Govt must facilitate production of high-quality goods for export —IEA

September 9, 2019 / Comments (0)

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The Institute of Economic Affairs (IEA) has called on the government to facilitate the production of value-added goods for export to help reduce the demand for imports through the expansion of the domestic industrial base.

It said such a move would ensure the stability of the Ghana cedi and relieve businesses of the challenges they faced with fluctuations in the value of the local currency.

The measures, it added, would also lead to a total transformation of the economy.

The IEA’s recommendations were based on a study it carried out in February last year on business constraints and how a favourable business environment could be created to facilitate economic growth.

The study surveyed 200 businesses in the Greater Accra, Ashanti, Western and Eastern regions in the agricultural, industry and service sectors on their key constraints and the effect on their confidence and performance.

Binding constraints

Presenting the findings of the research at a roundtable in Accra last Thursday, September5, the Director of Research of the IEA, Dr John Kwakye, said the top 10 most binding constraints that emerged during the study were high cost of raw materials, high cost of credit, low or insufficient domestic demand for some goods, high utility charges and unstable exchange rates.

The rest, he said, were high government taxes and charges, excessive influx of imports, an unfavourable regulatory environment, unreliable electricity supply and difficulty in obtaining licences or permits.

According to him, there was the need for direct government intervention to address the constraints.

Recommendations

Dr Kwakye said the problem of high cost of raw materials had to be addressed through a comprehensive set of policies supporting the production of raw materials and other inputs domestically to feed companies and reduce their operational costs.

The high cost of credit, he said, needed to be dealt with through a multifaceted approach involving policies to improve operational and management efficiencies of banks, reducing lending risks, reinforcing regulation and ensuring durable macroeconomic stability.

On the problem of low or insufficient domestic demand, Dr Kwakye said improvements in the quality of domestic  goods, education and sensitisation of consumers to utilise made in Ghana goods and trade policy interventions to check the dumping of imports on Ghana could deal effectively with the problem.

High utility tariffs, which he said was affecting businesses, could be abated by restructuring the utility companies to improve their management efficiencies and reduce their operational losses.

“A stable macroeconomic environment will also contribute to keep their costs and tariffs down,” he added.

The way to ease the tax burden on businesses, Dr Kwakye said, was to address the lapses in the tax system by expanding the tax base, checking noncompliance, reducing exemptions and plugging the numerous tax leakages.

In his view, the excessive influx of imports needed to be checked by revisiting Ghana’s liberal trade policy and introducing necessary interventions, including appropriately structured tariffs and quotas, to check dumping and to ease the burden on domestic companies to allow them to grow.

He added that trade liberalisation had created a market failure that clearly needed official intervention to correct.

On Ghana’s regulatory environment, Dr Kwakye said it needed to be improved to ease the burden on businesses.

That, he said, required shortening the time and streamlining the process to register businesses, including the use of automation.

He emphasised the need for stable power supply to support business activities, adding that it would require, among other things, a complete overhaul of the power sector, including enduring the availability of adequate generation capacity, improved management and generation diversification to ensure stable power for both businesses and households.

He also noted that the streamlining of the acquisition of licences and permits in the context of overall reforms to ease the regulatory burden and the associated transaction costs to businesses was also very necessary.

Source: Graphic Online

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