Public-Private Partnership, Investment Promotion, Food Security

							Public-Private Partnership, Investment Promotion, Food Security and Rural Development:
Agents of Poverty Reduction in Ghana
Introduction:
The development challenges of Africa are largely unique and worrying. Not only is Africa the
poorest region in the world, but it is also the only major developing region with uncertain and
problematic growth in income per capita spanning decades (Sachs et al. 2004). Meanwhile Africa’s
population continues to increase adding more stresses to the economic strains. Development
lending to Africa over the past years did not solve the problem either. And a heavy debt burden
followed, compounding Africa’s woes. Africa therefore remained neck-deep in poverty and debt
over major parts of the just ended century. The often too common diagnosis is that Africa is
suffering from a crisis of governance, as there are highly visible examples of profoundly poor
governance in many countries which resulted in glaring scenes of poverty in Africa. But this may not
always be the case. There are well-governed countries that are trapped in poverty and possibly too
poor to achieve high levels of economic growth. What it means is that mere policy or governance
reform may not be sufficient enough to overcome Africa’s growth and poverty reduction challenges
as others assume. There must be some other reasons that must be explored.


Poverty reduction
The Government of Ghana introduced and implemented a programme known as the Ghana
Poverty Reduction Strategy (GPRS I) in 2003 as the main working guide for poverty reduction. The
GPRS I outlines how the government intended to develop the country and improve on the quality
of life of Ghanaians over a three-year period (2003 – 2005). The core objective of the GPRS I was
to achieve stability in the economy, as well as reduce poverty in the country. Data from the Ghana
Statistical Service (GSS) indicates that both poverty (upper line) and extreme poverty (lower line)
declined significantly in 2005/2006. The national poverty incidence for instance reduced from
39.5% in 1998/1999 to 28.5% in 2005/2006 indicating a decline of 11% (GSS, 2007). This also
implies that the proportion of the population living in poverty declined by an average of 1.5% on an
annual basis, and represents about 44.9% decline from the 1991/92 level of 51.7%. The proportion
of the population living in extreme poverty also declined from 36.5% in 1991/92 to 26.8% in
1998/99, and then to 18.2% in 2005/06. This represents about 50.1% decline in the incidence of
extreme poverty over the period 1991/92 to 2005/2006.


This remarkable progress achieved makes Ghana the first Sub-Saharan African country to achieve
the MDGs target of reducing by halve the proportion of the population in extreme poverty ahead of
the target date of 2015. To further consolidate and strengthen the gains made in the economy a
follow-up national development policy guide called the Growth and Poverty Reduction Strategy
(GPRS II) was prepared and implemented in 2006 for another three years (2006 – 2009). The GPRS
II indicated how government with the support of Ghanaians wants to develop the country by
reducing poverty and improving the quality of life of all Ghanaians over the period 2006 – 2009.
This phase focused on how to grow the economy faster, and covered three broad pillars of national
development: Private Sector Competitiveness, Human Resource Development, and Good
Governance and Civic Responsibility.


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A review of the economic situation of the country during 2008 indicates that despite the global
financial turmoil and energy crisis in 2007 and 2008 the Ghanaian economy made substantial
progress in sustaining the upward trends in economic growth. The real GDP growth rate continued
its upward trend since 2001 to the peak of 7.3% in 2008, higher than the projected Sub-Saharan
average of 6.75%, and above the 2008 budget targets of 7% (ISSER, 2008). The relatively high GDP
growth rate impacted positively on the per capita income and consequently raised it by about 9%
from US$654 in 2007 to about US$712.25. It is expected that the improvement in per capita GDP
will reduce further the poverty incidence levels. There were also positive growth rates in all the
sectors of the economy as compared previous years.


Clearly, Ghana is one of few countries in Africa that continue to do well notwithstanding the unique
challenges of growth and poverty reduction that African countries face. The challenge for Ghana
today is how to sustain the remarkable progress made in poverty reduction and ensure that people
do not fall back into extreme poverty ahead of the 2015 MDGs target date. The difficulty for most
African countries in sustaining little glimpses of growth and threads of poverty reduction is the lack
of increased investment when it is needed most. Africa’s poverty does not engender national saving
rates, which leads to low or negative economic growth rates. Meanwhile low domestic saving is not
compensated by large inflows of foreign direct investment (Sachs et al. 2004). Africa is in a fix. This
is compounded by the slow pace of fulfillment of development assistance’s promises. In most cases
promises made by donor nations or development partners are not fulfilled. And when they are
fulfilled, they come too late. While acknowledging that Africa still needs a genuine big push from
donors the realistic paradigm for Africa is conscious investment promotion strategies, public-private
partnership, and food security and rural development.


Investment promotion
The challenge to economic growth and poverty reduction in Africa has to do largely with low
investment. The New Partnership for Africa’s Development (NEPAD) accordingly places greater
emphases on the importance of foreign direct investment (FDI) as Africa’s new engine of economic
growth. In an effort to attract more FDI, a number of African countries have over the years
undertaken reforms geared primarily at improving their business environment. These reforms have
included changes in the legislative and regulatory framework governing investment; the elimination
of price controls on a number of products and inputs; the liberalization of producer markets in
some cases; the privatization of state-owned enterprises; financial sector reforms; the liberalization
of foreign exchange markets; the establishment of export promotion agencies and the establishment
or review of investment codes (Economic Commission for Africa 1997; UNCTAD, 2004b; Basu
and Srinivasan 2002).


Ghana has undertaken a number of measures to attract investment into the country. The Ghana
Investment Promotion Centre (GIPC) is a key governmental agency with responsibility for
promoting investment in the country. The core functions of the institution include, initiating and
supporting measures that will, enhance the investment climate in the country for both Ghanaian and
non-Ghanaian companies; Promoting investments in and outside Ghana through effective
promotion; Collecting, collating, analysing and disseminating information about investment

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opportunities and sources of investment capital, and advising on the availability, choice or suitability
of partners in joint-venture projects; Providing and disseminating up-to-date information on
incentives available to investors; Assisting investors by providing support services including
assistance with permits required for the establishment and operation of enterprises.


Ghana also has the Free Zones Scheme managed by the Ghana Free Zones Board. This is an
integrated programme established to promote processing and manufacturing of goods through the
establishment of Export Processing Zones (EPZs) and encourages the development of commercial
and service activities at seaport and airport areas. What this means is that the whole of Ghana is
accessible to potential investors who have the opportunity to use the free zones as focal points to
produce goods and services for foreign markets. The Program is completely private sector driven.
Government’s role is limited to the facilitation, regulation and monitoring of the activities of zone
developers/operators and enterprises.


The incentives available under the Free Zone status include: 1)100% exemption from payment of
direct and indirect duties and levies on all imports for production and exports from free zones for
ten (10) years, 2) a free zone developer or enterprise is granted 100% exemption from payment of
income tax on profits, and income tax rate is capped at 8% after this ten (10) year period, 3) total
exemption from payment of withholding taxes from dividends arising out of free zone investments;
4) there is also relief from double taxation for foreign investors and employees; 5) When it comes to
customs and excise obligations, a Free Zones enterprise is not required to obtain import licenses and
customs formalities are immersed, 6) There are no restrictions on total foreign or local ownership of
free zone enclaves and enterprises. (The Free Zone Act, 1995; No 504)


As regards capital or profit repatriation, there are no conditions or restrictions on:
i. payments for foreign loan servicing;
ii. payments of fees and charges for technology transfer agreements;
iii. remittance of proceeds from sale of any interest in a free investment.
• A free zone developer is allowed to operate foreign currency accounts with banks in Ghana.
• A Free Zones enterprise or company is permitted to sell 30% of their annual production of goods
and services on the local market and export the remaining 70%.
• Investment in Free Zone is guaranteed against nationalization and expropriation.


Other policy and administrative or bureaucratic measures instituted to attract investment include
improvements in the time it takes to register a business in Ghana, the time it takes to solve a
business dispute, etc. For example the number of days it takes to resolve commercial disputes in
Ghana in 2008 was 30 days, having dropped significantly from 80 days in 2007. Prospective business
registrants only needed five (5) days to register their businesses too in 2008, again a significant
decline from 14 days in 2005. This contributed to a strong investor confidence in the economy and
consequently led to an increase in FDI net inflows, and an increased in the private fixed investment.
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Total new investments for 2008 for example was GH¢3.17 billion (US$3.19), an increase of over
160% from GH¢1.15 billion (US$1.2 billion) recorded for 2007. The value of investment coming
directly into Ghana from abroad increased from US$970.3 million in 2007 to US$2,120.41 million in
2008.


Public-Private Partnership
Private sector development is considered one of the key areas for sustaining and expanding
businesses, stimulating economic growth, and reducing poverty. The promotion of the private sector
has become an integral part of Ghana’s economic development strategy since it embarked on its
structural adjustment program (SAP) in 1983. Indeed, the sector has been recognised as the engine
of growth in Ghana’s economy. Governments are generally very slow in admitting private
participation in key sectors of the economy even when there is conspicuous evidence that involving
the private sector is good for the economy and enhances poverty. Running state enterprises is
generally very difficult even in an environment where resources are available (Brobbey, 2006). And it
is even more difficult where public funds are not keeping pace with the demand of public or state
enterprises. For some time now, there has been an ongoing debate and rethinking in academic
circles, in the international financial institutions and elsewhere about the public-private partnership
approach to infrastructure provision, and how policy can best address this issue. There is general
awareness amongst stakeholders in development that public-private partnerships could be a viable
option for infrastructure development and service delivery.


In Ghana, as far back as the 1980s with the introduction of SAP, the key role the private sector
could play either singly or in partnership with the public sector to promote economic growth and
enhance poverty reduction was realised. A lot of state-owned enterprises were privatised and for
others, the state shared ownership (Public-Private Partnership). This has allowed the injection of
fresh capital into most hitherto struggling enterprises, and many others revived after being sold to
private entrepreneurs. Again, as part of a broader public sector reform programme, the Government
of Ghana launched in 1994 a comprehensive reform programme known as the National Institutional
Renewal Programme (NIRP). The NIRP was to coordinate all un-going reforms in the public sector
(Institute for Public-Private Partnerships). Public-private partnership (PPP) in Ghana can be found
in water management, telecommunication, banking, customs operations and other social services.
The Government of Ghana struggles with financial constraints and a dearth of technical capacity
just like any other African country. Therefore, PPP is considered an ideal method for implementing
new systems, foster stakeholder buy-in, and ensure sustainability.


The Government of Ghana was motivated to use this arrangement for instance in overcoming the
problems it encountered at the customs operations points at the ports. In 2000 the Government of
Ghana drawing upon earlier experiences in the execution of trade facilitation and revenue
management projects established the Ghana Community Network Services Limited (GCNet) as a
joint venture (PPP) for the processing of trade and customs related transactions. The PPP is a useful
medium for project implementation or delivering services, which were traditionally provided by the
public sector, in a more economically efficient and sustainable manner (Heilman J. and G. Johnston,
1992). In the case of GCNet for example the Government used PPP to modernize customs

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operations without having to support, on its own, the total cost (US $12 million) for physical
infrastructure work, the establishment of communication networks, the upgrading of customs
facilities, and electric generators placed in remote border stations (Business Trade Policy).


The support for closer collaboration between the public and private sectors was given further
impetus in 2001 with the creation of a Ministry of Private Sector Development to promote such
public-private sector collaboration. Though this ministry is no more distinct, it is been added to the
ministry of trade to continue to facilitate the activities of the private sector. Effective Public-private
partnerships in Ghana will however require a significant investment in developing the investment
climate, including the legal and regulatory framework, project identification and preparation capacity.
Other measures include the strengthening of private investment in Ghana by encouraging foreign
direct and portfolio investment. This requires competitive business environment which include
operable and competitively priced infrastructure services, power, telecommunications, a good
network of roads, access to potable water and reliable air links with the outside world.


Food security and Rural Development
Ensuring food security and rural development are fundamental to achieving inclusive and
sustainable economic growth and poverty reduction. Food security is a multi-faceted and often
flexible concept (Maxwell et al, 1992). This is reflected in the number of attempts to define it. The
most recent definition of food security is “a situation that exists when all people, at all times, have
physical, social and economic access to sufficient, safe and nutritious food that meets their dietary
needs and food preferences for an active and healthy life” (WFS, 1996; FAO, 2002). This definition
is based on three important pillars: food availability; food access; and food utilization (International
Federation of Red Cross and Red Crescent Societies, 2006). Redressing the issue of food insecurity
is an indispensable requirement for sustainable development in developing countries, particularly in
Africa.


Food security issues lie at the core of the MDGs: Halving hunger and extreme poverty by 2015. As
noted earlier, Ghana has made steady progress towards achieving this goal and has indeed exceeded
the target of halving extreme poverty. However, seasonal hunger still lurks in pockets of the country,
especially in the northern and rural parts. The food security situation in Ghana is largely seasonal
(Maxwell, et al. 2000) and more severe in Northern Ghana. Northern Ghana receives much lower
inflows of remittances, and participating much less in trading activities compare to the south. The
north remains largely dependent on low return food crop farming. As the agriculture season
progresses, so does the food security (scarcity) situation worsens. These factors explain the food
insecurity situation in that part of the country. This is reinforced by concomitant increases in the
prices of food stuff hence worsening an already bad situation.


Food security challenges in southern Ghana are mainly associated with the fishing communities
along the coast. Agriculture households in the coastal belt of Ghana and urban dwellers depend
largely on fishing and informal non-agriculture sector respectively as their source of income and
livelihood. In the event of food shortages in the hinterlands (rural areas) non-agriculture households
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in the urban areas struggle with high food prices. Clearly, this affects the amount of food a
household is able to purchase. Alderman and Shively (1996) note a difference of 50 percent in the
real price of maize in urban markets between June (the pre-harvest season) and September (the
postharvest season) (see Maxwell, et al. 2000). Maxwell and others used both the calorie adequacy
and the proportion of the total household budget devoted to food to determine ones food security
in Ghana. In the end they found a strong relationship between expenditures and calorie adequacy. In
the group with the lowest expenditures, 80 percent of the households fall below 80 percent of the
calorie requirement and 78 percent fall below 2,200 kcal/aeu/day. In the group with the highest
income, only 10 percent of the households do not meet the calorie requirement.


Ghana has experienced great improvements in most of the important standard measures of food
security since then. Improvements in agricultural productivity and cultivated land sizes have
impacted positively on annual output to raise the agricultural sector growth rate successively from
2.1% in 2000 to 7.5% in 2004 before dropping to 5.7% in 2006 (Ghana MDG Report, 2006). There
has been a significant increase in the production of fingerlings from a level of 150,000 in 2003 to
about 6.9 million in 2006. These have yielded some positive impact on food availability. Crops and
livestock production, for instance, has equally seen upward growth trends from 0.9% in 1990-94 to
4.1% in 1995-1999 and further to 4.6% in 2000-2006. As a result, food production index has risen
from 46.5 in 1990 to 121 in 2004, with per capita index of food production rising from 100 to 114
over the same period.


These improvements in food availability have significantly contributed to the decline in malnutrition,
with respect to both the number and proportion of undernourished people. For the periods 1990-
1992 and 2003-2004 the total number of undernourished Ghanaians reduced from 5.8 million to 2.3
million, representing a decline from 37% of the total population to 11%. At the same time the
country managed to reverse the upward trends with respect to the prevalence of children suffering
from wasting and stunting that characterised the late nineties. For instance, the proportion of
children aged 0-35 months, suffering from stunting, has reduced to 23% in 2006 after rising
successively from 26% in 1993 to 30.5% in 1998. Similarly the incidence of wasting has declined
from a peak level of 12% in 1993 to 5% in 2006, while the occurrence of underweight has declined
from about 30% in 1988 to 18% in 2006


Even though the country has significantly reduced the level of malnutrition over the last few years,
malnutrition continues to remain a serious problem in the country particularly in the rural areas
where large investments are required to eradicate it. Rural poverty also continues to increase despite
monumental strides made in reducing extreme poverty in 2006. Poverty and malnutrition, ironically,
are largely rural in Ghana. It is ironical because, it is from the rural areas that large baskets of food
are produced. Reducing poverty and hunger will therefore require encouragement of rural
development in general and a prosperous smallholder private agricultural economy in particular
(Ayres and McCalla, 1996). Encouraging rural development is the best way to help poor farmers and
rural dwellers become more productive and improve their living standards. It is also critical to
increasing national and global food supplies. Ensuring rural development can contribute significantly
to improved management of natural resources and the environment. The action of ensuring food

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security is huge and complex. Approaching it thus requires a multifaceted strategy that would be
holistic and colossal.


The implication of Korea’s Development Model for Ghana
The development experience of Korea is unique. It is the only nation in the world to have
successfully turned from aid receiver to a donor nation (Chun, Lee and Sohn, 2007). A cursory look
from outside suggests two main characteristics of Korea’s development strategy which are worth
mentioning: 1) The mind set of the Korean people: the determination and aspiration for
development, a common vision for a better future, faith in human potential, sense of ownership,
diligence, dynamic entrepreneurship, etc. 2) The second is the good policies of the government:
promotion of the free market economy, export-led and pro-growth economic policies, research and
development in science and technology, development of human resources through education, etc.


The implications of this for Ghana’s efforts to promote growth and reduce poverty are huge. Ghana
may not simply benchmark Korea's case. But Ghana can learn a lot from the Korean model. This
development model shows that the most important factor of successful development is the attitude
of the people. It is the people who drive the engines of development. The people must be filled with
the determination and aspiration to succeed. The people of Ghana have common vision and
aspiration for development. We now need to whip up our self-belief spirit and have faith in our own
ability. This is firmly enhanced by our strong and growing democratic achievements. Good political
system, leadership and economic policies are important in this direction.

The Korean type of economic development follows contemporary economy development theory of
on the basis of knowledge. Ghana can learn from the Korean belief that “knowledge is the only
resource in modern economy.” Moreover, the focus on today's industry has been shifted from
manufacturing to knowledge and information, and the knowledge/information industry is shifting to
culture and emotion-related industry, which is based on a human being's idea and creativeness.

Can Ghana learn from the Korean experience? Yes, but not without “breaking eggs”. These
conditions seem to be important and worth learning. First is the need for a “cultural tolerance
system”. This requires an open society and freedom of thought. Second, a “coordinating mechanism
is required to bring about harmonization. Governments should be strong but small. Third, there is
need to strive for the improvement of human nature which leads to respect for opposite ways of
life and thought. These are based on Confucianism, the underlying source of Korea’s motivation
that sped development. The dominant subject in Confucius’ teachings is how to become a good
person by improving one’s own character (Lee and McNulty, 2003).


Considering that poverty reduction has become the basic aid policy for the international community
in the 21st century, it is important that the Korean model serve as an efficient model for developing
countries to emulate. Until now, many international organizations and donating nations
concentrated more on providing aid to the lowest class, with the assumption that it was the fastest
way to help those in need. Korea's experience, however, has shown that results can come within.

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Another advantage is that the Korean model emphasizes the mid- and low-skill technology needed
in developing countries. Korea's development since the mid-1960s constitutes one of the handful
success cases among the world's more than hundred developing countries. The Korean success is
also of interest because much of what happened in Korea can be applicable in Africa. Korean
development therefore provides a model for other countries intent on accelerating the pace of their
own development agenda.


How Korea and Ghana (Africa) can cooperate for common prosperity
Given that Korea employed extra financial and technological assistance from aboard to overcome
dire poverty, the country clearly knows how to put financial and technological assistance from
abroad to good use. That knowledge could be a big help to other nations in Africa. Korea obviously
has a new role to play in Africa. Having themselves emerged triumphantly from the abyss of poverty,
Korea surely does understand much better the problems of Africa.


Korea and Ghana have complementary economic structures, a similar territorial size and some
common cultural features. This makes them appropriate partners for cooperation.
Ghana/Africa needs to develop various infrastructure (Infrastructure and IT), to construct plants
(gas pipeline, oil refinery, oil storage, and petrochemical factories), airports, ports and railroads, to
undertake human training, and to develop its water resources, agriculture and housing. Meanwhile
Korea has good human and financial capital, experience and technology that achieved economic
success in the shortest time from an underdeveloped country. Korea can be a useful partner by
sharing their experience in economic development with Africa. A way to share ideas is for both
countries to offer their academic institutions to interact more, to share knowledge, experience, and
technology.


References




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