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Speeches & Transcripts

TV Africa's Bare Facts Host, Kwesi Pratt*, Interviews World Bank Country Director for Ghana, Ishac Diwan

May 17, 2011

Kwesi Pratt, Ishac Diwan TV Africa's Bare Facts

Transcript

Kwesi:          What is the mandate of the World Bank?
Ishac:           The mandate of the World Bank, if I remember correctly, it is to "reduce poverty with professionalism and passion".
Kwesi:          That’s all?
Ishac:            That is the main "terms of reference" of the Institution.
Kwesi:           Have you succeeded in reducing poverty in Ghana and elsewhere?
Ishac:            Attribution is an issue.  We have to work with countries, with governments, and there are success cases; partnerships that you can think about that have been successful and there have been other failures as well.
Kwesi:           What are some of the failures?
Ishac:            What are some of the failures?  Broadly speaking - if you are interested in Africa - if we look at Africa in the past decade, it is a success story.  The general picture is one of success.   Poverty is being reduced by about one percentage points a year, if I remember correctly its about 50% and it has been going down by one percentage points a year for the past 10 years.  Growth rates have been around 5% a year for the past decade.  It has been a good decade for Africa and it seems that the momentum is also in the right direction.  We can talk in more detail.  Now, there has been some failures, failed states have been fragile countries which have had trouble, and these have been the main cause of regression.  I am thinking say, Cote d' Ivoire.  I mean very often it is the political circumstances that would set the country back - decades, in a few months sometimes.
Kwesi:           Can we talk specifically about Ghana.  What is the poverty situation now as compared to 1983 when the Economic Recovery Program was implemented?
Ishac:            Well, from that perspective Ghana is often touted as a big success story.    Poverty has been reduced to more than half - to something around 30% now.  We are talking about $2 a day.  And this was due to steady economic growth over the years - political stability, broadly speaking, over two decades of 3, 5, 6% of growth of GDP per year;  growth of incomes that have lifted people overtime out of poverty.  There are pathways for poor households out of poverty - through education, through agriculture, through moving to towns, getting into the services, the IT revolution has helped a lot.  Many elevators have allowed people out of poverty but still so many struggles for their daily subsistence.  But broadly speaking it is a country with opportunities and stability that has allowed the poor to get ahead.
Kwesi:           When we are talking about poverty, what are we exactly talking about?  Because if you are talking about growth rates and so on, they can tend to be misleading.  What are we talking about when we are talking about poverty?
Ishac:            That is a very good question.  I mean what is development - all together?  I mean poverty is a state of iliberty.  It is the opposite of freedom.  It is when households feel so miserable that they are not be healthy, or happy, they cannot afford to invest in the future of their kids for example.  Its the opposite of freedom so we see ourselves coming out of poverty as gaining in human rights and being able to participate more fully in human endeavors, and developing the capabilities of the persons.
Kwesi:           But if that were the yardstick, then the vast majority of Ghanaians are still very poor.  Many Ghanaians cannot feed themselves.  Even the so called ' elite'  have to wear second-hand clothes, drive second hand cars, they can' t pay their childrens' fees and so on.
Ishac:            Its all relative. I mean, clearly the gap in the world between rich and the poor  is amazing, terrifying and growing.  So, when you think about it in relative terms, there is a lot of deprivation.  At the same time, eh, if one trust the figure, and as I travel around Ghana - I see success!  I mean I also work in neighbouring countries.  I worked in Ethiopia before and I visited villages there and I can tell you there is more human rights and capabilities and happiness in Ghanaian villages.  You have a clinic, you have a water point and you have services, you have social capital - people help themselves when they are hit by a shock; and they see opportunities - they see a brighter future.
Kwesi:           How much premium should we place on GDP, increases in GDP rates and so on.. Because that’s one of the things that are thrown at us all the time.
Ishac:            Its one measure.  We shouldn't be fanatic about it.  I think at the end of the day its happiness one seeks for.  It’s one measure.  Its a measure of economic activity and I think it is an important measure because as people are more productive they can produce more; because they use science, they use skills, because they are using assets that are being invested in - from the past they earn more with less effort and that is part of development.
Kwesi:           But GDP is a statistical average.  It doesn't tell the whole story.
Ishac:            GDP per capita is a very imperfect measure of things, sure, you have to use it carefully - for particular statements but not exaggerate its use.  I would agree with you.
Kwesi:           And the same should go for per capita income.
Ishac:            Yeah. Agree.
Kwesi:           And all of them.
Ishac:            Yes, No! - I mean look, to use two, three figures to depict an economy is simplistic!  We have to see where the country is coming from, what is the social momentum, what are the differences in the family. It takes much more than three numbers to describe a society.
Kwesi:           OK. So now let’s see where the country is coming from.  We are coming from an era where we used to produce most of the things that we needed.  You know, we were producing electronics, we were producing shoes, we were producing food, and we had unfettered access to education and so on.  Now we are here, we are virtually importing everything - toothpicks, catapults and all.  What does that tell us about the state of the economy?
Ishac:            I would contextualize your description of "the lost paradise".  I don't recall a time where Ghana was producing all these things effectively to the benefit of the whole population.  There was a time, short time in history.
Kwesi:           We were producing radios, we were producing television sets, we were producing refrigerators, we were producing our own fish, we were producing our own shoes, we were producing jute bags, we were producing alcohol and beverages, we were producing matches, we were producing cars, now we do not produce any of these things.
Ishac:            Well, I wish you would produce all these things. 
Kwesi:           Why is it that now we are more and more becoming dependent on the outside for the things that we need.
Ishac:            I mean the general view, which you may disagree with, is that this is an interconnected world with a lot of opportunities for dealing with each other, that it pays for countries to specialize in what they do best because that maximizes their income and then it allows them to import what they don't produce.  - The theory of comparative advantage.   I recall our Chief Economist, who is Chinese - was here recently and you know, we were talking about growth and he was asking - ah you know why you don’t produce motorcycles.  It would be useful, you know, you start with small industries and all that. He ended up concluding that, ah you know, very Chinese mind - really Ghana should focus on producing good chocolate for the whole world - that China alone could take all the production.  It’s an extreme view but it reflects the idea about comparative advantages.  You can produce more of what you would consume but in a small market, it is not necessarily very efficient.  If ECOWAS was open in one market, I think it would create immense opportunities for Ghana and others because you would serve a market of 200 million.  Now we are serving here a market of about 20 million, and a lot of the industries you are talking about are they about scale?  I mean, there is competition by Chinese manufacturers for example.  They are extremely efficient.  Why would you produce something here by about twice the cost of what you can import from China?  You have to be competitive.  Now it seems to me, the key to competitiveness, and I am with you, industry has a role to play.  Its a large market, and the question is what is  it  Ghana  could do,  take it politically to open up its West African market because this will have to be the incubator for these industries.
Kwesi:            But there you are doing market analysis!   There are other analyses that you can do.  We import because we need things.  We export because we need money and so on.  So if were producing the things that we needed, couldn't we be cutting down on our imports?  Couldn't we be looking inward and looking at a more self reliant national economy?
Ishac:            I think for many goods and wares, you can easily be competitive with a little push, the answer is YES.  The key is to pick those goods that don’t turn into white elephants that burn public resources for no good.  I can take the example of rice.  You know, it bugs my mind, that Ghana imports something like $600 million a year of rice.  I mean there is land, there is water, there is sun, and there are people with skills that can produce it.  There is a need for public support for these industries to be competitive.  Because East Asia exports rice quite cheap, so one will have to be just fair to the consumer.  That’s the challenge and it’s I think it is possible and I have been working hard to help make that possible. 
Kwesi:           In discussing the theory of comparative advantage and so on.. What do you think that we should concentrate on, If you were to advise us.  You know, Ghana - what should we concentrate on and what should we leave to the outside world.
Ishac:            Okay - first, as you know, I cannot really answer this question because it has to do with the creativity of a society and the concept of comparative advantage is a dynamic one.  It evolves over time.  You could do some now, you can do something else in the future - and one could think of culture and all kinds of potential comparative advantages.  But if I look - kind of calls as an Economist - at Ghana and West Africa, from the outside and I see where the world is going, I would say agriculture and mining are the two big advantages of West Africa.  If you take a look at the world, the world has invested enormously in industry in the past decades with the competition between China and the West.  And the recent recession has shown that there is enormous excess capacity that would take years to resolve in manufacturing.  The scarce factor right now is becoming food and minerals.  Because of the world growth, we expect billions of people in China and India to become middle class, start eating meat regularly.  That place has enormous demand on agriculture.  In the past thirty years if you recall in Africa, there was export pessimism, right!   Export prices were always falling, right?  The future, I think is about agriculture and mining prices always rising, because the world is going through these X curves where these demands will grow faster than world growth.  So I think it is agriculture and mining, but the key, is how? One figure, by the way, that would interest you - it seems that about 60% of uncultivated land ready for cultivation in the world is in Africa.  And you just look at the map of Ghana and you realize the potential.  I mean, Ghana could easily be say what Brazil has done in a few years, if it gets organized in commercial agriculture.   In mining, gas and oil, I think the real challenge there is how to add value, not to just export raw; and how to get organized, including on the governance side to maximize the domestic gains from it so that it is not an enclave thing with the foreigners investing, the stuff going out with very little employment, little bit of taxes, a lot of corruption - avoid that model!   And from a micro perspective, to have these two together - agriculture and mining - is also a challenge.  Because mining, you know, gives you easy foreign exchange, an appreciation of currency, it makes agriculture less competitive, unless you invest in agriculture to make it more competitive.  So it is somewhat a difficult mix but I can picture Ghana, say, for the next two decades really rising on these two reactors. 
Kwesi:           I was wondering if you were taking cognizance of the damage for example, that mining is reportedly doing to the environment, to agriculture, the spillage of cyanide, the destruction of forests and so on.  You know, have you taken cognizance of these aspects?
Ishac:            Of course, of course!  You know mining could be very risky to communities, export creation, to the environment as you are saying and to the economy as a whole.  I mean, you have heard of the resource curse so the big challenge is how to take advantage of it.  And it has to do with good governance, with how to control these things and we contribute to that.  We have a good dialogue and budget support line for mining and forestry where to we try to strengthen the institutions - from the environmental agencies, to the ministries, to the communities to deal with the sector in ways that lead to gains instead of losses.  But you are right.  It is a dangerous sector and we have all of colonial history to remind us.
Kwesi:           Exactly!  But would you, for example suggest that we have a real look at the legal regime.  For example the legal regime which guarantees the retention of foreign exchange abroad by the mining companies, the legal regime which deals with the environmental pollution and so on.  Would you recommend that we deal with the legal regime?
Ishac:            Yeah, absolutely!  And I think you have an okay legal regime.  I mean we have been working with your government for several   years now, technically in bringing technical skills to refine the legal regime.  A lot of it is about implementation.  You know, if you recall recently, for example the environmental agency issued a big penalty on some mining corporations, this was a premier.  I mean could it have been done say politically, a few years ago, given the political power of the miners.  I was very happy with this.  Also recently, the EPA tried to tax one of the Oil companies that weren’t a good in experience, but nevertheless I think it is very revealing.  We were quite happy with the passage of the Oil Revenue Bill, but Oil - there are other bills that need to come also under environmental aspects that are still being discussed in Parliament.  But say in the Oil Revenue Bill, one of the components is that the contracts with the companies have to be made public.  I thought this is very progressive.   This is something we really pushed for, not only with the Government, but by the way also increasingly useful with civil society groups.  I mean in Ghana you have a political system.  You have the government, you have activists - and it is that relationship that I find very rich.  And increasingly, we see our role as stepping back and letting the system function, so helping not just the government but civil society in getting their acts together, and they manage.  I think this is a big win, compared to other countries.   I mean in countries next door contracts are not publicly available.  If they are publicly available and there is no hidden appendix, you can see exactly what the agreement is and whether this agreement respects the law.
Kwesi:          Well, the other leg of your suggestion is agriculture.
Ishac:            Right!
Kwesi:          Is it possible for Third World agriculture to grow in a situation where the so called "first world" you know, keeps heavily subsidizing its agriculture and we are not in a position to subsidize our agriculture.
Ishac:           It’s not fair fields, that are for sure - but it is possible.  It is possible.  Eh.. You know, after all these subsidies come from their budgets.  I mean they are paying for them, right, so it makes the country as a whole not as competitive.  I mean they are not going to subsidize for hundreds of billions.  They are gonna subsidize to keep 3% of their population in eh.. you know, in the rural areas ... so its limited.  And reality calculations we have show that the disadvantage it creates for African agriculture is of the order of 10-15%.  The disadvantage you have, say due to poor infrastructure is much larger than that.  So it is a task - it pulls you down but ah.. it’s not the end of the world.  I think it can be overcome.
Kwesi:          But, we are talking about competition on the global market.
Ishac:            Yeah, yeah!
Kwesi:          ….and if our production costs are much higher, then we lose out.
Ishac:            I am telling you its 10 -15%.  It is in trust and it is a task but I say it can be compensated because it has many other advantages.
Kwesi:          Now, what are you doing in the area of infrastructure, you know, I want to know what you are doing in the area of infrastructure in agriculture.  What is the World Bank doing in Ghana?  What is the general policy and what is it doing in Ghana?
Ishac:            On agriculture?
Kwesi:          On infrastructure for agriculture. 
Ishac:            Well, we are very involved in infrastructure and have been for years.  Eh… broadly in two sectors - in transport on the one hand, and in energy on the other.  Eh, we have large investments in transport.  There is always several $100 million rolling.  Eh, we have important programs now on feeder roads as well which serve agricultural lands.  What we are trying to do with these feeder roads program is to bring back something to life - its something that Ghana developed in the 80's but lost.  Ghana was leader in labor intensive methods for rehabilitating and maintaining roads.   Because you know, feeder roads - the key is to maintain them regularly.  There is a road fund which we helped set up, so the system is self-sustaining and actually the quality of roads is not bad, it needs to improve more - I think 60% of the roads are passable in Ghana.  Could be much less in other countries, need to improve more.   And so, there are renewed efforts in our programs on these labour intensive methods, small SMEs across the country using labour to maintain the road network.  Umh energy... well, the other thing on roads is we are also putting a lot of efforts to connect Ghana .. umh.. as I was speaking before, really the real dream is this regional space - and transport is quite important.  So with others, we have worked on the road on the north to Burkina and linking it to the poor, to the whole system of trucks that can get directly out of Customs and north to Burkina, Mali and other countries and also the coastal backbone which comes from actually Abidjan all the way to Lagos including trying to have easier routes for trucks to move around and we can come back to that; trying to understand politically why all these road blocks.  The other aspect where we have been quite involved with is energy, and energy is also important in agriculture.  Here too, I think the situation has improved over the past few years.  We have had energy crises at some stage.  It was a wakeup call.  Since then, there have been a lot of efforts and your production has increased a whole lot.  And here too the regional market is quite important.  You know it is interconnected to other countries.  I think Ghana will be a leader in the future in energy, partly because of hydro and there is more hydro potential and you got a heads start with Akosombo and we are happy that the World Bank was an investor in Akosombo -one of our proudest projects but also the gas is gonna really give you a cake to produce cheaper energy.  I think you will be one of the main producers.  To give you a sense of magnitudes, right - when they produce energy in Burkina Faso, they have to track the fuel from the Port here in Tema, say all the way to Ouagadougu.  it ends up costing them 35 - 40 cents to produce a kilowatt.  The kilowatt you will produce with gas will cost a few cents.  So the difference is enormous.  Exactly!
Kwesi:          And hydro for about 2 to 4 cents.
Ishac:            Yeah, once you put a few billion dollars to build the dam.  Correct!  Correct!
Kwesi:          Now, how about eh.. Irrigation - because we are told that, one, the lack of irrigation is one of the major problems confronting agriculture.  Are you in any way interested in irrigation?
Ishac:            We are very interested in irrigation;   I think this is definitely part of the future.  We are looking back…. I mean President Nkrumah left many things not done but big visions and we are looking right now at the Accra Plains which is fabulous piece of real estate by the port, several hundred thousand of hectares by the river.  It’s one of the best places to produce horticulture.  It’s close to the markets, so we are looking into it but I must tell you irrigation is very expensive.  I mean we are talking tens of thousands of dollars per hectare.  Ah so, kind of.. to approach irrigation ,as gift to a few lucky farmers - I don't think it is necessarily the right way to go. 
Kwesi:          Which is the right way?
Ishac:            I think a more interesting way is to think about it commercially.  You know, it is an expensive infrastructure and the State's got a get a good return on it because it’s  coming from peoples' taxes.
Kwesi:          But the good return is that people get fed.
Ishac:            The good return is that, people are producing and making money and you are taxing it.  And you are getting good returns for those, you know, you are collecting taxes from people and investing them in irrigation - they' ve got to get something in return.  So, I mean we' ve been looking not only at small schemes but also at commercial schemes, public - private partnerships where the government does - say the main canals and companies - small and large and medium invest in the secondary and tertiary canals and maintain the schemes. 
Kwesi:          Should agriculture be driven by the private motive?  Shouldn' t agriculture  just be about feeding the people and improving the nutrition of people.  Should it necessarily be driven by the profit motive?
Ishac:            That’s very deep and philosophical.  Eh.. what right I see…
Kwesi:          It’s practical also.
Ishac:            Yes of course!  I mean you wonna discuss whether the capitalistic system is the right system?  Let’s say it is the system that Ghana has adopted and the question is, it is not about the fundamentals - there is a broad agreement.  But yes, incentives drive people but that’s not the end of the story.  They have to be regulated also so they don’t hurt others.  Collective action is very important and that requires social capital not just .. eh..  you know, financial capital.  So there are other things in life but yes, incentives are very important.
Kwesi:          Yes but incentives always don’t have to be profits!
Ishac:            They don’t always have to be profits, I would agree with you.  They include profits but they include many other things.  Working for the public good is a great incentive.  It drives many people.  I know it drives you, for example!
Kwesi:          Well, it drives all of us. 
Ishac:            It should drive all of us. Agreed!
Kwesi:          Now, let’s deal with the issue of umh… partly perception and partly the concrete advice you give to governments.  There is the suggestion that you give the same advice to all governments and all countries do not have the same conditions.
Ishac:            Well, that would be wrong.  Because countries' specificities are enormous.  em… I hope we do not do that.  I don’t do that.  I try not to do that.  I try to understand the situation; I try to manage my teams.  If I have a team that comes for three days  and walks from the hotel to the ministry and gives a classical presentation which is " cookie cutter" , I send them back and tell them I don' t need you.  I try to shop in the world.  The World Bank is a bit of a "super market" - I try to shop for groups that have eh... some skills that can help the country.
Kwesi:          But over the last twenty years or more, the prescriptions look alike.  Privatization of state enterprises, withdrawal of subsidies on social services, retrenchment of labour, you know – non- payment of subsidies on agriculture and so on…  Classical prescriptions!  Aren't they?
Ishac:            Is that right?  I mean, for example look at our work in Ghana today.  We do not deal with any of the things you have listed. 
Kwesi:          Because you have finished privatizing more than 400 state enterprises.
Ishac:            No, there are still many.
Kwesi:          There are not many more to privatize.
Ishac:            Look, there are still many state enterprises and frankly I…you know, there was a shift in regime and in development philosophy.  There was also a big shock to Africa in the ' 80s and that required adaptation.  As in the family, you are hit by a shock, your income is not sufficient to maintain yourself.. it’s bad news.  You know, you have to tighten your belt!  So there was a situation like this which has similarities across the continent.  That’s a historical moment.  I don't think that that should define the character of the World Bank.  We had to deal with it the same way you had to deal with it.  We tried to help as much as possible. It was a bad shock, a negative shock that left bad things.  And part of the bad... part of it is that some industries including some public driven industries, because you know, public sector had taken the lead on some technologically more advanced industries and that’s a good idea for, you know, states that are well organized to lead the development where the private sector would not go.  But then they couldn' t afford to do that anymore, and perhaps in retrospect.. there was more destruction than there should have.  Other.. some countries have managed to sustain some of these experiments to fix them instead of to let them be destroyed.  There are some interesting examples in Ghana which I need to investigate more to understand.  For example, take the COCOBOD - this is a marketing board, public sector.  It played historically a very important role in moving out of poverty.  I have so many friends now that are professionals whose parents and grandparents were planting cocoa; may be a third of people that went out of poverty in the past two decades were through cocoa.  So that institution of the state, which brings science through research - new seeds, fertilizers, all of that have played a very important role and I am so happy that it has survived and thrived, and by the way there was a World Bank loan to help it reform and improve it.  On the...
Kwesi:          But even….
Ishac:            Let me just complete.  On the other hand, the marketing board for rice disappeared.  It went bankrupt!  It was very inefficient!  It turned out.. You know, It was politically infiltrated.. There were many specific problems that led to the fact that it had to go under.  I regret that.  Right now we are doing new efforts with the government to revive the rice sector with a new.. a different model, a model that’s more adapted that I think will work with large firms working with small firms.  But I wish somehow that rice marketing board was saved in the past, because it could have… ah have kept tens of thousands of people in the north richer and happier over the past two decades.
Kwesi:          Yeah, but even with COCOBOD it has undergone significant reforms.  You now have the License Buying companies.
Ishac:            You know…
Kwesi:          It used to be a monopoly of COCOBOD.  Now you have introduced the private sector in the buying of cocoa.
Ishac:            Yeah, so.. I mean things evolve.
Kwesi:          What is their effect?
Ishac:            I mean, things evolve.  Institutions evolve….but the COCOBOD, the cocoa sector is more efficient than it used to be but it still has a long way to go.  You know, cocoa farmers could be two, three, four times richer if they have access to more science to better planting methods.  Ah, if I know my figures correctly, I think we produce here 400, 500 kilos per hectare of cocoa.  In ideal conditions in Brazil I am told farmers produce 2000, so farmers here could be five times richer.  So there is a way to go.  Ah.. you know, the COCOBOD has pluses and minuses.  The minus is that, you know, it is not extremely efficient.  The plus is that it affects so many people. It has allowed so many people to ... so its a trade off.  You know, you are a big institution you are less efficient but you touch the lives of so many people.
Kwesi:          But the policy of privatization has had many negative effects as well.  Our State Fishing Corporation has collapsed completely, our fish imports are rising, ah… the Black Star Line is gone forever.. and so on. 
Ishac:            But you can also point to successes with the private sector.  Take Telecom for example, I mean that’s a revolution that has .. that was deployed through the private sector.  The investments that these companies have done, tens of billions of dollars, the state couldn't have afforded to do them that fast.  So there are also pluses in the private sector.  There are negatives in the private sector, there are pluses and minuses in the public sector.  Eh.. nothing works by itself.  You have to puts efforts.  Private sector, you have to regulate so you are to prevent excesses and public sector you have to put pressure to get efficiency because otherwise the politicians will get their cousins and friends to work there.. and the wage bill will be immense, and it’s not very productive because the profit motive is not there. 
Kwesi Now let’s look at this!  In 1983 the PNDC adopted the Economic Recovery Programs, certainly under your tutelage.  They did everything that you told them to do.  By 2001, you and others were telling us to declare ourselves HIPC.  What happened!
Ishac:            Well, first of all, tutelage - I don't like.
Kwesi:          OK, your direction, with your advice.
Ishac:            I mean look, if you look at the history of Ghana, the adjustments that you made in the early ' 80s and the very strong political leadership sets you apart from other countries today!  You' ve cleaned up the mess of years of corruption and… there was  a beautiful dream at the beginning and that dream was very state led, import substitution led, it was post-colonial, it was understandable but it was also driven by some abrasive it wasn't successful.  May be it was too ambitious for the time and so it led to excessive spending and it was not sustainable.  And then, it fell into very corrupt system basically of clientelism and the like.  Regime came and cleaned all that - it was tough.  We were part of it, we provided advice, but it was successful ultimately.  This is what gave us the current Ghana.
Kwesi:          How was it successful when after twenty years we were declaring ourselves HIPC!
Ishac:            You know we'll come to HIPPIC in a sense… but you know, it was successful in the sense that the exchange rate, for example was so over-valued to benefit these public enterprises that it really hurts the vast majority of the country that was exporting cocoa.  For example cocoa export collapsed before ' 83.  It took this major devaluation, which by the way was a political bet.  It was to take away from urban and give to rural to make cocoa, your engine, to start again.  Now.. now for the HIPPIC - What is HIPPIC!  HIPPIC is the elimination of the debts of the loans provided by the multinationals.. eh.. mostly over the years because debts grew faster than the economy.  So the economies weren't able to sustain, so in terms of the loan history it does point, perhaps true to some failures as you were saying.  I mean the economy didn't grow as fast as the debt therefore the debts weren't eh eh.. the loans weren't productive - right, that’s the plural.  Eh the positive side of course is that HIPPIC liberated these economies.  I mean, I am really happy that the world really managed to refund all these loans and eliminate them.  Because we saw a lot of growth, you know, it created a lot of fiscal space for governments to start functioning, making decisions, discussing socially where to invest, what to do,  it gave rise to you know energy and plans for the future.  In terms of the past, we can have a special program if you like, but the past is complicated; it’s not just about the World Bank and Ghana, it also about the cold war, it’s also about the shock of the 80's and .. you know, the world was full of shocks and Africa paid for it. 
Kwesi:          Yeah, but certainly in giving advice to governments you take cognisance of the total global environment.
Ishac:            Yeah, you have to!
Kwesi:          Yeah, so the total global environment is part of the conditions leading to the formulation of advice.
Ishac:            Yes, yes.
Kwesi:          Now, I am not asking about the value of HIPPIC.  I am saying that from 1983 to 2001, we did everything you told us to do.  By 2001, we were highly indebted, we were poor, we could not meet our commitments.  Is that success!
Ishac:            But, as I said.. This is not just you and us, there is the world also and the world moved in ways that were negative for Africa, and that’s what created the loses.  You know, we spot of export pessimism of commodity prices going down.  The global environment of the cold war - the global environment was very negative .  You know, whenever Europe sneezed there was a recession here.  Now, my current optimism comes from the fact that the global environment is moving in a way that is favourable to Africa.  There are also inner changes within Africa that are favourable.  You have ah...you know, a critical mass of intellectuals of civil society, of private sector with its competitive politics - I mean we are not where we were several years ago.  The colonization was only 50 years ago!  Let’s not forget that there is a huge shock that started a lot of things - the racialism, the phenomenon of the big man - I mean a lot of things came out of this, so let’s keep in mind the way history is moving.  As I said, my current optimism is from the reading of the evolution, of the global world in the way that I see as much more positive to Africa. 
Kwesi:          Now, are you doing things today, which are different from what you used to do in the 80's - the early 80's?
Ishac:            Oh yeah!
Kwesi:          And what is that difference?
Ishac:            I mean look!  Our institution reflects the world.  In the 80's if I recall, I wasn't that old in the 80's ha ha… The 80's were very coloured by the cold war.  I mean somehow, capitalists were very capitalist and communists were very communist and there was a Washington consensus in the sense of.. this is the list of what’s gonna be done.  Since then the world has changed a whole lot and there is much more appreciation, for as you were saying, the specificity of places, the history, the politics, the social relationships of what’s feasible.  I mean to give the right advice say.. I was posted in Ethiopia before - eh what a shock to go from Ethiopia to Ghana, I mean in a way Ethiopia is a development state but it is an autocracy.  Eh, you know, I would spend an hour with the Prime Minister to discuss in detail all issues.  Ghana, is the very dynamic - messier I would say- democracy.  The power does not reside in one place.  You have to work with the system.  When you say - provide advice, it is easy to say - who should we provide an advice to?  There is no one address in Ghana.  You have to become much more of a knowledge Bank, open to every one's advice. 
Kwesi:          Sir, something very interesting happened!  We had the World Bank advising the Government of Ghana on the State of the Economy between 1983 and 2001 and saying all the right things about the economy.  The New Patriotic Party comes to power and what the World Bank does is to write a letter to complain about the state of the economy.  The new government takes all the advice of the World Bank, all the way up to 2008.  There is a new government and the World Bank writes to complain about the state of the economy - what is happening!
Ishac:            Well, again with your premise - it’s not right! 
Kwesi:          OK!
Ishac:            I mean it’s not true that the government takes all the advice of the World Bank - they never do, plus we do not advice on everything.  Second, I did not write a letter to complain about the state of the economy.  I wrote a letter to alert the new President of the bad state of the economy because it was not known yet!   
Kwesi:          But that is exactly what I am talking about. You have been in 1983 and 2001…
Ishac:            But that’s the macro.
Kwesi:          If you listened to all that the Bank was saying, the impression was that the economy was very good, it was on track.
Ishac:            Right!  Now let me tell you what happened!
Kwesi:          Now all of the sudden, we are hit with a thunder bolt! Why?
Ishac:            Now let me tell you what happened.  First of all its.. it’s very specific what this is about.  This was about the macro economy and the size of the deficit in particular.  It was about how much has been spent before the election, relative to the revenues.  And that figure, as we've learnt later, was much larger than expected.  I mean, first you probably know that there is an electoral cycle in Ghana.  I mean... 
Kwesi:          Yeah, sure!
Ishac:            Although it’s the government in power which spend more.. eh before an election, and ah.. I will come back to that in a second.  Now its very hard to know exactly how much a government is spending because.. Eh, you know, you get to know about it nine months afterwards or so, and so we didn't know that the spending had increased that much, and the candidates didn't know either, I suspect; because they were making big promises.  Now as it turned out after, the situation got clarified and the spending was very large even by historical standards, and it took several years of, you know, tightening your belts to absorb that. Now, I think the real question if you just wonna be political... you wonna be constructive is what’s it gonna take to reduce these electoral cycles in Ghana because afterall the competition is very intense politically.  So one can understand the generalities, whether it is one party or the other that is in power.  Some people in the party would say - look, we wonna win this election, spend some more money, you know, get your Finance minister to relax a little bit.  This is not the time to wonna be conservative!  But then it’s very costly, it takes years to adjust.  Interest rates shot to 25, 30 40%; all businesses stopped - you can't do business.  Can Ghana at this stage of its development of its maturity afford a shock every four years like this! No, it can't.  So, civil society is grappling.  It’s not all of the World Bank, I just wrote a letter to the man to alert him because I had nothing before - it’s just out of courtesy. So don't take it beyond that.
Kwesi:          It’s not about courtesy.  It’s not about you.  Your predecessor did the same thing.
Ishac:            I know, but I am explaining!
Kwesi:          So that seems that there's a certain pattern…
Ishac:            But let me come in.  Let me continue.  I mean just to focus on the important thing. The important thing is what society is trying to do to reduce this.  So eh first - its transparency, freedom of information.  I mean this freedom of information bill that is at Parliament now is very important.  It’s taken a bit of time to pass but that will obligate the Ministry of Finance to have quarterly reports on its website all the time so that it would be part of politics, you know.  If they wonna spend more, fine, but at least the opponent knows and tell people - look its true there are more jobs but they are spending tomorrow's money.  That’s number one.  Number two, I think there is now a bit of a swing vote.  I mean, the private sector knows that this is bad.  If they see it happen they will probably vote for the opposition.  So there is change!  I even see both parties starting to talk together about - I mean, is there a constitution where you can bind your hands - there are things we agree on.  We don't wanna be led by our extremists.  Can we constitutionally find ways to reduce the temptation  which is short-termish!  So, you know, we can talk about the World Bank if you like, but this is a very important issue for Ghana. 
Kwesi:          Now, you have been dealing with the new administration for two years!  How do you evaluate your relationship with the new administration especially, the benefits accruing from your relationship?
Ishac:            Very cordial, very close.  I mean..it’s not a one-to-one.  It’s a team to team.  As I said, we are a supermarket.  Eh, It took a little while for the administration to get to speed, and that’s also something we could come back to.  But..ah…I think eh.. there has been several, you know, creative good initiatives where this administration will leave its marks, same way as the previous administration lefts its mark in many ways, and it will leave important things behind.  We have been able to work closely with them on eh.. fisheries, on agriculture, on energy, eh.. on gas, ..on eh.. decentralization, and on water and sanitation.  I think these are the five, six things where we had very close discussions and we were able to..to..add good value.  Eh.. what I wanted to come back to, is eh..the fact that it took a little while for this administration to get up and running and I think its gonna take a bit of effort to adapt your institutions to the fact that there's gonna be change now.  Change is the name of the game.  Eh.. you know, President gets into the Castle..there is no.. it’s not organized for transitions, and I think that is an important area for the future, even the constitution reviews is looking at things like that. 
Kwesi:          Are you convinced about the petroleum pricing policy? 
Ishac:            The petroleum pricing?
Kwesi:          Policy.
Ishac:            I think the principle is right!  The principle is basically..eh that, broadly speaking it’s the word 'price' that the consumer would think.  Eh, why am I saying that!  Because if you want to..., you can protect people short term and that is done.  There is a fund to smooth price but there is no avert policy to keep prices below the international price.  To do so, would be extremely expensive, because it is much consumed.  You know, this is massively consumed. and so a little bit.. you reduce the price a little bit, it’s gonna cost billions.  Now, I don’t think this is a good idea for two reasons.  First of all, it benefits mostly the richer people.  It’s regressive as a subsidy.  Number two, I think you have a government that is better than that.  You know, governments that end up subsidizing or governments that people don't trust to deliver services, you know, it’s like the Egyptian government… so corrupt in the past.  I mean people would say, give us all your money in subsidies, you know, subsidies to petroleum prices in Egypt before the revolution and still now, is four times the expenditure on health and education together.  This is a failure of the state.  I mean you want your state to deliver services.  So, I think ah...that the other question really is whether these petroleum prices are taxes, taxed sufficiently.  The tax is low in Ghana because in many countries it’s the main good to tax, eh.. partly to protect the environment also. I mean overtime we are all moving to carbon taxes so the real tax is being reduced elsewhere and we are moving there.. and there is an issue here about the tax revenues in Ghana are small relative to the size of the economy.  You see that in public servants being under-paid and this is not sustainable.  I mean your public servants.. the pay has increased a whole lot, by the way, in the past, in the previous and in this half....
Kwesi:          But it is not sufficient!
Ishac:            But they are still not sufficient.  Actually, on average, I should say that because it’s a fact.   It is about half the pay for the average African.  So, therefore - just to come back, therefore you need more taxes and petroleum is a natural thing to tax.
Kwesi:          Briefly, the governments claims that.. Ah..it has reduced inflation to a single digit.  How do you say - is it true?  What is the import of that?
Ishac:            It is true, because I believe in numbers and it’s very important.  Inflation hurts the poor more than anybody.  It’s a very bad tax on the poor and let me say the poor carry money and the money is losing value every day.  The rich have their money in Bank accounts and earning interest they compensate.  Inflation is very bad for the poor.  It gets interest rates high, there less investments, less job creation, it’s very bad.  Big inflation by the way, single digit around 10% is OK.
Kwesi:          OK.  Unfortunately we have to end the conversation.   I would have liked to pose questions about the value of the currency, about education and about many other things.
Ishac:            Right!
Kwesi:          But unfortunately we have only one hour and we would like to say thank you very much for coming to the studio.

* Kwesi Pratt is a journalist, staunch member of the Social Forum, politician, social commentator, opinion leader, publisher of the Insight Newspaper and host of TV Africa’s deep probing BARE FACTS weekly interview program.

 

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