The state and private sectors must play a complementary role in implementing Ghana's Long-Term Development Plan to ensure the realization of planned strategies to guarantee the structural transformation of the national economy.
This and other identified strategies will go a long way to move Ghana from an emerging economy to a middle-income country by 2015.
This was the consensus reached at a National Consensus Building
Forum organised by the National Development Planning Commission (NDPC) in Elmina at the weekend.
The forum, which attracted stakeholders from the public and private sectors, financial institutions, World Bank and the media, was under the theme: Financial Resources and Services for a Middle-Income Ghana”.
Mr J.H. Mensah, Chairman of the NDPC, was the moderator at the consensus building forum that was held against the backdrop of four strategies for structural transformation of the economy as contained in Ghana's seven-year development plan.
These are industrialisation on the back of modern agriculture; investing in people for enhanced productivity; removing spatial disparities with growth enhancing investments; and strengthening institutions for effective development management.
These strategic areas are meant to foster a higher average productivity, improved employment generation and to foster spatial equity.
The discussions, inspired by the need to move Ghana from a pre-emerging economy to a middle-income status, were interspersed with frank expressions of concern from particularly the private sector participants and financial institutions.
Touching on some challenges posed by the external economy, the forum called for a robust financial picture and an optimistic forecast about the country's capacity to finance its strategic vision and associated plans.
It, however, stressed that such a forecast was still challenged by increased savings investment gap in the near future, investment block triggered by major infrastructural bottlenecks that increase the cost of economic activities and reduce productivity as well as an investment still dominated by the public sector.
Though it was agreed that expected oil revenue would make a major impact on the overall fiscal performance of the economy, participants sounded a caution that revenues would rather be modest in the order of 50 per cent of current levels but short-lived and, therefore, “we should invest more than we consume”.
The forum recommended the need to increase investment in sectors currently performing below potential such as improving human capital, agriculture, especially in the north where investments in transport and irrigation was needed to unlock the potential of future industries.
It urged investment in competitive skilled services such as banking, health and education and selected segments of industry like agro-business and Information Communication Technology (ICT).
With regard to the financial service sector, the forum agreed that Ghana was still on the frontier of a pre-emerging economy with promising characteristics to evolve into an 'emerging market'.
Ghana's policy prongs must therefore aim at continued improved access of the formal sector to secure long-term financing and access of low-income households to the financial system.
“A developmental state is needed to balance the financial service needs of the private sector with the imperatives of the public sector within a developing economy,” the forum stated
Other significant issues discussed were challenges and national orientation, financing and the development plan, mobilizing funds business model and other key sources of financing such as municipal bonds and the role of the capital market in financing gaps.
On strategies to move the plan forward, the forum asked that the NDPC to examine the vision and align it with the fiscal framework and associated financial systems and instruments for mobilizing funds.
It again stressed the need to reconcile the needed policy decisions with the priorities for financing as well as the needed private sector investments for growth and transformation.
“To do this, all key actors in the financial sector must agree on the prime assumptions that will inspire the flow of a quantum set of investments that can be made to achieve the targets set out by the National Development Planning Commission.”
On how the current banking system could adjust to provide long-term capital for development as outlined in the plan, the forum stated the need for a clear policy on user-charges to assure private investment in infrastructure by issuing long-term bonds to support such investments.
With regard to agriculture, the banks called for models of development finance that could make investment in agriculture attractive.
This could involve government financing, but not necessarily, government ownership and management as being done in the Venture Capital sector.
The forum noted that previous attempts had not been appropriately assessed to learn lessons about why efforts to increase financing from commercial banks had not been successful or sustained.
In developing the African entrepreneur, the forum said money should not be spent by government ministries and departments; rather they must set the framework for the entrepreneurs who produce to be the spending agents.
This would assure the banks that private sector suppliers had the market and could use the innovative technology to sustain their market niche.
The forum said that Pension Funds were critical for mobilizing additional investments for growth and national development, adding that already the Social Security and National Insurance Trust (SSNIT) had set up an informal sector fund, which was already mobilizing funds from the informal sector.
However, an enabling legislation was required to elaborate on the three-tiers of pension fund management and to assure citizens of the necessary security for their future pensions.
The forum discussed the nature, structure and policy orientation of the private sector and agreed that specialised, growth-prone sectors which are currently below potential such as textile could be encouraged to create specialized institutions to promote technology transfer and adaptations to increase their competitiveness as well as engage the banks on behalf of the industry.
“Public policy must be clear in vigorously supporting the private sector while avoiding the invasion of 'rent-seeking private sector' invading and undermining the productive sector,” it advised.
The forum also called for a policy for levying a fee on imported rubber products to be channelled to support recycling while enabling the producers of authentic, environmentally-sustainable leather products.
On the next step forward, the forum called for the establishment of an interface between the NDPC and key financial and industrial sectors in translating the results of the recommendations into concrete policies.
They again urged that for the Finance Minister to request money through the budget, it should obtain a certificate of compliance with the National Strategic Plan from the NDPC to enable external partners to rationalize their inputs and also be bound by the plan.
The forum agreed that a medium-term fiscal framework must be established quickly as part of the way forward in financing the plan.