Monday, October 31, 2016

Terkper eyes diaspora bonds

The Finance Minister, Seth Terkper has strongly indicated that the government is seriously considering issuing diaspora bonds to raise cheaper funds in a bid to tap into the wealth of Ghanaian emigrants after the country’s first domestic dollar bond issued recently was deemed a success.

“Diapora Bonds is feasible. We are looking at it. Everything is feasible with planning and with stabilization of the economy.

“There have been long standing suggestions that we should be doing diaspora bonds given the large number of Ghanaians who are living outside. We are going to see the extent to which there could be an interest in Diasporans who are holding money,” said Mr. Terkper at a media interaction in Accra.,”
“These are all just plans. We are not going to rush into it but we could see whether this could be a step towards making them buy bonds,” he added.

Such bonds, he said, have been successful when a particular group of people from a country living abroad are targeted to invest in the bonds aimed at raising funds to support growth of the economy.

“The Diaspora Bond is for residents who are in the diaspora or who are outside and have resources like someone living in the US and earning dollars.  So, you can look at this group and target them and give them an instrument, just like a bond, just as we have the sovereign bond or the corporate bond,” Terkper explained.

He indicated that Diapora funds constitute a significant amount of inflows into the economy. “It’s about the third or fourth largest source of foreign exchange into the country. With such bonds there should be a number of roadshows and awareness creation to assure investors of repayment and also understand that their monies will be safe.”

A report by the Chief Economist Complex of the African Development Bank Group, confirms that issuing Diaspora bonds may well give Ghana an alternative to donor funds and help it fill the yawning infrastructure gap.

It has been proposed over the years that Africa could tap into an estimated US$53billion, being the savings of an estimated 140 million Africans living outside the continent, according to a paper titled “Diaspora Bonds: Some lessons for African countries”.

Drawing lessons from Diaspora bond issuances in Israel, Ethiopia and India, the paper said tapping into migration wealth could be an effective means of funding development on the African continent.

In May 2012, Mr. Terkper, then deputy Finance Minister, told the B&FT that government might sell a Diaspora bond to build infrastructure if the conditions were favourable and competitive.

“In fact, to the extent that Ghanaians living outside send money to buy Treasury bills, three-year bonds and five-year bonds, it’s a Diaspora bond except that we haven't designated it as such.

“The size of Ghana’s Diaspora makes a Diaspora bond an attractive proposition,” he added. At least one million Ghanaians live abroad, according to a 2005 study by researchers from the Institute for the Study of International Migration and Inter-American Dialogue. Bonds are a debt security instrument with a maturity of more than one year, tradable on the financial markets.

Diaspora bonds are issued by a country to its own Diaspora to tap into their assets in the destination country - as an alternative to borrowing from the international capital market, multilateral finance institutions or bilaterally from governments.

The practice goes back to the 1930s in China and Japan, and was later followed by Israel and India in the 1950s.

Diaspora bonds are typically used as project financing tools for public-sector, large-scale infrastructure development. Generally, they are to be used by a country to implement its development strategy, the report said.

Lately, the World Bank has been advising countries about Diaspora bonds, arguing that while remittances help countries like Ghana benefit from the incomes of their emigrant populations, Diaspora bonds are a means to tap into their savings, too.

Gov’t negotiates to access remaining US$3bn Chinese loan

Government is in strategic negotiations with Chinese authorities to access the remainder of the US$3 billion loan for energy and gas infrastructure projects, Seth Terkper, Finance Minister has said.
This loan will be repaid by leveraging revenue flows from lean gas from the country’s Jubilee oil field. The China Development Bank (CDB) disbursed US$1billion of the US$3billion loan and government placed a CAP on US$1.5billion. The disbursement was to finance the Atuabo Gas Plant, pipelines from the Jubilee fields and other infrastructure.  

Mr. Terkper, speaking in an interview explained that there is a Presidential task force, under the Chairmanship of Mr. Ato Ahwoi that is working with the Ministry of Finance and Foreign Affairs to continue the negotiations with the CDB in order that the CAP of the US$1.5 billion loan that was placed is removed.

“We already had some discussion in Beijing, China to set the framework for this. The terms of reference of the taskforce is to discuss the US$500 billion and the possibility of the additional US$1.5billion, and the CAP whether it can be brought back,” he said.

The Taskforce, he mentioned, is to table again strongly the principle of self-financing and to argue with the Chinese that the price of crude is so volatile that, “if we complement it with a lean gas and the by–products coming out, we have a better chance of maintaining stability in terms of repayment and bringing on board the US$1.5billion.”

Outlining the terms of reference of taskforce, Mr. Terkper mentioned that the team has no power to enter into any agreement, rather they are expected to submit their recommendations which will be tabled in Cabinet for onward submission to Parliament.

 “If any of their recommendations including use of funds is outside the original master facility agreement and subsidiary agreement we have to go back to Parliament on the advice of the Attorney General.

“The premise of CDB facility is in tune with our self-financing strategy, which states that processed from any commercial project must be used to pay for the loans which financed the project, not paid from taxes as public debt,” he said.

He explained that revenue from crude oil sold at international market price at Brent benchmark price and the resources are repatriated to the Bank of Ghana and used to service the facility. 

“When the crude oil prices fell that source of financing the loan became inadequate and that is why disbursement of the entire US$3billion loan was stalled. It is always envisaged that the potential for the energy sector in the country is not always just crude it includes gas and lean gas which is under reference now. 

Hence, other sources of financing the facility include revenues from crude and lean gas which will ensure that the loan is not put on the tax payer to increase public debt, there projects will pay for themselves.

This, Mr. Terkper said is in consonance with the government’s focus on insisting that state institutions follow the Ghana Cocoa Board in using the proceeds from projects to repay loans. This being done by Ghana Airport Company which is using the airport tax and other charges to develop the airport. The Ghana Ports and Harbours Authority is also using proceeds from the port to pay for their expansion projects.

This is part of a broad strategy of financing alternative and more prudent ways to fund infrastructure projects in the country and this is working today, he said.

“We are not going to be putting the loans of commercial projects on tax payers as public debt. Ghana has a potential gas from three fields, Jubilee, TEN and Sankofa but this deals if for only lean gas from Jubilee. We would develop similar strategies for the TEN and Sankofa Oil and gas fields,” he remarked.

ICC lauds Parliament for ratifying WTO Trade Facilitation Agreement

Parliament has been commended for ratifying the long awaited World Trade Organisation’s Trade Facilitation Agreement which aims at helping to reduce the cost of doing business and improve the investment climate in the country.

Recommending to the House to adopt the ratification, George Aboagye, Chairman, Committee on Trade, Industry and Tourism said: “The Committee has thoroughly examined the Agreement and is of the view that ratification of this Agreement by Ghana would inevitably reduce the cost of doing business and improve the investment climate in Ghana.

 “Ultimately, the attraction of Foreign Direct Investments would impact positively on production, employment and government revenues especially, as revenue leakages would be minimised.”
The ratification of the WTO Trade Facilitation Agreement was laid in Parliament on 3rd August, 2016. It was later referred to the Committee on Trade, Industry and Tourism for consideration.

Meanwhile, International Chamber of Commerce (ICC) Ghana, the lead advocate towards the ratification has commended Parliament for taking the decision to adopt the ratification which has the potential to impact positively on the country’s business environment.

“ICC Ghana wishes to thank the Government of Ghana, Parliament of Ghana, Ministry of Trade and Industry, Global Alliance for Trade Facilitation, National Coalition members, West Blue Consulting, the business community and all other stakeholders for the effort put in having the agreement ratified,” said in a statement.

The Secretary General of ICC Ghana, Mr. Emmanuel Doni-Kwame commending Parliament confirmed to B&FT that the trade facilitation agreement is very important to businesses because it can have a major impact on bringing down trade transaction costs, adding that trade transaction costs are highest in developing countries, which are least able to carry transaction cost burdens.

He highlighted the need for the private sector to bring its expertise to bear in assisting the government in the implementation of the agreement.

The WTO Trade Facilitation Agreement contains provisions for expediting the movement, release and clearance of goods, including goods in transit.

It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building.

The Trade Facilitation Agreement (TFA) amendment protocol was adopted by the WTO in 2014, consequently paving the way for member countries of the WTO to ratify the agreement through their domestic legislative procedures.

In recent times, exporters, importers and manufacturers have decried the high cost of doing businesses at Ghana’s ports and borders.

The delays and its attendant cost have placed huge burden on businesses, making the agreement an essential part of addressing this phenomenon.

It is estimated that the trade facilitation agreement could reduce business costs by between $350 billion and $1 trillion, according to WTO, 2013, and could increase world trade by between $33 billion and $100 billion in global exports per year and US$67 billion in global GDP, said World Bank, OECD,2011 reports.

Following the delay in the ratification and implementation of the agreement, ICC Ghana this year led a coalition made up of Association of Ghana Industries (AGI), Ghana Employers Association, Ghana Shippers Authority, World Trade Centre (WTC) Accra, Ghana Institute of Freight Forwarders (GIFF), Federation of Association of Ghanaian Exporters (FAGE), Ship Owners Association of Ghana, Ghana Union of Traders Association (GUTA) and West Blue Consulting to advocate for the ratification of the agreement.

 The advocacy which was funded by Business Sectors Advocacy Challenge Fund (BUSAC) and supported by the Ministry of Trade and Industry led to extensive education of the business community on the benefits of ratifying the agreement.

An international dimension of the advocacy resulted in a seminar on trade facilitation agreement by the Global Alliance for Trade Facilitation and the International Chamber of Commerce (ICC) in September this year.

At the 1st anniversary of the National Single Window and launch of the Single Window manual, the Chairman of ICC Ghana, Alhaji Asoma Banda called on the Government and Parliament of Ghana to ratify the TFA.

The recommendations from the advocacy supported the National Committee on Trade Facilitation of the Ministry of Trade and Industry which has culminated in the ratification of the agreement by the Parliament.

ICC Ghana wishes to thank the Government of Ghana, Parliament of Ghana, Ministry of Trade and Industry, Global Alliance for Trade Facilitation, National Coalition members, West Blue Consulting, the business community and all other stakeholders for the effort put in having the agreement ratified.

International Chamber of Commerce Ghana one of the world business organisation’s 89 national committees located worldwide, was re-launched in March 2014. The launch, in one of Africa’s fastest growing economies, is set to strengthen the presence of ICC in Africa and further expand ICC’s extensive global network that currently comprises 6.5 million enterprises in over 130 countries.