It is a travesty to scrap minimum capital requirement for foreign investors – Prof. Asuming
An Economist and Senior Lecturer at the University of Ghana Business School, Professor Patrick Asuming, has joined the many calls urging the government to maintain the minimum capital requirement for foreign investors, describing the decision to scrap it as a travesty.
According to him, this requirement has been included in the Ghana Investment Promotion Centre Act for a reason, noting that its complete removal may benefit the state in the short term but endanger the bigger picture.
Contributing to the discussion on JoyNews’ PM Express on Monday, Professor Asuming explained that countries that benefit most from Foreign Direct Investments (FDI), are those that make what he described strategic choices, by outlining a longer-term goal for their economies and identifying where foreign participation is required.
“You look at your economy and set a long-term strategic plan and vision, then you figure out where foreign participation will be helpful, but even that is generally temporary because you have a strategic plan,” he elaborated “so you check where you don’t have enough expertise and capital and strategize that maybe in the next 10 years you will encourage foreign participation in that space, so you do that to ensure that they are there to fix or fit into your long-term strategy.”
On the potential dangers the government’s plan might pose to the economy, the economist emphasized that allowing foreign players free entry into some key sectors of the economy such as the trade sector, risk inflating the country’s import bill, adding that economies facing challenges in their production capacities such as Ghana, must strictly control foreign entries into these key sectors.
“I am particularly worried about issues regarding the investment in trading, because there is a reason why the minimum capital requirement for those coming into trading is double [compared to] what you have for other sectors…when you allow foreigners to participate in trading that is one of the easiest ways of increasing your import bill, especially for an economy that has challenges with production capacity,” he explained.
“If you are not producing yet you say foreigners should come and engage in trading, what are they going to do? They are simply going to import from their country to come and trade,” he added.
Professor Asuming further noted developments over the years, indicating a gradual but consistent ease in conditions for foreign investors and suggested that instead of scrapping the capital requirement for these foreign investors, government should outline a long-term plan and identify where and how foreign players fit in to accelerate growth.
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