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Ghana has opportunities to boost global investment competitiveness – World Bank

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Ghana is one of the more open economies to foreign equity ownership in the Sub-Saharan Africa Region, “Investing Across Borders 2010,” a new report by the World Bank says.

The report said all of Ghana’s major sectors covered by the “Investing Across Sectors” indicators, with the exception of the primary sectors, are fully open to foreign capital participation.

The equity restrictions in the primary sectors (mining and oil and gas) are stipulated in the Minerals and Mining Act (2006, Act 703), and the Petroleum (Exploration and Production) Law (1994, Act 84).

Both Acts mandate a compulsory local participation in investment projects; the Government automatically acquires a minimum equity share of 10% in ventures at no cost.

In addition to these overt legal restrictions on foreign equity ownership, the electricity transmission and distribution sectors are dominated by publicly owned companies, representing a further potential obstacle to foreign investors.

Furthermore, Ghanaian laws specify a minimum investment amount for foreign companies – it is currently set at $50,000 or the equivalent in goods. Portfolio investments and businesses set up solely for export are exempted from this regulation.

The Report is “the first World Bank Group report to offer objective data on laws and regulations affecting foreign direct investment (FDI) that can be compared across 87 countries.  Clear and effective laws and regulations are vital for ensuring best results for host economies, their citizens, and investors”.

It said “overly restrictive and obsolete laws ware an impediment to FDI and their poor implementation creates additional costs to investment,” adding that FDI was critical for countries’ development, especially in times of economic crisis.

Launching the Report in Vienna, Austria, Janamitra Devan, Vice President of Financial and Private Sector Development, World Bank Group, said: “FDI brings new and more committed capital; introduces new technologies and management styles; helps to create jobs and stimulates competition to bring down local prices and improve people’s access to goods and services.

“In Angola and Haiti excessive red tape means it can take half a year to establish a subsidiary of a foreign company.  In Canada, Georgia, and Rwanda, this can be done in less than a week.  Leasing industrial land in Nicaragua and Sierra Leone typically requires half a year as opposed to less than two weeks in Armenia, Republic of Korea, and Sudan.  In Pakistan, Philippines, and Sri Lanka it can take up to two years to enforce an arbitration award.”

The Report finds that countries that do well on the “Investing Across Borders” indicators also tend to attract more FDI relative to the size of their economies and population.  Conversely, countries that score poorly tend to have higher incidence of corruption, higher levels of political risk, and weaker governance structures.

“Investing Across Borders 2010” aims to help countries to develop more competitive business environments by identifying good practices in investment policy design and implementation.  It provides indicators examining sector-specific restrictions on foreign equity ownership, the process of starting a foreign business, access to industrial land, and commercial arbitration regimes in 87 countries.”

The Report does not measure all aspects of the business environment that matter to investors. For example, it does not measure security, macroeconomic stability, market size and potential, corruption, skill level, or the quality of infrastructure. However, the indicators provide a starting point for governments wanting to improve their global investment competitiveness.

Source: GNA

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