GHANA: THE MIDFIELD ECONOMIC GROWTH MODEL

UNCLAS ACCRA 001604

SIPDIS

E.O. 12958: N/A
TAGS: ECON PGOV PINR GH
SUBJECT: GHANA: THE MIDFIELD ECONOMIC GROWTH MODEL


1. SUMMARY: An economic analyst with ties to ruling party NPP
candidate Nana Akufo-Addo praised the Kufuor Administration's
economic record, noted remaining problems, and laid out key economic
policy proposals and benchmarks necessary for the success of the
next President of Ghana. END SUMMARY.


2. At an economic talk for President Kufuor, his economic advisors,
and the diplomatic community, Dr. K.Y. Amoako, a former UN Under
Secretary General and head of African Center for Economic
Transformation (ACET),an economic think tank with ties to the
ruling New Patriotic Party (NPP),praised the Kufuor
Administration's economic record, identified a few problem areas,
and laid out his economic policy proposals and benchmarks for
success by the next President of Ghana.


3. K.Y., as Dr. Amoako is known, is rumored to be one of NPP
presidential candidate Nana Akufo-Addo's unofficial economic
advisors. Although K.Y. did not claim to be speaking for the
candidate or the party, his selection as keynote speaker for the
event attended fully by President Kufuor underscored the weight of
his words.


ECONOMIC STRATEGY: PLAY THE MIDFIELD
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4. K.Y. proposed what he termed the "MIDFIELD" strategy for
transformational economic growth, playing on Ghana's infatuation
with soccer, a goal of reaching middle income status in the next
seven years, and what the speaker characterized as the country's
role playing both offense and defense in the regional and global
economies. His points, the acronym for "MIDFIELD," follow.


5. M: Modernizing agriculture. K.Y. claimed that no country with
the size of Ghana's agricultural sector (36 percent of the economy)
could realize economic improvements without agricultural
modernization. Ghana's main strategy should be to increase its
higher-value agricultural exports, such as livestock and processed
agricultural products. He also saw the need for introduction of an
inventory control system, a strengthening of property rights, and
optimization of land use through changes to land management policies
-- which he said traditional regional leaders such as tribal chiefs
would oppose, but was necessary nonetheless for Ghana's growth.


6. I: Investing in infrastructure. K.Y. told the politicians,
economists and policymakers assembled that Ghana had among the
poorest quality of infrastructure in the world (88 out of 100
countries),with the GOG currently not meeting the minimum spending
threshold to achieve Millennium Development Goals in infrastructure,
which he pegged at 10 percent of GDP for a decade, from 2005 to

2015. He cited the PRC's cost-recovery policy as one way to create
a first-class infrastructure base.


7. D: Diversifying exports. Ghana has spent too long focusing on
traditional exports of gold, cocoa and lumber. K.Y. called for
focus on the service sector, long underdeveloped in Ghana. This
tied in to agricultural modernization with a proposed expansion of
horticulture and the food processing industry.


8. F: Fundamental financial system reforms. The speaker asked the
audience to consider both basic reforms such as improving the
country's system of land registries, which are a drag on land use,
and more innovative measures. In a country where funerals are major
expenses and events for families, he proposed funeral lending by
banks (NOTE: Ghanaian banks are notoriously conservative in their
consumer lending. END NOTE). He also proposed loosening current
regulations stifling microfinance in the countryside.


9. I: Increasing regional integration. The economist also said it
was too difficult to cross borders in West Africa, greatly hindering
regional trade in ECOWAS. K.Y. stated the need for the West African
Gas Pipeline, which has taken 26 years to near fruition and is still
hampered by supply problems in Nigeria. He also called for more
regional airlines in West Africa to alleviate chronic road transport
obstacles and to facilitate unrealized trade with nearby countries
such as Mali.


10. E: Enhancing employment. Improvements in private sector growth
in urban areas of Ghana have unfortunately led to unemployment in
rural areas, K.Y. stated. He bemoaned a decline in manufacturing,
now at only 6.4 percent, a two point drop from earlier in the
decade. He called for growth in small and medium enterprises in
order to encourage innovation and job creation. K.Y. noted that
SMEs only contribute 10 percent of GDP, but they could, and should,
be as high as 50 percent of Ghana's economy. One reason for the
dearth of SMEs was that they can be the hardest element of the
economy for government bureaucrats to comprehend and assist.


11. L: Leveraging technology. Calling technology the bedrock of
transformational economic growth, K.Y. called for more research in
scientific and technology fields. He noted that ICT (information
and communications technology) was one of the most vibrant sectors
of the economy.


12. D: Delivering transformation through the developmental state.
This requires lean, efficient institutions (NOTE: sorely lacking in
Ghana. END NOTE) focused on 1) a vision of how to decentralize
governance; 2) macroeconomic stabilization and rightsizing the
current account deficit; 3) understanding one's own endowments and
competitive advantages; and 4) protecting the vulnerable in society.



A SCORECARD FOR THE NEXT ADMINISTRATION
--------------


13. K.Y. offered three indicators that he would be closely
monitoring in the next government to determine whether its economic
policies are successful. They are:

o Progress on Millenium Development Goals through 10 percent
decreases in a) Ghana's infant mortality rate, b) the rate of deaths
from childbirth, and c) HIV/AIDs and malaria infection rates.

o 30 percent growth in manufacturing and service sector
employment in order to create work for Ghana's youth, avoiding the
economic destabilization caused by youth under-employment.

o 25 percent growth in the university student population, which
K.Y. sees as necessary to increasing human capital in Ghana and
complementary to other factors of production.


COMMENT
--------------

14. Recalling Africa's post-colonial history, Amoako stressed that
institutions and ideas matter. Whether the ruling party candidate
will pay heed to the MIDFIELD game plan, or if it is even
achievable, is unclear. But its common sense approach, grounded in
pro-market economic principles and astute observations, is hard to
refute. Unfortunately for recent economic performance, politicians
in pro-growth Ghana sometimes seek short-term gain at the expense of
long-term development. Seasoned economic observers point out that
some of the elements of his plan are already contained in the
government's Ghana Proverty Reduction Strategy (GPRS) I of 2003-2006
and GPRS II of 2006-2009, but wonder why it is taking so long to
achieve progress in these goals.


TEITELBAUM