Private investment promotion and regional balance in the Ghanaian economy: a Study of Macro Economic Policies with reference to the Northern Sector of Ghana

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Past government policies soon after independence ha d greatly contributed to concentration of industries in the metropolitan areas along the coast. This was justifiable on the basis of the theories and models of unbalanced growth during the initial stages of development. These seemed to have provided the conceptual justification for the top-down development as experienced in the country since the 1960’s making industrialization development policies urban biased through import substitution strategies. However some three decades of practice and the consequent trickle up or polarization el feet, mainly because of the absence of the conditions such as forwards and backwards linkages among the sectors necessary for the top-down urban bias growth strategy to trickle downy has created problems including rural urban drift of the population. Industrial location which is part of the wider problem of spatial distribution o economic activities is therefore employed to help address the general problem of regional imbalance. This is through the use of fiscal tax incentives to reduce the concentration of pr1ate manufacturing investments in metropolitan areas along the coast particularly the Accra - Tema conurbation. The study attempts therefore to investigate the type of locational incentives that will make private manufacturing industries locate away from these metropolitan centres Tb is can he possible after assessing the impact of current fiscal policies, and gathering of views from investors on the field. The procedure for the research was as follows: Theoretical framework that was expected to throw light on the rationale behind existing behaviour of both policy makers and private manufacturing investors was extensively reviewed. This was also expected to help iii the prediction of long run industrial pattern for the country. Industrial policies since independence were also reviewed paving the way for suggestion of alternatives. A sample frame for private manufacturing investments between 1976 and 1995 was established using date mainly from the Ghana Investment promotion Centre and the Ministry of Trade and Industry in Accra. Based on census population a change in the number of private manufacturing industries established before and after tax policy was assessed between the Greater Accra region and the other nine regions put together and later between Greater Accra and the other regions individually. A Shift and Share Technique was employed to analyze the industrial employment in the various product sectors of private manufacturing in the national economy versus the Greater Accra Region. Industrial employment Shift and Share Analysis between the national economy and the other nine regions put together was compared, followed by a comparison involving the individual rune regions and the Ghanaian economy. These were expected to bring out the impact c the a\ policies on the various regions of the country. Views from investors as to the influence of fiscal tax incentives and other factors besides tax incentives in directing the location of private manufacturing industries in the country were moreover gathered through questionnaire and direct interviews. This was done random sampling of 60 private investors of sixty Private firms out of 131 in five regions in the north of the country established after the tax policy. Testing of Hypothesis using field survey data from the study regions was purported to provide a statistical evidence to accept or reject the assumption that fiscal tax incentive were solely responsible for the location of private manufacturing industries in the selected regions alter 1986. Findings made from the research are summarized as follows. Even though tax policies have influenced the rate of development in the nine regions other than greater Accra, put together, the individual regions have virtually not benefited from them. Other factors such as accessibility to market areas, input materials and investors own decisions do influence location of Private industries in the hinterlands. Since the influence of tax incentives in the location of private manufacturing investments away from the Accra- Tema area of the Greater Accra region and the metropolitan centres along the coast has been discovered to be limited, it is proposed that other policies should complement fiscal policies
A thesis submitted to the Board of Postgraduate Studies, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfilment of the requirement for the award of the Degree of Master of Science in National Development Policy and Planning, 1997