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Employment Effects of Different Development Policy Instruments: the Case of Ghana Agyapomaa Gyeke-Dako Abena D

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Employment Effects of Different Development Policy Instruments: the Case of Ghana Agyapomaa Gyeke-Dako Abena D R4D Working Paper 2015/1 Employment Effects of Different Development Policy Instruments: The Case of Ghana Agyapomaa Gyeke-Dako Abena D. Oduro Festus Ebo Turkson Priscilla Twumasi Baffour This country report presents an overview of developments in the Ghanaian economy over the last two decades with the intention to provide background information for further studies on technological upgrading and foreign direct investment on one hand and connecting local firms to the global economy on the other and consequently the link between each of these issues to employment. Specifically, the report discusses among other issues: macroeconomic trends; sectoral performance; firm landscape; infrastructural development and overview of microfinance. In addition, we examine the educational system and its relation to employment; social protection; national development policy; technological upgrading and productivity; labour market restructuring and the connection between local enterprises to the global market. This research received financial support from the Swiss Agency for Development and Cooperation and the Swiss National Science Foundation under the Swiss Programme for Research on Global Issues for Development. The project “Employment Effects of Different Development Policy Instruments” is based at the World Trade Institute of the University of Bern, Switzerland. Table of Contents Abstract ......................................................................................................................................................... 4 1. Introduction .......................................................................................................................................... 5 A. Political History and Governance ...................................................................................................... 5 B. Geography ......................................................................................................................................... 5 C. Population ......................................................................................................................................... 6 D. The Role of the State in Ghana’s Economic Development ............................................................... 6 2. Background Information to the Economy of Ghana ........................................................................... 10 A. Macroeconomic Trends .................................................................................................................. 10 B. Sectoral Performance ..................................................................................................................... 20 C. Firm Landscape ............................................................................................................................... 22 D. Infrastructure Development in Ghana ............................................................................................ 25 E. Overview of Microfinance in Ghana ............................................................................................... 30 F. Education System Reforms and Its Relation to Employment ......................................................... 32 G. Poverty, Inequality and Social Protection ....................................................................................... 34 3. National Development Strategies ....................................................................................................... 37 A. National Development Policy Frameworks ..................................................................................... 37 B. Industrial Policy ............................................................................................................................... 43 4. Technological Upgrading and Productivity ......................................................................................... 45 A. Policies aimed at Technological Upgrading .................................................................................... 45 B. Policies to Attract FDI ...................................................................................................................... 46 C. Technological Upgrading and Labour Productivity ......................................................................... 47 D. FDI Trends ....................................................................................................................................... 48 E. Diversification and Sophistication of Exports ................................................................................. 49 5. Labour Market Restructuring .............................................................................................................. 50 A. Motivation ....................................................................................................................................... 50 B. Formal Sector and Informal Sector Employment ........................................................................... 51 C. Sectoral Shares of Employment ...................................................................................................... 54 D. State policies that link education and employment ....................................................................... 55 E. Trade Unions and Collective Bargaining ......................................................................................... 55 F. Developments in Labour Market Regulation .................................................................................. 57 2 6. Connecting Local Enterprises to the Global Market ........................................................................... 58 A. External Developments Regarding Global Markets ........................................................................ 58 B. Trade Policy Regime ........................................................................................................................ 60 C. Public and Private Sector Coordination to Link Firms to Global Value Chain ................................. 64 7. Conclusion ........................................................................................................................................... 67 References: ................................................................................................................................................. 68 3 Abstract Ghana, located in western Africa along the coastline of the Gulf of Guinea with an approximate population of about 25 million and land size of approximately 239,000 square kilometres has undergone economic reforms since 1983 against the background of over a decade of economic stagnation and decline in the mid- 1970s to 1983. Since 1993 when the country was ushered into a democratic rule, Ghana has maintained a relatively stable political climate, under which good governance, the rule of law and respect to human rights have been paramount. Together with the stable political environment, the abundance of rich natural resources under economic reforms have contributed to attracting foreign investment and strong economic growth. In the last four years since Ghana commenced production of oil, income per capita has increased to US$1600 placing it among the ranks of low middle income countries, a feat which was expected to be achieved by end of 2015. In addition Ghana’s Human Development indicators such as access to education and health have also improved markedly leading to its classification by the United Nations as one of the few "medium human development" countries in sub-Saharan Africa, with a ranking of 135 in the world in the latest Human Development Index Report. This country report presents an overview of developments in the Ghanaian economy over the last two decades with the intention to provide background information for further studies on technological upgrading and foreign direct investment on one hand and connecting local firms to the global economy on the other and consequently the link between each of these issues to employment. Specifically, the report discusses among other issues: macroeconomic trends; sectoral performance; firm landscape; infrastructural development and overview of microfinance. In addition, we examine the educational system and its relation to employment; social protection; national development policy; technological upgrading and productivity; labour market restructuring and the connection between local enterprises to the global market. 4 1.Introduction A. Political History and Governance Ghana is located on the west coast of Africa, lying north of the equator. It is bordered by the Atlantic Ocean to the south, Cote d’Ivoire to the west, Togo to the east and Burkina Faso to the north. It gained independence from Britain in 1957 and became a republic in 1961. Ghana has gone through a chequered history of military and civilian rule after the ousting of its first president through a coup d’etat in 1966. The fourth republic began in 1993 after 12 years of military rule. The country has been under a democratic dispensation since then having twice successfully conducted elections that handed over governance of the country from one political party to another. Its democratic credentials were tested further when the New Patriotic Party, dissatisfied with the conduct and outcome of the 2012 presidential elections presented a petition to the Supreme Court. The calm and mature acceptance of the Supreme Court ruling against the petitioners by the country at large and the petitioners in
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