Besides its tax contribution to the Liberian Treasury or annual budget, the operations of Firestone Plantations Company have made negligible impact on the national economy since 1926.
Besides its tax contribution to the Liberian Treasury or annual budget, the operations of Firestone Plantations Company have made negligible impact on the national economy since 1926. The company concern has been payment of starvation wages to its plantations workers, the importation of rice, some haphazard donations of a charitable nature - often political ones in disguise. In fact, it was until 2005 before the company could build a high school which is only in Harbel City. The company lacks school buses to take students to and fro their schools, which left students to walk approximately 2-5 hours before getting to the nearby elementary school, and the number of school buses the company has now is not access to students in other towns/divisions. The company primary concern has been to maximize profits by exporting the unprocessed rubber latex or products. This has presented company to be an enclave within the dual economy the Liberian economy became after the influx of foreign investments after 1926.
Been aware of the underdevelopment Firestone’s selfish exported- driven operations would land the country into, and the quest to change the country’s economy from export-oriented to a producer of finished (rubber) products, the Liberian Government made numerous proposals to Firestone to establish a tyre processing plant in Liberia. In 1967 a Liberian mission visited Akron, Firestone’s Headquarters in Delaware, U.S.A., to discuss with the managers of the Firestone Tire & Rubber Company the possible creation of a tyre factory in the West African Republic. Anxious as it was to succeed, the Liberian Government it offered the rubber producing and processing company extremely favourable incentives and privileges. In 1969, according to evidence, after over twenty studies and numerous visits by Liberian Government officials to Akron the first definite proposal for the establishment of a tyre factory by Firestone in Liberia was put forward.
Accordingly, the proposal requested Firestone to construct a factory with a minimal annual output capacity of 125,000 tyres and involving a total investment of approximately $ 8.5 million. In the efforts to encourage domestic production of tyres and other finished products in Liberia, Firestone was granted the rights to unrestricted import licenses for imports needed; exemption from customs duties, other customs charges of general application, and corporate income taxes for a period of 10 years; and the right to employ a maximum of fifteen expatriates connected with the operation of the plant. In addition, to protect the new company from internal and external market forces, the Government further promised an increase in the import tariff on vehicle tyres, tubes and retread materials of the same type and sizes as would be manufactured by Firestone Liberia. The tariffs imposed in this connection were not to be less than 150 percent and would become effective on the date the first product of the factory became available to the Liberian market. Furthermore, the Government also promised to restrict the importation of these items prior to the production by Firestone-Liberia to avoid hoarding and speculation.
More importantly, to offset any loss of duty revenue which might have resulted from the protection afforded Firestone-Liberia, an excise tax would be levied on all vehicle tyres and tubes and retread material and other rubber products produced by Firestone-Liberia. According to Dr. van der kraaij (1983), there was no time limit set for this protection via Liberia's trade policy nor was there a time limit provided for the company's right to unrestricted export licenses and to its exemption from export and excise duties for the products of its factory. This means that there would be no tax or levy on interest, dividends, royalties, rents, compensation or other income remitted to recipients abroad by Firestone-Liberia which would exceed the amount that would be fully usable as a tax credit by the recipient.
In addition, the capital of the tyre plant would be acquired in the form of paid-in capital funds and/or in the form of long-term loans. Hence, in the government proposal, there was no provision made prescribing a maximum debt-equity ratio despite the (costly) lesson which by now the Liberian Government had learned from its experiences with other companies notably the mining companies. The new company would have no obligations and only rights. Firestone-Liberia would not even have the obligation to use (exclusively) Liberian produced rubber. The (draft) agreement provided that the company would utilize Liberian natural rubber in its production "to the greatest practicable extent". This seemingly peculiar provision resulted from the extremely high quality of Firestone's Liberian grown rubber which makes this product more suitable and economically more attractive for use in the computer and war industries (e.g. the production of electrical wires, of high quality tyres for planes etc.) and for medical equipment (e.g. surgical gloves).
Firestone's commitment though was conditional upon agreements with surrounding countries and the company put pressure on the Liberian Government to enter negotiations with the governments of these countries. In accordance with tyre plant agreement, this was relating to the provision in the agreement which stated that construction of the plant would commence 18 months after the Government of Liberia would have notified Firestone of the conclusion of trade, tariff and other agreements with neighboring countries. Notably the Government had to negotiate with the governments of the Ivory Coast and Sierra Leone. However, as no progress was made in this respect, the attempt to establish a tyre plant in Liberia proved abortive as Firestone brought unnecessary tactics to weaken the Government efforts. However, Firestone's attitude was not unprecedented as already in 1951, when the Firestone Plantations Company put pressure upon the Liberian Government to conclude a trade agreement with Spain (to supply the company's factory in that country with Liberian rubber. This were just few tricky attempts by Firestone Plantations Company to exploit the country of its natural resources.
Evidentially, after new talks in Akron in October 1969 between the Liberian Secretary of Treasury, J. Milton Weeks, and Firestone officials, Mr. Weeks left the U.S.A. with the impression that Firestone agreed to build a tyre plant with a capacity of 55,000 tyres a year and involving an expenditure of $ 6 million. If the Liberian Government were to reach the trade agreements with Sierra Leone and the Ivory Coast an additional $ 2.5 million would be expended to increase the plant's capacity to 125,000 tyres. However, one month later Firestone communicated that it merely wanted to undertake another feasibility study. This developed strong feelings of disappointment in Liberia, especially among prominent Government officials, thereby describing Firestone company's attitude as increasing insults.
According to studies, the climax was reached when the then company's managers, who under heavy pressure from President William Tubman, submitted another proposal in May 1970 which reduced all previous proposals to the creation of a satellite (plant) of the Firestone-owned tyre plant in Ghana, with a capacity of only 47,000 tyres a year and involving a $ 3 million investment whilst employing 38 persons of whom 28 would be unskilled. It would produce only passenger-car and light truck tyres, and its raw material component would be imported from Ghana. The Firestone Tyre and Rubber Company besides the usual investment incentives with respect to import duty exemptions and a tax holiday demanded the exclusive right to import tyres into the country together with an embargo for an indefinite period on such type of tyres as would be produced locally. The indignation aroused by this proposal led among other things to the personal intervention of President William Tubman. In a letter to Raymond C. Firestone (dated June 12, 1970) which was hand-delivered in Akron, U.S.A. by his son, William V.S. Tubman, Jr., and the Economic Advisor to the President, Lafayette K. Morgan, he expressed his anger about the proposal and reaffirmed the Government's willingness to encourage the establishment of a tyre factory by Firestone in Liberia. In reply, Firestone out-rightly stated that a 55,000 tyre factory would not be economically feasible. Despite Firestone’s unwillingness to establish tyre processing company which would kick-start industrialization in Liberia, the Government then proposed to share in a loss that would be sustained by a tyre factory with that capacity, while maintaining the investment incentive of a tax holiday of least ten years. The angry letter of President Tubman and the general feelings provoked by the proposal of Firestone resulted in a new, and final proposal. Late in 1970 (October) the Firestone Tyre & Rubber Company proposed the establishment of a factory with a capacity of 55,000 tyres, requiring an investment of $ 6.2 million. The conditions, however, were such that one doubted the seriousness of the proposal.
Besides demanding the acquisition of the site of the plant by the Republic of Liberia and the subsequent leasing of the lands to the new company at a nominal rent for 60 years with a renewal option for an additional 60 years at a reasonable rent, the U.S. parent company also wanted the tyre plant to be incorporated as a division of the U.S.T.C. (United States Trading Company), a subsidiary of the Firestone Tyre & Rubber Company. This would cause the U.S.T.C. to be the sole distributor of the production of the new plant, and grant it tax loss carry forward privileges. The company also demanded a monopoly for U.S.T.C. as the sole importer of tyres in Liberia for twenty years.
Disgustingly, the Company demanded that the Liberian Treasury should absorb fifty percent of the (expected) annual net loss of the new company until the company would show a profit for two consecutive years. It must also credit U.S.T.C's miscellaneous and all other taxes due for the balance fifty percent of the new company's annual loss, and to absorb all payments, deductions, license fees, and abnormally high interest expenses of the new company during the computation of net income; grant the new company a ten year income tax holiday, unrestricted export licenses and export duty exemption, duty free privileges for at least ten years, and grant sole manufacturing and exclusive importation rights, respectively, to the new company and U.S.T.C. for ten and twenty years, for the manufacture and import of tyres and related products. With respect to any dispute arising out of its Investment in Liberia, Firestone demanded that the Republic of Liberia would explicitly give up its sovereign rights and submit the dispute to the International Centre for Settlement of Investment Disputes. If the Government were to grant Firestone all the privileges and incentives it demanded, the new company would commence to produce tyres, still using less than one percent of Liberia's natural rubber output because of the high quality of the Liberian grown rubber. As the conditions of this draft agreement were unacceptable to the Government of Liberia, the tyre factory never materialized.
In order to achieve the middle economy status agenda set by this government and diversify sources of domestic resources mobilization, the national government (next and future administrations) must prioritize domestic production by reawakening the proposed tyre processing plant introduced by late President William V.S. Tubman's Administration. Adopting an import substitution industrialization approach of tyres and other natural resources in the country will only kick-off Liberia's industrialization journey, but will increase employment opportunities and significantly eradicate poverty and other socio-economic deprivations.