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FDIs Crowding Out Indigenous Enterprise
 
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29-Nov-2011  
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The drive to record higher foreign direct investment (FDI) inflows, and to improve receipts from the sector, is contributing significantly to the further marginalisation of an already beleaguered indigenous private sector.

Government ministries, departments and agencies responsible for investments lack a comprehensive and scientific mechanism for tracking domestic investments, especially for start-up indigenous enterprises and their survival and growth potentials.

Data from the Ghana Investment Promotion Centre (GIPC) however indicate that, in recent years, the structure of ownership of FDIs is skewing increasingly toward wholly-owned foreign enterprises and fewer joint-ventures.

The GIPC report for Q3,2011, shows that of a total 161 new investment projects registered by the Centre, 105 or 65.22% of that were wholly-owned foreign enterprises valued at GH˘908.51million or 81.37 percent of total value of projects registered.

The remaining 56 registered projects, translating into 34.78 percent or the total and valued at GH˘3.98million or 18.63 percent of total value of registered projects, constituted joint ventures between Ghanaians and their foreign partners.

The trend has been typical of FDI flows into the country in recent years and, tellingly, observers are now complaining about it as an unhealthy development.

Some analysts have questioned whether the GIPC, in its desire to rack-up impressive FDI statistics, takes into consideration the strategic needs of the local private sector when planning and executing its activities.

“Obviously, the current trend is indicative of a weakening indigenous private sector; either foreign firms have the liberty to edge out local firms and are deliberately doing it, or local firms’ lack of capacity is discouraging foreign firms from partnering with them,” an investment analyst told B&FT
“Whichever is the cause, the effect is that indigenous enterprise is growing weaker and is being crowded out of the Ghanaian business space by foreign firms,” he said.

The president of the Association of Ghana Industries (AGI), Nana Owusu-Afari, at the 51st annual general meeting last Thursday intimated that the local private sector lacked the capacity to enter into joint ventures with foreign partners.

“Government intervention, in the form of a comprehensive local-content policy, is critical to the building of a strong indigenous private sector -- without which the country’s economy will be out of the control of Ghanaians,” Nana Owusu-Afari said.

Trade and Industry Minister, Hanna Tetteh, observed earlier at the launch of the National Industrial Week celebration on November 22 that increasingly foreign investors register with the GIPC to undertake investment projects in sectors that qualify for tax exemptions and other benefits only to actually engage in activities reserved for indigenous businesses.

She disclosed her ministry has observed that foreigners register with the GIPC as manufacturers only to end up importing end-user manufactures into the Ghanaian market.

Such activities, she noted, do not only undermine local manufacturers and traders in that line of business, but also denies the country job-creation opportunities that were envisaged in their investment plan -- based on which they were granted the licence to operate in the country.

“The GIPC’s preoccupation with recording higher FDI receipts could account for its laxity in monitoring foreign investors to ensure that they are complying with regulations with regard to their line of activities, employment of indigenous labour as stipulated by law, and whether those investments indeed materialise,” explained an analyst.

Lately, there have been complaints that GIPC’s reporting of FDIs is not helping matters since those reports lack detailed information with regard to the identity of investors and their line of business, and other useful information needed by other stakeholders in the investment community.

“I would want to be able to access useful information on foreign investors from the GIPC quarterly reports and to deal with them promptly when need be, rather than having to go to the GIPC offices every time I have a need,” said an insurance broker.
 
 
 
 
 

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