"24-Hour Economy is Possible via a Carefully Crafted Industrial or Development Plan"

" 24-Hour Economy is Possible via a Carefully Crafted Industrial or Development Plan \r\n\r\n Disclaimer: This paper attempts to point out key pillars or features of an Industrialization Plan required to generate\u00a0 a 24-hour economy in Ghana. The thoughts and opinions expressed here are author\u2019s own and were not copied or\u00a0 redacted from another source. Kindly revert with the author for further clarification or details if necessary.\u00a0 \r\n\r\n \u201c24-hour economy is meaningless unless it leads to at least two of the following outcomes: increase in\u00a0 productivity and real incomes, doubling of real GDP growth, drastic reduction in youth unemployment and\/or the acceleration of inclusive economic growth\u201d\u2026.Author\u00a0\u00a0 \r\n\r\n First, there is no historical precedent where a country became or evolved into a 24-hour economy without\u00a0 a carefully executed industrial or development plan. Second, no developing country can develop into an\u00a0 upper middle\/high income country and have a stable currency without having a sustained increase in\u00a0 manufacturing share of GDP over time ( Chang, 2003 ). Today, countries like Singapore, China, South Korea,\u00a0 Japan, US, UK have their economies humming for 24 hours because of specific industrial plans\u00a0 implemented at some point or over a period (examples here ). Economist Joseph Stiglitz in his 2018 paper argued the diminished role of manufacturing export-led growth in the 21 st century (and recommends a multi\u00a0 \r\n\r\n sectoral development approach because of the rise of artificial intelligence and potential loss of\u00a0 manufacturing jobs robots), he failed to point out that the positive effects manufacturing\/industry has on\u00a0 import substitution , the current account, productivity, real incomes, and the exchange rate.\u00a0 \r\n\r\n The reason why successive governments have \u201cfailed\u201d since Nkrumah is because of the failure to\u00a0 implement a bold industrial or development plan! What we have had has been the medium and long-term\u00a0 development plans crafted by the National Development Planning Commission (NDPC)-which have been\u00a0 largely ignored by the NDC and NPP. The reason they have been largely ignored is because they\u2019re too\u00a0 long-term instead of short\/medium term (e.g., the vision 2057 development plan ) and the political parties,\u00a0 having only 4-8 years in power, only focus on their own campaign promises. Osagyefo Dr. Kwame\u00a0 Nkrumah laid the foundation for Ghana (and Africa\u2019s) development and gave the blueprint to be\u00a0 implemented via a 7-year Development (or Industrial) Plan. \r\n\r\n An industrial plan is usually a part of a broader\u00a0 development plan, and the government of National Democratic Congress (NDC) only needs the former to\u00a0 achieve its vision of creating Africa\u2019s first 24-hour economy. Since Nkrumah\u2019s 1963 7-year development\u00a0 plan, no government has been able to present Ghana a bold Industrial\/Development Plan. A development\u00a0 or industrial plan is bold when it is short-medium term , and transformational . His Excellency President\u00a0 John Mahama (\u201cJM\u201d) has the opportunity to be the Nkrumah of our time if he and his team can present\u00a0 Ghana a 7-year Industrial or Development Plan! And I pray God will grant the NDC the opportunity to do\u00a0 so come December 7 th . \r\n\r\n I know His Excellency had thought it through when he announced his vision of 24hr economy as the main\u00a0 \u201cpolicy\u201d for economic transformation in the next NDC government. And I believe he meant NDC would\u00a0 pursue policies to accelerate the pace of economic growth, increase wealth and improve the livelihoods of\u00a0 Ghanaians. Thus, the goal 24-hour economy should be to double real GDP growth , reduce youth \u00a0 unemployment and deliver inclusive economic growth . This means 24-hour economy itself can only be\u00a0 judged as good economic \u201cvision\u201d ex-poste after it has delivered the above.\u00a0 \r\n\r\n But here is the problem. A 24-hour economy cannot be achieved by the multi-sectoral approach as\u00a0 suggested by Stiglitz (would be difficult in our Ghana context) or a cocktail of \u201ceclectic\u201d policy\u00a0 interventions. The NDC\u2019s official document on operationalizing the 24-hour economy ( www.johnmahama.org\/files\/shares\/FAQs-on-Mahamas-24-hour-strategy.pdf ) contains sound and laudable\u00a0 policy initiatives and interventions, but I believe they would work better within the context of a broader\u00a0 industrial policy plan. I understand the said document is not final and is only meant to give summary\u00a0 information or highlights of what JM and the NDC intends to do, but I believe it is still missing the bold\u00a0 industrial transformation plan or its key requirements needed to make the economy work for 24 hrs.\u00a0 \r\n\r\n When there\u2019s a clear and implementable industrialization plan, a 24-hour economy would be a natural\u00a0 by-product of it . What am I saying? Instead of looking for the by-product (i.e., 24-hour economy), let us start with a focus on the \u201cmeat\u201d or substance (i.e., industrialization plan) and the by-product (which is a 24- hour economy) will consequently come forth. Thus, if a 7-year Industrial plan achieves the goals underlined below, the economy operating 24hrs or 16hrs or 8hrs will not matter much. Thus, the focus or goal of the\u00a0 industrial policy should be to doubling real GDP growth, reducing youth unemployment, and accelerating \u00a0 inclusive economic growth , and not necessarily a 24-hour economy; as 24-hour economy in itself is no\u00a0 benefit if does not increase productivity . The goals above (underlined) are specific, measurable, achievable,\u00a0 relevant, and time-bound (SMART) but 24-hour economy is not.\u00a0 \r\n\r\n Now the question is, where do we begin if Ghana is to transform its industry? A good starting point can be Nkrumah\u2019s 7-year development plan (1963-1970). The key aspects Nkrumah\u2019s development plan were industrialization , agriculture modernization , infrastructure development , education and human capital \u00a0 development , and state dominance\/central socialist planning . Apart from the latter (i.e., replace socialist\u00a0 planning with Public-Private Partnerships), I would say all these aspects are relevant today and lagging in\u00a0 our dear nation Ghana. \r\n\r\n But a focus on industrial transformation will deliver some, if not all, of the other\u00a0 aspects of Nkrumah\u2019s plan. Thus, a bold industrialization plan (featuring forward and backward linkages\u00a0 among industries, and great emphasis on import substitution ) will involve or lead to agriculture\u00a0 modernization, infrastructure development, education and human capital development. \r\n\r\n In the pages below, I outline some of the key pillars or requirements needed of a successful industrial\u00a0 transformation plan in Ghana. Here, I point out the policy interventions that must be preconditions and\u00a0 those that can be implemented during the take-off stage of the plan. The preconditions are policies or\u00a0 solutions that must be undertaken before strategic investments or policy interventions are undertaken to\u00a0 deliver a 24-hour economy. The take-off policies are those which can be pursued as strategic interventions\u00a0 to double real GDP growth, reduce imports, stabilize our currency, and deliver shared prosperity, and\u00a0 eventually transform Ghana into a 24-hour economy. Without these key policy interventions or investments, \u00a0 the implementation of 24-hour economy will come down crashing!\u00a0 \r\n\r\n Preconditions for Take-Off !\u00a0 \r\n\r\n Pillar 1: Selection of Clear Strategy and Objectives\u00a0 \r\n \r\n \t Strategy and Sectoral focus : Aggressive Import Substitution Industrialization! I suggest His\u00a0 Excellency should aggressively pursue an import substitution industrialization while also\u00a0 promoting value addition in the export sector. Without a focus on import substitution, Ghana\u2019s cedi\u00a0 will always be under pressure, driving up import prices and inflation. The problem with the\u00a0 exchange rate is simply a demand and supply issue. If demand for US dollars is not curtailed, even\u00a0 a historically high levels of supply of forex will be enough to support the cedi. Ghana\u2019s financial\u00a0 account (i.e., net FDI and FPI) has never been high enough to address the hemorrhage in the current\u00a0 account, causing the perennial drawdown of official reserves of Bank of Ghana ( I explain why this\u00a0 is the case through a chart in the Appendix ). This means we can\u2019t rely on FDI and foreign portfolio\u00a0 investments (FPI) to support the cedi. We must take our destiny into our own hands, and drastic\u00a0 reduction in annual import bill is the only way to go!\u00a0 \r\n \r\n As pointed out by renowned Cambridge University professor, Ha-Joon Chang, all major developed\u00a0 nations (USA, UK, Germany, Japan, etc.) pursued import substitution through protectionism at\u00a0 some point in the development process and some are still pursuing protectionism even as of today.\u00a0 An example is the USA\u2019s protection of the agricultural sector. The NDC document on 24-hour\u00a0 economy states \u201c there will be no limit to the sectors the 24-hour economy initiative will target \u201d but\u00a0 I suggest a bold and targeted 7-year import substitution industrialization plan targeting select\u00a0 sectors of manufacturing, agro-processing, transportation and infrastructure development.\u00a0\u00a0 \r\n \r\n \t Objectives (Short and medium): Industrial policy should align with national development goals,\u00a0 focusing on sustainable economic growth, employment creation, technological advancement, and\u00a0 competitiveness. As pointed out in preceding paragraphs, the short\/medium-term objectives of Ghana\u2019s industrial policy should be as follows: drastically reducing imports through domestic\u00a0 \r\n \r\n production, doubling real GDP growth, reducing youth unemployment, and accelerating inclusive\u00a0 economic growth . There should then be targets assigned to these objectives in the short and median\u00a0 term. Targets should include reducing Ghana\u2019s annual import bill by 30-40% by 2030, achieving\u00a0 consistent 7%-10% annual real GDP growth over 10 years, doubling real income per capita, 5%- 7% youth unemployment target, etc.\u00a0 \r\n \r\n \t Long-term Vision: A 24-hour economy can be set as the overarching strategic long-term vision ,and it would be a by-product of carefully executed industry plan when policies are progressively\u00a0 scaled-up or implemented. But I suggest the long-term vision should be to making Ghana\u00a0 manufacturing hub of Sub-Sahara Africa over the next 7 years .\u00a0 \r\n \r\n Pilar 2: Supportive Regulatory Framework\u00a0 \r\n\r\n Another precondition for industrialization take-off is to create a conducive regulatory environment catering\u00a0 to the following:\u00a0 \r\n \r\n \t Business-friendliness and readiness: Reduce red tape, streamline procedures, and ensure clear,\u00a0 predictable regulations to ease business operations. This calls for enhancing the ghana.gov website with ease of navigation and 24\/7 live support for foreign and local investors to register and obtain\u00a0 business licenses, pay fees, and file documents. Income Tax law be amended to give tax breaks for\u00a0 new start-ups and firms engaged in import substitution.\u00a0 \r\n \t Competition and Intellectual property rights (IPR): New laws should be enacted, or current\u00a0 laws amended to prevent monopolies, promote fair competition and prevent undue market\u00a0 concentration in all sectors. Also, Strong IPR frameworks to encourage innovation by protecting\u00a0 businesses' technological advancements.\u00a0 \r\n \r\n Pillar 3: Access to Finance\u00a0 \r\n \r\n \t Amend the B ank of Ghana Act 612 to give the BoG a dual mandate of (i) price stability and (ii)\u00a0 f ull employment . Thus, BoG\u2019s inflation targeting framework needs to be abandoned, because\u00a0 it has never achieved its targets since it was adopted in 2007 . Ghana needs a low-interest rate\u00a0 regime! And we cannot wait for interest rates to fall in line with inflation rates. The current interest\u00a0 rate regime is too high to offer any support to industrialization and must be drastically reduced!\u00a0 BoG\u2019s policy rate need not necessarily be above the inflation rate (e.g., the Nigeria Central Bank\u00a0 kept the official policy rate well below the inflation rate for very long time until recently, and the\u00a0 naira did not crash! This is another discussion the author would like to have later). And even if the\u00a0 BoG wants to keep the policy rate above the inflation rate, the risk premium must be reduced or\u00a0 \r\n \r\n eliminated entirely to keep interest rates low. Currently, the BoG sets its short-term interest rate\u00a0 policy adhering to the international interest rate parity rule which, in simple terms, determines\u00a0 Ghana\u2019s policy rate as follows; Policy Rate GH = Policy Rate USA + Expected Cedi Depreciation Rate + Risk Premium \r\n\r\n With this equation, the only thing making BoG\u2019s policy rate consistently and ridiculously high is\u00a0 the risk premium it attaches or adds to Ghana interest rates. If you minimize or eliminate the risk\u00a0 premium (which many Africa central banks have been doing), BoG\u2019s current policy rate should not\u00a0 exceed 15%.\u00a0 \r\n\r\n The solution? Amend the Bank of Ghana Act 2002 to give the BoG a dual mandate of (i) inflation\u00a0 targeting(i.e., price stability) and (ii) full employment just like the US federal reserve. The current inflation targeting regime of Bank of Ghana (BoG) -which sacrifices economic growth\u00a0 for inflation targeting- does not urger well for developing nations like Ghana. Has the BoG been\u00a0 successful in reaching its targeted inflation rate since Act 612? The last time was under Prof Mills\u00a0 administration, I remember. So, to ensure the BoG plays active role in Ghana\u2019s economic\u00a0 development, the Bank of Ghana Act 612 should be amended to give the BoG a dual mandate to\u00a0 enable it to lower the interest rate to levels conducive for the business environment.\u00a0 \r\n \r\n \t Affordable credit: Create credit financing schemes and vehicles ensuring businesses, especially\u00a0 SMEs, have access to financing through banks, venture capital, or government-backed funds to\u00a0 encourage investment.\u00a0 \r\n \t Incentives for Growth: Provide tax breaks, grants, or subsidies for new and existing\u00a0 manufacturing firms, especially those engaged in import substitution or expanding into high growth sectors.\u00a0 \r\n \r\n Pillar 4: Investment in Official Statistics-Create Database for These Relevant Statistics.\u00a0 I believe the following initiatives will greatly support any industrialization and economic growth agenda.\u00a0 \r\n \r\n \t Create Database for the Demand and Supply of Made in Ghana Goods : A database to support\u00a0 domestic industry and import substitution will be to create a platform (on ghana.gov or new\u00a0 website) which publishes contacts of companies producing locally manufactured intermediate and\u00a0 final goods. The platform should also contain information (address and contacts) of local suppliers\u00a0 of raw materials and inputs. For example, a company producing plastics and paper supplies needing\u00a0 raw materials should be able to find a local supplier of the input in the database. Likewise, an\u00a0 importer of baby food or building materials should be able to find local producers on the website. \r\n \t Create a dedicated Labour Statistics Unit (LSU) to report Monthly\/Quarterly Jobs\u00a0 Gains\/Losses: Since independence, Ghana has not had a credible employment (jobs) tracking\u00a0 system to report monthly jobs gained or lost. Being able to track job gains\/losses consistently is a\u00a0 better leading indicator of economic prosperity than reporting the growth rate of GDP. When the\u00a0 economy is recording positive net job growth consistently, all other macroeconomic indicators will\u00a0 be good. In advanced economies like USA, people care less about GDP growth, inflation rate,etc what matters is the monthly jobs report! Once there\u2019s positive net jobs, other indicators do not\u00a0 matter much. The LSU can be created as a sub-unit of Ghana Statistical Service or the employment\u00a0 ministry.\u00a0 \r\n \r\n The Take-Off or Implementation Stage!\u00a0 \r\n\r\n Pillar 5: Increase Ghana\u2019s National Grid & Electricity Generation Capacity\u00a0 \r\n \r\n \t Double the Power Grid: For the economy for work for 24-hours, we all agree it would need the\u00a0 national power grid be at least doubled. And any industrial plan would need electricity power\u00a0 behind it; reason Nkrumah installed the Akosombo dam. As of 2024, Ghana's total installed power\u00a0 generation capacity is estimated to be approximately 5,500 MW (hydro~33%, Thermal~65%, Solar\u00a0 & Renewables~1%). Lots of room for investments in Solar & Renewable energy sector.\u00a0 \r\n \t Partnership with Elon Musk and Tesla Energy for Solar Power Generation: Solar energy is\u00a0 abundant in Ghana, and we have a great opportunity to tap into the abundant sunshine by partnering\u00a0 with Tesla energy to increase solar power generation over next 7 years.\u00a0\u00a0 \r\n \r\n Pillar 6: Investments in Public Transportation\u00a0 \r\n \r\n \t Provision of Free (or Subsidized) Public Transportation: Availability of Public Transportation (\u00a0 to foster easy movement of people and goods) is vital for economic growth and 24-hour economy. The blanket adoption of privatization policies under the structural adjustment program (SAP) has hurt critical sectors such as transportation in the country. Almost all developed and advanced have\u00a0 reliable, affordable, or subsidized public transport systems comprising buses, rails and trams.\u00a0 Reason advanced economies have invested so much in free (or subsidized) public transportation is\u00a0 because of its critical importance in boosting or stimulating economic activity by enabling free and\u00a0 easy movement of people (i.e., labour) and goods (i.e., firms). When people and labour can move\u00a0 freely for 24 hours, supply of labour is increased (and according to Say\u2019s Law, supply will create\u00a0 its own demand)- and the supply of labour will be demanded by businesses who need people to\u00a0 work around the clock. Thus, classical economists believe supply creates its own demand , and\u00a0 \r\n \r\n Keynesian economists believe demand creates supply- and both are right, because there is evidence\u00a0 which supports both. So, a huge public investment in \u201cfree\u201d and accessible transportation will be\u00a0 money-well-spent because of its huge economic benefits.\u00a0 \r\n \r\n \t Investment in Railways Linking all Regional Capitals: One of the missing pillars for industrial\u00a0 development in Ghana has been inadequate of investments in railway transportation. Railways\u00a0 linkage all regional capitals is a non-negotiable foundation that must be laid before any serious\u00a0 industrialization can thrive. We should also invest in both cargo and passenger trains to provide\u00a0 easy transport of people and goods. Passenger rail transportation access to regional capitals will\u00a0 also ease the congestion in Accra. For example, of people can, by rail, get to Accra from Winneba\u00a0 in less than 20mins, rural-urban migration will ease. People will buy lands and build outside Accra.\u00a0 \r\n \r\n Pillar 7: Forward and Backward Linkage Industrialization\u00a0 \r\n \r\n \t Targeting Top 10 Imports: To build a resilient economy ( and a Ghana beyond aid), we have to\u00a0 take import substitution industrialization seriously. And a good starting point should be to target\u00a0 Ghana\u2019s top 10 imports. According to the 2023 Ghana Trade Report , our top 10 imports are;\u00a0 \r\n \r\n \r\n \r\n \r\n Refined Petroleum (Diesel)\u00a0 \r\n 15.0%\u00a0 \r\n Secondhand vehicles\u00a0 \r\n 1.4% \r\n \r\n \r\n Refined Petroleum (Light & Motor oil)\u00a0 \r\n 12.3%\u00a0 \r\n Herbicides & agro-chemicals\u00a0 \r\n 1.3% \r\n \r\n \r\n Plastics\u00a0 \r\n 4.0%\u00a0 \r\n Bulldozers & machinery\u00a0 \r\n 1.3% \r\n \r\n \r\n Cement Clinkers\u00a0 \r\n 1.8%\u00a0 \r\n Rice\u00a0 \r\n 1.1% \r\n \r\n \r\n Cereal Grains\u00a0 \r\n 1.5%\u00a0 \r\n Shea Nuts\u00a0 \r\n 1.0% \r\n \r\n \r\n \r\n \r\n\r\n With exception of secondhand vehicles, all top 10 imports involve demand for US dollars (Ghana\u00a0 Cedi buying US dollars). Therefore, import substitution local firms should be developed to produce\u00a0 these goods locally. We should: revive Tema Oil Refinery , aggressive investment in local rice\u00a0 production via public-private partnerships, develop a local producer of cement clinker , etc.\u00a0 Agri-business firms must be targeted to produce rice, cereal grains, chicken, etc., to attain food\u00a0 sufficiency.\u00a0 \r\n \r\n \t Forward Linkages: Any industrialization policy in Ghana must consider forward and backward\u00a0 linkages for its to be effective in reducing importation of raw materials and intermediate goods. Forward linkages occur when the output of an industry serves as an input for other industries\u00a0 \r\n \r\n downstream. For example, firms producing cement clinker will have a forward linkage with local\u00a0 cement producers.\u00a0 \r\n \r\n \t Backward Linkages: Backward linkages occur when an industry creates demand for inputs from\u00a0 industries upstream in the supply chain. Thus, the product of the newly emerging industry induces\u00a0 demand for materials and enables the emergence of supply industries. This means local firms\u00a0 should be developed to supply inputs ( raw materials & intermediate goods) to import substitution\u00a0 industries. Without forward and backward linkages, local producing firms would still be importing\u00a0 inputs and keep the cost of production high, making them non-competitive.\u00a0 \r\n \r\n Pillar 8: Investment in Critical Infrastructure\u00a0 \r\n \r\n \t Physical infrastructure: Expand the road network, dualize Accra-Kumasi, and investments in\u00a0 energy, and digital infrastructure are critical for the efficient operation of industries.\u00a0 \r\n \t Digital infrastructure: Make affordable high-speed internet and digital technologies to ensure\u00a0 industry is well-connected and competitive globally.\u00a0 \r\n \r\n Conclusion\u00a0 \r\n\r\n The author holds the view that, although the policy initiatives mentioned in the NDC\u2019s document on\u00a0 24-hour economy are laudable, they can be effectively implemented (or achieve success) within the\u00a0 context of a broader and well-crafted industrial policy plan. The best industrial policy will be one with\u00a0 prime focus on import substitution, and the eight (8) points outlined above should be critical pillars of\u00a0 an industrial policy for Ghana. An industrial plan, having these pillars, will make the economy resilient,\u00a0 prosperous, make our currency stable, and deliver food sufficiency.\u00a0 \r\n\r\n \r\n\r\n Author: Jeff Sampong, Graduate Teaching Assistant, Johns Hopkins University\u00a0 \r\n\r\n Email: jefsam5@yahoo.com "

"24-Hour Economy is Possible via a Carefully Crafted Industrial or Development Plan"

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