Barely a year after government grandly announced a reduction in benchmark import values of 30 percent for vehicles and 50 percent for other goods, the move has come up for review. Indeed, a circular from the Ghana Revenue Authority effectively exempts some goods from the reduction, which means the import duties payable on those goods will rise back to their pre-reduction levels.
Unsurprisingly, in complete reversal of the fanfare with which the reductions were announced, the latest exemptions are being introduced on the quiet. This gives the impression that government regards the initiative as a failed one which it is embarrassed by.
However, while this newspaper is relieved that government is at least partly retracing its steps with regards to benchmark import valuations, we also hold the view that government has nothing to be ashamed of.
The policy initiative was well intentioned, even if ill-advised. The data supported government’s actions, at least with regards to winning more market share for Ghana’s sea ports. Indeed, it is still unclear why the reduction in bench mark import valuations has failed to appreciably win import traffic from competing sea ports along the West African coast line.
But whatever the reason, the fact that its failure has convinced government to restore the erstwhile higher benchmark values for some goods – expectedly as a precursor to a wider restoration of the previous valuations – is a good thing.
Here we completely agree with the Association of Ghana Industries that the reduction has made local manufacturers less price competitive against imports and this should be the key consideration, not the cost competitiveness of the countries sea ports as facilities for receiving imports.
However the two considerations need not be completely mutually exclusive; government could maintain the lower benchmark values for imported industrial inputs, but restore the higher values for imported consumer goods. This would keep local industry price competitive against imported finished consumer goods while at the same time encouraging the use of our sea ports for importing raw materials, intermediate inputs and plant and machinery.
But even such a compromise has its defects. Lower benchmark import values on industrial inputs and consequent lower duties payable would serve as a disincentive for efforts towards increasing local content in manufacturing processes. Import substitution is supposedly a key policy objective and lower benchmark values on imports work against the achievement of that goal, whether it is applied on finished consumer goods or on industrial inputs for local manufacturers.
International trade is a good thing. It is proven economic doctrine that increased trade volumes translate into faster economic growth. At the same time more international trade gives consumers more choice and forces local industry to become more price competitive.
However, there is the other side of the equation; more local production creates more local wealth and value as well as more jobs. These too are crucial considerations.
Ultimately the market share held by Ghana’s sea ports, as compared against competing sea ports in other countries should be a lesser consideration than all the aforementioned ones, whether in support of more imports or against more imports.
Consequently, any reduction in benchmark import values should only be driven by the right reasons – that is reasons that would benefit the consumer, not reasons simply aimed at benefitting the sea ports themselves.