Business News of Tuesday, 1 February 2005
Accra, Feb. 1, GNA - Three institutions have commended the government for its economic performance in the last four years but said much needed to be done to attain growth.
Speaking in separate interviews with the GNA in Accra, the Institute of Economic Affairs (IEA), Association of Ghana Industries (AGI) and Centre for Democratic Development (CDD) lauded the government for achieving most of the economic and governance goals but also noted that there were some grey areas that still needed attention. Mr Cletus Kosiba, Policy Director of the AGI, said the government's firm handling of macroeconomic policies in the past four years yielded positive outcome in the indicators they posted.
He said, however, that stability in itself was not enough to bring development and growth in the industries.
Mr Kosiba said there was the need to ensure that macroeconomic stability was achieved alongside the implementation of the appropriate microeconomic policies aimed at reducing cost of operations and creating access to capital at reasonable interest.
He said members of the AGI had had to compete with global players who had easy access to credit at lower interest rates, therefore, there was need for government to address concerns in that area. Another area of concern to the AGI is the lack of will on the part of the government to implement policies.
Government in the last four years has come out with some policies and programmes such as the setting up of a venture capital fund and the proposed removal of tax from some imported inputs as a result of which the AGI has identified beneficial industries for tax relief as at August 2004.
However, the government has so far not been able to gazette the affected inputs.
Mr Kosiba said time was of the essence to the industries and therefore it was necessary for the government to put some form of urgency in the process of implementing such policies.
This is because initiatives such as the venture capital would be very useful for Small Scale Enterprises (SME), but as at now the AGI does not know when the fund would take effect, he said.
The AGI has about 1,200 members made up of manufacturing, services and utility companies but majority of them fall under SMEs. Mr Kosiba said the government came out with the small business credit guarantee scheme in 2002 and also designed a programme to attract businesses into the production sector with the view to providing tax holiday and "locational" incentives.
The "locational" incentives package was also aimed to evenly distribute industries to deprived areas but he said such incentives should match with the deficiencies of the area of operation. Mr Kosiba said for instance, if the government decided to grant a 50 per cent tax rebate to attract investment to a deprived area, the amount of incentive should be enough to compensate for the absence of skilled labour, housing and other social facilities to be provided by the industry itself.
On relations with the government, he said the two parties enjoyed excellent relationship and fruitful dialogue on various issues but this could have been better if the government had taken it (AGI) into confidence on demands from donor agencies.
"Such a relationship would have enabled the government and the business community to present a united front to the donors, especially the IMF and the World Bank, in order to resist some of their unpleasant demands like request to remove tariff expected to protect local industries."
On the Association's expectations of the next term of the Kufuor Administration, Mr Kosiba said the Association was anticipating an upward shift in petroleum and utility prices but urged the government to try and reduce the tax element on petroleum products to lessen the burden on industries.
He said the government had enough sources of revenue and therefore it behoved it to protect the industries so that they would be able to compete on the international market.
"For instance, our colleagues in Nigeria are benefiting from a 40 per cent export credit facility while their government has banned importation of certain products to shield local producers," he said.
Mr Kosiba also said the AGI supported the establishment of commercial and tax courts to speed up the processes of solving litigations and urged the government to empower the business community so that they could pay good wages.
Dr Kwesi Jonah, Executive Director of the IEA, said even though it was impossible to implement all set goals, the current government had fewer carryover as compared with previous administrations.
He said the Kufuor Administration managed to build significant external reserves, register favourable balance of payment figures, stabilise the economy and reduce substantially, the inflation figure from more than 40 per cent when it took over to about 11.8 per cent as at December last year.
Year-on-year inflation for December 2003 was 23.6 per cent but stood at 12.3 per cent at end November.
Gross international reserves at the end of November 2004 stood at 1,653.9 million dollars or 5.1 months' import cover as compared with 1,296.3 million dollars, an equivalent of 4.3 months' import cover for the same period in 2003.
Government expects further increase in the Gross International Reserves partly from the seasonal inflows related to cocoa exports. Exchange rate of the dollar to the cedi moved from 8,852.3 at December 2003 to 9051.26, of same period in 2004, while the pound sterling rose from 15,296.0 to 17,411.5. The Euro however, slid from 10,986.2 to 12,309 during the period under review.
From January to October 2004, the cedi depreciated by 2.3 percent, 7.7 per cent and 5.4 per cent against the US dollar, pound sterling and the euro in that order. For the same period in 2003, the figures were 3.8, 9.9 and 18.9 per cent respectively.
GDP growth for 2004 is likely to be above the 5.2 per cent projected at the beginning of the year.
According to Dr Jonah, during its term, the government enjoyed goodwill from the donor community who were generally satisfied with its economic policies and this resulted in regular inflows.
Investor confidence also grew hence the resultant mergers and investments in Ashanti Goldfields, Coca-Cola Bottling Company, Nestl=E9 Ghana Limited and Newmont Mining Company Limited.
The government, however, fell short in areas such as the protection of the textile and tobacco industries.
Dr Jonah said the government did not show the strong will to control the smuggling of cheap textiles and this hurt the industry. He said in as much as tobacco had its negative aspects, the government must protect the local industries and prevent them from collapsing as a result of the importation of cheaper foreign brands. He also urged the government to take a second look at the tax policy for the private sector, which was rather on the high side.
Dr Baffuor Agyeman-Duah, an Associate Director of CDD, said the overall performance of the government in terms of governance was quite positive and commendable.
He said the government exhibited a high tolerance level because it restrained itself from arbitrary acts such as arrests, detention and abuse of human rights.
There was also a high performance in the effort to respect the rule of law as the government opened itself for popular participation in public and media debates.
Dr Agyeman-Duah said the government managed to strengthen some institutions such as the Commission on Human Rights and Administrative Justice, Serious Fraud Office and the Judiciary "to a certain level." For instance, the Judiciary had been provided with some resources as a result of which "Ghanaians are beginning to see a new Judiciary that uses technology in administering justice", he added.
Dr Agyeman-Duah, however, said there was room for improvement in the fight against corruption and expressed the hope that the passage of the Financial Act and Procurement bill would significantly help to stem corruption.
He also said government was sluggish in the decentralisation of certain aspects of governance and urged the government to allow the district assemblies to take control of the implementation of certain policies in order to be accountable for them.