Ghana’s attractiveness to foreign direct investment declines in 2015

InvestmentGhana’s conduciveness and attractiveness to foreign direct investment has slumped in 2015 after a good performance last year, according to the latest Global Opportunity Index Rankings.

Ghana scored 5.16 over 10 and is ranked 77th in 2015 out of 136 countries, compared with a composite score of 7.10 and a rank of 18 last year.

Ghana’s latest score and rank, mark a sharp drop from a good performance last year and a return to the average and poor performances in the rankings, that characterized the period from 2010 to 2013.

The Global Opportunity Index is a ranking by California-based economic think tank Milken Institute, which assesses the business environments of countries and their attractiveness to investors.

The latest ranking, released in June 2015, ranks 136 countries by aggregating the performance of each on 61 variables grouped into four broad categories: economic fundamentals, ease of doing business, quality of regulation, and rule of law.

The category economic fundamentals assesses a country’s macroeconomic performance and the macroeconomic environment’s openness and conduciveness to trade and foreign direct investment.

Ease of doing business measures the implicit and explicit costs of doing business such as the cost of starting, tax, crime, terrorism and so on.

Quality of regulation assesses the effectiveness of policy and enforcement: “the extent to which a country’s laws and regulations prevent the free flow of trade and investment.”

Rule of law “reflects the extent to which a country’s legal system protects investors and property rights to support and enhance business investment.”

Ghana performed poorly in the following categories – economic fundamentals and ease of doing business.

From 2010 to 2013, Ghana’s scores for Economic Fundamentals were very low; always under 3.5 (over 10) and placing Ghana in 3-digit ranks: 107th, 104th, 116th and 110th.

But Ghana did well in economic fundamentals in 2014: a score of 6.23 over 10, put the country at the 36th position among the sampled countries, for macroeconomic environment and conduciveness to foreign investment.

However, with a score of 2.82 over 10 in 2015, the rating of Ghana’s economic fundamentals by Milken Institute has gone back to the familiar 3-digit ranks – 115th.

The ease of doing business has also shown a fall from 7.78 over 10, to 5.52, bringing Ghana’s rank in the category from 12th to 81st.

Singapore tops the list in the 2015 Global Opportunity Index ranking, followed by Hong Kong, Finland, New Zealand and Sweden.

Malaysia, a country that is often compared with Ghana in development because it also achieved independence in 1957, lies 10th on the list and is the only developing country in the top ten.

Six sub-Saharan countries are in the top half of the list: Mauritius, South Africa, Botswana, Rwanda, Namibia, and Zambia.

By Emmanuel Odonkor

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