In Search of the Holy Grail

ICT not Agriculture will lead to accelerated Growth in Ghana

The World Bank country director for Ghana Matt Karlson is quoted in the Ghanaian press (Daily Graphic 30th December 2005) as saying ?Ghana has no reason to complain about difficulties in managing its economy, because it has all the resources for accelerated development at its disposal?. After all, Ghana is a beneficiary of HIPC, debt relief and a tripling of donor aid he said. He goes on to add that for Ghana to achieve accelerated development there is the need to harness Ghana?s natural resources particularly agriculture, services and mining. He identifies vegetables and pineapple as the major exports that can be used to spur growth.

His words bring back a sense of deja vu. In 1993 the Bank in a strategic document: ?Ghana 2000 and Beyond: Setting the Stage for Accelerated growth and Poverty Reduction? said pretty much the same thing. It predicted that Ghana would enter the middle-income country status with a per capita income of US$611 in 2003. This it said will only happen if Ghana implemented an accelerated growth strategy using its ?comparative advantage in horticulture and (potentially) in fruit and vegetable processing industries? nontraditional exports (coffee, sheanuts, cotton)? to accelerate its growth. Additionally Ghana was to focus on labour intensive manufacturing activities in the agro processing sector through assembly and light manufacturing activities. As we all know most of these policies have been implemented and 2003 passed with Ghana still in the low-income bracket of countries. Today 78.5 percent of the population lives on less than $2 dollars a day, 45.9 percent of adult are illiterate and 25 percent of children below five are under weight for age.

In the face of such realities, the Fund and the Bank keep growing back to its fixation with an agriculture led export strategy as the engine of growth in the Ghanaian economy. History and the current global trading system makes such a strategy ill advised and ill suited for any form of accelerated growth in Ghana. World trade today is dominated by high technology and manufactured goods; manufactured products are fast becoming a major component of international trade, growing nearly three times faster than primary products. At the same time high technology products are the fastest growing exports.

It will be interesting if the Bank can show one single country in the world where any aggressive agricultural exports drive has lead to a massive increase in growth and for that matter reduction in poverty. Anecdotal evidence may obviously exist but there is no systematic empirical evidence to show that such a strategy has worked. On the contrary there is significant evidence to show that, countries which has achieved significant levels of growth in the last few decades, did so through a diversification of their agricultural base and a massive drive towards high technology manufacturing exports. The evidence from both Asia and parts of Latin America is there for all to see. Take Taiwan (China) for example, in a space of less then twenty five years this small island country has moved from being a primary based economy to the third largest producer of IT hardware, following only the United States and Japan. To be sure, Taiwan (China) was still a very poor country when it embarked upon its industralisation drive. In 1962 its GNP per capita was at par with Zaire and Congo at US$170. In human development for example in a space of 35 years it increased its graduate turnover of 10,000 in 1961 to 200, 000 graduates in 1996, of which 40 percent were in the area of engineering. Ghana today produces only 10,000 graduates a year. In India software exports alone accounts for 10 percent of total exports bringing in some $3.6 billion in 1998. In Thailand the share of manufactured exports (mostly IT ) as a percentage of total exports increased from 5 percent in 1970 to 74 percent in 2001.

It seems pretty clear that there is a direct correlation between high technology manufacturing exports and massive increases in growth. The importance of economic history is the learning that it brings; industralisation is the best route towards accelerated growth.

So it is clear that Ghana must industralise and trade her way out of poverty. The Banks strategy of aid and primary goods exports are clearly ill advised and unsustainable. After all, what has the results of massive injection in donor aid coupled with quite a favorable increase in the world price for most of Ghana?s exports brought? GDP growth rate has been at 5.8 percent in the last two years and a projection of 6 percent has been made for next year. A cursory look at the structure of the Ghanaian economy explains the slow growth rate of the economy. The Ghanaian economy, has not changed much since independence, agriculture still contributes 40 percent of GDP and employs 60 percent of the working population. In 2004 it contributed 46.7 per cent share of total GDP with cocoa alone accounting for 17.9 percent of GDP growth in that year. So whilst world trade has been changing significantly over the last few decades Ghana?s economy is still at its 1957 level.

So when the economists say Ghana should be growing faster than the current 5.8 percent growth rate, they should also be looking at how to diversify the agriculture base of the economy. Diversification can be a complex and daunting task but Ghana has no choice. The growth of the multi trillion dollar Information and Knowledge Economy (IKE) is one area no country can lose sight of. Ghana must find its niche market in this global economy and develop its human potential to take advantage of the opportunities it presents. For sure, Ghana has made a good start in the IKE. We have an ICT4AD policy document, which clearly articulates our vision for an Information society in Ghana. In the 2005 e-government readiness report Ghana ranked 133 out of 179 countries in the world. Ghana has attracted quite a number of Business Processing Outsourcing (BPOs) firms into the country and the telecommunications sector is growing from strength to strength. What is needed in Ghana now is therefore not backtracking into agriculture but to leverage the current gains and the international good will of the country to first grow a strong domestic ICT sector whilst at the same time attracting the necessary FDI into the ICT sector.

To be sure, agriculture will continue to be an important part of the Ghanaian economy for a considerable amount of time. However our focus on agriculture should be more about food security than about using agriculture as a means of accelerating growth in Ghana.