GEA recommends quarterly dialogue to review challenges in the economy

The Ghana Employers Association (GEA) on Tuesday called for quarterly dialogue between the private sector and the Government to review challenges and concerns that might arise out of the implementation of the 2011 Budget during the year.

A statement signed in Accra on Tuesday by Mr Terry Darko, President of GEA said, “On the whole, the national economic outlook for 2011 appears promising provided government is able to effectively implement the numerous economic policy initiatives that have been outlined in the budget. Most of the proposed policy measures would affect the private sector”.

It was the Association’s contribution to the debate on the 2011 Budget presented to Parliament by Dr Kwabena Duffuor, Minister of Finance and Economic Planning in Nov ember, this year.

The second budget statement of the NDC Government was on the theme: “Stimulating Growth for Development and Job Creation.”

The statement said the 2011 Budget gave an indication that the Government intended to engage major stakeholders (banks and non-bank financial institutions, borrowers and investors) on ways of improving the interest rate transmission mechanism and getting the existing tight credit conditions relaxed.

The current prevailing interest rates coupled with tight credit conditions in the market make it difficult for businesses especially MSME’s to retool and expand their production to generate more employment.

“The government objective of stimulating growth for development and job creation can only materialise if businesses have access to competitive cost of capital,” it said.

The statement said the GEA appreciated government’s commitment to engage stakeholders to discuss and find ways of improving the interest rate transmission mechanisms.

However, it said although the engagement of stakeholders was in the right direction, it was also important to establish a Task-Force made up of representatives from the Government, Monetary Policy Committee, Banking and Financial institutions together with other representatives from the business community.

“This Task-Force could look at the current situation and make recommendations on what can be done to drive down interest rates to help business, industry and especially SMEs to access credit,” the statement said.

It said the private sector as the engine of growth, being touted by policymakers, needed affordable fuel to operate effectively.

“Indeed, it is generally difficult for the private sector to grow and create the necessary productive jobs within the current high lending rate regime,” the statement added.

The Association said the Government’s intention to raise revenue through taxes was a laudable idea; however, it was important that such initiatives did not render consumers and businesses worse off.

“The budget proposal to scrap tax holiday granted real estate and, hotel and hospitality sector need to be given a second look. Abolishing the tax holiday would compound the already existing problems faced by the real estate companies, especially, the infant industries,” it said.

On job creation, the Association said even though, it appeared to be key policy consideration in the budget, policy measures to achieving this important macroeconomic policy objective was quite limited.

It said although, the budget indicated government’s commitment to creating conducive environment for private sector to expand and create jobs, there were no direct intervention in that direction.

“The government’s commitment to making improvement in the areas of starting business, dealing with licensing, registering property, payment of taxes, contract enforcement, and access to credit is welcome but in the environment of high cost of credit, businesses cannot make significant headway in terms of expansion and job creation,” it added.

The statement said Ghana’s competitiveness at both national and international levels depended heavily on the quality of supply of electricity which continued to deteriorate.

“The recent Global Competitiveness Report 2010-11 ranked Ghana 109 out of 139 countries surveyed in terms of quality of electricity supply. This indicates that a relentless improvement of energy policies is needed if long-term growth is to be sustained,” it said.

The statement said the 2011 Budget was silent on some policy initiatives intended to augment power supply in the country which were proposed in 2010 Budget, such as completion of the TT2PP and 125MW Osagyefo Power Barge and 23OMW Kp one thermal 1 Power.

“These initiatives are very significant to forestall any future occurrence of power outage in the country. The government’s proposal in the budget to review electricity tariffs quarterly to ensure continued cost recovery is very crucial,” the statement added.

It said since there was an existing tariff adjustment mechanism which had been suspended for the past three years, it was good that government re-instated the mechanism to ensure regular increments on gradual basis instead of leaving a long gap and suddenly imposing high utility rates on consumers.

The GEA said the proposed removal of the bonded warehousing system, if implemented could be catastrophic, because the bonded warehousing scheme was invaluable for food security.

“This is a time of escalating food prices on the world market and projections are that this would continue in to the foreseeable future. To stabilise prices locally, there is the need for buffer stocks which in turn are practically impossible without the bonded warehouse system.

“Indeed, during the 2007/2008 world food crises, stocks held by members in bonded warehouse were instrumental in stabilising local food prices. By the system, importers of food products are able to even out to solve some of the cyclical and periodic fluctuations in world market prices, thus affording stable year round prices for the Ghanaian consumer. Through the system government could influence the release of stocks and availability in the market, and assured of backup to local food stocks,” the statement said.

The Association urged government to maintain the bonded warehouse system but have shorter limits on the length of time in which goods were stored, between six to 12 months.

Source:GNA