Ghana can leverage trade policies to accelerate export diversification and job creation – World Bank
The competitiveness of Ghana’s merchandise trade has declined over the past decade, leading to a reduction in the number of exporting firms and their participation in global value chains (GVCs).
However, improvements in transport logistics and access to ICT infrastructure over the past decade can be leveraged to expand trade and economic transformation; a key pathway to creating quality jobs, according to the latest World Bank trade analysis for the country.
The recently released Ghana Trade Competitiveness Diagnostic – Enhancing Ghana’s Trade Competitiveness in the Context of the AfCFTA, notes that trade in services and foreign direct investment are also important to ensure deeper integration into GVCs and the efficiency of the manufacturing sector.
“The potential benefit offered by the AfCFTA (about 0.5% additional GDP growth per year over the next ten years) – is very significant,” said Pierre Laporte, World Bank Country Director for Ghana, Liberia and Sierra Leone.
“This should motivate Ghana to harness the transformative potential of trade by cultivating export-oriented activities in the manufacturing and service sectors and pursuing the ongoing negotiations and implementation of the AfCFTA protocols.”
The report presents four key policy recommendations and conclusions to enhance trade competitiveness in the context of the AfCFTA.
To improve its participation in GVCs, Ghana needs to enhance its trade competitiveness, particularly that of the manufacturing sector, promote foreign direct investment inflows and deepen its regional integration efforts in regional markets and global value chains, by particularly in the manufacturing sector.
This would help raise incomes by improving access to markets, technology and skills, and increasing the domestic value added of exports. Ghana’s participation in GVCs remains predominantly in commodities, while its ambitious peers, Kenya and South Africa, have moved from the commodity group to the limited manufacturing group of GVC participants.
Improving the effectiveness of trade facilitation requires strengthening customs administration to reduce the costs faced by traders and improve the ease of trading across borders. Other trade facilitation improvements include the removal of VAT on transit services and the removal of redundant and inefficient checkpoints.
The recent growth of commercial services, as well as the increased digitization of Ghana point to the strategic importance of streamlining the regulatory environment for the services sector.
The World Bank said a special effort should be made to support the most dynamic segments of the service sector, with potential for innovation and economies of scale. These include services such as business services, professional services, financial services and economic activities based on information technology.
He added that policy reforms are needed to take advantage of the potential opportunities offered by the AfCFTA and GVCs. These include reducing tariffs, where appropriate, such as reducing tariffs on imported raw materials, eliminating non-tariff barriers (NTBs), improving trade facilitation, as well as promoting a favorable business and investment climate.
“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 trade and financial services in the West Africa sub-region,” added Daniel Boakye, co-author. .
“However, much more needs to be done to remove barriers to trade flows in Ghana,” he said.