IEA Director: Improve enviroment for investments to grow

Though Ghana is being touted as the most investor-friendly country in Africa, a senior economist has pointed out that a lot more needs to be done to improve the environment for increased foreign direct investment.

According to Kwabena Anaman, Director of Research at the Institute of Economic Affairs, several factors and variables must be addressed for the country to attract more investors than it is doing at present. In a telephone interview with The Statesman, Dr Anaman said that labour productivity is generally low largely due to negative attitudes to work such as absenteeism and malingering.

"Another factor is that so much time is spent on funerals as part of Ghanaian culture, which is an urban and rural phenomenon. Usually, time is lost," he told this paper. He noted that falling educational standards have also contributed to the current level of investment in the country, adding that the quality of education needs to be improved as students are not properly trained for the job market.

Dr Anaman, who is also the Head of the Economic Centre at IEA, attributed other factors like traffic congestion and over-centralisation of government to the prevailing investment environment. He stated that the big development gap between the North and South of the country is yet another contributory factor that hinders the growth of investments.

"Despite these factors, I think the hospitable nature of Ghanaians make potential investors to be comfortable with doing business in the country. There has also been 23 years of political stability Ghana. We never had civil war."

The Director of Research said Ghana's "calm transition" from military rule to constitutional governance as well as the smooth change from the National Democratic Congress regime to the ruling New Patriotic Party government assured investors that the country was a safe haven for investing. He stressed that factors such as tolerance of opposition and little ethnic differentiation also convinced some investors to stake their capital in the country.

The economist said the current investment environment indicates mixed blessings as there has been increased investment and employment in the mining sector. "We also had extensive environmental degradation and the sector pays low royalties." He said the non-mining sector has not seen significant investment, which situation, he observed, has to be improved.

The Head of the Economic Centre said the construction industry is fast-growing and it "will be the key engine" in the growth of investment. He regretted that investors largely use imported raw material, and called on Government to encourage investors to use local raw material for their productive activities since that has a positive multiplier effect on the economy.

Dr Anaman said newly established enterprises have an advantage over old ones because they enjoy tax holidays, thus, making the cost of doing business low. He believed that was not good for investment growth since "the newly established ones may be coming into the country with a lot more capital."

It is, however, instructive that the 2005 Africa Foreign Investor Survey has indicated that Ghana is the most investor-friendly country in Africa; but she has the lowest wage levels that do not reflect labour productivity. The survey, which is the third in a series conducted by the United Nations Industrial Development Organisation in 15 Sub-African countries, revealed that the wage level in Ghana was 47 percent below average.

The objective of the survey was to optimise resource allocation for investment promotion in Africa; and to enable policy makers to better target investors, tailor policies and services as well as leverage foreign direct investments growth. The survey data was collated based on investor motivation, performance, perception and impact on domestic economy.

According to the fourth quarter of 2006 report of the Ghana Investment Promotion Centre, 64 projects estimated at $56.99 million, made up of FDI component of 57 percent and a local currency component of 43 percent, were registered. Out of the projects, wholly-foreign owned formed 57.8 percent while joint foreign-Ghanaian ventures were 42.2 percent. The projects are expected to employ 2,307 persons, out of which nearly 90 percent would be Ghanaians, and about 10 percent expatriates.

Cumulatively, the GIPC registered 238 projects in 2006 - the highest since 1994. These projects were expected to employ 12,044 people; with about 92 percent being Ghanaians and barely eight percent expatriates. Approximately 28.6 percent of the projects were in the service sector while 26 percent were in the manufacturing sector.

The congenial investment climate in Ghana has turned her into a magnet for conferences on investment. On April 27, the GIPC launched the Ghana Investment Forum in Accra with the aim of bringing top-level Government officials, and local and international corporate players to discuss and explore ways of increasing investment in key sectors of the economy.

Taking place May 21-23, the forum will be used to promote small and medium sized enterprises and seek joint ventureships for 30 projects which have been pre-screened by the GIPC. States Robert Ahomka-Lindsay, CEO of GIPC, "the forum will showcase investment successes in Ghana and highlight the policies and programmes which have been put in place to make Ghana an attractive investment destination ."

Also, there is an upcoming Ghana-Nigeria Investment Conference, organised by the Nigerian High Commission in Ghana, which is scheduled for May 24-26 in Accra to enable Nigerian investors explore opportunities in the country. Participants include, among others, Nigerian Export Promotion Council, Manufacturers Association of Nigeria and Nigeria Stock Exchange.

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