IMF, World Bank Support Chinese Loan

The International Monetary Fund (IMF) and the World Bank have indicated their support for Ghana’s efforts at securing a $3 billion loan from China, the Minister for Finance and Economic Planning, Dr Kwabena Duffuor, has said.

However, he said, the Fund would meet to take a firm decision in December this year, after a country economic review exercise which would determine the impact of the loan on the economy and whether it breached any agreements following a presentation to a joint World Bank /IMF Tam in Washington on September 28, 2011 by the government on what the loan would be used for and its viability.

The IMF, on the other hand, will send a team to Ghana on October 12, 2011 to conduct the fifth review of the economy under the Extended Credit Facility, which will cover areas such as recent economic policy performance and challenges going forward.

The IMF supports Ghana mainly to fix its macroeconomic indicators to achieve the stability needed for business planning and growth, while the World Bank broadly supports projects through the national budget and sector specific interventions to achieve growth and development while reducing poverty.

Dr Duffuor, who led the team that made a case for the $3 billion loan in Washington, told the Daily Graphic that “the two institutions have not shot down the loan; they are rather supportive, as they believe it will have a positive impact on the economy and the quality of lives of the people.”

He explained that the fifth economic review starting from October 12, 2011 under the Credit Facility Programme, which would have terms different from the fourth, the IMF Board would meet to take a decision in December, during which a new non-concessional credit/lending limit would be set.

The current agreement, reached in May 2011 and which expires in June 2011, puts the ceiling on non-concessional loans at $800 million. The limit was set at a time when oil revenue inflows had just started trickling in. Ghana’s remarkable and unprecedented growth of 23 per cent in its Gross Domestic Product (GDP) means that an upward review of credit limit for non-concessional loans is likely.

Dr Duffuor said Ghana had already done its own assessment of the $3 billion loan from China, which will fund infrastructure projects, including a comprehensive gas infrastructure.

Parliament has already approved the Master Facility Agreement covering the $3 billion loan which will be used on a number of projects, such as gas processing facility, gas transmission pipelines and the building of railways and trunk roads

Position Economy As Hub For ECOWAS

The Delegate of the German Chamber of Commerce and Industry, Mr Patrick Martens, has urged Ghana to sustain its economic and political stability in order to grow the private sector to make it the hub for West Africa.

Mr Martens said although Ghana by itself was not a large market, many European investors preferred to adopt the country as their West Africa hub because of the economic and political stability.

Speaking on the sidelines of a cocktail organised by the German Tech Pavilion at the just ended German and European industrial fair, GEREU 2011, Mr Martens told the Daily Graphic that it was also important for managers of the economy to identify sustainable sources of infrastructural development and not necessarily those that were cheap.

Ghana has to take advantage of the stable conditions it has and work harder to sustain it. In doing so, the country should go for infrastructure solutions which are of a high quality and sustainable, and not just always the cheapest, Mr Martens said.

GEREU was organised by the Ghanaian –German Economic Association (GGEA) and the Delegation of German Industry and Commerce in Ghana (AHK) from September 29 to October 1, 2011, with companies exhibiting various industrial products in the areas of pharmaceuticals and chemicals, automobiles, information and communications technology (ICT), energy, construction, financial services among others.

The German Tech Pavilion at the fair was a dedicated stand for German companies to exhibit products and services. The pavilion had a total of six companies (Terra Trading International GmbH, Bay-Sat Engineering & Technology, Gebr. Willing, Hanwha SolarOne, Lahmeyer International GmbH and AG-Tech Ltd.) exhibiting the latest technologies in solar energy, self-sufficient housing and construction machines.

Other areas were concrete shuttering systems, construction, security engineering of buildings, pipelines and airfields as well as telematics.
Mr Marten said the idea was to encourage the German companies, which were averse to doing business in Africa, to enter the market and also have them partner with industries in Ghana to ensure efficient performance and growth.

We have companies interested in agriculture and agribusiness. We believe this sector can be a key driver of employment and exports. It is important to note that we are not here as donors but we want to do good business across the value chain, the Delegate of AHK said.

The German development bank, DEG, which offers cheaper financing, a key ingredient for investments, was also at the exhibition to express its readiness to support and promote viable private sector businesses in the country.

Mr Martens said so far the fair had been very successful in matching

China hits back

It is entirely the duty of Ghanaian authorities to regulate trade and check the illegal activities of foreigners who do business in the country, Chinese officials have said in a response to complaints of malpractices by their nationals in the local trading sector.

Among the charges, Chinese traders and businesspeople have been accused of illegal mining activities, pirating local textile-designs, and venturing into the retail sector which by law is a preserve of indigenous entrepreneurs.

Chinese employers have also often been cited for their disregard for workers’ rights, with some reported incidents of inhuman treatment of local labour in their employ.

But in a response, the Commercial Counsellor of the Department of West Asian &African Affairs at the Chinese Ministry of Commerce, Xie Yajing, stated: “It is your government’s responsibility to regulate trade. We, on our part, encourage our businesses to respect and abide by local laws and regulations.”

A lot of these companies are not state-owned enterprises but personal, private businesses, she said. While state-owned firms and other registered contractors doing business overseas are regulated by authorities in Beijing, her ministry is not fully aware of the overseas ventures of many private businesspeople, she claimed.

Though an increasingly important trade partner, China’s exports into Ghana have not always been welcomed. Local industries fret about cheap and sub-standard Chinese imports which have taken over their markets, and are gradually pushing them to the wall.

Xie Yajing defended the quality of products manufactured in China, noting that different standards apply in different export markets, which could explain why, for instance, a product that is rejected by the EU market may be permitted to enter Ghana or some other African country.

Franklin Cudjoe, an analyst with policy think-tank IMANI Ghana, agreed with the sentiments of the authorities in Beijing during an interview with the Business & Financial Times.
“I absolutely agree with them. You don’t blame foreigners for a lack of focus or proper regulation.

“If you look carefully at the mining sector, the only reason why the activities of so-called illegal miners have become significant is simply because there is a failure of regulation; and to the extent that we haven’t seriously looked at the laws regarding mining by ordinary individuals, it opens up the space to other nationals as well.

“The other crucial point on the issue of piracy is that we have not invested sufficiently in strengthening our copyright system. If the investments matched the technology that is needed, you wouldn’t have customs officials going after traders selling pirated products that consumers want to buy anyway.

“It is important for the Ghanaian authorities to have technology and software that allows them to crosscheck electronically in order to detect pirated materials at their points of entry.

“Also, the local textile industry is now a very expensive industry due to the cost of production. About 90% of ingredients in textile manufacturing are imported; therefore the combination of import and local taxes makes it difficult for local producers to meet the demand or compete with imports.”

Ms. Yajing recognised the lopsided nature of trade between China and Ghana, but said it is largely the outcome of both countries’ economic structures. Exports from Ghana comprise mainly primary resources like cocoa and minerals, while trade in the other direction is made up substantially of high-end manufactures like electronic products, machinery and ICT systems.

China intends to further boost bilateral trade and its cooperation with African countries, she said. Accordingly, it plans to assist some African countries to establish logistics centres that will serve as focal locations for the distribution of Chinese-manufactured goods to different markets in Africa.