Impact of FDI on the GDP of Ghana
“Foreign direct investment (FDI) is the net inflows of investment to acquire a lasting management interest (10 percent or more of the voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. It usually involves participation in management, joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative) and “stock of foreign direct investment” which is the cumulative number for a given period. Direct investment excludes investment though the purchase of shares. (Foreign Direct Investment. http://en.wikipedia.org/wiki/Foreign_direct_investment, retrieved 14 April, 2011.)”
Ghana’s natural resource driven economy is the third largest in West Africa. It is the second largest exporter of lumber and gold on the continent, and the second largest exporter of cocoa worldwide. “Ghana enjoys ample mineral deposits of diamonds, bauxite, manganese and salt, and lays claim to a vast expanse of arable land, forests and marine and fishing stocks. The political stability, economic liberalism, abundant natural resources, highly motivated work force and infrastructure improvements have positioned Ghana to be West Africa’s gateway country, providing investors access to a regional market of over 250 million people. ( Snapshot Africa: Ghana. https://docs.google.com/viewer?url=http%3A%2F%2Fwww.fdi.net%2Fdocuments%2FWorldBank%2Fdatabases%2Fsnapshot_africa%2Fdocs%2Fsnapshot_africa_ghana.pdf, retrieved 14 April, 2011.)”
Attracting foreign direct investment has been a priority of Ghana’s Government since 1983 with the establishment of an economic recovery program. The result has been an incremental increase in the FDI inflows to USD 139 million in 2004, a slight increase from USD 137 million in 2003. These figures are well above the average for non-oil producing sub-Saharan African countries. The country’s top non-African investors originate from India, China, Lebanon, UK, US and Germany, while the top three African investing states are Nigeria, Cote D’Ivoire and South Africa. ( Snapshot Africa: Ghana. https://docs.google.com/viewer?url=http%3A%2F%2Fwww.fdi.net%2Fdocuments%2FWorldBank%2Fdatabases%2Fsnapshot_africa%2Fdocs%2Fsnapshot_africa_ghana.pdf, retrieved 14 April, 2011.)”
Key attractions for investors to Ghana include the following:
1. Low corporate tax rates
2. Tax holidays
3. Low equity requirements
4. Custom duty exemptions for plant, machinery, equipment and parts
5. Automatic immigrant quotas
6. Relief from double taxation for foreign investors
“Ghana’s foreign investment code eliminates screening of foreign investment, guarantees capital repatriation, and does not discriminate against foreign investors. The only pre-condition for investment is a minimum capital-requirement. ( Snapshot Africa: Ghana. https://docs.google.com/viewer?url=http%3A%2F%2Fwww.fdi.net%2Fdocuments%2FWorldBank%2Fdatabases%2Fsnapshot_africa%2Fdocs%2Fsnapshot_africa_ghana.pdf, retrieved 14 April, 2011.)”
An article on Ghana To Ghana, Foreign direct investment in Ghana doubled, on 19th January, 2011 posted the following:
“Foreign direct investment in Ghana doubled to $1.11 billion in 2010, with China leading the number of investment projects, the government said on Tuesday. The year 2010 ended with a total of 385 projects with a total estimated value of $1.28 billion. The FDI component of this figure is $1.11 billion, a significant increase compared to $551.30 million recorded in 2009,” the Ghana Investment Promotion Centre said in a release.
China led the number of registered projects with 67, it said, and came in fourth in terms of estimated cost of the projects behind Bermuda, Nigeria and Trinidad.
Ghana, one of a handful of sub-Saharan countries with a Eurobond, is expected to post Africa’s fastest rate of growth in 2011 after starting commercial oil production last month.
The West African country is also the continent’s second-largest gold miner and the world’s No. 2 cocoa grower.
China has expanded its presence across the resource-rich continent in recent years as it seeks to lock up long-term energy and commodities supplies to fuel its rapid growth. (Kwajo. Foreign direct investment in Ghana doubled. 19 January,2011. http://www.ghanatoghana.com/Ghanahomepage/foreign-direct-investment-ghana-doubled, retrieved 14 April, 2011.)
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