Ghana - 2000 and beyond : setting the stage for accelerated growth and poverty reduction

Report No. 11486-GH Ghana 2000 and Beyond Setting the Stage for Accelerated Growth and Poverty Reduction Novenmer 6,1992 Western Africa Department FOR OFFICIAL USE ONLY i U MICROFICHE COPY Report No.: 11486-GH Type: (ECo) Title: 2000 ANF BEYOND SETTING THE ST Author: LEECHfOR, C Ext. :34569 Rciom:J 6099 Dept. :AF4CO Dom"entof te World Rmk This docuient has a restrcted distribution and may be used by recipients only in fte performance of tir official duties. Rts contents may not otherwise be disclosei without World Bank authorization. . *s6 *  FOR OMCIAL USE ONLY is report was prepared, under the overtl direction of A. Chaibber, by a team led by C. Leechor compising W. Alberts, J. Bahal, S. Commawler, M. Fardi, P. Glewwe, A Gupta, R Kaibur, E. Kin& S. Mink, A. Mody, J. O'Connor, P. Plesch, M Schankeman, G. Schreiber, AL SegaL K. Sigrist,J. Singh, G. Spiro, C. Ugaz.Estrada and S. Younger. MA Iander,J Joyce, O. Meesookj. StongmanJ. WaltesandJ. WrihtaboconUedtothe report. The report has benefited enormously from comments byE. Iim, L Husain, G. Nankan J. Page, AL Bd, V. Thomas, P. Hsn, S. Laceef, C. Ranade, T. Swayze, AL Walon, D. Bec, and N. Bennt Many Ghanaian officils e also proded vaule assisnce and comments on an earier draft of this teport, icuding Dr. Botchey, Dr. Joe Abbey, Mr. AmissahArthur, Mr. Anyemedu, AM. MAmah (MFEP), Mr. Dapah (MOG) and Mr. Kimah (BOG). This document has a restticted distribution and may be used by tecipients only in the pWfonce of their official duties. Its contents may not otherwise be discsed without World Bank authorlmtion.  Contents Execuive smmay vii 1. Introducton 1 MCrcmincChage 1 Itituional Deepment 4 Poverrty Impla s 2. Povt reducdon thoug gowh 6 Poverty ALlation: The Lessons f Globa Exped 6 A Poverty Ptofile of Ghana 8 The Patte ofAcceleated Grwth and PovertyAlevisdon 10 Public Exnture Pates 12 Socia Saety Nets and Tatonl Coping MehaIms 15 3. Ivest in peopl 17 Eucaton 17 Hea 22 Enaling Enviroment fir Huma Resource 24 4. Sect sources of gowth 27 IMustrative Scenarios 28 Prosc in Agialum 29 Arculua Prd s, I_entie and Suly Pons 29 Gwth ProspectainMining 42 Prospctin Industry 43 5. Foerig enteprensip I: In d se 2 M Pocies to Prmote Private Inesment 32 Wae Inomes and Inflan Mobilzing FancalRoures 9 Creatig an Enablig Enviroment 61 6. Fostering ete uip nastucasu ppo rt 72 Infstuce 72 T ~~~~82 Energy 85  ^~~~~~I U  (ih2 ana's sstudent anscheme for higher education 21 33 Agenda for acdon 26 4.1 Combis flower exports 41 42 Agiultural intensification can lessen pressure on foresm 42 43 Diverion through agroindusay in Thiland-he case of casssva 47 4.4 Should saes Intevene in trade or shouldn't they? 50 5.1 Does Ghana need a VAT? 56 5.2 Costly end-of sevie benefit slow down privatiaon in Ghana 68 53 Acceleating privaiadon: The experience of Hungsay 69 5A On the CIMC phenomenon: Joint.vente companies in China 71 7.1 Democra or u im 90 72 Does ownerip matter? 95 Tavbes 1.1 Stwture of producon 2 1.2 Structe of aggate demand 3 2.1 Variadon in country experience 6 2.2 Food expenditure pattens by povert group 8 2.3 Sources of income by poety group 9 2.4 Sorc of agrituld income by poverty group 9 2.5 Revenue fiom the sale of cropsbypovertygroup 9 3.1 1Ipact of isng jior secony school qualitY on cogtidve ac_ievement: Ghana 19 3.2 The economic burde of adu f ilness, selected countries and yea 23 4.1 Regression estimates of Wiculur supply response 30 4.2 Rado of retail price farm ae price, Ghana 31 43 Southeast Asia Contrudon of manu and mining 44 4.4 Maysia: Growth in nufngvalue added (1968-86) 45 45 Growth in agrictultualducon andexports in Southeastsia: 1971-81 47 4.6 Distrbution of dynamic export products (Thald and Malysia) 48 4.7 Dynamic poducts in wodd mcadixse trade, 1979-87 48 5.1 Projected economic indicators 54 5.2 Fancial depth selected countries 55 53 Indices of pric, average earnings and minimum wages, 1983-90 57 5.4 Credit extended by the banling sysem 59 55 Invstment incentives on P)I in ASEAN counies and Ghana 65 5.6 Export incentives in Southeast Asia and Ghana 66 6.1 Telephone main lines per 100 inhabitants 84  Executive summary nGa ba begxbthe bcox on th Afic amcossoverthepovertyine for aothe rhlf _SNIWindcentury. Ghan nee to consoidat Nd kuw opew po i kuws bulod n itsam ts in ecet t yearSt dso &fust to mm VoSd ndfow kat, ordertofurtheradnethegoafpoet sivea4iaftn& WWlnoWbecomeWj reducluoJtneedstostriveforfisegrowth to chie raed ad dq&"k ru` though polcs the ateate o runte an tngibl chag for the poor. ITe Ghanaian economy stands at a aoss- CanGhanabreakoutofitslow-ince roads. Gan's dutmet progam is by stusandmakeabcddashtowardabetter any yardstck one of the more ucessful quality of life by the next centuy? The ones in Sub-Saharan Afiica. A decade of dynam gowth in Eas Asia sow tat it stbngpolicieshasyiededbroadbudget can be done. It took the UK 58 yeas to bance, stronge export growth, a ason- double per capita imco, and Japan 34 able e poition and sme beginnin years todo the same. Hove, fastgming ih respc to stuctur reorm, icuding Eat Anecownomies sch as China, Indo. some limited pdvatization of stte-owned nes, and Thailand achieving this in enterprises and closure of chronic about a decade. The e also doing itwith lbss lkem There has been grwth in se- an e ted teducto in pweq. tions of the aicultur ecnmy, paticu- Ghanawturay owaGhanaionway lary fk the main export earner, cocoa, and instmgo lthesobjecveLIshould, also in the mnng sectr where reneed noneteess,seewhathaswodrkdesewhere foregainvesnenthasbeenattracte&Thse and adapt itto the Ghanaian envionment. policy Adfts have mvased to a coadle Thisswudyattemptstoa ssistin this debate extent the apparently inexoble decine of by aking the question-hatwould it take the ecOamy that maed much of the pe- forGhanatobecomeamiddleincomecoun- dod berween Independence (1957) and rybytheyewr2007, the50tanenie of 1983. Gpanan indec? And what would By the end of the 1980s, however, be needed to enure that the average poor Ghaasperapitaicomerem_ndatabout Gh lnian would paricpae in this prces US$390, which. placed Ghana among the sufficientlytocrmssoverthepovertylmneby poorestcounniesLGhanacontnuesto hwe that time? a high dependence on a smal rnge of eprables,prinipalycoo,godandodher Eeu_ of Succesful G=w& miners; low domestic Sain low ggre- gate investment and astrilinglyowlevel of Inbloodigat sueul developm expe- privatevestment.Evenwiththeimpvd nea an obvsvious area r om where economic performance since 1983, rel wouldtrytodrwlessnssEastAsaaswell grwth has only been about S perent per as pas of Latin America The Est Asian anum, with per capia income dsng at successisoftenreferedtoasa'mirce- about2percentperannumAtthisrate, the which is a minom. Instead, East Asia avage poor po in Ghana would not demo ates what can be achieved with a EXCIWESUMMAW  comination of pragmatic and se gov- Ghanaian private capital abroad. For this to ermntpoliciesandacplnedandhard- hpen Ghana needs vigorous private secc working population that responds to the tor patidpation and investmen Ghana's ight incenives. bdeed, other East Aian prate investment to GDP rtio is otlyone economies such as the Philippines, Viet half of that observed in East Asia in the Nam, andMyanmiarLavenotyetac ieved 1960s s onlyone quarterof the pnvate the sucess of thei neighbots. Fawvble invstment rates today. Finaly, it should be etal fictors obviously had an impact, noted that, even if growth does not quite butwere not vital to this succs. reach the tnt anticipated, the effortitself * Were favorable global trai condi- may provide a common nadial purpoe tions the reason for East Asias export suc- and a unifying force smidst the anxiety cess? ITe region's exports grew at nearly 9 asw iatedwiththepoliticaltransition.Aim- percent ayearduring 1965-80, when global ing high and trg harder appears to be a conditions were helpfuL But they also con- low-risk andhigh-guin option provided that tinued to grow at neady 10 percent in the expenditures are kept within limit 1980s,whenplobaconditionsdetedorated. One lesson of intenational experience * WasareladonshipwithJapanthekeyto is that the soures and pattens of grwth their export success? Exports firm East seldom follow a plan, whether rigid or in- Asia tojapanin the 1980s grew at 7 percent dBte.But,clarymuchofGhana'sgowt ayearbutexportstotheUSAandtoEurope in the medium term (up to 2000 AD) can grew at 12 percent and 11 percent, respec- comeprmarilyfrom agculture, miingand tively, in the same penod. Nor were tading the service scors Indust grwth vil blocsafactorbecauseEastAsiadidnothave folow with a time lag, but the basis of any arrnments that mattered in an eco- indusil growth-education, infrastruc- nomic sense. ture, telecommunicaions, support for de- , Was Japaneseinvestmentacritcalfac- velopment of markets and import of tech- tor in East Asian success? Perhaps, but nolobg-must be laid now. To make an Japese investment typicaly went into asssmet of the feasibility of achieving counties which followed sound growth- fasergowthitshouldbenotedthatGana's prmoting policies. In most cases recovery gw ratessince 1983 were not verydiffer. in domestic prvate investmet preceded ent from dtose achieved by Thlnd and Lge inflows of foreign direct investment Madaysia agenetation ago, exceptinagdcul- Is Ghana readyforacceleratedgrowth? ture where performance has becn weak Ihisisaquestonoftenraisedindisci The potentl for rapid agicult growth both in the country and in internationd clearly does exist in Ghana fora The question suggests that there may The centralquesdonsthisstudysks are be poitios for fast gwro ich do what domestic actions accounted for the not yet exist in Ghana Certainly, in human success stories and what is their relevane resources and inrasuce Ghana falls for Ghana? Mree factors stand out in the behindsomeofthefast-grwingNICswhen success stories despite their considerable they were beginning their acceleration into diversity-primary education and literacy, fast growth a genetidon ago. Te catch-up opennessinintnaional makets, andpub- process in these areas, if propedy funded, licsectordisciplineaugmentedbyacomple- wi take at least a decade Thbis process mentarrelationshipwiththeprivatesector. should bein by realocating public fimds into these priority aeas by reducng expen- EmphAs oe Hwxax DeIopmewi The ditures in other areas. If the necessry one area where we were able to find very changesarermade,theaccelerationofgrowth clear differences between Ghana and some could begin before the end of this decade. of the more sucessul fast-growing econo- Ghana can move toward faster growth mieswasintheareaofeducation-pau- though betteruseofitsexistnghuman and lady primary education. Ghana's tertiar phyal resources as well as by aturacing and secondary education system compae Vs EXBCt= SUNMLW  favorbly with those of fast-gwing coun- in the first plce but dthre mins the ties at the time when they were beginning quaeston of financial distwess of compnies ther push toward rapid growth-t least it which wer ealier potected but could now does so in number But where Ghana lap invest in potentially compeive acvitdes if farbehdisinprmayeducationandover- tiey ee able to get financial and othe all litera. Most successfil countnes had spport. How best to help these enterpises achieved near-unhersal literacy as a pre. is discused in the teport. condition to rapid growth compared to While Ghaas trsde rado (ratio of ex- GhnSas literacy level of about S perent ports to GDP and imports to GDP) have (funcdonal iteracy is estimated to be only dsen in recent yea, for a small country 3S40 percet). Ghana is so behind sev- dwese ratios could increase substantially. eral African countries on this score. Ghana Gha's export ratio of lS percent of GDP needs to focus the bulk of its public re. remains small. The export ratio is low be- sources in education toward this objective causeGhana'sexportsoutsideofcocoaand and rdy more on private resources to fi- mineralsremainsmafl.WhatcanGh}anado nance its growing secondarq and teriy topushexportrowthmoreforcedlly?One. educadon program. kt must also look into itcanconsdertheoptionofanappropriae less eark ive forms of terta education. exchange rate pol"i to prwvide non- Similar choices need to be addressed in cimmang export incentives and focus on the are of health. By compasn with rap- provding govenment suppott in finance idly groing developing countries, identify- and inucture to expoing firms. Two, ing Ghanas long-term health and nutrition labor costs are an importnt f actor in deter- goals appears simple. But budgety and mining the oof Ghanas ex- manpower capacity constraints wi force ports. Thus, wage bargan should be oices. First, more emphsis is neededon linkedmuchmorecarefullytolaborproduc- imaryhealth and preventative cae rather tivity. Three, Ghana needs a better devd than hospital and curative care. Second, oped system for duty dawbak, export fi- resources tend to be skewed toward urban nanceandqualitycontrolm m0ou, areas. The unequivocal recommendation of changes in rules and regulations are needed patstudieshasbeenfortheGovernm tto to facilitate entry of foreign buying compa- maintain its commitment to improve, and niesintothemaket Five,thereisaneedfor more equitablydeliv, pzimaryhealthcam better expotna- In addition, other key areas deserve discus- nications, warehousing, refigeration, etc. ion: the development of a national drug The need to promote exports is policy to stengthen the capacity for drug uncontesWe Whatdebataehowever, tegu1aion and enforcement, and the craft- is the role of foreig partners, including ing of a consstent natidonal strategy to ad Ghanians abroad, in the future Ghenaian dress malnutrition problems economy. In the past ths question has not been discussedon economic consderations Opemm. The second clear atd obvious alone But it is Impotnt that two issues difference has been in the degree of out- should be brought out. Fi officaldevel- wardorientadon.Ghananeedsamuchmore opment assistance may come down fiom aggrve export drive focusing especially about 8 percent of GDP today, which is onagricuture,agro processedproductsand relv hi by intetionl tdards. light manufacturng industries. Ghana in- Commercial borwing on a lage scale is troduced fairy sweeping trade libezilia- not a viable orwise opdon for Ghana. For tion early on, and Ghana's inport regime eign direct investment can play an inpor- remains relatively liberal. Some would ar tant role i filing this gap Second, foreign guethattheimporliberalizationproceeded partners can play a key role in technolog too fast and has led to swvere adjusmnt transfer and in Ghana's export drive as was prblm for the indu sector. Many of the case in mot East Aian economies and these industries were not very compeiive in parts of Latin edca. Parteship with EXECUTrVSUAW Is  foeln businesses ne greater emphasis. d mmu as wel as in min. Even Chins-an avwedly socilt cao ing and manufctin by encouraging t-Lw lows lOOperettforeNWequity ater patcpaton of the pnvate sector incompmes and bas ac massive for- troughesg joint ventures nd msnage- eign nvemt. mentcontcts. PubLic sector discpline and pnivate m- Publc Se.*ov D1che nd PW n vestme promotn go beyond exend- vwg*g A tid and vey stiking dier- ture allocation and fiscal ues. Lack of ence between Ghana and the East An clarity in the limits to public sector acdvity success stories is in the intect beween ;parskepticismin the minds of potential the pbic and pvate sectr. Good oven- Inveso This sense of uncertantyexstsin ment does not necessarily mean a smal Ghana today, and remains as a major 1m- govement, but one which has a dearly pediment to prvate sector confidence and deflnedwleandmostimp ntlyaptoactiv hwesmet response. Part of it is due to the complementary relationship with the pui- continuance ofacobwebofold controls and vatesector. InEastAsiagovernmentspend. vegulationswhichremaitnonthebooks. Even ingwasnotnecessailysmall,butwasgred tough the wultio ame not usually en- to promoting the pvate sector. Te em- forced, investmrs ae apprehensive. Part of phasis on the rde of govenment in mot the uncerainty ar es from lack of tanspr- counttesinEastAsihashoscluredafunda, encyin the enforcementoflaws and regula mental fact in East Asia the public sector tions.Andpartofitatisesfrmthecontinu- has been a net saver since the 1960s, rary ance of govnment ownership in a wide cowding out the pivate sector. East Asian ramge of production activities despite its governments have been fiscalypnruent. In intended objective to leave these areas to Ghana's case, fiscd polihcy as improve the priate sector. Transparency, due pro- considerably, butthere is scope to do mo cess, speedy divestiture which cuts dtugh Thistsudypointstowaystolowerthesizeof the red-tape suonding asset valuadon, the ova pubic sector dficitinGhnamq labor lws and the requirents of indig- reducing transfer to SOEs, reducing enous ownersip are necessary to rebuild unfiud liabilities such as end-ofsenvice conden benefits, cutting uneconomic subsidies on In regad to the degee and nature of wa,electricityandtransport,andip- government interventon in promoting ing revenue mobilizatin through VAT. gowth, there is considerable debate and But, lower fisc deficits need not imply importunt diferences in interpreting the a smaller vment. In fact,a stragy for international experience. One interpreta- acceleraing gowth would imply a larger tion emphazes the dege and extent of role for the Goverment. Even if the share across-the-board market-friendly reforms of govrnmtependiwreintheeconomy that aere insmental in East Asian suc- s conat its sewould increase enor- cess. These included: macroeconomic sta- mously as the economy grows raply. The bility, fiscal prudence, competitiveness Govenment can contdibute more for the through apppiat xchnge rate and la- economy with the some resurces by im- bormadcetpolicies,andappropriateevpen- pving its financial magement, peeding diures in socil and physical expenditures. upimlementat onofdevdelopmtpnrjects, Much of the dthust of the ERP has been rooienting its expenditure pattern and by along these lines and should obviously con- rising the quaity of its service. There is a tinue. A second intetpretation argues that case for lar r govment involvent in, governments wet much further and tar- amon gothertings, pmry education and acted either pecific sector and in the case h,trunsportinsrutue, andresearch of Koa certin business houses for pecial and extension, as well as operatio and ance, especallyiftheseweregearedto mdntenance. At the same time, the Gov- eorts. These special intives included emientcouldleverageitsoutlaysinenewy privileged access to credit and foreign ex- E UItE mnsutMMM  change as wel as tax incentives It is com- be addressed. At the same time, however, mon today to acknowledge that East Asian informal labor markets, espeily in utban governmentsinteened,butthat theywere areas, are often highl inefficient, were more efficient at it than othier Should underemployment, and herce low mcome, Ghana go in for this type of 'state-spon- is the le ratherthan the exception. Dimin- soe capitalism in the future is not an easy iing the distortions and rgidities In factor question to *aswer. and productmarkets mustbe understood as If Ghana does follow this path a few themostefficientmeansforincrasingthe simple rules would help. First help only the poor's productive assets and raising the re- export industries Second, help only those turn on these assets throu changes in industies which already exist in the pivate telative pnices. The key public polt7 prob. sector-fledging companies which are try- lem in this regard is therefore hoy., j assist ing to break into the export market-avoid poorandvulnerahlegroupswithoutdistot- supportingprojects wherethereisnoappar- ing economic mechanisms, since any seem- ent private sector interest. Third, help inglyupro.poorfdistortionscouldhurtboth subsectors in general, but not particular the chances for sustained economic growth firms toavoidthe dangerof thepotential for and, ultimately, the poor themselves. crony capitlm" An informal body such Second,abroad-basedpatternofpublic as tde Private Sector Advisory Group expenditure in badc education and heal"h, (PSAG), which has provided sensible op- as noted above, and other sodal and eco- tions on deregulation, could continue to nomic infrastructure has also been an im- povide a useful forum for discussion on porant feature of countries thatave trans. these issues as well, and be the basis of a lated high growth into effective poverty re- deveoping business-government partner- duction. Ghana's current pattem of public ship in fostering growth. expenditure reveals considerable bias to ward urban areas, and against primary edu- Other Relevant Lessons cation and health care. But even if public fomIntatinal Experience and development eenditures were dis- uibutedmoreequitablygeogphclly,care Iummd Oppwrnte for the Poor. If the mustbetakentoensuretatsuchadditional aceleratedgrowthenvisionedinthisreport resources are not distributed so as to en- is distbuted proportonately, or better, to trench existing relations of inequality, al- the poor, then a sustained and significant lowingpowerfullocalgrpoitogainprefer- reducton in poverty can be achieved by entisl access to resources and services. 2007. What is needed to ensure that the poor participate in the growth process? In Eviwmmexd ComideraiS. The in- the first instance, iternational expetience ternational experience also shows that pur- suggests that wel functioning factor mar- suing indiscriminate grt policies cn kets, partcularly labor markets, are crucial cause significant environmental damage. In in alowing income increases at the growth hindsight, many of the current high-grwth poles to spread throughout the economy. counties may wish to have gen more at- But such factor market mobility is not auto- tention to the management of the growth matcaly pro-poor and care mustbe taken process and its enrnmeiicis. to understand the unique characterisics of For example, subsidies for the use of fossil Ghanaian society which can either encour- fuels, chemicals, irrgation water and log- age or inpede the poor from benefiuting ging may have been curtailed. Tle rights to from access to these markets. For example, own and manage land and natural resources the evidence from Ghana indicates that may have been clarified. Provision of clean whie rural and urban informal labor. waterandsanitationmayhavebeenacceler- kets work well and respond to economic ated. Andyetitwouldbeincorrecttoinfer stimuli, the urban formal sectoris character- that grwth or accelerated growth is neces- izedbyrigidifiesanddistortionr ciatneedto sady achieved at the expense of envion- EXECUTIVESUMMARY  mentalintegrity.Prperlymanged,growth andneeds. eyvwouldalsobemoremrpon- can poceed without sactificing environ- sivetolocalconsituenciesifgivenadequate mental qualty. Furthermore, the resoures r bilites and resources. With the ex- generatedbygrowthnsupporttheinvest- ception of a few major cities, however, the ments in human And physi calpital neces- process of devolution wM have to be gadu- smyfor improvingthe envrome t. guyphadintoa owforabuild-upoflocal oranztions. APl SccMr MAnage. Ghana has Ghana is currently facing difficuldes benefitted from strong and able economic clearingthe backlogof rehiitation due to maagemt during a difct penod of many years of mauntenance negect. The adjustmentsince 1983. Continultyandprag- current strtegy which placsa high ptiority matism bave contributed immeasurably to onrehabilitatonandmaintenancewvthsome this sucs. Ihis strong centralized man- extensions, based on e tmatd high eco- aement was a major hallmark of the suc- nomic tates of return, is correct and should cesfu East Asian economnies where a small be continued. For the near future the ability group of economic managers had a rela- to produce and ansport agricultural prod- dvely free-hand in economic management. ucts and minerals wil remain criticaL The This was coupled with an insutution vithin accelaatedgwthsaueycanbeenhaced the Govemnt entustedwith the task of by giving a higher priority to public invest- long-term thincing and policy formulato ments in the reladvely underdeveloped ar- Ghanhasablepoiqmakers,butlackssuch eas vith high growth potential, such as the an int d body akin to Tawan's Westernregion,butwithdueconsideration Council for Economic Plnnig and Devel- for enronmental concems. A greater role opment or Korea's Economic Planning of local audtorities in project design, selec- Boatd (F.PB). It ou also benefit from tion and maintenance is desible as pan of independent policy and research institutes an overl devolution of responsibilities. suhastheThailandDevelopmentResearch Major changes in procedures for contract- lnstitute (IDRI) and the Korea Develop ing, procurement and planning are also ment nstitute (IDI), which provide vety needed. Tle rle of the public sector in essentialinputsintopublicdebateonpohcy many infrastructrelated activties also needs re-eaminon. As far as basic infra- While there is a case for geater central- sucre is concerned, the issue is not own- iion in stategic planning and macroeco- erhip but management and execution. The nomi policy, there is a clear need for a Govment can own the ports-both sea greater devolution of responsibilities for and ai-the railway stok, and the road projects nd progmsin severa areas from network, but should consitder transferring the central to subational authoriis, as is their operations and management to the enviagd in Ghana's curent policies De- private sector. Innovadve finance and leas- vodesd on o tti implydtatthe ing arrangements are being designed else- local authodties wil hbve to pwve the where toimproveeffectivedeliveryofinfra- seies dtemse , but to ensure that ap- structure services whie ensunng basic ser- propdate sevic are proided, perhaps vices are provided to the needy and to throug mangement and operational con- remote egions Powerandtelecounica- tracts Distict assemblies, city councils and tions are areas where private participation is community oqanizations have ber ac beingencouagedtheworldoverandGhana cess to information about local preference should draw lessons from this trend. iX SUUMR  CHAPIER 1 Introduction The arithmetic of the grwth rates is fairly beensowntobesobytheEastAsian NIs. straightforwatd. At current rates of growth Thalandhadapercapitaincomelevelabout of per capita income (about 2 percent per 50 percent of Ghana's in 1960, yn by 1990 anmum), Ghana would reqvire about 20 its income level was 3 times dtht of Ghana years for per capita income to grow from its (Figure 1.1). A comparson of Ghanas ey present level of US$400 to US$600. This indicators with that ofThaandand Malay- would just about qualify Ghana into the siashowswhytheseeconomiesdidsomuch stau of lower middle income countnies. A better tham Ghana. Theydearlystatedwith 2 percent higher growi rate would push relative advantagms-better infrsrt Ghana into the lower middle income cat^ and a more educated population. But sin egorywellbeforetheendofthecenturyand then they bave built on these advntages would also, if maintained, place Ghana into wheress Ghana lagged beind (Figue 1.2). the upper middle income category by the Faster growth wil bring with it finda. year 2015. It is conceivable that growth mental changes in the structume of the creates its own momentum and Ghana can economyandinitsinstitutions.lhedsareof acieve significantly higher growth rates. agmcuturewilldedminedevy,andmore With a 6 percert gowth in per capita in- and more of the labor force vitl be em- come Ghana would reach the status of an ployed in the urban ateas The nature of upper middle income country by the year political representation will change and the 2007.1 demandsandpromisesofsocietywillchange Accelerated growt goes hand-in-hand There will be both macroeconomic and in. with poverty eradication. At the current stitutional transformations. rates of economic grwth (t percent) and population increase (about 3 petcent) it is Macroeconomic Changes estimated that the average poor person would not cross over the poverty line for As a starting point, Ghana's production is another half a century. By contrast, if the dominated by a slow-growing agdctural paceofeconomicgrowthcouldberaisedto sector (see Tble 1.1) and the dynamic 8 percent a year, this cross-over time would be teduced to bout 23 years. If popuation FIGURE 1.1 growthcouldbereducedto2percentayear Per capita GDP: Ghana and Thaland while GDP growth remained at 8 percent, 1m61dohtrs the time for the averagepoorperson tocross 400 the poverty line would be less than two decades. Such a strawy needs careful consider- 200 ation because of the potential of macro- instility and other isks assoiated with it. But if any low-income African country is on 0 1961 1970 1980 1990 that path, Ghana surely is among them. A souie: FS. rapid growth spurt is achievale and has INIRODUCIION  _.M . agriculture and the rest of the economy. Itis Dvopimt dimonds for Gh , lhalland and Malaysia unlikely, however, to maintain the growth of I4unan resources industry and services without raising g- man %. oute1989) cultural growth. Already, there are indica- i <100 tions that the manufacturing sectorhasbeen slowing down since 1988. Continued slug. gish performance of agriculture would Emit the potential for accelerated growth. Enhandngtheperformanceofindividual GlobW 1 10;8 s720 20 ~ 4 6 10 Infrastructure subsectors dearly would improve the over- inu