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Autonomy, Partnership and Beyond IOB Study | No IOB Study | n0. 394 IOB Study Autonomy, partnership and beyond A counterfactual analysis of policy coherence for Ghana IOB Study | no. 394 | Autonomy, partnership and beyond | IOB Study | no. 394 | Autonomy, partnership and beyond | IOB Study | no. 394 | Autonomy, partnership and beyond | IOB Study | no. 394 | Autonomy, partnership and beyond | IOB Study | no. 394 | Autonomy, partnership and beyond | IOB Study | no. 394 | Autonomy, partnership and beyond | IOB Study | n | IOB Study | no. 394 | Autonomy, partnership and beyond | IOB Study | n Autonomy, partnership and beyond Autonomy, IOB Study Autonomy, partnership and beyond A counterfactual analysis of policy coherence for Ghana May 2014 Preface Preface For several decades, donors have been supporting the economic and social development of low-income countries and emerging economies with various activities and interventions in different sectors, while using a large number of instruments. However, the policies of these same donors in areas such as trade, finance, agriculture, migration and energy are likely to have an important impact on recipient countries. This raises the question of policy coherence. Development programmes will achieve better results if donors’ trade policies are aligned with the objectives of these programmes. Coherent policies involve opening up markets for the exports of goods and services from developing countries, for example, while at the same time helping these countries to boost their export supply capacity. Trade- distorting subsidies and tariffs, on the other hand, may undermine economic development in recipient countries. In the 1990s growing awareness of the cost of incoherent policies and the benefits of more coherent policies led, international development organisations in EU and OECD countries to introduce the concept of Policy Coherence for Development (PCD). The OECD defines PCD as ‘working to ensure that the objectives and results of a government’s development policies are not undermined by other policies of that government which impact on | 3 | developing countries, and that these other policies support development objectives, where feasible’. Both the EU and OECD have developed guidelines and have started to examine the overall coherence of its members’ policies in agriculture, trade, investment and migration in terms of these policies’ development impact in developing countries. Policy Coherence for Development has also become an important topic in the Dutch policy debate. In the policy note entitled ‘A World to Gain: A New Agenda for Aid, Trade and Investment’ (TK 2012-2013, 33 625, no. 1), the Dutch Minister for Foreign Trade and Development Cooperation devoted a great deal of attention to coherence issues, seeking to synergise trade and development policy. The document sets out three key ambitions: to eradicate extreme poverty within a generation; to promote sustainable and inclusive growth across the globe; and to help Dutch companies doing business successfully abroad. In a number of countries, including Ghana, the Netherlands is transitioning from an aid to a trade relationship. The minister also acknowledges that there are risks. While the Netherlands aims to improve access to markets in lower and middle-income countries, these countries may not be able to cope with international competition. There are also other important issues, such as tariffs and non-tariff restrictions, especially for agricultural products, on exports to the Netherlands and Europe; suspicious fiscal practices to avoid taxes; and the sustainable use of national resources. In 2013 the minister presented the results of an assessment of PCD policies to parliament (TK 2013-2014, 33 625, no. 41). While PCD is not a new area of focus, it is apparently still difficult to assess the coherency of policies in practice. Several policy studies on PCD focus mainly on the supply side, e.g. the Autonomy, partnership and beyond procedures for dovetailing foreign aid and other policies within a consistent framework (or put differently, a consistency between the various efforts). Far less attention has been devoted to the likely effects of different donor policies on the realisation of development goals in the recipient country, however. Within this context, IOB has invited the Centre for World Food Studies at VU University Amsterdam (SOW-VU) and a team of researchers from the University of Ghana to develop a methodology for assessing coherence options for Dutch and European aid. Ghana was selected as a pilot. Ghana and the Netherlands have maintained trade relations for more than 300 years. Moreover, Ghana has been and still is one of the major partner countries for Dutch Development Cooperation. These aid relations are changing very fast, as the country shows favourable growth rates and has become a lower middle-income country. SOW-VU researchers Dr Lia van Wesenbeeck, Wim van Veen and Bart van den Boom and Ghanaian researchers Prof. Amoah Baah-Nuakoh, Dr Kwadwo Tutu and Prof. Daniel Sarpong developed an approach for analysing scenario options for policy coherence at county level. In close collaboration with IOB evaluator Antonie de Kemp, the team constructed several counterfactual scenarios, combining quantitative data with qualitative insights within a modelling approach. This enabled them to analyse the options for of | 4 | different donor policies (such as on trade, tax policies and migration) and reactions by the Government of Ghana in a single framework. In December 2013, the team presented and discussed the draft findings in a seminar in Accra. The seminar was hosted by the University of Ghana and the audience consisted of Ghanaian policy makers, members of parliament, representatives of civil society and development partners. A special word of thanks goes to the chair and the panel of speakers. Vice-chancellor Prof. Ernest Aryeetey chaired the meeting. Prof. Kwadwo Asenso-Okyere, Prof. Augustin Fosu and Prof. Michiel Keyzer provided comments and suggestions for the finalisation of the report. In May 2014, IOB and the team were shocked to hear of the unexpected death of Prof. Asenso-Okyere on a field mission outside of Ghana. Prof. Asenso-Okyere supported this study and brought the team together. We will remember him with gratitude. Prof. dr. Ruerd Ruben Director Policy and Operations Evaluation Department (IOB) Ministry of Foreign Affairs, the Netherlands Table of contents Table of contents Preface 3 List of tables and figures 7 List of abbreviations 9 Summary and synthesis 12 1. Introduction 18 2. Trends in Ghana’s socio economic development, 2006-2011 26 2.1 Introduction 27 2.2 Population 27 2.3 Economy 27 2.4 External sector 30 2.5 Poverty and MDG indicators 32 2.6 Concluding remarks 35 3. Policies of development partners 36 3.1 Introduction 37 | 5 | 3.2 Official Development Assistance (ODA) 37 3.3 Trade 41 3.4 The EU’s Common Agricultural Policy (CAP) 45 3.5 FDI and bilateral tax treaties 47 3.6 Migration 49 3.7 Environmental concerns: Deforestation in Ghana 51 4. Ghana’s policies and external influences 54 4.1 Introduction 55 4.2 Historical context 55 4.3 The role of foreign aid 57 4.4 Role of migration 60 4.5 Policy developments in the agricultural sector, 2006-2011 62 4.6 Trade policies 68 4.7 Emerging economies: Donors, investors and trading partners 70 4.8 Internal developments: The discovery of oil and increased income from exports 73 4.9 Challenges, external influence and graduation 74 5. Applied welfare model 76 5.1 Introduction 77 5.2 Characteristics and properties of the Social Welfare Model 78 5.3 Social Accounting Matrix for Ghana 2006 79 5.4 Factual: Simulation of the economy 2006-2011 83 Autonomy, partnership and beyond 6. Counterfactual scenarios 88 6.1 Introduction 89 6.2 Concept and implementation 89 6.3 Counterfactuals: Dutch aid 90 6.4 Counterfactuals: Economic Partnership Agreement 93 6.5 Counterfactuals: Reduced market protection in the EU 96 6.6 Counterfactuals: Bilateral tax treaty 98 6.7 Counterfactuals: Migration policies 99 6.8 Counterfactuals: Voluntary Partnership Agreement 102 6.9 Summary 103 References 106 Annexes 116 Annex I Persons interviewed 117 Annex II Technical specification of the applied welfare model 118 Evaluation and study reports of the Policy and Operations Evaluation Department (IOB) published 2009-2014 124 | 6 | List of tables and figures List of tables and figures Tables Table 2.1 Economic growth in Ghana, 2006-2011 (million cedi, 2006 purchasing prices) 27 Table 3.1 Total ODA to Ghana 2006-2012 (gross disbursements in USD million) 38 Table 3.2 Ghana: Aid for trade 2006-2012 (gross disbursements in USD million) 39 Table 3.3 Dutch bilateral aid to Ghana 2006-2013 (EUR million) 40 Table 3.4 EU and the Netherlands’ aid and trade relations with Ghana 2006-2012 (EUR million) 42 Table 3.5 FDI stock of the Netherlands in Ghana (2007-2011) (USD million) 47 Table 3.6 Applicable tax rates 48 Table 4.1 Ghana ODA envelope in USD millions (2003-2010) 59 Table 4.2 Resources provided by development partners for GPRS and GSGDA, by thematic area, 2006-2012 (USD million) 60 Table 4.3 Summary of Chinese aid to Ghana 71 Table 4.4 Annual Budget Funding Amount (ABFA), cedi million, 2011, 2012 74 Table 5.1 Overview of the 2006 SAM (cedi millions) 82 Table 5.2 Implied reaction of poverty to GDP growth, 2006-2011 85 | 7 | Autonomy, partnership and beyond Figures Figure 1.1 Schematic representation of the study 24 Figure 2.1 Composition of agricultural GDP, 2006 and 2011 (percentages) 28 Figure 2.2 Composition of industrial GDP, 2006
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