- Trade-to-GDP declines to 48% in 2019 from 53% a decade ago
Ghana’s merchandise trade competitiveness declined over the decade from 2010 to 2019, resulting in a reduction in number of exporting firms and level of participation in Global Value Chains (GVCs), a new report by the World Bank has revealed.
Over the period, Ghana’s overall trade performance has been disappointing despite improvements in the country’s trade balance, largely driven by the new hydrocarbon sector since 2010, as the contribution of trade to structural transformation remains negligible.
The total percentage of trade-to-GDP declined to 48 percent in 2019 compared with 53 percent a decade before, reflecting less integration into the global market.
The newly released Ghana Trade Competitiveness Diagnostic – Strengthening Ghana’s Trade Competitiveness in the Context of AfCFTA – highlights that export growth was driven largely by the boom in the extractive sector… oil and gold.
“The non-extractive sector exports grew by only 1.7 percent on average over the period 2010-2019. Extractive rents fuelled imports, and the report examines the possibility of leveraging trade policies to accelerate export diversification and economic transformation associated with services trade. The growth in imports however lagged behind that of exports,” the report said.
Composition and Direction of Trade indicate that concentration on the export basket increased – largely on the back of increasing dependence on the extractive sector, which represents about 70 percent of total exports, while export destinations were slightly diversified.
A more worrying indicator shows that the technological classification of the country’s exports has not significantly changed since 2010. The share of primary products in total exports rather increased from 69.2 percent to 72.4 percent.
Nonetheless, the World Bank’s latest trade analysis for the country highlights that there have been improvements in transport logistics and access to ICT infrastructure over the period.
This, it says, can be leveraged for more diversified trade and economic transformation; effectively charting a pathway to produce quality jobs.
“Ghana is well-positioned to leverage trade in services, including logistics services, foreign direct investment and trade policy to consolidate the country’s comparative advantage as a hub for business and financial services in the West Africa sub-region,” Daniel Kwabena Boakye, co-Author and Country Economist at the World Bank Office said. “However, more needs to be done to remove the obstacles to trade flow in Ghana.”
Services trade increased significantly over the period, as the extractives sector accounted for one-half of services value-added. Other service categories outside of transport and construction have shown modest growth.
“The impressive performance in services export underscores the potential for leveraging the services sector for economic transformation in Ghana, as AfCFTA offers significant opportunities for increased intra-Africa trade and deeper regional integration,” the Bank said in the report.
Global Value Chains
To enhance Ghana’s participation in GVCs, the Bank calls for strengthening and deepening integration into global value chains – especially in the manufacturing sector, as this will help boost incomes by increasing access to markets, technology and skills, and increasing the domestic value-added in exports.
Ghana’s participation in GVCs remains mostly in commodities, while its aspirational peers Kenya and South Africa have graduated from the commodity group into a limited manufacturing group of participants in GVCs.
“To improve the efficiency of trade facilitation requires strengthening Customs administration to reduce the costs facing traders and improve efficiency. Other trade facilitation improvements include removal of VAT on transit services, and removal of redundant and ineffective checkpoints,” the report said.