Nobody doubts now the prospects that the IT revolution brought to the global economy at the beginning of the last decade and the trillion dollar business empires it created worldwide. Microsoft fuelled the dot.com, the Asians developed its business alternatives, the Americans and Western Europe used it to power the global financial system with the stunning increase in the access to information provided by the Internet. However, the first decade of the 21st century ended sadly in the turmoil of the global credit crunch and a near global financial meltdown. Promising as the signs may be, the forces which shape global business have not changed – geopolitical power, technology, population, natural resources, regulations and environmental issues. Global Economic Geopolitics and Ghana. This is what globalisation brought us - governments and companies from everywhere competing with everybody for everything, thus the force behind the shift of “the centre of global economic activity”. The direction of the shift, however, is on the shoulders of China, India and few South American countries. “China’s economy, already the second-largest in the world in terms of output and third-largest overall, will continue to grow at many times the rate of most developed economies, at least for the foreseeable future: 10% to 11% per year compared to 2% to 4% per year in the United States. The number of millionaires in China is expected to double in the next five years to nearly 800,000 according the Boston Consulting Group. The combined wealth of these potential investors, according to the estimate, would exceed US$7.5trillion. In the next 10 years China is expected to have 100 new airports and 186,000 miles of new roads. India’s rapid development in engineering and information technology is overwhelming. Behind these developments are 3.5 million graduates and post-graduates that are added annually to India’s talent base. Perhaps you can ascertain the reasons for the huge budget increases of global financial institutions in their emerging markets departments. Global equity flows into these markets are gradually increasing, notwithstanding cries over property protection, transparency and foreign investment regulations. “China and India both scored poorly on the Wall Street Journal’s 2009 Index of Economic Freedom with virtually composite scores of 53.2 and 54.4 respectively (with 100 being the best possible score).” The reasons for these scores are basically attributed to tightly-controlled government interference in business, burdensome regulations, high cost of credit and limited foreign participation in their markets. However, analysts cast big doubts over these Asian powers assuming world super-power status. China’s inability to assume that mantle is due to insufficient natural resources, inefficient bureaucracy, lack of transparency, inadequate protection of intellectual property rights, governmental interference, and poor production-quality. The same can also be said of India, among other things. Ghana has inevitably launched itself onto the geopolitical economic warfront with the discovery of oil. Sometimes, we sadly seem to have nothing to fight for - but watch the fight over us. Ghanaian authorities mistakenly declared their displeasure at the sale of Kosmos shares to a fellow American oil empire, and the next thing we see is President and deputy Presidents of Chinese oil corporations paying courtesy visits to the Ghanaian Presidency. Should you doubt the comparison of the situation to war, check those who have been refused visas this month! This is just to illustrate where we are on the economic warfront. Again, that is the dictates of globalisation; so fault no-one. But the question is, do we really know what is going on and have we really planned the cards to play to be secure the next four or five decades from here? The giants in global trade are being substituted, but the powers that be will not change, at least not in the next decade. It may not be necessary to change our foreign policy, but foreign economic and trade policy. If you ask my opinion, it should not be who comes in or goes out, but what we get when they come or go, all with discretion. If you cannot innovate, copy. The last thing we want to do is to make friends, take sides or give ourselves a negative PR. Thus, while raising the bar of economic freedom policies, we should ensure adequate increases in educational investments to empower the working population to meet industry demands and foster start-ups. And I mean “applied sciences” empowerment, obviously a paradigm-shift in educational curricula. The implication of this strategy is that we will absorb Ghanaians in all the foreign investments industries to create wealth while propelling indigenous industry. But do we even have a development strategy? Ghana in the “IT-Global.” The dot.com generation will become the mature workforce and consumer populace during the coming decade with their different psycho-economic inclinations. Remember they have grown in an era of an ever-wired world of instantaneous information. Believe it or not, they will demand instantaneous information, service and support. Established, they will have all the information for instantaneous services reviews across numerous channels with such reviews being shared to millions. The power of these reviews is beyond measure. Facebook and other global entities have been forced to make consumer policy changes with pressure from these reviews. This attitude will also drive data-sharing in finance and trade. According to United Nation’s International Telecommunications Union (ITU), mobile phone penetration world-wide is reaching 60%. With this development, individuals and businesses will demand a 24/7 plug-in and expect their banking and business partners to support them with real-time access. Illustratively, the frustrations facing Ghana’s quest to build the credit-scoring industry to drive down cost of credit will gradually fade. New capabilities will force stakeholders to delegate access to and control over their data and allow it to be shared across individual banks, brokerage firms and credit scoring agencies. One reason for this development will be that “the many of the smart tools that were available only to people working in large banks will become available to everyday lay-people - which will democratise financial decision-making in new ways. The mysteries of high cost of credit will be thus unravelled. Identity, privacy and security issues will become big. However, this will only drive high-powered technology innovations and regulations. Unfortunately Ghana, the HOME LAND, is lost in the picture here. Perhaps we have not realised that information and its big brother, technology, will be driving developments in the coming decade. The signs are everywhere as to how the dot com generation is hungrily embracing the information age - the cause of the hunger being absence of technological infrastructure to open-up and speed-up the flow. The other aspect is the intellectual capability to turn IT and its related issues into developmental prospects. How to empower the human resource capital of Ghana with this intellectual capability should be a policy issue. The “Build To Compete” Decade and Ghana. Infrastructure development will be seen as the key global competitive edge and a foundation for future economic growth. An infrastructure-spending boom is expected in the coming decade - especially in emerging markets. In a meeting with his cabinet and economic advisors in November 2009, President Obama noted: “When we’ve got several trillion dollars of infrastructure falling apart, we need to put people to work doing the work Americans want done.” However uncertain as to how Obama intends financing this, it signifies what the appetite for infrastructure will be in the foreseeable future. The US has its hands tied in yearly increases in infrastructure spending, in this case not by the World Bank but by its own debt. China is spending 8% of its GDP on infrastructure. Clearly, there are no questions about the direction of infrastructure spending, but the President Obama earlier added: “But we’re also in an era of fiscal constraint, which means we have to find more creative, new approaches to financing these projects.” Funding is clearly the thorny issue now. While Europe seems to lead the way with their European Investment Bank (EIB) model like Brazil’s BNDES, which injected over US$50 billion into the Brazilian economy, there’s been an intense debate on the form the proposed National Infrastructure Bank (NIB) of the US should take. Obviously, this funding strategy will be the trend in the coming decade with these banks raising substantial funds on capital markets and on-lending at favorable terms to projects seen as furthering the interest of governments. Fortunately for Ghana, Dr. Kwame Nkrumah trail-blazed this funding strategy on the African continent decades ago with the National Investment Bank (NIB), although tainted with not-so-popular socialist quintessence. The Abu-Dhabi Group and The Kuwait Investment Authority (the brain behind the Zain Network) are just examples to show how popular the concept is in the Middle East, although they may not need to raise capital due to their state funding strategy. In 2006, Ghana established the Venture Capital Trust Fund which could be reviewed to give it investment banking status while maintaining its Venture Capital functions as a subsidiary in the group. A strategic merger or discretionary absorption of state-owned NIB with such an investment bank would not be out of place. Emphasised, it is critical for private sector economic empowerment and industrial development - highly recommended. Ryan Orr, an executive of the Collaboratory for Research on Global Projects at Stanford University based in California, identifies four trends in infrastructure finance that will shape project finance decisions in the next ten years. First is Private-Public Partnerships (PPP) agencies globally. Though its experimentation has not been too successful in the Ghanaian scene, it will be a sure option for infrastructural funding in the foreseeable future. Infrastructures have gradually emerged as a new asset class alongside real-estate and private equity. A third trend that is Ghanaian-concerned is the availability of information about the behavior of host-governments toward project investors as a result of the Internet. According to Orr quoted earlier, “governments cannot get away with expropriation and other opportunistic behavior because everybody will know about it.” Last is the developing shift in the opportunity set. By this he meant individual and institutional investors will seek business models in countries with exciting GDP series. “Destination Tomorrow” – Global Finance and Ghana Assertions that regulatory failures formed the catalyst for the global recession which occurred at the tail-end of the last decade saw accusing fingers pointed at governments and regulatory agencies. Reactions to these accusations have been back and forth on the way forward. Noted, more regulations and further tightening of existing regulations will be the order of the day. The former British Premier, Gordon Brown, noted there is “a need for greater transparency so that the public is aware of what is happening.” Apparently, the UK - frontrunner in regulatory changes - is concerned about executive remuneration issues. The EU however has proposed a law that would give national regulators the power to fine or raise capital requirements for a bank whose remuneration policies encourage too much risk-taking. Although analysts believe there are enough rules and power to deal with the issues concerned, Alan Greenspan, the former head of the US Federal Reserve, advocates a stronger capital cushion for banks with graduated regulatory capital requirements. At least for the foreseeable future, the global banking system will be the subject of attention for political leaders and regulators. Whether by sheer proactive strategising, responding to Basel II or response to early warnings signals, Ghana raised the bar to give enough cushion to its banks. With the deadline for the new capital requirement for banks drawing ever closer, efforts of most banks to raise additional capital are insistently taking place - and most successfully. By and large, the regulatory tools for the banking industry have not been lacking. However, as it is said, enforcement of the rules has always been a bane of Ghanaians. Although the Securities and Exchange Commission (SEC) has proven its control over its jurisdictional industry in recent history (the Ayrton and UT listing), vibrancy of the industry has not been promoted enough. It is also argued that to make local commercial banks stronger for stronger business, especially when we are entering into an era of a stronger oil industry, the Bank of Ghana’s (BoG) capital requirements regulations for local banks should be at par with the expatriates. At best, the existing discriminatory regulatory system will only amount to pampering them to develop as frail second-class banks. Apart from regulatory issues, the other financial issue to dominate the decade will be the direction of credit and its exigencies. Although the global financial system is unwinding itself from governmental rescue, it has been painfully slow as depicted by the rate of recovery. Unfortunately, this trend will be around for some time. Katzman, an investment advisor from Constellation Wealth Advisors in New York noted: “the problem is that once governments become involved, they feel it necessary to impose their politics on the system.” Mark Esbeck, President of the International Network of M&A Partners (IMAP), a global organisation of M&A advisors, says there is a great deal of government influence in financial markets. They are quoted as saying that “the outcome of such government interference or regulation is likely to constrain global credit and make it difficult for market participants to predict behavior as economies recover around the world.” It should also be noted that two trends will drive up global cost of credit: nations seeking record finance for stimulus packages will drive up the demand for funds, thus driving up prices; second is the behavior of hungry investors daring greater risk for earnings intended to make up for recent losses. Happily, when the gloomy clouds have gradually lifted, we will see that emerging economies and even some frontier economies could be excellent for mortgage and consumer credits. Days ago, the Vice President hinted at government’s intention to go back to the international market to raise funds. Frankly, the timing may not be right. Too many countries are on the market, which will obviously drive up prices. In the very recent past, El Salvador, Angola, Nigeria, and Vietnam have been active on the market - with Russia expected to return to the market. 2010 has seen the developed world sovereign borrowing alone up to US$12 trillion. This will push interest rates to climb up, making it harder for emerging countries to borrow, says Robert Smith, founder of the Turan Corporation in Boston. Already, the World Bank is raising concerns about the Ghanaian intent, and I think their argument is legitimate. As the global economy recovers, global economic activity will heat up gradually and Ghana can take advantage of the bounce-back by deepening the macro-economic indicators and boosting private sector activity. Concluding the Ghanaian decade Ghana is standing on the threshold of change. Ghanaians should always remember President Obama’s words: “Africa’s destiny is in its own hands!” The oil discovery decade is the single biggest opportunity to change its destiny forever. Unfortunately some politicians are thinking the change means changing to win the next election. It is far greater than that. Educating the generation now and unborn can singularly effect the change for the half-century to come. From the Primary to the University levels, educational institutions should be dotted every where in the country. Leaving this subject to the private sector only amounts to doing nothing – failure. A paradigm-shift should also be ensured in the educational curricula with science and technology education taking centre-stage. One of the single major development policies for the decade should be to empower the human resource capital of the country - and it should start now. The second of the major policies should be pragmatic, deliberate private sector development. This policy should see the “Black Star Investment Bank” or “Ghana Investment Bank” making specific proactive interventions in the indigenous private sector while propelling new indigenous start-ups. These will tell where we will be in 2020. Research based on Reports of Global Finance (GFM) e-mail:fiifiannorh@yahoo.com Source: BFT