At a time where economic world powers, such as the United States and United Kingdom, are turning inwards with their economic views and are enacting protectionist policies, Ghana should follow suit to increase its industry, but this is still not without hurdles.
Ghana’s large amount of imports create difficulties for the establishment and growth of domestic producers; a point Dr. Kwabena Nyarko Otoo, Director of Research and Policy in the Labour Research and Policy Institute of the Trade Union Congress, made the morning of June 7th in a presentation entitled “In Search of Solutions: Labour Private Sector Partnership for Jobs.”
In 2016, Ghana imported 37.6 billion dollars’ worth of goods, resulting in a negative trade balance of $553 million. While running a trade deficit isn’t necessarily unhealthy for an economy, the lack of diversity that made up Ghana’s exports is. Ghana’s three largest exports, gold, cocoa beans, and crude petroleum, respectively, account for approximately 70% of its total exports. Gold alone makes up over 50%. In comparison, the largest export of the United States makes up only 3.6% of its total.
While Ghana has been enjoying the current favorable price of gold, reliance on primary commodities presents issues. Primary commodities, especially non-oil goods, are associated with significant price volatility.
Along with lack of export diversity, unemployment also remains a pressing issue in Ghana. The 2015 Labor Force Survey Report found that 11.9% of the population aged 15 and up were unemployed, however, a relatively broad definition of unemployment was used. Youth unemployment, those 15-24, is at a staggering 48%, found the World Bank in a recent report. Unemployment remains higher in urban regions as people are migrating to cities in hopes of work faster than these developing cities can produce employment opportunities. This influx is resulting in overpopulation and is putting strains on cities’ infrastructure, especially Accra. Industrialization can help address these issues.
Otoo later stated that “Our private sector is struggling. In such situations, what some countries have done is find ways of shielding domestic firms that are vital sources of employment from the external competition.”
These infant industry protection policies illustrated by Otoo are precisely the policy strategies that have so quickly developed the East Asian Tiger’s industries. South Korea was able to increase its GDP per capita from $198.37 to $27,538 in just 50 years and is now a world leader in high skilled manufacturing. Strategic tariffs can be used to protect emerging industries, allowing them to become established, grow, and increase productivity, whereas they would otherwise never be able to compete with the already established multinational corporations in the global market.
Trade liberalization is crucial to growth as economic theory demonstrates, however, the countries that have recently experienced the most economic development have primarily had some type of protectionist policy in place.
President Akufo-Addo’s One District, One Factory initiative is a calculated move for Ghana. Aiming to establish a minimum of one factory or enterprise in each of Ghana’s 216 region, the initiative comprehensively pushes for increased industrialization and market diversification, while addressing the state’s issues of unemployment and economic dependence on natural resources. However, to achieve this initiative and establish a strong industrial sector providing employment opportunities, the Ghanaian government should further examine and implement infant industry protection policies as it is significantly harder to keep a factory in operation than it is to build one. With proper policies to grow the industry sector, Ghana can join the Asian tigers as an African lion.
By Andrew David (Intern)
