AGI Construction Sector discusses FDI with World Bank

A team from the Macro, Trade and Investment unit of the World Bank Group paid a courtesy call on leadership of the Construction Sector of the Association of Ghana Industries (AGI) in Accra on May 28 to June 8, 2018 at the AGI Secretariat.

The team from the World Bank comprised Kaliza Karuretwa (Senior Private Sector Specialist); Hania Kronfol (Private Sector Specialist); Barbara Kotschwar (Senior Private Sector Specialist); Kobina Daniel (Senior Private Specalist); Lina Sawaqed (Consultant); Jim Friedlander (Consultant); Zhi Ken Gan (Consultant); Neustadt Amarteifio (Consultant); and Bianca Clinton (Consultant).

The mission’s objective in Ghana was to meet with the Ghana Investment Promotion Centre (GIPC) Board and related stakeholders to present and discuss key policy and institutional recommendations aimed at improving Ghana’s ability to attract and retain private investment. The focus of the meeting was on the level of services investors are getting from GIPC and also identify the main entry-barriers to foreign direct investment.

It emerged that trade barriers in the form of some local content policies may be hindering foreign direct investments. The uncompetitive nature of most local businesses emerged as a strong reason for the existing trade barriers. Many factors, such as the lack of capacity and financial constraints among others, contribute to the uncompetitive nature of local businesses. In the construction sector, for example, delayed payments by government for public construction work was identified as a major limitation to growth and sustainability of construction businesses and the sector at large, according to the Chair of the Sector, Rockson Dogbegah.

Rockson further stressed the difficulty faced by local construction companies to raise finance from banks because of government’s failure to pay contractors on time. This, he said, explains why local construction companies are unable to compete effectively with their foreign counterparts. As a result, the big and juicy contracts go to foreign companies who are relatively favoured in terms of payments for construction works.

Kobina Daniel, a Senior Private Sector Specialist with the World Bank, therefore suggested partnerships between local and foreign companies as a potential solution to delayed payments. However, large multi-national corporations often lack the incentive to strike such partnerships.

Kalisa Karuretwa of the World Bank intimated the weaknesses of unions and lack of strong collaboration and a unified voice in dialogues with government. She therefore indicated the need for more private dialogues, which the World Bank is willing to support.

Eric Defor, Vice-Chair of the AGI Construction Sector, emphasised the need for local content as one of the surest ways to ensure that Ghanaians participate in the construction sector. He said this with reference to some construction contracts with Chinese contractors that have provided only a few jobs for Ghanaians because labour and equipment, even those that are available locally, were imported into the country.

Kenneth Donkor-Hyiaman, the Executive Secretary of the Sector, cautioned against any move to liberalise the construction sector with investment to build the local construction sector’s capacity to compete effectively. To this end, he encouraged foreign companies to partner local companies and promote technology transfer.

Rockson Dogbegah acknowledged the World Bank’s support and collaboration with the sector in the areas of corporate governance; developing and sharing inputs in public private dialogue platforms; and promotion of sustainability concepts in building designs and construction methods in collaboration with the IFC Edge programme. He also noted the Bank’s support in completing work on the Building Code of Ghana and the general support given the country in general in terms of fiscal discipline and enhancing the general business environment.

The following conclusions were reached:
  1. There is a need for the world bank to keep supporting government and the private sector to build sustainable institutional relationships;
  2. World Bank to help strengthen capacity of the private sector to effectively engage with peers in other jurisdictions in the area of sharing best practice in private dialogues;
  3. The construction sector could be better supported by improved construction governance systems in the country, which could provide ready opportunities to solving unemployment challenges facing the country;
  4. The private sector must be more engaging and strategically represented across the country’s governance architecture.

In attendance were the Finance Director, Nathaniel Quarcoopome, and the Policy and Research Director of the AGI, John Defor – who also made general observations about the importance of local content for development of the local industry and prosperity at large.

Source: B&FT

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