GHANA’S COMPETITIVENESS IN THE GLOBAL MARKET AND THE WAY FORWARD

National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists.

A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. Nations gain advantage against the world’s best competitors because of pressure and challenge. They benefit from having strong domestic rivals, aggressive home-based suppliers, and demanding local customers.

Competitiveness is defined by the World Economic Forum (WEF) as the set of institutions, policies and factors that determine the level of productivity of a country.

Ghana is ranked 103rd out of 144 countries in the latest (2012-2013) Global Competitive Index (GCI), moving up by an impressive 11 places in the 2011-2012 report.

This achievement was realized on the back of improvements in the country’s basic requirements of its macroeconomic stability, health and educational outcomes, the report said.

The GCI uses twelve pillars which are divided into three main sub-indexes to measure countries’ competitiveness. These are: Basic Requirements (comprising institutions; infrastructure; macroeconomic stability; health and primary education), Efficiency Enhancers (which includes higher education and training; goods market efficiency; financial market sophistication; technological readiness; market size) and Innovation & Sophistication Factors (consist of business sophistication; innovation).

The secret of being successful in the global market is having strategies that will strongly position Ghana against competitors and give us the strongest possible strategic advantage.

What then is the way forward for Ghana to enhance her competitiveness in the Global Market?

1.      GOVERNMENT SHOULD EMPHASIZE TECHNOLOGY AND INNOVATION

There is an overall low level of science, technology, research and development and innovation in industry. This limits the absorption and adaptation of modern technologies into the various sectors, thus affecting its competitiveness.

Nations achieve competitive advantage through acts of innovation. They approach innovation in its broadest sense, including both new technologies and new ways of doing things. They perceive a new basis for competing or find better means for competing in old ways. Innovation can be manifested in a new product design, a new production process, a new marketing approach, or a new way of conducting training. Much innovation is mundane and incremental, depending more on accumulation of small insights and advances than on a single, major technological breakthrough. It often involves ideas that are not even “new”—ideas that have been around, but never vigorously pursued. It always involves investments in skill and knowledge, as well as in physical assets and brand reputations.

2.      PRODUCTION AND DISTRIBUTION

Ghana’s economy has not responded well to the various economic and trade policy reforms pursued over the past decade. Manufacturing firms have faced considerable challenges in the form of increased competition in the domestic and export markets and high production and distribution costs arising from high interest rates, aged and obsolete equipment, inefficient infrastructural services and low productivity. There are many strategies as market productivity means squeezing more profits out of the same volume of sales. One is example changing the product mix giving it a new release of identity, or focusing on a less price sensitive – customers such as the Scandinavian countries. Or add value to the existing product for example a classic bar of chocolate to be served on the business class only. Government will need to initiate and implement policies to develop requisite skills, ensure adequate and cost-competitive production inputs and services and provide needed finance for industrial development. With this in place production and distribution can be enhanced to boost competitiveness.

3.      FOCUS ON SPECIALIZED FACTOR CREATION.

Government has critical responsibilities for fundamentals like the primary and secondary education systems, basic national infrastructure, and research in areas of broad national concern such as health care. Yet these kinds of generalized efforts at factor creation rarely produce competitive advantage. Rather, the factors that translate into competitive advantage are advanced, specialized, and tied to specific industries or industry groups. Mechanisms such as specialized apprenticeship programs, research efforts in universities connected with an industry, trade association activities, and, most important, the private investments of companies ultimately create the factors that will yield competitive advantage.

4.      DEREGULATE COMPETITION.

Regulation of competition through such policies as maintaining a state monopoly, controlling entry into an industry, or fixing prices has two strong negative consequences: it stifles rivalry and innovation as companies become preoccupied with dealing with regulators and protecting what they already have; and it makes the industry a less dynamic and less desirable buyer or supplier. Deregulation and privatization on their own, however, will not succeed without vigorous domestic rivalry—and that requires, as a corollary, a strong and consistent antitrust policy.

5.      PROMOTE GOALS THAT LEAD TO SUSTAINED INVESTMENT.

 Government has a vital role in shaping the goals of investors, managers, and employees through policies in various areas. The manner in which capital markets are regulated, for example, shapes the incentives of investors and, in turn, the behavior of companies. Government should aim to encourage sustained investment in human skills, in innovation, and in physical assets. Perhaps the single most powerful tool for raising the rate of sustained investment in industry is a tax incentive for long-term (five years or more) capital gains restricted to new investment in corporate equity. Long-term capital gains incentives should also be applied to pension funds and other currently untaxed investors, who now have few reasons not to engage in rapid trading.

6.      ENFORCE STRICT PRODUCT, SAFETY, AND ENVIRONMENTAL STANDARDS.

 Strict government regulations can promote competitive advantage by stimulating and upgrading domestic demand. Stringent standards for product performance, product safety, and environmental impact pressure companies to improve quality, upgrade technology, and provide features that respond to consumer and social demands. Easing standards, however tempting, is counterproductive.

When tough regulations anticipate standards that will spread internationally, they give a nation’s companies a head start in developing products and services that will be valuable elsewhere. Sweden’s strict standards for environmental protection have promoted competitive advantage in many industries. Atlas Copco, for example, produces quiet compressors that can be used in dense urban areas with minimal disruption to residents. Strict standards, however, must be combined with a rapid and streamlined regulatory process that does not absorb resources and cause delays

7.      INCENTIVES AND REGULATORY REGIME

Incentives are important policy instruments for promoting industrial growth. Targeted incentives can help overcome market failures that lead to under-investment, low export capacity and limited use of domestic content in the various sectors. Ghana has developed series of incentives that have general application which need to be strengthened to support the objective of increased value addition and promote industrial development. The government of Ghana aimed at mobilizing domestic and international resources for investment in production, especially for value added products, is essential for developing adequate international supply capacity. 

The above policies can be achieved through the adoption and implementation of the following strategies:

1.      Government must strengthen export finance institutions and programmes to enhance their effectiveness.

2.      Government should streamline and enhance incentives to export-oriented manufacturing firms.

3.      Government will promote Ghana as a globally competitive location for ICTES (ICT-Enabled Services) and BPO (Business Process Outsourcing)

4.      Government will support SMEs to implement quality assurance systems.

5.      Government will strengthen the linkage between market research and advertising institutions and manufacturing firms.

References

1.               Feature Article; How Could Ghana Create A Competitive Advantages In The Global Market; Mercy Adede Bolus.

2.               Country’s level of determinants; Michael Porter.