In a smoky office on Bushrod Island, the ashtray on his desk brimming over with cigarette butts, a shipping agent explains why the tiny west African nation of Liberia has the world’s second-largest fleet registered under its flag. “The rules change from country to country and they get laxer and laxer all the way down the chain until you reach Liberia,” he says.
Flags of convenience—or open registries, as some prefer to call them—are where you go to get a vessel registered as shipshape while avoiding high taxes, high labour costs and, critics say, too many questions. A ship need never even dock in the country under whose flag it sails. Cheaper labour in the developing world means that open registries are increasingly popular and Liberia’s 2,511-strong fleet is the world’s second-largest after Panama’s (with 7,357 ships).
The associated registration fees and taxes are a vital foreign-exchange earner for Liberia: a large 30,000-tonne vessel can cost up to $13,225 to register and $11,500 a year thereafter to keep the flag flying. This makes the country’s maritime registry a mainstay, alongside rubber, of its post-civil-war economy. Sanctions were only recently lifted on timber and diamonds and iron-ore production has yet to restart. Liberia expects revenues from shipping this year of $13m, or about 6.5% of the entire government budget.
As commodity prices fluctuate, the maritime registry is a rare source of regular income for the government. Yet many Liberians wonder why the country is not benefiting more from owning all those ships. A veteran politician, Senator Blamoh Nelson, complains that although the government of Liberia owns the registry, “it doesn’t control it.” In fact control rests with the Liberian International Ship and Corporate Registry (LISCR), a Virginia-based company that has managed the shipping registry since 2000 and which takes a quarter of net profits for its troubles. The rest, say LISCR officials, goes to the government.
LISCR took over the registry when the previous agent was sacked by Mr Taylor. He wanted to plunder the registry, which had been established by the American government after the second world war. During the worst days of Liberia’s civil war, when almost everything that could be was being stolen or destroyed, as much as 90% of government revenues came from the registry, an enticing prize for Mr Taylor. A UN report found that nearly $1m was siphoned from the registry to Middle Eastern bank accounts by Mr Taylor, used to pay off sanctions-busting arms dealers. However, the payments were stopped by the end of 2000.
Although Liberia’s earnings from its fleet are up by $2m on last year, that is still less than the $18m that came from the registry in 2001. But back then few benefited, apart from Mr Taylor and his cronies. Now at least the cash stands a better chance of being spent on schools and hospitals rather than guns and patronage.