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17.11.2005 Business & Finance

Make Ghana a real investment destination - ISODEC

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Accra, Nov. 17, GNA - Ghana's effort in becoming an investment destination in the West Africa Sub-Region would be a mirage if the needed resources were not provided to correct the institutional inefficiencies and the imbalances in the system, two nongovernmental organisations (NGOs) said on Thursday.

The Integrated Social Development Centre (ISODEC) and the Centre for Budget Advocacy (CBA), the two NGOs, said although Government's promotion of private sector investment through tax incentives was commendable, massive public investment was critical in "crowding-in" private sector investment and providing the necessary enabling environment.

Addressing the media on this year's Budget Statement in Accra, Mr Vitus Azeem, Programme Coordinator of (CBA), a wing of ISODEC, noted that human resources, competent institutions, adequate infrastructure and appropriate legal private framework were all important conditions and were indispensable to attracting and stimulating private investment.

"In the absence of the adequate resources for a systematic and credible programme of public investment to correct the institutional inefficiencies and imbalances, the talk about making Ghana a destination for investment in the Sub-Region would remain a mirage." Mr Azeem noted that despite the reduction in the Bank of Ghana Prime Rate the spread between the lending and deposit rates was too high.

"The lending rates by most of the commercial banks are above the 25 per cent while the deposit remained very low."

The efforts by the Central Bank to reduce interest rates to enhance credit to private sector are also not yielding the desired results. Mr Azeem noted that although the 2006 Budget was dubbed: "Investing in People, Investing in jobs", it tended to conflict with the key macroeconomic targets such as low inflation and low budget deficit. He said it was imperative for the Government to shift its focus on macro stability, low or single digit inflation and lower deficit target and dwell more on generating employment and improving the general well-being of the people.

"Ghana's budget has often been constrained by the desire to achieve low inflation and low deficit on one hand and poor budget execution and monitoring on the other, thereby reducing Government's ability to better the living conditions of the majority of Ghanaians."

On agriculture, Mr Azeem said a critical examination of the Budget indicated a marginal nominal increase from 642.9 billion cedis in 2005 to 682.138 billion cedis. He said although this was the highest allocation within the economic sector in real terms, there had been a decline in the agricultural sector allocation.

This is worrying because there would be inadequate funds for the implementation of the numerous policies and programmes outlined in the Budget for the sector. Moreover, 50 per cent of the allocation amounting to 341 billion cedis goes to the cocoa sector.

He also stressed the need to change the structure of the economy to ensure that the industrial sector contributed more to GDP. Mr Azeem said promoting the economy from agricultural economy to an industrial economy, especially in areas where the agricultural sector could provide the needed raw materials, required policy interventions to credibly deal with inflation and the stability of the economy, especially given the fact that industry was demand-constrained and agric was supply-constrained.

He noted that the Good News Budget only favoured the rich and high-income earners, especially with the reduction of the marginal tax rates to 25 per cent and the cancellation of the National Reconstruction Levy for companies.

Mr Azeem agreed that the private sector needed tax concessions to grow but it also required good roads and efficient and reliable utilities such as water and electricity.

"Why do we continue to bleed the poor of this country especially the low paid formal sector salaried workers, who cannot avoid paying the taxes?" he asked.

Mr Azeem noted that there were still vast geographical inequalities in the provision of quality education coupled with the problems of poor and inadequate infrastructure, low enrolment, retention and completion. "One, therefore, expects that the 2006 Budget focuses more on addressing these problems."

Mr Azeem observed that the positive results of the capitation grant were unfolding just as the problems also unfolded saying "we expect that the Budget will increase grant per child as the current amount is grossly inadequate".

He applauded the Government's intention to bear the full tuition cost of teachers, who availed themselves of the Distance Learning Programme, as it would reduce the pressure on study leave with pay. Mr Azeem expressed displeasure at the Budget being silent on some key gender issues particularly children and people with disabilities saying they expected to see the passage of the Disability Bill into law. He urged the Government to ensure that the benefit from the Highly Indebted Poor Countries (HIPC) Initiative and 100 per cent debt cancellation by the multinationals reflected in improved living conditions.