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29.11.2004 CPP News

London Financial Times Report Makes Case For CPP Government

By IC4 , London

In a Financial Times article published on November 24 2004 entitled “If Ghana fails, what hope for Africa?, David White makes the case which demonstrates the need for a CPP government in Ghana.

David White says “half a century ago Ghana carried the hopes of a continent, endowed with gold, the world's biggest producer of cocoa at the time, and some of the region's highest educational standards, Ghana seemed to have everything needed to flourish”.

Today “ there is good reason to look at Ghana because it poses an uncomfortable question. “Ghana more than any other African nation has meet the expectations placed on it by its rich-world benefactors. But after two decades as a favourite pupil of the International Monetary Fund and the World Bank, Ghana remains trapped in poverty and aid dependence. If Ghana cannot narrow the gap with the developed world, what hope is there for the rest of the continent?” This is a point that the CPP has repeatedly made that we cannot continue on this path of donor dependence.

The FT article goes on to say that “ the various fora on Africa should be asking the question on what effect four decades of foreign aid - flowing at an average of about $10bn a year - has had on the continent. And to succeed they will also need to look at removing the obstacles that appear to be holding countries such as Ghana back, and recognise the uncomfortable truth that the basket of policies recommended for Africa is not working.

The CPP continues to argue that the IMF and World Bank policies have failed Ghana and that Ghana needs to follow a different economic path.

“Ghana is locked in a vicious circle: low income, shortage of savings, lack of investment, low productivity and therefore low income. Output is about $1 per person per day. At independence, Ghana's economic product per head of population was almost exactly the same as South Korea's, but by the early 1980s it was one-fifth of the South Korean figure. Last year, according to the World Bank, the proportion was one to 37. "Why have African countries that were on the same level as Asian countries 30-40 years ago fallen so behind competitively?" a western ambassador in Accra asks.

For the CPP the answer is simple, the CPP path to industrialization which almost industrialized and led Ghana to the point of take-off was terminated with a coup and subsequent governments, for dogmatic reasons did not follow the development plans of the CPP.

“The New Partnership for Africa's Development, launched three years ago as a "self-help" project by Africans (see below), has already identified much of what is wrong. The widely accepted agenda for helping Africa centres on dealing with conflict, promoting more honest and open government, backing the private sector, providing better market access for African exports, wiping off debt and seeking bigger and more reliable flows of aid.

By these criteria, Ghana should be a model. It has had ethnic clashes but nothing to compare to the conflicts that have ravaged the countries to its west - Ivory Coast, Liberia and Sierra Leone. Its governance is one of the best in Africa; it was the first volunteer for Nepad's innovative "peer review" process, in which a country's political and economic governance is vetted by teams from other countries. It has strong institutions, respect for the rule of law and a free press. Its government is at least nominally committed to private enterprise. Along with most African countries, it makes use of both US and European preferential trade arrangements, although it is not poor enough to get the maximum EU concessions. It has just qualified for $3.5bn of relief on debt service costs, roughly halving its outstanding debt. And it is a favoured destination for official aid, receiving about $30 per person per year - above the African average.

"We seem to have all the right things being done," says Alan Kyerematen, trade and industry minister.

Why indeed is the question that the CPP continues to ask.

But while reforms have made for a more open economy, he says, they have failed to transform its basic structure. Gold, cocoa and timber - all prey to volatile prices - still account for more than 80 per cent of exports. To grow more quickly Ghana needs to move "on to a different curve", says Mr Kyerematen, but where can it find the means to do so? It has neither the domestic savings nor the government resources. Aid might be an answer if there were enough of it, but until now it has been used for other purposes. And direct foreign investment is hard to obtain in today's intensely competitive global economy: "Whether we like it or not," Mr Kyerematen says, That different curve is the road to development as proposed by the CPP – an abandonment of the dependence on aid, the re-0structuring of Ghana's industry towards local consumption and use of local raw materials.

The obstacles to faster growth are in part external - unfavourable trade conditions, particularly as a result of subsidies to developed-world farmers and escalating tariffs, which penalise the higher stages of processing and impede industrial growth. But competitiveness is also hampered by gaps in critical infrastructure such as energy, telecommunications and port facilities, and by high financing costs.

Above all, Mr Kyerematen says, Ghana has failed to attract advanced technology, "the single most important element" that the country has missed out on. In emerging Asian countries higher-technology activities have sucked poor people from rural areas into better-paid jobs.

These are the reasons why the CPP government was so focused on Research & Development, setting up the Atomic Research Institute, the restructing of the Kwame Nkrumah University of Science and Technology into two faculties to concentrate on applied sciences and advance technology – a situation abandoned by subsequent governments without the vision of the CPP.

“World Bank economists in Accra say the country is operating well below its capacity and that employment in the formal private sector is actually decreasing. Manufacturing is a smaller part of the economy than it was 30 years ago”. The industrial base built by the CPP has slowly been allowed to collapse.

“Hasty trade liberalisation in the 1980s had a positive impact at first. It allowed manufacturers to import much-needed raw materials and capital goods. But then competition kicked in. Many factories - from textiles to canneries - were forced to close. "Trade liberalisation in itself is not a bad thing as long as you have policy measures that support your own companies to be able to compete. You cannot open up when you have not done the basics," argues Mr Kyerematen. "There is a need for government to play a stronger facilitating role than has so far been allowed under the rules of the donor community."

We are glad that Mr Kyeremanten seems to be singing from the same sheet as the CPP except his government is following policies which exactly the opposite of his comments to the Financial Times.” The CPP believes that unbridled liberalization has harmed our industries whilst the developed countries continue to subsidize their farmers etc.

“While Ghana is largely agricultural, the chance to add value from processing raw products is often forfeited. Ghana has good land for growing sugar cane. But in the Koala supermarket in Accra, the refined sugar on the shelves is either from Brazil or the European Union - subsidised beet sugar processed in France or Britain.

Productivity in African agriculture has stagnated in the last 20 years, while the amount of farm aid per agricultural worker has fallen sharply. Average output is about one-sixth of the level in Latin America. "It has not reached the take-off point where peasants have a rising standard of living and are able to save and spend money," says the western ambassador. "You see it in rural areas of South Asia, but you do not see it here yet."

As for foreign investment, the flow into Africa has been rising, but it goes mainly into oil and gas and is still less than 3 per cent of the world total.

The CPP has repeatedly said that the wait for FDI's is not the solution to Ghana's problems.

The article said further that “Kwame Pianim, one of Ghana's most respected economists, points to the distorting effects of donor programmes on economic management. "If you spend the money on building hospitals and schools," he says, "it is building up your recurrent expenditure to maintain them." Stories abound in Africa of aid projects that have run aground - a modern clinic that cannot be properly staffed, an irrigation scheme that falls into disuse because there is no money to pay for the electricity it depends on.

Mr Pianim further argues that aid has distracted attention from economic strategy. The country's administrative capacities, he says, are overburdened by the need to fulfil requirements laid down by the IMF and World Bank.

"What aid has done," says the local head of a development agency in Accra, "is to turn ministries into finely-honed instruments for delivering donor-backed projects and undermine the normal functions of government." Aid money, like oil revenue in oil-rich states, may also reduce the incentive to make the most of other potential sources of income.

This is why the CPP position is to reverse Ghana's dependence on aid.

The Article concludes saying that “Jeffrey Sachs, director of the Millennium Project and special adviser to Kofi Annan, the UN secretary general, insists that for development goals to be met “the main change has to be from the rich world's side”.

The CPP does not believe that the rich world has the interest of Ghana and the developing world as a priority and therefore our salvation lies in our own hands.

The case for a CPP government is clear for all to see.

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