It was late last year that President John Agyekum Kufuor complained that the economy was not growing as expected despite the achievement of a stable macroeconomic and business friendly environment.
The president thought that after achieving low levels of lending and inflation rates, a stable exchange rate, and having offered generous tax rebates to companies coupled with massive infrastructural growth in the area of roads, telecommunications, and harbors among others, the Ghanaian economy should at least be growing at 8% per annum.
Especially also that investor confidence at the moment has peaked and the country having attained a B+ credit rating by Standards and Poor. He did not also understand why in the face of the massive inflow of foreign remittances, the HIPC debt relief, and liberal reforms in the financial and public sectors, businesses could not expand and spur the economy to an eight percent growth rate.
In spite of that, the Ghanaian economy is still stagnating. His fear is that should the trend continue, his dream of Ghana reaching a middle-income country and attaining a per capita income of $1000 by 2015 would not be realized. And if that were to happen, most of the millennium development goals would be significantly missed and poverty and unemployment would still be with us.
But experts had an explanation as to why the Ghanaian economy was not growing as expected. And this was when they met at the British Council to listen to a lecture on "Globalization and Corporate Governance," by Ms. Elsie Addo, a managing consultant with Lawfields Consulting. The lecture was the second of this year's Development seminar Series organized by the Institute of statistical, Social and Economic Research (ISSER) and the Merchant Bank Ghana limited.
Some experts pointed out that under a government, that has declared the private sector as the engine of growth, it cannot be gain said that the growth of the economy depends largely on the growth of the private sector. Especially, so when the government appears to not be supporting distressed state enterprises to stand on their feet because as it is said, "government has no businesses in doing business," (sic).
But private businesses are stagnating and reeling under the pressure of globalization and unbridled free trade orthodoxy. Indeed, the Association of Ghana Industries (AGI) has disclosed that more than six hundred domestic businesses have collapsed over the past decade, a period that saw unbridled trade liberalization and globalization, take full grip on the Ghanaian economy. The past two decades have also seen Ghana run from a state-led, self-sufficient food producing economy in the mid 60s and early 70s to an import dependent one. The AGI has again indicated that more than 80% of goods consumed in the country are imported.
The Director of ISSER, Professor Earnest Aryeetey even disclosed recently that Ghana is the second largest importer of tin tomato in the world, second only to Germany and first in Africa. A similar story is told about rice, poultry, cotton, toothpicks and tooth paste, etc.
The reality of these statistics however is that rapid growth will forever remain elusive so long as the trend continues. And it appears it will.
But the concern of the experts is not that globalization or free trade should not be. They are worried that the political leadership and policy makers do not appear to have a full understanding of what these globalization and free trade concepts are all about. As a result, they are not retooling globalization to their local realities.
They cite for instance that whereas the government of Ghana, in the spirit of free trade, is often more than ready to accede to international standards and regulations regarding the conduct of businesses, the internal mechanisms, which should naturally accompany such global standards are often not implemented.
They point out also that though globalization requires of businesses to adapt to global standards of good corporate governance, most Ghanaian companies are still largely husband-and-wife, family or small and medium-sized private businesses and operate in their own style as if they were insulated against global happenings. This is largely because government is not forthright in implementing reforms that would provide incentives for businesses to adopt to good corporate practices.
But if Ghanaian businesses were to benefit from globalization and expand, they would have to adapt to good corporate practices and be listed on the stock exchange, so as to have access to shareholders capital for expansion and for global competition.
Dr. Sam Mensah, a Technical Advisor at the Ministry of Finance and Economic Planning argues that it would be useless adopting to global standards and rules when local conditions would not allow such rules and standards to function properly. To him, the best option would have been to concentrate our efforts at resolving internal constraints on the growth of local businesses "before we think of global standards and rules.
He points out that if market-based incentives or rules-based incentives were effective, it would have encouraged local businesses to practice good corporate governance and enjoy the benefits of globalization but that has not happened because the two are not.
And that is because the availability of complete information, which is a key ingredient to market efficiency is lacking. The rule-based incentives are also not working because laws are rarely enforced.
According to Dr. Sam Mensa, if the market-based incentive packages were functioning well; well-managed companies would be appropriately rewarded, while the bad ones would be punished. He explains that with some efficiency in the market, share prices of good companies will increase while bad ones will suffer falling share prices. Besides, managers, who distinguish themselves in managing a company effectively and competently, would also receive compensations in terms of good remunerations and other condition of services.
This would have helped companies to grow and by extension, the economy.