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26.10.2001 Feature Article

Why The Foreign Investors Are Coming But Not Staying.!

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by Kojo Frempong Ghana has been seen as one of the safe havens in Sub-Saharan Africa and the world. The recent peaceful political transition from the National Democratic congress to the New Patriotic Party, was a great boost to investor confidence. The ex- president of Ghana Jerry Rawlings started an impressive tour of the world with the view of convincing investors to Ghana. Investors of all shapes and colours came to Ghana but little or no new big investor stayed or came again?! It was not surprising when a minister of State in President Kuffour’s government expressed surprised at the above. Ghana has a very serene atmosphere, good investment climate, political stability, human resource, market oriented economy, Great investment code that allows almost 100% repatriation of revenue, yet we are drawing blank, so what and where lies the problem? How many made in Ghana goods do you see in US markets, EU or East-Asian markets? Ghana’s chocolate the Golden Tree has won many trade show awards as the best chocolate why don’t we see in Europe or America? The reason is the problem of market accessibility, period! If Goods labelled “made in Ghana will have difficulty entering US, and European markets why should the investors come? Am sure we know of the trouble Banana growers in Ghana are going through before they get the product to Europe? Ghana has almost no quota and market access and so the Ghana growers must by Quotas from another country to have the chance to sell the Banana. The EU is giving all Least Developed countries free access in their initiative EBA ie, Everything but Arms , The EU’s “everything-but-arms” package of ‘tariff-free, quota-free’ market access for products from the LDCs - excepts not only arms, but three of the six key commodities exported by LDCs (bananas, sugar and rice), Market access” is an umbrella term for a number of measures that a country may use to restrict imports. Perhaps the most obvious forms of such restrictions are tariffs and tariff quotas on imported goods. There are also non-tariff barriers to market access for goods, such as technical standards, antidumping suits, import quotas, import licensing, and variable levies, among others. Market access also concerns regulation of imported services: does a country limit its number of Foreign Service suppliers? The issue is that because of our low and indifference to trade negotiations in the multilateral trade system our products are faced with tariff blocks and protection by the western countries. We are faced with tariff escalation and quotas where it has cost us so much to diversify our products. The effect is to keep us as consumers of western products and producers of raw materials. Tariff escalation is punitive taxes on products as they go through processing. For instance if Ghana exports raw cocoa beans to EU or US markets we pay almost nothing is taxes but if we process the beans to chocolate we pay about 21% of the revenue in taxes and we face quotas, that is a limit to the quantity we can export. Lets see below the general level of tariffs on the developing countries; Peak tariffs, for the study, are those above 12% ad valorem rates - rates which may provide substantial effective rates of protection to domestic producers of up to 50%. While as a result of the Uruguay Round, average tariff levels of many countries have been substantially reduced to low levels, the widespread belief that tariffs are no longer a major problem of international trade or for the trade of developing countries is not true, the study notes. Problems of high tariffs are still widespread, and even after full implementation of Uruguay Round concessions, and taking account of the GSP concessions, a substantial number of high tariffs still remain and provide high levels of protection. Both the frequency and tariff levels, the study says, are a matter of concern. The Quad countries In the Quad countries, about 10% of the tariff universe of these countries will continue to exceed the level of 12% ad valorem rates - effectively applied rates for imports from developing countries - after full implementation of the Uruguay Round and subtracting all presently applied tariff suspensions and GSP concessions. The Quad countries maintain an extremely large variation of tariff rates, with tariff peaks reaching in extreme cases as high as 350% - with the majority of tariff peaks in the 12-30% range. One-fifth of US peak tariffs, one-quarter of those of the EU, 30% of Japan's and one-seventh of Canada's exceed 30%. In the EU, in the agriculture and fishery product group of the 2,726 HS tariff line items, 1,273 have tariff peaks - 572 in the 12-19% range, 334 in the 20-29% range, 334 in the 30- 99% range, 31 in the 100-299% range and 2 in the above 300% range. In industrial products as a whole, of the 7,771 HS lines, 27 are in the 12-19% range, 7 in the 20-29% range, and 8 in the 30-99% range. Motor vehicles (184 lines) account for 15% of tariff peaks, and chemicals, plastics and rubber products (1,596 lines) account for 21 peaks. Of the 967 lines in textiles, 3 are in the 12-19% range, and 3 of the 82 lines in footwear are similarly in this range. In the case of Japan, 718 or 80.5% of the 1,890 HS lines in agriculture and agricultural products have high tariff peaks - 204 in the 12-19% range, 307 in the 20-29% range, 132 in the 30-99% range, 53 in the 100-299% range and 22 with above 300% tariffs. In the leather, textiles, clothing and footwear sector, of the 2,410 tariff lines, 70 have 12-19% tariff peaks, 51 have 20-29% tariff peaks, 25 have 30-99% tariff peaks, 14 have 100- 299% tariff peaks and 9 have above 300% tariffs. 33 leather and leather products, 9 textile products, 27 clothing products and one footwear item have a 12-19% range; 13 leather and leather products and 38 footwear products have 20-29% tariffs, 12 leather and leather products and 13 footwear products have 30-99% tariffs; 2 textile items and 12 footwear items have 100-299% tariffs and 9 footwear items more than 300%. The US and Canada's product lines In the US, of the 1,779 agricultural and fishery products, 334 or 36.6% face tariff peaks - 139 in the 12-19% range, 70 in the 20-29% range, 99 in the 30-99% range, 15 in the 100- 299% range and 11 above 300% range. In the US, of the total of 8,123 lines of industrial products (including leather and leather products, footwear, textiles and clothing), some 579 or 63.4% face tariff peaks. Of the 1,814 leather and leather products, footwear, textiles and clothing HS line items, 524 face peak tariffs - 374 in the 12-19% range, 110 in the 20-29% range and 40 in the 30-99% range. In Canada, of the 1,429 items under the agricultural and fishery products sector, 164 face tariff peaks - 65 in the 12- 19% range, 10 in the 20-29% range, 21 in the 30-99% range and 68 in the 100-299% range. In the industrial sector of the 6,791 items, 413 have tariff peaks - 374 in the 12-19% range, 39 in the 20-29% range. Within this broad group, of the 1,209 leather, textiles and clothing items, 347 face tariff peaks - 320 in the 12-19% range, and 27 in the 20-29% range. 10 leather and product items, 177 textile items, 120 clothing items and 13 footwear items have 12-19% range of tariffs; 7 textile items, 5 clothing and 15 footwear items face 20-29% tariffs. Developing countries, the study notes, apply rates above 12% ad valorem more frequently than the Quad countries, but they have fewer extremely high rates. The proportion of peak tariffs range from 8% in South Korea to 10% in Malaysia, 60% in Brazil and 70% in China. At the end of the Uruguay Round implementation period, no MFN tariffs will exceed 100% in Korea, and no rates above 20% in Brazil, once the Mercosur Common External Tariff has been implemented. Malaysia's will be 30% or more for one-third of all peaks, and this is also the case for half of China's. But China is in the process of negotiating entry into the WTO and for a progressive liberalization of tariff and non-tariff measures. In the agricultural sector, the most important areas with the highest frequencies and rates are the major agricultural staple foods - in particular meat, sugar, milk, butter and cheese and cereals, as also tobacco products and cotton. The tariffication of the agricultural Quantitative Restrictions (QRs) has resulted in extremely high rates - in most cases above 30%, and up to 30% and more for MFN trade above the tariff quotas. It looks scary the level and the numbers an exporter and investor will go through on all these fronts. There has been along and impressive growth in the service sector in Ghana with special mention to cyber cafes, telecommunication etc,. In a meeting held in Gabarone, BOTSWANA (06/18/99) - It was noted that Africa may be a late starter on the Internet but it is currently undergoing a rapid transformation, outpacing the global average for growth in number of host systems, according to statistics presented at a workshop on telecommunications reform here recently. From July 1998 to January 1999, the number of Internet hosts grew at a rate of 38 percent, from 7,800 to 10,703, while the worldwide average growth rate stood at 18 percent, said Mike Jensen of Communications Consulting, at an International Telecommunications Union workshop. This situation is different for other sectors because goods labelled made in any African country faces tariff escalation and peak controls, which makes it a disincentive for the country to diversify, and other foreign companies to invest .Its evident that its more convenient to invest there than any other since we rather import the technology from the West which faces little or no barriers. The way forward? Ghana must increase and improve its role in the multilateral trade negotiations on all levels and empower its trade negotiators to be specific on demands and not generalise. When President Kuffour and three other presidents visited President Bush in the white house he said “ I will encourage the private sector and investors to come to your country but its their decision and prerogative to do so!” Furthermore Ghana should change its negotiation technique of always being the underdog. What we need to do is to go into free trade zone creation with big markets, bilateral trade agreements with waivers for our goods and specific goods which will benefit our economy. We have seen a lot of trade pacts and agreements where the Western countries determine which products will be allowed to enter their market but we have no hand in what we will allow in our market. A clear example is the African Growth and Opportunity Act Initiative by the US to give market access to African countries. The US determines who should be part and then what goods should be allowed into US markets, which Ironically excludes important agricultural products from African countries like Ghana. Pakistan and India have used their great negotiation power and a lot more to get free waivers on important products to the US markets. Ghana should be a voice for Africa on all trade fronts, WTO and other so as to be heard and listened to. From the above its clear that even though investors like the climate they will not do business with us if we can not help them get their goods to EU and US in general. Why should Burma (Myanmar) get companies like NIKE, ROEBOK, ADIDAS and other clothing industries to invest there when they have instability, dictatorship, and serious problems with ILO over child labour? Simple! They have great access in terms of Quotas in textiles and apparel to the US and EU markets, which the local industries cannot fulfil, even 10%. The textile and clothing industry in EU and US then move there in joint venture investments, produce the goods cheaply and sell very high in the West! Ghana can also give them all but little market access! I only pray that Ghana gets the focus right and intensify its campaign for greater accessibility and bilateral agreements with free market access as the goal.


Kwadwo Frempong
Kwadwo Frempong, © 2001

The author has 6 publications published on Modern Ghana. Column Page: KwadwoFrempong

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