Ghana - Private Sector Development Project

Documet of The World Bank FOR OFMCIAL USE ONY Rept No. P4320-B MEMORA 1M ANID RECONKEATION OF TME PRESIDEUT OF TIHE TERNATIONAL DEVEPME ASSOCIATION TO TEE ;EKEOTIVE. DIRECTORS ON A PROPOSED CREDIT OF 51R 9 MILLION TO THE REPUBLIC OF GCU FOR A PRIVATE SECTOR DEVELOPMENT PROJECT NOVMER 2, 1994 !4T CRO'ThAE.HTCS Peport N- r_ 2C ': Tyl: -- PF This document bas a restricted distibution and may be and by reipies enly in th perfmance of their officid duties. Its contents may not otherwise be disclosed witbout Wodd Bank autboration.  CURl CY NQUIVAUMUI (As o Septmber 1994) Currency unit edis (C) US$1 C M996 el US$0.0011 ACRONYM AND ABBREVIATION APDF Africa Project Development Facility AGD Attonw General's Department BRRI Building Roads Reseach InstAe BOG Bank of Ghana CSIR Council for Scientific and Indial Rerch DAPIT Development and Application of Itemediae Technologies EMPRETEC Empretec Ghana Foundation FRI Food Rese-h Isttute GSB Ghana Standards Board GTFA Ghana Trade Fair A t nu n Research _nstue ISO Inenational Stadards OrgaDzation Mo Ministry of Finance and Economic PLaning MEST Ministry of Envionent, Science and Technology MTI Mnstry of Tde and Industy moJ Ministry of Justice NPART Non-Pefoming Assets Recovery Trust ODA Overseas Developmet n (U.L) PCT Project Coordinating Team PEED Private Enterprise and Export Dovelopmet Project PEP Private Eprie Foundation PPF Project Preparation Facility PSAC Private Sector Adjustmen Credit ROG Republic of Ghana RPED Regional Program an Enteprise Developmen SIC Scientific SSA SubSaharan Afica TEDF Technology and Etprise Development PFnd USA Unite St Agenc for snenion Developient FCAL YEAR January 1 - December 31  FOR OMCAL USE ONLY UBIICOF Ghl;A FRIATE BE= PROEC CDIT AND PROJEC SUMMARY Borrower RePpublic of Ana Amount SDR 9 million (US$13 million equivent) Te:m- Standard IIDA with 40 yews maturiy Baieficlrles : Ministry of Envionment, Science and Technology Couci for Scientific and Indutial Resarch Ghm Stdwds Board Ministry of Trade and Industy Empreec Ghana Foundation Ghana Tade Fair Authoty Ministy of Jusice Pivat small- and mdiunm-scae en rises Finandng Pina (ES$ miion equivalen) IDA 2.4 10.6 13.0 Goverment 1.4 0.0 1.4 Beneficiares 41 J0 _LI Total L = = Poverty Category Not applicable Economic Rate of Return Not applicable Staff Aprapsal Report Not applicable Map BD 26472 ddltlo lbCotlEd_DaKe edabod l_di1_WwUBkadwlBac__  MEMORANDUM AND RECOMENDATON OF THE PRESIDENT OF THE INtNATIONAL DEVELOPMEN ASSOCIATION TO THE EXECTiV DIR1ECT1ORS ON A PROPOSED CREDWT TO THE REPU}IC OF GHANA FOR A lUANO EQp RIC 1. I for your approval fte following m nd n on a proposed crdit to he mRepublic of Ghana (ROG) for SDR 9 mm l (US$13 million equvnt) to help finc the Pivat Secor Developm Project (PSD). The credit would be on standard IDA terms with a matuity of 40 years. 2. Cgn .r k gIbd : Ghana has bad a strong record an ma_oonic perrmance uni the electionreated fisc shock in 1992. In the 10 years prior toe intction of the Econor1Ac Recovery Program (ERP), rea GDP fel by 2 prce per annum in the 10 years since its introduction, real GDP has risen by 5 percet per annu. Iflatn fell from a high of 123 prcen In 1983 to 18 percen in 1991 and invtnt rose fom around 6 percent to 16 pere in 1991. The lare electionreated wage creas resulted in a higher fi deficit and raisenflation. The fiscal sitbation improved In 1993, but by less tm plamned but growth was around S perm Ihe 1994 budget expecs fiscal balace to be restored. After the collapse in pvate investme In 1992, it has been risig and investment is expected to reach 18 percet by 1997. 3. ITe overnment is commtod tD forging a new alliance With the prvat sector to ine and deepen that sector's contribution to the country's growth. While the Govemet has, through its varis policy and regulory reforms, done much, there is stil work to be done to deVeo and broaden the overall technological, productie and export capcity of the privat sector. With industry accounting for only 9.2 percent of GDP in 1990, it is imperative to stregen and deepen this sector's ability to compet in the hiSgy com'efitive and i ingy hnologicly demading Intational markets. To overcome the m and technols constraints facing te privaw setomr and create a more dynamic "we-tradidonal secor alteaive, it i necary to address the lack of coection, and bridge the gap, between the state sponsored research and development ies and a ologically deficiet pvate scor. bese conaim s are worsened by a private sector addionaly limied by its own lack of capacity to develop feaible busnes plans, manage producon, handle financial matters and which generasy opeames In an enviromment In which the necemary supports for such eements as trade development iad competive product designs are also laig. Finaly, a general constraint to growth and productvity can also be ideified in a deficient com cial legal serices system whose lack of capacity and limited responsiveness impedes the flow of business transactions and the timey resolution of routine cmer disputes. 4. This project is consistent with the co - ty assistan strategy and closely suort te private sector development objective thereia (see para. 19) in conjunction with other IDA project under imp l n (mee Anne 1) and under preparion as dicussed below. Th Prvate Sector Adjustme Credit (PSAC), under paion, is beg designd to address o macroecomic issues and other polcy conditDons that are seen to be ihibit to the prve sector- led growth, the cOr ero of the oveal cooy stategy. Si ly a prposed Vocatnl Skills and Infm Appre Support Projec is being prepared to address incsd pobducvity and the enigs of workers in selected occuation areas touh improved apprenticesp programs and the provision of training on a demanddriven basis. S. This ptoject is also deigned to be compl to the ongoing U.S. Agency for Intenonal Development (USAID) financed Trade ad lavmw l Project which prvides tecbical to Ghanalam private sector companies In developing her export potenl dthogh advice on  -2- production, marketing and commercial aspects of exorting. To this en, USD has financed the establidment oan Afidca Project Deveopment Faciiy (APDT) ofice as woU as the Private Enerprie Foundation ). a registered, private, n-profit compay in Ghan. addion, the proect will supplem the ongoing efforts of the UK Overa Deve_omt Isan (ODA) in proviig teical to pmoegrowth in suployent and Income; support Empretc Ghana Poudon 0(MPRErEC) an uq-e, nrofit busines spont agency; ad promot expors and impon substtution by small and medim enises in Ghana. 6. Finally, the proje also bncora its received fom a 1993194 Private Sector Roundtable, spored by the Bank and swpported by the Govrnent, whckh has atmpted to identify a nwmber of disce constnts beng fed by the prirate sor. While many of the h r A Id 61oudied in the findings of the Roundtable arw either cros-sescoral or project dicrete in naue, this project, in coformity with the country isnce stra, will address th that are more pressing and immediat to the needs of the private sector. 7. Erjl* QbWf:: The project would contnue the process of foseng the development of a competive private sector by (a) assisting the Govemment In building on its investment lialization by suppon its orts to restucture, reform and commercialize ls echnical research and development establishment along compettive and demand driven principles. Fm this selective institonal Ghaas private sector wfll be asisted in evaluating and developing aopriate tedhology, improving its Inowledge of quality and sndards and in general deepening its tecbical cqcity and informaton (b) providig to a broad seg_m of the private sector the ecessary financi and technc assistance to support the developmen of commercialy bankable projects by Imrvn their feasibility and qulity; (c) suortig effods by th export industry to imrve dteir design and the pmotion of their products; and (d) assting the Goveame in developing a progrm to upgrade the delivery of legal serices to the co_mmcial and sectrs, thereby acoderating reo time for commerial tasactions and comercial conact disue. S. !D Ihe project includes the follAng components: (a) with the intention of developing a more comptitive and demand driven industri technology deveopment culture i Ghana, the project wll pwvide technical assis e and rainigo the Secrar of Ghanas Coun for Sciendfic and Industl Research (CSIR) and four s Ood Raa 1 (, Industa Research Inst ( , Sci c C C, d Bdi and Roads Research Indtute (BRRl) to develop a comma izatio strategy to serve th needs of the privat sector. In addion, the Ghana Standards Board (GSB), an Integral part of any caacity bung i tecnolog, will receive support to stengten its role in devlopig melrology Eld quaity testig s and to diseminate its services thoughu te country; (b) a chnolgy and enep development fund (MEF) to assist on a pilot basis pvate small- and medim-size nteprise (firm wilh asset or annua projected sales not exceedg USS400,000) in increing dhier efficiency to devlop valedded products and provid reliable servies, develoig their technical and fnacl plans to a leve of bakable qly and feasbility, and supporing hei effors to raise th neces financ or investupport; areas of w_e would include, but e not liited o, OF 1 r i ~ in an ml td ff_nM _ nad,m4 product quality and design, techwlogy advisoiry serves, and enerrse restructurig among oters; (c) fmndng for (I) a stdy to detrme the market demad bo domescay and i lly for a cal, Mally t ade pmots facility with private secow Invlvement for domestic expore, tad asocaio, foreig iorte and viiting rade reprsentaiv; i) an eging ard itcl uvey t asess he r abion and redesg neds of the pavffil on the Ghan Trade Fair Authoriy (OTFA) d0 to establish the investmet pramete tha would need to be met undr the study in 0) above; and lii)  -3- implel_noftiOf rs n ofofrom the two studies above, which will include constucto and rabilation work on the GIPA site, subject to the g of the Goverm and IDA; and, (d) a feasibit and market study to dtemin the scope, fici viability, commercial demand and or structure of an industral design center. Contigent on the findipgs under this study saif y to the Govemnt and IDA, fuds will be povided for the establ t and eqWipping of the desi ctr and u ot intenaoal ainng or twinnig arrangements necssary to develop a frst class desg capability; and (e) a study to examine and desimprovemeins in the delivery of legal services and _