Report: Ghana Can Leverage Trade Policies to Speed up Export Diversification

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Tema Port, Ghana

Accra, Ghana//-Improvements in transport logistics and access to ICT infrastructure in Ghana over last decade can be leveraged for expanded trade and economic transformation.

This is a key pathway to the creation quality jobs, the World Bank’s latest trade analysis for the country says.

Although Ghana’s merchandise trade competitiveness declined over the last decade, resulting in a reduction in the number of exporting firms and their participation in Global Value Chains (GVCs), the report maintains that the country can change the trend if the right set of policies are put in place.

The newly released ‘Ghana Trade Competitiveness Diagnostic- Strengthening Ghana’s Trade Competitiveness in the Context of AfCFTA’ which was released on 9th June 2022, notes that trade in services and foreign direct investments are also important for ensuring deeper integration into GVCs and efficiency of the manufacturing sector.

Speaking at the launch of the report in Accra, World Bank Country Director for Ghana, Liberia and Sierra Leone, Pierre Laporte, says: “The potential benefit offered by the AfCFTA (about 0.5% additional GDP growth per annum over next ten years) – is very significant.

“This should motivate Ghana to harness the transformative potential of trade by cultivating export-oriented activities in both manufacturing and services and following up with the outstanding negotiations and implementation of the AfCFTA protocols.”

He adds that regional integration, digital innovation and trade policy would be key to driving Ghana’s economic transformation agenda, emphasizing that the country is also in a unique position to benefit from the African Continental Free Trade Area (AfCFTA).

Given the importance of the above, Bank Mr Laporte says has prioritized the support of Ghana’s trade development, stressing that the Bank looks forward supporting the country in its endeavour to leverage trade for development.

World Bank Ghana Country Director, Frank Pierre Laporte 

In a presentation, an Economist and Co-Author of the report, Daniel Boakye notes that “Ghana is well positioned to leverage trade in services, including logistics services, foreign direct investment and trade policy to consolidate the country’s comparative advantage as a hub for business and financial services in the West Africa sub-region”.

He however urges the government to do more to remove the obstacles to trade flow in Ghana.

A Deputy of Minister of Trade and Industry, Herbert Krapa in a short message lauded the authors of the report, Daniel Boakye and his Co-Author; Jean-Christophe Maur ; and the World Bank for the great piece of work.

He assures that the government would put measures in place to address challenges and implement the recommendations of the report.

The report lays out four main policy recommendations and conclusions for strengthening trade competitiveness in the context of AfCFTA.

  • To enhance s participation in GVCs, Ghana needs to strengthen its trade competitiveness, particularly that of the manufacturing sector, promote inflows of foreign direct investment, and deepen its regional integration efforts into regional markets and global value chains, especially in the manufacturing sector. This would help boost incomes by increasing access to markets, technology, and skills, and increasing the domestic value-added in exports. Ghana’s participation in GVCs remains mostly in commodities, whilst its aspirational peers, Kenya and South Africa have graduated from the commodity group into limited manufacturing group of participants in GVCs.
  • Improvement in the efficiency of trade facilitation, requires strengthening customs administration to reduce the costs facing traders and improving the ease of trading across the border.  Other trade facilitation improvements include removal of VAT on transit services, and removal of redundant and ineffective checkpoints.
  • Recent growth of trade services, as well as increased digitization of the Ghanaian point to the strategic importance of streamlining the regulatory environment for the services sector. Special effort should be made to support the segments of services sector that more dynamic, with potential for innovation and economies of scale. These include services such as business services, professional services, financial services, and IT-enabled economic activities.
  • Policy reforms are necessary to take advantage of the potential opportunities offered by AfCFTA and GVCs. These include, reducing tariffs where appropriate -such as reduction of tariffs on imported raw materials, eliminating non-tariff barriers (NTBs), improvement in trade facilitation, as well as promoting a favorable business and investment climate.

The main findings of the report

The report finds out that Ghana’s merchandise trade competitiveness, especially in the non-extractive sector, has declined over the last decade from 2010 to 2019, resulting in the decline in number of exporting firms and the level of participation in GVCs.

It adds that nonetheless, there have been improvement in transport logistics and access to ICT infrastructure, which can be leveraged for more diversified trade and economic transformation.

Also, the report finds out that the impressive performance in services exports, especially in the innovation and dynamic segments of the sector, underscores the potential for leveraging the services sector for economic transformation in Ghana.

The establishment of AfCFTA offers significant opportunities for increase intra-Africa and deeper regional integration, it further states.

To take advantage of the emerging opportunities under AfCFTA and GVCs, Ghana needs to strengthen its trade competitiveness; through elimination non-tariff (NTBs), implementation of trade facilitation reforms, enhanced regularly framework for trade in services, and improvement of the investment and business environment.

Focus 

The new report focuses on how Ghana can leverage trade policies to achieve export diversification and economic transformation.

The report which examines Ghana’s export performance in goods and services over the period 2010-2019, focused not only on growth and composition, but other performance dimensions, including diversification sophistication and firm dynamics.

The report also examines the policy implications of emerging trends in value chains and the potential economic impact of AfCFTA on Ghana’s economy.

African Eye Report