By Ama Achiaa Amankwah
A Senior Fellow of the Institute of Economic Affairs, (IEA), Dr. John Asafu-Adjaye has decried the use of foreign remittances in putting up houses. In his opinion, such remittances should be invested in shares and bonds to propel economic growth.
Dr. Asafu-Adjaye said it is only when remittances are properly invested that Ghana would get better returns. He explained, “many Ghanaians abroad save and afterwards come down to put up buildings, only for them to become white elephants, as the owners seldom visit the country.”
Dr. Asafu-Adjaye who was speaking at a policy forum organised by the IEA in Accra, on the impact of Foreign Direct Investment in Ghana stressed the need to educate Ghanaians abroad on the investment opportunities available in Ghana so that they would know what to choose from.
“Capital is scarce; therefore we need to encourage people to bring it in, despite debt cancellation”, he said and stressed the need for investment rules should be balanced. “We should not do everything to bring investors here only to make things difficult for them.”
Foreign Direct Investment, (FDI) has been described in many circles as the life saving-tonic for poor countries, but recent studies by UNCTAD indicate that FDIs have done very little to solve the economic problems of poor countries. Ghana is said to receive annual remittances between US$I billion to US$1.5 billion, but their impact on the economy has been a source of disagreement between government.
Dr. Asafu-Adjaye however notes that a developing country such as Ghana must begin to target FDIs into areas where she has a comparative advantage.
This, according to Dr. John Asafu-Adjaye, should be done within the framework of a broad long-term development plan. In his opinion Ghana lacks such a plan and that her development agenda is being heavily influenced by the Bretton Woods Institutions- the World Bank and the IMF.
Dr. Asafu-Adjaye said currently Ghana has the Poverty Reduction Strategy supported by additional programmes including the President’s Special Initiative, among others that target some key sectors that are perceived to bring about rapid economic growth. “What is required is a comprehensive long-term development plan which provides not only a vision for where the country should be by 2015, but also a road map for achieving this vision.”
He added, “in general, improving the enabling environment for both domestic and foreign investors would be a better policy option than devising incentive packages for specific firms or projects.”
He stated that although the flow of FDI in Ghana has been low compared to South-East Asian countries, it runs 7th as most preferred destination in Africa.
This, he said indicates the great potential for FDI in Ghana’s economic development.
However, he said political instability has been very costly to Ghana’s economic growth, but positive developments in recent years, such as the adoption of the 1992 constitution that guarantees foreign investment, the Bank of Ghana Act 2002, that gives the Central Bank autonomy to implement financial policies without political interference as some policy implications to FDI.
“Over the last two years or so, positive results have begun to emerge. The economy has moved from a path of high inflation to one of disinflation and macroeconomic stability. The fiscal deficit and interest rate has declined, external reserves improved and exchange rate have remained fairly stable. These developments should boost our investor confidence.”
Dr. Asafu-Adjaye on the other hand, described the country’s financial sector as underdeveloped. He said Ghana’s economy is mainly cash-based which creates inefficiencies in business transactions.
Such economies, he stated renders the transmission mechanism of monetary policy ineffective and generally makes it difficult for the central bank to control money supply. He cited the development of ICT system, public education and measures to deal with electronic fraud, as some of issues that need to be addressed to move from the current financial system.
The Minority Spokesperson on Finance, Mr. Moses Asaga contended that a lot of Ghanaians overseas know about the market back at home and what to invest in. “Otherwise diplomatic visits by ministers has not yielded any results.
The Chairman of the Ghana Investment Promotion Centre, Mr. P.V. Obeng, making a contribution at the policy forum noted that there is no ambiguity about the positive impact of FDI on developing countries, particularly when they are able to manage it. “As a country, we need to build our national capacity to maximize the impact of FDI as a necessary component to enhance domestic investment. But this should not be done at the expense of our local investments.”
In his opinion, investors’ contribution to Gross Domestic Product, (GDP) should be traceable/definite.
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