This small West African nation has launched an aggressive campaign to attract foreign investment to help ease. . . the growing burden of economic development and halt rising unemployment.

On a continent where weak national economies generate fears among outside investors, Liberia is struggling to overcome difficulties in attracting foreign investment and is eagerly wooing the capitalists of the West. At stake is the country's future prosperty and political stability.

The major challenge for many African governments has been how to keep pace with demands for increased services and opportunities, which have outstripped the countries' meager resources.

Liberia's leadership was shaken out of a previously lethargic approach to its development by the unprecedented "rice riots" that struck the capital last April. The unrest, which caused about 40 deaths, numerous injuries and devasting property losses, grew out on an angry demonstration against a government proposal to increase the price of rice, the country's staple food. The proposal was hastily dropped.

Only traces of the riots remain in downtown Monrovia, but the memory lingers. Some merchants along commercial Randall Street have been reluctant to replace their plywood storefronts with glass, and others keep only a small inventory as a hedge againsat further violence.

A panic developed in December when a bus driver suffered serious knife wounds in a fight with a Liberian soldier. Rumors spread that the rioting had begun again, and merchants hastily pulled down their new steel shutters as pedestrians cleared the streets. The panic evaporated when government officials reassured the public about the insignificance of the incident.

In a speech a month after the April riots Liberian President William R. Tolbert touched on the causes of the disturbance and the difficulties his government faces in overcoming an ecnomic imbalance.

"My experience in government Tolbert said, "has caused me to reach the unmistakable conclusion that the problems of Liberia are socioeconomic in nature." With an 86 percent illiteracy rate, the masses of Liberians are demanding more schools, along with roads, clinics, hospitals, piped drinking water in rural areas and electricity, he said.

The government is working toward these goals, Tolbert added, but "against the cruel realities of economic restraints." Because it is dependent on the export of iron ore, Liberia has recently suffered from the world's recession in steel production. Iron ore accounted for 55 percent of Liberia's $486 million in export earnings in 1978.

While prices for its other exports, raw rubber, coffee and cocoa have risen or remained firm, Liberia's heavy reliance on iron ore sales leaves left it at the mercy of conditions in the industrialized world, according to recently appointed Finance Minister Ellen Johnson-Sirleaf. An outspoken critic of the government's past economic planning, Johnson-Sirleaf is backing a program for Liberia to diversify its exports commodities.

"Liberia, because of its [tropical] terrain is essentially a tree crop country" she said, and the government has recently started a program to expand oil palm, coffee and cocoa tree crops.

"We also have an unquantified amount of unexploited minerals," she added, such as gold, diamonds and uranium.

With a $2.5 million loan from the World Bank, Liberia also hired an off-shore oil exploration. Following the example of neighboring Ivory Coast, Liberia did not hire oil companies to do the exploration "because we think we'll get better leverage on terms if we know how much is there before negotiation," she said.

"We're keeping our fingers crossed," said Johnnson-Sirleaf when asked if commercially exploitable quantities of oil have been discovered.

"Everyone is tight-lipped about oil," she said with a laugh when pressed further.

She was critical, however, of the govenment's expenditure of $100 million -- almost a third of Liberia's annual budget -- to host the Organization of African Unity summit last July. Besides losses from a large conference center and numerous villas built outside Monrovia, a hotel built for delegates has already lost $360,000 because of low occupancy and poor management, she said.

"That certainly is quite a bit [of money] to allocate to any activity that is nonproductive," Johnson-Sirleaf added. "It certainly cannot be called an investment."

As a spur to development, the government doubled its external debt last year -- to $661 million -- bringing its level of debt servicing to a high rate of 25 percent of government earnings.

"I would lkie to keep the debt service level down to between 15 and 20 percent, which would put a brake on borrowing, Johnson-Sirleaf said. "It's at the peak now."

To finance further economic growth by attracting investors, Liberia has created an investment commission headed by the aggressive and wealthy paint manufacturer Clarence Parker. Two years ago, Parker headed an investigative committee that looked into the causes of Liberia's declining industries and issued a highly critical report to Tolbert.

The report investigated the reasons why there had been no new investment in Liberia for over five years and what caused several large companies to close between 1968 to 1977 -- a factor in the decline of industrial employment from 71,000 to 31,000.

It listed corruption, "bureaucratic pettifoggery," a hostile government attitude, "the forced purchases of business and equity by [Liberian] politicians, threats and intimidation of business with large international financial interests" as the causes of the problems.

In a January speech, Tolbert alluded to the corruption problem.

"Corruption cases [in 1979] numbered 58 and embezzlement of government funds amounted to more than $3 million, only 3 percent of which has been recovered," Tolbert said.

Parker said that "in the past, the normal rule of thumb would be the guy who could pay the highest bribe or the guy who would offer the highest number of stocks" would be allowed to open a business in Liberia.

"My commission is going to cut that out," he said. "I don't need any money and if any one offers, I'll push them out of the door."

Formed last fall, Parker's investment commission has generated 12 prospective business investment for Liberia in Europe and the United States, he said. Six contracts have been signed recently, he added, for companies that set up factories in Monrovia's industrial free-trade zone to produce exports to West African countries.

"The importance of the commission is to convince most of the people in the country, particularly government officials and bureacrats, of the importance that we should attach to investments," he said. "I think in the past some of our people felt this was a haven't and had a right to demand investment." But he said the "world does not function that way."

Parker added that initial reports of the success of former American U.N. ambassador Andrew Young's visit here in September as head of a U.S. trade mission were inflated, but he said that mission has developed one important series of negotiations with Consolidated Petroleum Industries of Albine, Tex., a $200 million expansion of Liberia's refinery. The proposed would enable Liberia to export refined petroleum products to other African countries.

The Texas firm has been represented by Washington, D.C., lobbyist Robert B. Washington Jr., who is also influential in local Washington politics.

But one source familiar with the project said Liberia may end up with another "white elephant" like its OAU money-losing hotels. Liberia would have to set a substantial increase in oil from a reluctant Saudi Arabia, its traditional supplier, or be guaranteed fresh supplies from oil-rich Nigeria.

"But even so, the price of refined [petroleum] products from here could be higher than world market prices and Liberia could be stuck with lot of capacity and no sales," he said.

Parker said the negotiations are not yet completed and added that he remains optimistic about the oil refinery expansion and other projects.

"We are meeting some resistence" from Liberia's bureaucrats, he said, "but they can't stop us. We are moving."