared to almost none at the end of the 1990s.

The West Africa Resource Watch (WARW) seeks to foster sound and equitable use of natural resource revenues in West African countries. Key development partners have continuously been engaged in policy dialogue with the Government of Sierra Leone on managing natural resources in a transparent and sustainable way. However, the progress to-date has been limited and reinforces the need for a more integrated and coordinated approach to support future mining development and stimulate broader economic impact from mining activities.

Adusei JumahEconomic Advisor

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List of Acronyms:

Throughout this document, There will be many abbreviated terms and titles of organizations. For quick reference, provided below is a list of all terminologies used.

ACCORD - The African Centre for the Constructive Resolution of Disputes. CPIA - Country Policy and Institutional Assessment Tool. CPI - Corruption Perception Index. DFID - Department for International Development of the UK. ECOWAS - Economic Community of West African States. EITI - Extractive Industries Transparency Initiative. EIU - The Economic Intelligence Unit. EU - European Union. GDP - Gross Domestic Product. GoSL - The Government of Sierra Leone HDI - Human Development Index. IDA - International Development Association. IFC - International Finance Corporation. KPCS - Kimberley Process Certification Scheme. KP - Kimberley Process. MMR - Ministry of Mineral Resources. NDMC - National Diamond Mining Company. NGO - Non Government Organization. OSIWA - Open Society Initiative for West Africa. UNDP - United Nations Development Programme. UN - United Nations. USAID - US Agency for International Development WB/CPIA - World Bank Country Policy and Institutional Assessment Tool. WTO - World Trade Organization.

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1. Introduction

This paper is a quick reference guide for gauging Sierra Leone’s economic, social and political performance as seen through international indices or other assessment processes. For this purpose, the document reviews 7 indices and 2 initiatives as assessment tools.

The indices are: Human Development Index (HDI), compiled by the UNDP Democracy Index, compiled by the Economist intelligence Unit Ibrahim Index, compiled by the Mo Ibrahim Foundation Fragility Index, compiled by Marshall, Goldstone and Cole Corruption Perception Index (CPI), compiled by Transparency International Ease of Doing Business Index, compiled by the World Bank Country Policy and Institutional Assessment Index (CPIA), compiled by the World

Bank.

The initiatives are: Kimberly Process (KP), governed by the Kimberley Process Certification Scheme West African Resource Watch, governed by the Open Society Initiative for West

Africa.

The indices provide quick and concise information on performance ratings associated with poverty, welfare, governance as well as the ease of doing business. The initiatives, on the other hand, gauge the degree of improvements in governance and economic performance with respect to the time the initiatives became operational.

There is no such thing as a perfect index or a flawless initiative. Neither do indices always reflect the best available knowledge. While there may be several other indices and initiatives, those employed in the paper have become industry standards. For example, the HDI has become the standard for measuring the level of development of a country. Likewise, membership of the Kimberly Process has become the standard for gauging the magnitude of a country’s trade in conflict diamonds.

The paper intends to serve three aims. The first aim is to raise awareness within the Government and development community on how Sierra Leone is seen by international ratings institutions. In this regard, an attempt is made for each index to portray the ranking of Sierra Leone relative to other countries and, where possible the trend of each index over time.

The second aim is to provide the government and donor community with some initial guidance on how to improve a number of key indicators and help design respective programmes and other interventions to improve the international image of Sierra Leone.

The third aim is to entice the government and the international development community to improve data collection and dissemination of economic, social and political indicators for Sierra Leone that would better reflect a better and more correct picture of the situation and recent developments in the country.

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2. The Human Development Index (HDI)

2.1 Overview

The Human Development Index (HDI) refers to the process of widening options of persons, giving them greater opportunities for education, health care, income and employment―among other things. This index has been compiled annually by the United Nations Development Programme (UNDP) since 1990. The HDI looks beyond GDP to a broader definition of well-being. In principle, the HDI is intended to gauge a country’s development through a composite measure of three dimensions of human development:

Living a long and healthy life (measured by life expectancy) Being educated (measured by adult literacy rate [two-thirds weighting] and

combined enrolment at the primary, secondary and tertiary levels [one-third weighting]).

Having a decent standard of living (measured by purchasing power parity, PPP, income).

The HDI is used to measure whether a country is: Developed Developing, or Underdeveloped

Thus, countries fall into three categories based on the value of their HDI: countries that have HDI scores between 0.8-1 are regarded as having high human

development countries with HDI scores between 0.5-0.79 have medium human development An HDI score of less than 0.5 implies that the country have low human development.

Critique: The index is not in any sense a comprehensive measure of human development. It does not, for example, include important indicators such as gender or income inequality as well as respect for human rights and political freedoms.

In spite of the criticisms, the HDI has had a significant impact on drawing the attention of governments, corporations and international organizations to aspects of development that focus on the expansion of choices and freedoms, not just income.

2.2 Sierra Leone and the HDI

Sierra Leone ranks among the world's least developed countries and has constantly found itself near the bottom of the UN's HDI (see Table 1). Since 2003 the HDI score for Sierra Leone has been within the range of 0.3-0.37, implying that the level of human development in the country is low. The 2007 HDI value of 0.365 ranks the country 180 th out of 182 countries.

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Table 1: HDI Trend for Sierra Leone (2003-2010)

Rankings ****2003 2004 2005 2006 2007 2010

HDI value 0.298 0.335 0.336 0.357 0.365 0.317Country rankings 176 176 177 180 180 158Number of countries in rankings 177 177 177 180 182 169Life expectancy at birth (yrs) 40.8 41 41.8 46.9 47.3 48.2Adult literacy rate (% ages 15 and older) 29.6 35.1 34.8 37.1 38.1 40Combined primary and tertiary gross enrolment ratio (%) 45 65 45 44.6 44.6 44.6GDP per capita (PPP US$) 548 561 806 647 679 808.7Source: Human Development Report, various issues

As shown in Table 1 and Figure 1, progress in basic human development indicators for Sierra Leone has been slow but consistent over the past 3 years. The improvement in Sierra Leone’s HDI value is a result of increases in its HDI component indicators―notably, life expectancy and adult literacy―a sign of real and steady progress in human development. More recently, progress has also been made in the sphere of primary school enrolment and this will reflect positively in future HDI values if the current trend continues.

Figure 1: Trend in Sierra Leone's HDI (2003-2007)

2003 2004 2005 2006 20070

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2.3 Comments

HDI scores in almost all countries have increased progressively over the years. For Sierra Leone to improve on its current rankings, it needs to accelerate improvements in all component indicators of the HDI. Greater improvements in its GDP per capita and combined primary and tertiary gross enrolment ratios are needed to lift Sierra Leone to a higher level in the HDI rankings.

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3.1 The Democracy Index

3.1 Overview

The Democracy Index provides a snapshot of the current state of democracy worldwide every two years in September for 167 independent states and two territories. This index is published by the Economist Intelligence Unit (EIU). Until now, there have been two editions of this index. The first edition was published in 2006 and the second in 2008.

The EIU’s Democracy Index is based on five categories: electoral process and pluralism civil liberties the functioning of government political participation political culture

Countries are placed within one of four types of regimes: full democracies; flawed democracies; hybrid regimes; and authoritarian regimes. Each category has a rating on a 0 to 10 scale. The overall index of democracy is the simple average of the five category indexes. The index values are used to place countries within one of four types of regimes:

Scores of 8-10 – Full democracies Scores of 6-7.9 – Flawed democracies Scores of 4-5.9 – Hybrid regimes (democracies) Scores below 4 – Authoritarian regimes

The index serves as a useful tool for comparing governance and development factors when planning programmes and anticipating issues that will impact future programmes. According to this measure of democracy, half of the world’s population now lives in a democracy of some sort.

3.2 The Economist Intelligence Unit’s Index Report of Democracy 2010: Democracy in retreat

The third edition of the Economist Intelligence Unit’s democracy index reflects the world situation, as of November 2010, that Democracy is in decline. Free and fair elections and civil liberties are necessary conditions for democracy, but alone, they are not sufficient to create a full and consolidated democracy. Transparency, a minimally efficient government, sufficient political participation and a supportive democratic political culture are the ingredients for a full democratic regime. Democracies must be maintained overtime as even in long-established ones, if not nurtured and protected, the state of democracy within nations can corrode.

Democracy in decline (An excerpt from The Economist Intelligence Unit’s 2010 Democracy Index Report)

The global record in democratisation since the start of its so-called third wave in 1974, and acceleration after the fall of the Berlin Wall in 1989, has been impressive. According to theEconomist Intelligence Unit’s measure of democracy, one-half of the world’s population now lives in a democracy of some sort. However, there has been a decline in democracy across the world since 2008. The decades-long global trend in democratisation had previously come to a halt in what Larry Diamond (2008) called a “democratic recession”. Now democracy is in

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retreat. The dominant pattern in all regions over the past two years has been backsliding on previously attained progress in democratisation. The global financial crisis that started in 2008 accentuated some existing negative trends in political development.

Disappointments abound across many of the world’s regions. Authoritarian trends have become even more entrenched in the Middle East and much of the former Soviet Union. Democratisation in Sub-Saharan Africa is grinding to a halt, and in some cases is being reversed. A political malaise in east-central Europe has led to disappointment and questioning of the strength of the region’s democratic transition. Media freedoms are being eroded across Latin America and populist forces with dubious democratic credentials have come to the fore in a few countries in the region. In the developed West, a precipitous decline in political participation, weaknesses in the functioning of government and security-related curbs on civil liberties are having a corrosive effect on some long established democracies.

Reversals in or erosion of democracy and rising disenchantment with the results of some political liberalisations appear to have a variety of causes. The pace of democratisation was bound to slow after the “easy cases”—eager-to-liberalise east-central Europe after the fall of the Berlin Wall and African regimes susceptible to outside pressure for political change. “Hard cases” such as China and Middle East autocracies were always going to be a more difficult proposition. Autocrats have also learned how better to protect themselves; many of them preside over energy-rich states and have been strengthened by sustained high oil prices. A key factor is the de-legitimating of much of the democracy-promotion agenda, which has been associated with military intervention and unpopular wars in Afghanistan and Iraq. A combination of double standards in foreign policy (autocrats can be good friends as well as foes) and growing infringements of civil liberties has led to charges of hypocrisy against Western states.

Problems in the functioning of democracy in leading Western states diminish the scope for credible external democracy promotion. The US and UK are near the bottom of the “full democracy” category in EIU index. In the US, there has been an erosion of civil liberties related to the fight against terrorism. Problems in the functioning of government have also become more prominent. In the UK, there has also been some erosion of civil liberties, but the main feature is an exceptionally low level of political participation across all dimensions—voting turnout, membership of political parties and willingness to engage in and attitudes to political activity. Although almost one-half of the world’s countries can be considered to be democracies, in our index the number of “full democracies” is low, at only 26 countries; 53 countries are rated as “flawed democracies”. Of the remaining 88 countries in our index, 55 are authoritarian and 33 are considered to be “hybrid regimes”. As could be expected, the developed OECD countries dominate among full democracies, although there are two Latin American countries, one east European country and one African country, which suggest that the level of development is not a binding constraint. Only two Asian countries are represented: Japan and South Korea. One-half of the world’s population lives in a democracy of some sort, although only 12% reside in full democracies. Some 2.5 billion people, more than one-third of the world’s population, still lives under authoritarian rule (with a large share being, of course, in China).

3.3 Sierra Leone and the Democracy Index

In 2008 the Democracy Index score for Sierra Leone was 4.11. This was an improvement over 2006 during which period the country scored 3.57. This also signified an improvement in the

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country’s rankings from being the 121st in 2006 to the 112th in 2008 out of the 167 nations surveyed (see Table 2).

Table 2: Democracy Index for Sierra Leone

Year Rank Overall Score

Electoral process & pluralism

Functioning of

government

Political Participation

Political Culture

Civil Liberties

2006 121 3.57 5.25 2.21 2.22 3.75 4.412008 112 4.11 6.58 1.50 2.78 5.00 4.712010 105 4.51 7.00 1.86 2.7 5.63 5.29

Source: Economist Intelligence Unit, 2008.

According to the EIU, the shift from authoritarian regime in 2006 to a democratic (hybrid) regime in 2008 indicates that Sierra Leone is gradually improving its democratic system over the years. This designation thus, places the country among the 36 nations that are categorised as having hybrid regimes

3.3 Comments

The EIU’s conclusion that Sierra Leone has moved from an “authoritarian” regime in 2006 to a “democratic (hybrid)” status in 2008 is rather surprising and is an assessment probably not shared by other international observers - including the UN. In fact, Sierra Leone has had democratically elected governments since 1996 and has made considerable progress with regard to improving its democratic institutions since the end of the civil war in 2002. In particular, the 2007 presidential and parliamentary elections that led to a peaceful and democratic change of government has been widely acclaimed as an example of democracy in Africa.

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4. Ibrahim Index on African Governance

4.1 Overview

The Ibrahim Index of African Governance is a comprehensive ranking of sub-Saharan African nations according to governance quality. The Ibrahim Index assesses national governance against 57 criteria. The criteria capture the quality of services provided to citizens by governments. The focus is on the results that the people of a country experience.

The criteria are grouped into four overall categories and intended to make up the cornerstones of a government’s obligation to its citizens:

Safety and Security Participation and Human Rights Sustainable Economic Opportunity Human Development

All 53 of Africa's countries are then ranked according to their total scores across the categories.

The Index has evolved to accommodate feedback and critiques from stakeholders, as well as changes in the governance context in sub-Saharan Africa. It was created in recognition of the need for a comprehensive and quantifiable method of measuring governance quality in sub-Saharan Africa, and has been designed to:

Provide a tool for civil society and citizens to hold governments to account Stimulate debate on the governance, in particular by providing information about

leadership performance Provide a diagnostic framework to assess governance in sub-Saharan Africa

The Ibrahim Index is complied under the direction of Professor Robert Rotberg, Dr. Rachel Geiselquist and their team at the Kennedy School of Government with guidance from a panel of eminent African academics and corporate leaders.

Additionally, the Mo Ibrahim Foundation has set up a 5 million dollar award for the African leader that has distinguished him/herself for his/her good governance capacity.

Critique: Despite the worthiness of the index’s ambitions, some scholars have questioned the effectiveness of the Index in the sense that it ignores the important role that civil society is now beginning to play in African politics. Others found the index to be unrepresentative of Africa because it covered only the 48 Sub-Saharan countries for the years 2007 and 2008.

Consequently, the index has been revised for 2009 and for 2007 and 2008 as well to consider the entire continent, not just the sub-Saharan region, following consultation with stakeholders and in consideration of the geographic and political links between all African countries

4.2 Sierra Leone and the Ibrahim Index

The 2007 rankings revealed that some of Africa's most economically powerful countries are not as well governed as some of its comparatively smaller counterparts―in the economic sense. In 2007, Nigeria ranked at 35th place among the continent's 53 nations, i.e., only one place ahead of Sierra Leone at 36th place. Kenya was at 18th place, below Lesotho (9), Tanzania (14) and Gambia (16).

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Table 3: 2007-2009 Ibrahim Index Scores for Sierra Leone

Category 2007 Score(out of 100)

2008 Score(out of 100)

2009 Score(out of 100)

2010 Score(out of 100)

Ibrahim Index 43.67 47.10 48.91Safety and Rule of Law 41.94 48.03 52.42Participation and Human Rights 56.19 57.99 60.17Sustainable Economic Opportunity 33.52 39.78 41.32Human Development 43.04 42.60 41.72Country Rankings (out of 53) 36 32 30Source: Mo Ibrahim Foundation, 2008

According to the 2008 Ibrahim Index, Sierra Leone improved its overall score by 3.43 percentage points over the previous year to 47.1, and ascended 4 places to rank 32 th out of sub-Saharan Africa’s 53 countries. Within ECOWAS, Sierra Leone ranked 12 th out of 16 countries.

The 2009 assessment noted that Sierra Leone scored 48.9 out of 100, and was ranked 30 th

out of 53 African countries – an improvement of two places over the previous year’s performance. Within the West African region, Sierra Leone was ranked ninth. Sierra Leone scored below the West African regional average, which was 51.7 and also scored below the overall continental average which was 51.2.

At the category level, the country scored below the continental average in the categories of safety and rule of law and sustainable economic opportunity, and well below the continental average in the category of human development. However, Sierra Leone scored well above the continental average in the category of Participation and Human Rights.

Also, from Table 3, there has been progress in all the categories for the Ibrahim Index except for the Human Development category. This contradicts the information on the HDI that is seen to have shown a positive trend during that same period. The reason is that the HDI is based on a more comprehensive data base that includes life expectancy, and GDP per capita – all of which have improved during the intervening period. These two variables are not included in the Human Development category of the Ibrahim Index.

4.3 Comments

Sierra Leone could improve its rankings on the Ibrahim Index by working hard to enhance its performance on especially, the Human Development category.

5. Fragility Index

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5.1 Overview

Fragility is the process that conflict-ridden states either enter into as a result of institutional failure or emerge from, in those cases where a political accord has been reached and a peace process has been put in place. The term fragility is intended to capture both the instability and the delicate nature of the limited capacity, unstable governance and fledging institutions often found in these environments.

Measures of fragility reflect the quality of institutions in these states. The World Bank, for example, defines low income countries as fragile if they have a Country Policy and Institutional Assessment Index (CPIA)1 of 3.2 or below. However, given the limitations of the CPIA as a measure of state capacity, the term fragile is intended only as a guideline for identifying only those countries that may have special needs due to particularly low institutional capacity and a low IDA allocation out of the entire spectrum of developing countries that are the Bank’s clients.

The State Fragility Index and Matrix by Marshall, Goldstone and Cole lists all independent countries in the world in which the total country population is greater than 500,000. The Fragility Matrix scores each country on both Effectiveness and Legitimacy in four performance dimensions: Security, Political, Economic and Social, at the end of the year. The state Fragility Index, then combines scores on the eight indicators and ranges from 0 “no fragility” to 25 “extreme fragility”.

5.2 Sierra Leone and the Fragility Index

The 2008 State Fragility Index and Matrix in Table 4 indicates that Sierra Leone is the 7 th

most fragile state in the world out of 162 countries, paring with Nigeria and Rwanda but less fragile than Burundi, Central African Republic , Ethiopia, Iraq and Liberia.

World Bank President recently excluded Sierra Leone in his talk on fragile states and security development at the International Institute for Strategic Studies in Geneva. The African Centre for the Constructive Resolution of Disputes (ACCORD) in South Africa also believed Sierra Leone was one of very few countries in Africa with demonstrable prospects for good governance and the peaceful settlements of disputes.

Table 4: State Fragility Index and Matrix 2008 (2010 data not yet updated)

Fragility Index Effectiveness Score Legitimacy Score

Somalia 25 13 12Sudan 23 11 12D. R. Congo 23 12 11Afghanistan 22 12 10Chad 21 12 9Myanmar (Burma) 21 10 11Nigeria 20 11 9Rwanda 20 11 9

1 See chapter 8 for the discussion on CPIA

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Sierra Leone 20 12 8Burundi 19 12 7Central African Rep. 19 10 9Ethiopia 19 10 9Iraq 19 9 10Liberia 19 12 7Source: Marshall, Goldstone and Cole, Global Report 2009

5.3 Comments

Fragile states, in the view of the World Bank President, lag behind in meeting all the Millennium Development Goals. A recent UNDP review disclosed that Sierra Leone will only be able be meet the 6th Goal, i.e., combat HIV/AIDS, malaria and other diseases. In spite of that, the country received the 2008 Peace Award in Durban City Hall, South Africa in recognition of the country’s protection for human rights, peaceful settlement of disputes and good governance in public affairs. Thus, the debate on whether or not Sierra Leone is a fragile state is inconclusive.

6. Corruption Perception Index (CPI)

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6.1 Overview

Transparency International, an anti-corruption NGO, was founded in 1993 and has since 1995 published an annual Corruption Perception Index (CPI) ordering countries according to the degree to which corruption is perceived to exist among public officials and politicians. Although other CPIs exist (e.g., World Bank’s Control of Corruption index and the index of the International Country Risk Group), Transparency International’s CPI is by far the most widely used indicator for assessing the extent of corruption in individual nations.

Critique: Critics of the CPI assert that the index is not a comprehensive measure of the degree of corruption in a country. In particular, they question the quality of the index itself vis-à–vis the lack of standardisation and precision stemming from the use of third-party data that can vary widely in methodology and completeness from country to country as well as the lack of actionable insights created from a simple country ranking.

Despite these criticisms, nonetheless, the CPI serves as a valuable reminder that corruption remains widespread in very large countries and that the fight against this endemic disease dare not be relaxed.

6.2 Sierra Leone and the CPI

Transparency International’s CPI scores for Sierra Leone have not been encouraging over the years. Sierra Leone has persistently scored less than 2.5 on a scale of zero to 10 (where 10 represents highly clean and 0 represents highly corrupt) since 2003 (see Table 5).

Table 5: Corruption Perception Indices for Sierra Leone (2003-2008)

Year Rank Total Number of Countries Surveyed Corruption Perception Index2003 113 133 2.22004 114 145 2.32005 126 158 2.42006 142 162 2.22007 150 179 2.12008 158 180 1.92009 146 180 2.22010 134 178 2.4Source: Transparency International, 2010.

Referring to the Transparency International’s CPI scores in Table 5, Sierra Leone has constantly remained among the most corrupt nations in the world. Whilst the perception on corruption gradually improved from a score of 2.2 in 2003 to 2.4 in 2005, it deteriorated thereafter to 1.9 in the year 2008 and thereby ranking as the 158th most corrupt nation out of the 180 nations surveyed―its worst ranking since 2003 (see also Figure 2). The situation improved in 2009 with a score of 2.2 and a country ranking of 146 out of 180.

Figure 2: Trend of Corruption Perception Indices for Sierra Leone

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1 2 3 4 5 6 70

0.5

1

1.5

2

2.5

3

Year

Scor

e

6.3 Comments

That Sierra Leone should move from rank 158 in 2008 to rank 146 in 2009 (with a corresponding improvement in the CPI scores) is an indication that the many initiatives taken by the new Government to rectify the state of affairs are materializing. The government’s policy stance on the fight against corruption as a priority is manifest through the global anti-corruption and awareness-raising campaigns, the many reforms in the Anti-Corruption Commissions that gave birth to the enactment of the Anti-Corruption Act in 2008 and the presidential campaign with a theme of zero tolerance approach to corruption. In addition, the body charged with the responsibility to fight corruption has been made independent. A key indicator of success will be the effectiveness of government management of its natural resources.

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7. Ease of Doing Business Index

7.1 Overview

The Ease of Doing Business Index is an index created by the World Bank that is meant to measure regulations directly affecting businesses. A high ranking on the ease of doing business index means the regulatory environment is conducive to the operation of business. This index averages the country's percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic.

A nation's ranking on the index is based on the average of 10 sub-indices:

Starting a business (Procedures, time, cost and minimum capital to open a new business)

Dealing with licenses (Procedures, time and cost of business inspections and licensing (construction industry))

Hiring and firing workers (Difficulty of hiring index, rigidity of hours of index, difficulty of firing index, hiring cost and firing cost)

Registering property (Procedures, time and cost to register commercial real estate) Getting credit (Strength of legal rights index, depth of credit information index) Protecting investors (Indices on the extent of disclosure, extent of director liability

and ease of shareholder suits) Paying taxes (Number of taxes paid, hours per year spent preparing tax returns and

total tax payable as share of gross profit) Trading across borders (Number of documents, number of signatures and time

necessary to export and import) Enforcing contracts (Procedures, time and cost to enforce a debt contract) Closing a business (Time and cost to close down a business, and recovery rate)

The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10.

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Critique: Critics argue that the Doing Business indicators used by the World Bank and International Finance Corporation (IFC) are not exhaustive to actually tell the ease of doing business in a country. Other areas that are important to business such as an economy’s proximity to large markets, the quality of its infrastructural services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business.

7.2 Doing Business in Sierra Leone

Table 6 indicates that Sierra Leone improved its ranking by 15 places between 2008 and 2010. However, rankings regarding the 10 indicators used in the Ease of Doing Business rankings exhibited mixed performances. While indicators for dealing with construction permits, registering property, trading across borders deteriorated in 2010, those regarding employing workers, getting credit, protecting investors, and paying taxes improved. However, issues relating to starting a business, enforcing contracts, and closing a business, remained the same in 2009. Of particular importance is the significant improvement in the areas of getting credit and protecting investors in the country, both of which improved their rankings by 20 and 26 points respectively, in 2010 relative to 2009. This could surely serve as a good signal to potential investors outside the country who are contemplating on doing business in Sierra Leone.

Table 6: The Ease of Doing Business in Sierra Leone

IndicatorsDoing Business (2008 rankings)

Doing Business(2009 rankings)

Doing Business(2010 rankings)

Doing Business 163 156 148Starting a Business 94 58 58Dealing with Construction Permits 171 168 171Employing Workers 173 167 166Registering Property 175 165 175Getting Credit 141 147 127Protecting Investors 49 53 27Paying Taxes 154 162 160Trading Across Borders 133 135 137Enforcing Contracts 139 144 144Closing a Business 144 147 147

Source: World Bank, 2009

7.3 Comments

Overall, starting business in Sierra Leone has significantly improved, owing to an increased effort by government to address issues surrounding business environment in the country including business climate reforms. Thus, Sierra Leone was ranked as the easiest place to start a business in West Africa according to the 2008 World Bank CPIA report.

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8. World Bank Country Policy and Institutional Assessment (WB/CPIA)

8.1 Overview

The Country Policy and Institutional Assessment (CPIA) is a diagnostic tool that is intended to capture the quality of a country’s policies and institutional arrangements—i.e., its focus is on the key elements that are within the country’s control, rather than on outcomes (such as growth rates) that are influenced by elements outside the country’s control.

More specifically, the CPIA measures the extent to which a country’s policy and institutional framework supports sustainable growth and poverty reduction, and consequently the effective use of development assistance. The CPIA consists of an overall score as well as sixteen separate scores, one for each of the criteria that compose the CPIA.

The CPIA tool was developed and first employed in the mid-1970s and over the years the World Bank has periodically updated and improved it to reflect the lessons of experience and the evolution of thinking about development. The CPIA rates countries against a set of 16 criteria grouped in four clusters (see also Table 71):

a) economic managementb) structural policiesc) policies for social inclusion and equityd) public sector management and institutions

For each of the 16 criteria, countries are rated on a scale of 1 (low) to 6 (high). The scores depend on the level of performance in a given year assessed against the criteria, rather than on changes in performance compared to the previous year. The ratings depend on actual policies and performance, rather than on promises or intentions.

The rationale for CPIA is twofold. At the broadest level, experience has taught the development community that good policies and institutions lead, over time, to favourable growth and poverty reduction outcomes, notwithstanding possible yearly fluctuations arising from internal and external factors. The second reason the Bank undertakes the CPIA exercise is functional: the ratings help determine the relative sizes of the Bank’s concessional lending and grants to low-income countries.

Critique: Critics argue that the costly and influential CPIA exercise is just another way to force borrowers into adopting the model of economic development supported by the Bank. Some cite the inability of the CPIA to discriminate between countries or over time. Others have observed that comparison between the overall CPIA scores and growth in GDP in the same year showed that many CPIA low performers are growing faster than countries that score well on the CPIA.

An external panel review in 2004 concluded that the index focus on the right set of issues and produce robust results. However, the panel also found unnecessary overlap in some of the criteria, and outlined actions to address some methodological and process issues. Accordingly, the Bank has periodically re-examined the criteria and revised them to reflect the lessons of experience and the evolution of thinking about development.

In 2005, both the Asian Development Bank and African Development Bank adopted the World Bank’s criteria as a starting point for their respective performance-based allocation processes. Although both the Asian Development Bank and the African Development Bank

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use the World Bank’s CPIA questionnaire in its assessment of country performance, country scores may not necessarily be the same. Given that each multilateral institution is accountable for the use of its concessional resources, full institutional ownership of country ratings that underpin the allocation of these resources is critical.

8.2 Sierra Leone and the CPIA

Table 7 illustrates Sierra Leone’s performance according to the 2008 CPIA. The revelation here is that the country’s main strength lies in the Economic Management and more so in the Macroeconomic Management. The Economic Management cluster is the only sphere where the country scored higher than the average IDA borrower among the four clusters. Indeed, the authorities’ commitment to stay the course with economic and structural reforms that ensures macroeconomic stability has enabled the country to weather the effects of the ongoing financial crisis more effectively, in comparison to other countries worldwide.

Table 7: 2008 Country Policy and Institutional Assessment (CPIA) for Sierra Leone (2010 data not yet updated)

Sierra LeoneAverage

IDA BorrowersCPIA Cluster A: Economic Management1. Macroeconomic Management 4.0 3.72. Fiscal Policy 3.5 3.53. Debt Policy 3.5 3.5 Average 1/ 3.7 3.5CPIA Cluster B : Structural Policies4. Trade 3.5 3.85. Financial Sector 3.0 3.16. Business Regulatory Environment 3.0 3.3 Average 1/ 3.2 3.4CPIA Cluster C: Policies for Social Inclusion/Equity7. Gender Equality 3.0 3.48. Equity of Public Resource Use 3.0 3.49. Building Human Resources 3.5 3.410. Social Protection and Labour 3.0 3.111. Policies & Institutions for Environmental Sustainability 2.0 3.1 Average 1/ 2.9 3.3CPIA Cluster D: Public Sector Management & Institutions12. Property Rights and Rule-based Governance 2.5 2.913. Quality of Budgetary and Financial Management 3.5 3.214. Efficiency of Revenue Mobilization 2.5 3.415. Quality of Public Administration 2.5 3.016. Transparency, Accountability & Corruption in the Public Sector

2.5 2.9

Average 1/ 2.7 3.1Overall CPIA 2/ 3.1 3.3Source: World Bank, 20091/ For calculating cluster averages, all criteria are equally weighted within a cluster.2/ The overall rating is calculated as the mean of the score of four clusters.

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Next, with regard to cluster performance was Structural Policies, where the country scored a 3.2 average, albeit lower than the IDA Borrowers’ average. In particular, the country performed relatively well with respect to the terms Trade criteria. According to World Bank internal documents, trade restrictiveness is 75% minimal in Sierra Leone. The country has continued to maintain a reasonably liberal trade regime with no significant non-tariff barriers.

The government, however, needs to give a boost to the Policies and Institutions for the Environmental Sustainability criteria. This is an area (criteria) where the country scored the lowest CPIA ratings. Indeed, Sierra Leone is undergoing immense environmental degradation due to human interference with the natural environment. Environmental degradation is mainly due to mining, deforestation, over-exploitation of the marine environment, and pollution from land-based activities (industries and sewage disposal).

8.3 Comments

Although the idea that aid contributes to aggregate growth only when a preferred set of policies are followed has been effectively discounted, this by no means lead to the conclusion that policies do not matter.

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9. Kimberley Process (KP)

9.1 Overview

The Kimberley Process (KP) began in May 2000 in Kimberley, South Africa, as many interested governments, NGOs and industry groups sought to come up with a practical way to prevent illicit diamonds from entering the legitimate diamond trade. As a result, the "Kimberley Process Certification Scheme" (KPCS) was designed with the support of the UN and the WTO. In January 2003, the KP initiative was officially launched. Under the KP, participant countries are required to export rough diamonds in tamper-resistant containers and provide certificates validating that their diamond exports are conflict-free. In order to be compliant with the requirements of the Kimberley Process Certification Scheme, the certificates are created on a forgery-resistant document with a particular format that identifies a shipment of rough diamonds as being legal for trade. Its overall objective is to ensure that conflict diamonds do not enter the legal diamond trade. The initial target of the KP was to stop the trade of blood diamonds used to bolster rebel armies and rogue regimes, but more broadly it has become an important tool in the effort to reduce smuggled illicit diamonds.

The KPCS now represents 75 countries, including Sierra Leone and all major diamond producing, trading and processing countries. Countries that participate must pass legislation to enforce the KP. They must also set up control systems for the import and export of rough diamonds. Participants are only allowed to trade rough diamonds with other participants. No uncertified shipments of rough diamonds will be permitted to enter or leave a participant's country. The aim is to prevent blood diamonds from entering the KP system. The KP participants (governments) and observers (the diamond industry, NGOs) meet once a year to discuss the implementation of the scheme. Working groups monitor participants' implementation of the scheme, assess applications to join, gather and analyze statistics, and discuss technical issues.

Critique: Critics argue that the KP was seriously flawed from the beginning. The Kimberley system of voluntary self-regulation on the part of the diamond industry signifies a significant lack of transparency and independent monitoring efforts. The World Diamond Council, initially established to represent the diamond industry at the KP, has failed to coordinate effective industry monitoring. Furthermore, governments have been uninterested in monitoring and regulating the diamond trade.

9.2 Sierra Leone and the Kimberley Process

Diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments, or in contravention of the decisions of the Security Council are classified as conflict diamonds (according to the United Nations definition). Conflict diamonds came to the attention of the world media during the extremely brutal conflict in Sierra Leone in the 1990s. Trade in these illicit stones is believed to have fueled decades of devastating conflicts in countries such as Angola, Democratic Republic of Congo, Sierra Leone and Cote d’Ivoire.

Conflict diamonds are high value commodities that can easily be smuggled and the KP controls have not been able to stop its trade globally. In Sierra Leone, for instance, KP experts assess the illicit trade to be between 15% and 20%. This poses a problem for the KP

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because any kind of illicit trade exposes gaps in the system that unscrupulous diamond traders use to trade in blood diamonds. Despite these shortcomings, the Kimberley Process has played a significant role in reducing the trade in illegal diamonds. It is estimated that since the inception of the KP, 4% of all traded diamonds came from war torn countries such as Angola, DRC and Sierra Leone. Since 2003, the level of illicit diamonds entering the international market is said to have been reduced to only 1%. Today, with the advantage of the Kimberley scheme the bi-annual tax revenue from the export of diamonds from Sierra Leone is over US$100 million which many consider a significant development.

Although the KPCS still has some ambiguities that undermine its effectiveness, this initiative has immensely reduced the market for conflict diamonds, thus cutting off a major source of funding for rebel groups and militias involved in conflict. In addition, the KP has also helped stabilize fragile countries and supported their development. As the KP has made life harder for criminals, it has brought large volumes of diamonds onto the legal market that would not otherwise have made it there. This has increased the revenues of poor governments, and helped them to address their countries’ development challenges. For instance, some $125 million worth of diamonds were legally exported from Sierra Leone in 2006, compared to almost none at the end of the 1990s.

Recently, an inter-sessional meeting of the Kimberley Process was held in Israel, June 2010. During this meeting, questions were raised on whether the KP should consider human rights in its work or leave it to other international forums that specialize in human rights. Participants at the meeting also made the point that the KP should also clarify its position on how to deal with human rights abuses that are linked to the diamond trade. Israel was elected to handle the Chairmanship of the Kimberley Process from 2010, at the latest meeting of the KP in Namibia on November 5, 2009. Boaz Hirsch, Deputy Director General for Foreign Trade at Israel’s Ministry of Industry, Trade and Labor, will be the official Chair. Hirsch said that the role of Chairmanship is one of great responsibility affecting millions of lives dependent on the diamond industry for their livelihood, and dozens of countries relying on the diamond industry for their economic development. He said that he saw Israel’s role as chair to be “in creating the momentum to improve the process and to suit it to the new challenges it faces.”

9.3 Comments

By tracing the evolution of conflict diamonds as a pressing human security concern in international politics, the ongoing Kimberley Process represents an intriguing development in global governance and multi-track diplomacy. However, there are increasing criticisms that the Kimberly process would not work. In recent years, many people are wondering what does the future hold for the KP, as some say it has been losing its vitality and focus. Now, more than ever, the KP must seriously consider introducing new dimensions to deal with emerging situations. For this to happen, the KP is in need of decisive and credible leadership from government, companies and civil society.

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10. West African Resource Watch (WARW)

10.1 Overview

The West Africa Resource Watch (WARW) is a sub-regional initiative established by the Open Society Initiative for West Africa (OSIWA) in 2007 in Dakar, Senegal. It is envisioned as a West-African home-grown institute committed to filling the gaps in the research, training, documentation, advocacy and policy advice needs of governments, civil society organizations and other stakeholders in the sub-region for the management of revenues from natural resources.

WARW seeks to empower critical stakeholders in West Africa towards popular participation in economic policy making, the equitable generation and distribution of national resources and the transparent and accountable use of public resources. It operates in the 15 countries of the Economic Community of West African States (ECOWAS) as well as in Cameroon, Chad and Mauritania.

According to a recent needs assessment report by the WARW on seven countries (Chad, Côte d’Ivoire, Ghana, Guinea, Guinea-Bissau, Niger and Sierra Leone), none of the countries has a long-term vision of extractive resources in the national economy and each lacks a comprehensive strategy to manage its natural resources. In most of the countries, civil society participation and influence have been minimal and restrictive laws and lack of resources block the media from playing a watchdog role.

West African countries lack the capacity to properly manage their natural resources, thus making the presence of the WARW ever more necessary. WARW aims to mobilize technical and financial resources to strengthen civil society, advocate for responsible use of resources, and reinforce laws and policies governing extractive operations and use of resource revenues. This initiative will indeed enable governments in the region to properly use their natural resource revenues to fight poverty.

10.2 Sierra Leone and WARW

In February 2008 Sierra Leone signed up to the Extractive Industries Transparency Initiative (EITI), a coalition of governments, companies and civil society, which aims to increase transparency of company payments and government revenues from mining, gas and oil. EITI was created as a way to encourage public scrutiny and greater accountability over the revenues received by governments and, currently, EITI is a multi-million dollar effort whose standards have been accepted worldwide by governments, industry, civil society, and multilateral institutions such as the World Bank and International Monetary Fund. Countries in the developing world have many incentives to join EITI and do so in order to attract investment, as companies may seek positive publicity. The main benefits of EITI for civil society groups is having enhanced disclosure and monitoring of government revenues, which in turn, help to combat the large-scale corruption and mismanagement that fuel human rights abuses and undermine development in many resource-rich countries such as Sierra Leone. Under the initiative's rules, candidates for membership have two years to complete an external review of their compliance with the initiative's basic standards, a process known as "validation."

For governments to be considered "EITI compliant," countries must meet several requirements. They must publish at least one national report disclosing company

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payments and government revenues from the extractives sector. Countries must create and put in place a functioning national multi-stakeholder assembly that includes civil society participation. The EITI board must then certify that the candidate countries have complied with requirements following an evaluation of a validation report prepared by an accredited third-party. The validation process is designed to provide quality assurance for the initiative's global standards. Sierra Leone was to comply with EITI conditions by March 2010 - implying that mining companies, the government and civil society must set up an independent body that will call on companies and business partners to report the taxes, royalties and bonuses paid to the government and for the government to declare all revenues received.

The international organization, Human Rights Watch, reports that 20 of the 22 current candidates to join the Extractive Industries Transparency Initiative have not fulfilled the basic requirements to have their candidacy assessed by the EITI deadline of March 2010. This raised serious doubts about the candidate countries commitment to disclose their revenues from oil, gas, and mining. "It's easy for governments to sign up for the initiative and claim they are open about the money they earn from lucrative natural resources," said Arvind Ganesan, director of the business and human rights programs at Human Rights Watch. "But the proof is in whether they actually do what they promised, and so far the results have been dismal." Only two countries that faced the March 2010 deadline completed EITI's validation process within the mandated two-year time frame. Following a review by EITI's board, both countries - Azerbaijan and Liberia - were found to be "compliant." One country, Guinea, voluntarily suspended its candidacy. The other 19 candidate countries are at various stages of implementation, with some relatively advanced and others lagging far behind. Sierra Leone, São Tomé e Príncipe, and some others have not even initiated the validation process. Equatorial Guinea, despite having signed up to join the initiative in 2008, only recently hired a firm to carry out its validation review on the day before the deadline to complete the validation process.

Akin to most West African countries, Sierra Leone is endowed with mineral resources. However, the mining sector has consistently failed to reach its full potential. This has caused the country’s citizens to remain in abject poverty. For quite some time, most mineral exploration and mining operations in the country were run by state owned enterprises. For instance, the National Diamond Mining Company (NDMC) was given the task to prospect, explore and mine diamonds in the country. By nationalizing mining activities, government hoped to capture more benefits from mining through local employment creation, direct spending on social services for mining communities, and higher budget revenue from having a direct stake in the business. Although some successes were achieved in employment creation, social and infrastructural benefits in the mining communities were minimal and the revenue that accrued to government from mining was mismanaged.

Currently, the mining sector is highly dominated by private companies. These companies pay for exploration and mining licences and also pay royalties to the government. Besides, these companies create jobs both directly and indirectly, transfer technologies and knowledge, and generate significant foreign exchange earnings, thus providing governments a financial base for the development of infrastructure and the provision of social services. Unfortunately, owing to a weak revenue management system coupled with corruption, the government has failed to transform these resources into the required benefits for the citizenry.

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Development partners - including the World Bank, Department for International Development of the UK (DFID), European Union (EU), United Nations Development Program (UNDP) and US Agency for International Development (USAID) - have been continuously engaged in policy dialogue with the Government of Sierra Leone (GoSL) on mining sector development. Support from the partners focused on early mineral sector governance reform actions, including the establishment of a mining cadastre system, development of an internationally competitive fiscal regime for mining and transparency principles, assistance in the review of legal acts related to mining, recommendations for the restructuring of the Ministry of Mineral Resources (MMR), and the review of environmental and social aspects of mining (through a Strategic Environmental and Social Assessment). However, the progress to-date has been limited and reinforces the need for a more integrated and coordinated approach to support future mining development and stimulate broader economic impact from mining activities.

10.3 Comments

Owning natural resources must not necessarily be a curse. Just like Canada and Norway, countries can actually manage their resources in such a way that it becomes a blessing. This will, however, involve tackling the issue of governance on the African continent.

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11. Conclusion

As a post conflict developing country Sierra Leone needs to mobilize massive external resources for reconstruction and development. Yet, its current status as a post conflict country also implies that it requires an uphill effort into reworking its image with international ratings institutions if it is to become successful at mobilizing external resources. This places onus on the donor community in Sierra Leone to work with the government to improve the country's rankings as seen through international indices and for that reason, help the government improve the country’s international image.

The paper employs 7 indices and 2 initiatives as assessment tools to serve three intended aims: To raise awareness within the Government and development community on how Sierra Leone is seen by international ratings institutions; to provide some initial guidance to the Sierra Leonean government and donor community on how to improve a number of key indicators and help design respective programmes and other interventions to improve the county’s international image; to entice the government and the international development community to improve data collection and dissemination of economic, social and political indicators for Sierra Leone that would better reflect a better and more correct picture of the situation and recent developments in the country.

Overall, there has been a considerable progress in the country’s performances as seen through all the indices and initiatives. Despite moving up the rankings in almost all the indices examined, challenges still remain more especially, in the areas of human development, state fragility, and corruption. The way forward for government and the donor community to address the enduring risk factors requires a continued collaborative effort in focusing on the appropriate programmes.

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