– Is Ghana taking trade and investment advantage of this US$3.85 trillion economic group?
BY ANTHONY SEDZRO & UTCHE OKWUOSAH
On April 28, 2018 the Pacific Alliance, an economic grouping made up of four Latin American countries – Chile, Colombia, Mexico and Peru – celebrated the seventh anniversary of its formation.
The Alliance was originally conceived as a free trade area oriented to allow its members to compete more effectively in the Asian economy. Unlike other regional blocs, like the Economic Community of West African States (ECOWAS) or the Arab League, the Pacific Alliance is non-political. The framework agreement that established the Pacific Alliance was meant to purely pursue economic and cultural ties among its states and other countries the bloc deals with.
The economic grouping has not only managed to maintain its unity in its seven years of existence, it has recorded some solid achievements. The Washington-based Centre for Strategic and International Studies (CSIS) lists the Pacific Alliance’s feats as follows:
- Elimination of over 92 percent of all tariffs among the four founding members;
- Reduction or elimination of visa requirements for member citizens;
- Creation of an educational exchange using scholarships and inter-university cooperation;
- Establishment of joint embassies in multiple countries around the world to deepen joint diplomatic goals, cut costs, and amplify the Alliance’s voice;
- Inauguration of an integrated stock market, which when fully unified will be the largest equities market in Latin America;
- Participation in the Trans-Pacific Partnership (TPP) — the “gold standard” of multilateral agreements — by three of the four Alliance signatories;
- Establishment of the concept of “associate member”; New Zealand, Singapore, Canada, and Australia were granted this status just last year;
- An initiative to establish a single passport for member nations.
The economies of the four member nations, if counted as a single country, would form the seventh-biggest economy in the world.
The regional trading bloc, which all border the Pacific Ocean, boasts a Gross Domestic Product (GDP) worth over US$3.85 trillion. Over the last decade, Pacific Alliance members had some of the fastest growing economies in the region. The four countries, taken together, account for 37 percent of Latin America’s population, 35 percent of its nominal GDP, 46 percent of its exports, and 50 percent of its total imports.
Alliance members are among the keenest proponents of free trade in the Americas. In the seven years of its existence, the regional bloc has expanded its impact, scope, and reach immensely to cover other new markets outside Asia. It has evolved from four States focused on free trade to a partnership with four new associate members (Australia, Canada, New Zealand, and Singapore) in 2017.
The alliance currently has 54 observer States focused on expanding financial and economic integration as an instrument of economic development. These efforts come at a time of headwinds for trade, as many of the traditional leaders of free trade are stepping back from their roles in the area.
Currently, the traditional trading powers in the world are pushing for protectionist policies. U.S. President Donald Trump has pursued an ‘America First’ agenda since assuming office and this has seen his country pull out of the North American Free Trade Area (NAFTA). In June 2016, Britain voted to leave the European Union.
The Pacific Alliance backed its member, Mexico, after U.S. President Donald Trump threatened to scrap the North American Free Trade Agreement and tightened immigration controls.
Pacific Alliance and Ghana
Each of these four countries on their own present unique opportunities in terms of trade, commerce, education and socio-culture.
With the enormous economic power the Pacific Alliance wields and the potential it has for growth, how has Ghana positioned itself to take advantage of this trading bloc?
Of all countries in Africa, only Morocco, out of 54 countries, has an observer status in the Pacific Alliance. Ghana has been offered an observer country and the country is still working on finalizing it. However, Ghana’s economy, which experienced the highest GDP growth in the world in 2011, after the economy grew at 14 percent, has had a difficult past few years.
A very high debt-to-GDP ratio, rising inflation, exchange rate troubles, and a crippling electricity crisis combined to stagnate growth. This compelled the country to seek an International Monetary Fund (IMF) bailout.
A new government has come into power and the current President has an ambitious programme of moving ‘Ghana Beyond Aid’, a mantra meant to inspire and urge Ghana to aspire towards living no longer on donor aid.
Key facts on the Pacific Alliance
- Home to 224 million people.
- As a group it is the 7th largest economy in the world with a combined GDP of US$3.85 trillion.
- Chile, Peru, Colombia, and Mexico have all experienced consistent economic growth since 2005 and are in the top 60 countries for ease of doing business.
- Alliance countries are agricultural producers, this similarity presents real potential for trade in agricultural technology and services, and opportunities for investment.
It all looks good on paper though. If this ‘Ghana Beyond Aid’ is to materialise, then it should start with taking trade and investment issues seriously. Economic blocs like the Pacific Alliance must be engaged with the seriousness of a country that wants to transform its economic status.
Indeed, it is surprising that Ghana does not have even an embassy in Chile, Colombia, Mexico or Peru, the countries that make up the Pacific Alliance. It is similar to other Latin American countries. If Ghana is to drive foreign direct investment inflow, then Ghana should be taking advantage of a US$3.85 trillion economic group that has opened its arms wide for business.
Ghana is the only country in the world that the Pacific Alliance has a joint embassy building hosting all the four Pacific Alliance members. Additionally, many of them do not have embassies in other West African countries. They use the Ghana office as the base to serve other countries in the West Africa sub-region.
To put things in perspective, Morocco, one of the best places to do business in Africa last year, re-joined the African Union, after it left many years ago. Crucially it applied to join the West African economic group ECOWAS, although Morocco is not based in West Africa. In a similar move, Rwanda, a Belgian colony, applied and joined the Commonwealth of Nations, an association of former British colonies. These efforts signal the strong desire of these countries to boost their trade, economic and cultural ties to create opportunities for their especially young populations.
Already, Ghana is the best place to do business in West Africa, according to the World Bank’s annual Ease of Doing Business rankings. Ghana has introduced business-friendly policies in the last few years and set up job-creation schemes like the One-District-One-Factory initiative to fast-track the country’s industrialisation; Planting-for-Food-and-Jobs to boost agriculture; and the Marine Drive Ecological project meant to boost tourism and hospitality.
In October last year, Alan Kyeremateng, Ghana’s Trade and Industry Minister, visited Mexico to attend the Mexico Business Summit, where he was also a guest speaker. One Mexican company has set up a company in the Volta Region of Ghana, and other trade delegations between the two countries have taken place as positive consequences of deliberate efforts made to exploit mutual trade and investment potentials. This ought to be encouraged and sustained, even beyond Mexico, as a country desirous of growing and expanding her economy.
It should be acknowledged also that, over the years, there have been investment, cultural and educational exchanges between Colombia and Ghana. The same applies to Chile and Peru.
No doubt, little initiatives are ongoing, but these need to be deliberate, bold and sustained initiatives; and the opening of embassies in the Pacific Alliance region will begin to make sense as the right step towards appropriating the existing immense opportunities for boosting investment, job opportunities and socio-cultural ties.