Ghana has not realized commensurate inflows of FDI

Accra, Sept. 28, GNA - A study on Foreign Direct Investment (FDI) in Ghana shows that while the country is perceived as an attractive location by trans-national firms, it has not realized commensurate inflows in comparison to other developing countries.

The trend, according to a study conducted by the African Economic Research Consortium in collaboration with the Institute of Statistical Social and Economic Research (ISSER), is an indication of the competitiveness of the FDI environment.

Mr Yaw Asante of the Department of Economics at the University of Ghana, who read the report of the study, said Ghana must aspire to be competitive on the global market if it aimed at becoming the real gateway to the West Africa Sub-Region.

He stressed that macroeconomics policies were extremely important for international competitiveness.

It called for a supportive microeconomic environment to create sufficient conditions for success with due attention towards poorly designed regulations, taxes, and other sector polices and time-consuming bureaucratic procedures with the potential to raise transaction costs of business that deterred both local and foreign investors.

Speaking at a dissemination workshop on the determinants of FDI in Africa, Mr Asante said while a lot had been done in the area of macroeconomic and trade policy reforms, serious questions remained as to whether a supportive microeconomic environment was in place to achieve the competitiveness required to attract investors to Ghana.

He described the kind of FDI into Ghana as non-market seeking type including investments for exploitation of natural resources. Giving the determinants of FDI in developing countries, Mr Asante said FDI would be attracted to those countries that provided a sufficiently high rate of returns.

=93These are countries that exhibit substantial macroeconomic and political stability with high growth prospects. In addition, countries that attract FDI are likely to possess good infrastructure and legal system, including enforceability of contracts, a skilled labour force and liberalized foreign sector.'

The country must have a large domestic market and natural endowments, openness of the host country, political risk measured by a country's credit rating, financial depth and government size, as represented by the ratio of government's consumption to GDP. Opening the workshop, Professor George Gyan-Baffour, Deputy Minister of Finance and Economic Planning, described it as timely as it sought to provide a forum for discussing research outcomes of the eight countries' case studies commissioned in 2003.

He said financing requirements of African nations were now largely determined on the basis of what it would take to achieve the Millennium Development Goals set for 2015.

'Given the poverty situation, it is unlikely that African countries will be able to mobilize adequate resources to finance the investment required to achieve an average growth rate of not less than seven per cent per annum,=94 Prof. Gyan-Baffour explained.

'It is important to pay attention to the imperatives of attracting considerable amount of FDI to assist in closing the yawning resource gap.=94