By Edmund Opoku-Agyeman
The services export sector has the potential to become Ghana’s next viable growth pillar with positive implications for foreign exchange earnings, job creation and government tax revenue. This article makes a case for developing the sector to realize its potential as an exportable offer.
Ghana’s international reputation for the supply of high quality professionals of various specializations is well-documented and almost legendary. There are Ghanaian professionals who are currently engaged in various professional pursuits throughout the world and whose services are being sought for by foreign companies in such fields as medicine and allied services, freight-forwarding, teaching, architecture, engineering, planning, legal services, management consultancy, finance, and ICT, amongst others. This reputation can extend into considerable advantage for seeking market access outside the borders of the country.
Globally, services represent 60% of total economic activity, while accounting for just 20% of world trade, according to the WTO. However, the recent explosion of trade activity and technological capability, as well as the accelerated liberalization of market access through enhanced commitments under the multi-lateral General Agreement on Trade in Services (GATS), means that the future looks very bright for trade in services. According to the WTO, world trade in commercial services in 2007 was up by 18% to $3.3 trillion and is projected to constitute half of total world trade by 2020.
Most service firms do not realize that they do not have to leave their home country to export their services. When a foreign business person visits Ghana and buys a service from you, you are exporting your services. When you are emailing a report to a client in another country, you are exporting your services without leaving your home country. When a freight forwarder clears imported transit goods for a client in Burkina Faso, he has exported a freight-forwarding service. When service firms gain more knowledge about exporting services, they usually become much more proactive at pursuing export sales.
The services sector is very important to the development of the Ghanaian economy. The sector currently accounts for 30 percent of GDP and 31 percent to GDP growth in 2007. Service exports amounted to US$ 1.07 billion equating to 8.3 percent of GDP. However with merchandise exports accounting for over thirty percent of GDP, there is every indication that there is considerable potential for the development of Ghana’s service exports. Tourism accounts for most of the services export revenue with US$ 836 million in earnings.
Even though there is a paucity of accurate data on the composition of the remaining US$ 234 million, it is estimated that the major components are likely to be from more traditional sectors like financial services and transportation. A survey of selected service sectors estimates that non-traditional services exports amounted to US$ 34 million, comprising Business Process Outsourcing (BPO) exports US$ 24 million, professional consultancy US$ 2 million, higher education exports US$ 8 million. A positive growth in the sector would therefore have far reaching desirable implications for the growth of the national economy.
The Ghana Trade Policy December 2004 rightly recognizes the importance of the services sector to the Ghanaian economy both in terms of domestic supply and export potential and prescribes that Government will engage in successive WTO Services negotiations to obtain improved market access in partner WTO countries in specific sectors where Ghana has an identifiable opportunity.
In spite of the obvious potential of the sector as reflected in Ghana's specific commitments under the General Agreements on Trade in Services (GATS) which cover tourism, financial services, and telecommunications, Ghana has traditionally remained a net importer of services. Practical efforts to promote the export of services in Ghana have been largely fragmented and uncoordinated. Public sector institutions have not engaged the private sector well-enough to chart a common national agenda with the view to positioning Ghana as a hub for service exports, at least within the sub-region of West Africa.
Some key reasons responsible for this state of affairs include for the large measure the absence of a clear national policy framework, institutional capacity and a focused private sector led advocacy. Hitherto, private sector participation in developing the sector has been more reactive than proactive and driven more by narrow sector-specific interests. What is lacking is a broad-based approach to resolving cross-cutting issues and prosecuting a common agenda to promote the professional services export sector.
In response to this state of affairs, the Ghana Export Promotion Council has had a national services export strategy drawn-up to develop and promote non-traditional services exports sector. Whilst lauding this initiative, it is expected that greater private sector participation following best-practice elsewhere would be valuable in achieving effective mainstreaming of service exports into overall national exports strategy.
Pursuant to Government’s commitments under GATS, appreciable strides have been made in the tourism, financial and telecommunications sectors by way of exports.
Of particular interest in this regard is the commendable programmed attention that the Business Processing Outsourcing (BPO) sector has received. The establishment of the IT-Enabled Services Secretariat (ITES) as a component of the e-Ghana programme has greatly impacted the gradual but steady development of BPO as a viable exportable offer from Ghana. The formation of the Ghana Association of Software and IT Services Companies (GASSCOM) has also added the dynamism of a determined private sector to bear on the sector. Thankfully, Ghana’s efforts have been recognized by the recent A.T. Kearney Global Services Location Index which ranked Ghana as the most preferred destination for BPO in sub-Saharan Africa with high marks under three key criteria- financial attractiveness, people skills and availability, and business environment.
According to a study conducted by Hewitt Associates into the BPO industry in Ghana in 2006, the sector is capable of generating at least 24,000 jobs over the five-year period 2006-2010.
Despite the existence of a considerably developed built-industry sector comprising such professional services like engineering, architecture, planning, survey, etc, Ghana has yet to take full advantage of opportunities within the construction and allied engineering services sector in post-war Liberia and Sierra Leone. Having made huge sacrifices as a nation in both human and material terms to secure peace in those two countries, one would have expected Ghana to pursue a full scale concerted onslaught to secure a good chunk of the reconstruction opportunities offered by the post-war environment in the two countries.
One of the dubious legacies of the two wars was the huge housing and other critical infrastructure deficits in most parts of the two countries. Unfortunate as these were, they also presented economic opportunity to the built-environment sector which our Government needed to have taken advantage of through the provision of material support and political leverage to the private sector players to enable them bid for and participate in reconstruction programmes within the context of ECOWAS. It beats one’s imagination as to why the huge goodwill we enjoy within the sub-region has not been translated into meaningful business openings for Ghanaian professionals.
This writer had the opportunity to participate in the Ghana-Sierra Leone Week in Freetown in 2002 when Sierra Leone was just about emerging from the ravages of a ten-year civil war with such devastating consequences on its national infrastructure. In a discussion between the then Deputy Ministers of Works and Housing of Ghana ad Sierra Leone, the fact was underscored that there was great room for cooperation and that Ghana’s could be useful in assisting Sierra Leone to reconstruct its infrastructure. Strangely enough no concrete steps have been taken since then save for the bold initiative of one of Ghana’s leading real estate developers who moved in to partner one of the State institutions in Sierra Leone to provide critical housing stock for the population.
This absence of a coherent national policy framework and plan for the development of professional services export sector in Ghana in comparison with Malaysia, our immediate post-independence compatriots, is yet another grim reminder of the lost opportunities that have characterized our often checkered march towards economic development.
Malaysia has made remarkable strides in the development and promotion of professional services exports over the years. This achievement was occasioned by Malaysia’s recognition of the services sector as the next engine of growth which has been duly reflected in all of its Industrial Master Plans. The thrust of these plans was the strengthening of the institutional and implementation capacity of Malaysians not only to supply professional services to the domestic economy but also to export first to neighbouring countries and subsequently further afield to other parts of the world. The results have been remarkable. In 2004, the value of Malaysia’s export of services stood at US$ 30.75 billion. In 2002, that country ranked as the 29th largest services exporter in the world, according to WTO sources.
This focus for services is reflected in the respective roles entrusted through the various MDAs such as the National Professional Services Export Council and the Professional Services Development Corporation which have spearheaded Malaysia’s march towards becoming a hub for professional services exports in South East Asia. A Services Export Fund (SEF) is also in place to provide assistance in the form of reimbursable grants to Malaysian Service Providers for undertaking activities to venture into the international market through tendering or negotiating for international projects, conducting pre-feasibility or feasibility studies for international projects, and export promotion activities.
While not necessarily advocating for a dedicated fund for services exports, it is not far-fetched to suggest the re-engineering of our own Export Development and Investment Fund’s grant portfolios to include specific components to support the services sector along the lines of Malaysia’s SEF.
Ghana has been too tentative in responding to the fast-changing trends in global trade. The recently launched National Strategy for the Export of Non-Traditional Services from Ghana is yet another pioneering initiative of the GEPC with support from the Commonwealth Secretariat. This is a good start with some useful recommendations that can generate some degree of interest in the sector.
However, that strategy is not audacious enough to capture national imagination about the huge potential of the sector and can therefore not be depended upon solely to bring services into mainstream national export discourse. What Ghana needs is a revolutionary approach that will totally transform the services export sector. This approach must be fashioned along the lines of efforts that transformed what is now known as the Non-Traditional Export sector from apparent non-existence into a key growth pillar of the national economy in terms of foreign exchange earnings, job creation and government tax revenue. Launched in the early eighties as a corollary to the Economic Recovery Programme (ERP), the Export Diversification Programme provided the blue print for diversifying the export base of Ghana.
That programme came with massive injection of resources, relevant policy initiatives, sustained national interest and institutional strengthening which were responsible for unlocking private sector potential and catapulting the NTE sector to become the fourth largest foreign exchange earner after coca, gold and tourism.
The NTE sector-style approach is recommended to unleash the huge national potential for exporting professional services. And, in this regard, Government alone cannot be depended upon to initiate the process. Strong private sector advocacy will be needed to make all the ‘right noises’ and constructively engage Government in crafting a comprehensive national programme with broad-based ownership and participation to transform Ghana’s services sector into a truly viable and internationally credible exportable offer.
This country owes it as a responsibility to support the large pool of professionals to successfully explore business opportunities in external markets, especially as the local market is unable to profitably absorb all their services. Whilst, Ghana as a country will continue to depend for the large measure on merchandise exports for most of its foreign exchange earnings, it is justifiable to expect and indeed demand for a sensible blend between merchandise and services export development and promotion.
Edmund Opoku-Agyeman [email protected], [email protected]
? The writer is the Founder and Coordinator of the Services Export Support Initiative (SESI), a non-partisan, non-sectarian, not-for-profit private initiative offering support towards the accelerated development of the services export sector in Ghana.