This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 ACCRA 001681 
 
SIPDIS 
 
DEPT FOR AF/EX 
DEPT PASS TO USITC LYN SCHLITT AND NANNETTE CHRIST 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ECON ETRD PGOV PREL GH
SUBJECT: USITC STUDY AND REQUEST FOR INFORMATION ON U.S. -- 
SUB-SAHARAN AFRICAN TRADE AND INVESTMENT 
 
REF: A. STATE 137500 
 
     ¶B. 03 ACCRA 1295 
     ¶C. 03 ACCRA 841 
     ¶D. 03 ACCRA 933 
     ¶E. 03 ACCRA 652 
     ¶F. 03 ACCRA 2000 
     ¶G. ACCRA 01234 
 
¶1. In response to Ref A, Post submits the following 
information to assist the USITC in its investigation for its 
study, U.S. Trade and Investment with sub-Saharan Africa. 
This cable builds on Post's previous submission of November 
2003 (Ref B), and includes activities of USAID's West Africa 
Regional Program (WARP), which is based in Accra, Ghana. 
 
Developments in Economic, Trade or Investment Policy 
--------------------------------------------- ------- 
¶2. 2003 was a good year for Ghana's economy, mainly due to 
sound macroeconomic policies and high cocoa and gold prices. 
Ghana is succeeding in getting the budget under control, 
improving transparency and accountability in its use of 
public resources, and is maintaining fiscal discipline as its 
top economic priority.  Real GDP growth was 5.2 percent for 
2003, up from 4.5 percent in 2002.  The cedi is stable, 
foreign exchange reserves surpassed USD 1 billion, inflation 
is falling, as are interest rates, and Foreign Direct 
Investment (FDI) flows through June 2003 exceeded FDI for all 
of 2002. 
 
¶3. Standard and Poor's acknowledged the GoG's commitment to 
sound economic management in September 2003, when it assigned 
Ghana a "B-plus" sovereign credit rating.  Standard and 
Poor's based this rating on Ghana's macroeconomic performance 
and reforms, political and social stability, and the 
substantial debt reduction expected under the Highly Indebted 
Poor Country (HIPC) initiative.  Fitch Rating Agency 
simultaneously rated Ghana's sovereign credit at "B" with a 
positive outlook. 
 
¶4. Ghana reached HIPC completion point in July 2004, and will 
realize significant budgetary savings as a result.  Total 
debt forgiveness from IMF, World Bank, ADB and official 
creditors will exceed USD 3.5 billion.  As one of the few 
stable, democratic countries in the region, Ghana is 
increasingly seen as a gateway to West Africa and a hub for 
international business, NGOs and international organizations. 
 
 
Developments in Major Regional Groupings 
---------------------------------------- 
¶5. Ghana is participating in talks on the ECOWAS Common 
External Tariff (CET), which is based on the existing CET 
shared by the eight member states of the predominantly 
francophone West African Economic and Monetary Union (WAEMU). 
 The CET is supposed to go into effect January 1, 2005, with 
each country phasing in new tariff levels over three years so 
that all ECOWAS member states have harmonized tariff 
structures by December 31, 2007. 
 
¶5. Although the CET treaty was originally signed by ECOWAS 
heads of state in 1975, and revised in 1993, the process was 
resuscitated by the EU's declaration that it will only 
negotiate trade agreements with or disburse European 
Development Funds to regional groups after 2007, not 
individual countries.  Under the new Cotonou Agreement, the 
negotiation of WTO-compatible new trading arrangements 
between the EU and African, Caribbean and Pacific (ACP) 
countries must be completed by 2008.  The European Commission 
proposes that regional reciprocal free trade agreements 
replace the current non-reciprocal preferences in the trade 
relations between the EU and ACP countries.  The next round 
of CET negotiations will take place in September. 
 
¶6. The West African Monetary Zone (WAMZ), comprised of Ghana, 
Gambia, Guinea, Sierra Leone and Nigeria, remains committed 
to launch the West African Common Currency -- ECO -- in July 
¶2005.  Before this happens, the countries and the West 
African Monetary Institute must first finalize and implement 
plans for statistical harmonization, currency unification and 
West African Central Bank operations.  The countries must 
also meet four preconditions:  single-digit inflation, budget 
deficits under 4 percent of GDP, foreign exchange reserves 
covering over three months' exports, and domestic debt 
limited to 10 percent of tax revenue.  The West African 
Central Bank, based in Accra, will manage the single monetary 
policy and pooled foreign reserves, and will work to maintain 
price stability. 
 
¶7. WAMZ's goals in introducing the ECO are to create a larger 
regional market, increase cross-border trade and investment, 
achieve lower inflation and stable prices in response to good 
monetary policy and financial discipline, maintain stable 
exchange rates, and attract FDI.  Although donors are 
skeptical about the attainability of the July 2005 launch 
date, they support the process because it provides stronger 
external discipline to fiscal policy. 
PRIVATIZATION EFFORTS 
--------------------- 
¶8. Ghana embarked on a privatization program in the early 
1990s that resulted in the sale of more than 200 of 
approximately 300 state-owned enterprises.  The GoG's 
privatization program stalled due to political sensitivities 
surrounding certain industries, lack of legitimate partners 
for divestiture, and the inefficiencies and management 
concerns that render some industries less appealing.  Refer 
to Refs B, C and D for reporting on Ghana Commercial Bank 
divestiture, water privatization efforts and cocoa sector 
liberalization. 
 
GHANA AND AGOA 
-------------- 
¶9. Ghana's AGOA exports have increased rapidly, although 
overall trade to the U.S. has declined.  2003 AGOA exports 
were USD 40.6 million, compared to total exports to the U.S. 
of USD 83.6 million.  President Kufuor has announced several 
special initiatives ) including textiles and industrial 
starch -- aimed at taking advantage of AGOA, but they are 
thus far small in scale.  The GoG on occasion has extended 
beyond its regulatory mandate of ensuring compliance with 
AGOA regulations, and has sought to select specific companies 
to export under AGOA.  This has caused concern among private 
businesses opposed to government interference.  The 
USAID-funded West Africa Trade Hub is assisting Ghana and 
other countries in the region to take fuller advantage of 
AGOA. 
 
¶10. Ref E provides updated information for the President's 
2003 AGOA report.  Ref F, an AGOA Eligibility Review, 
provided more detailed accounts of AGOA-related trade and 
investment and GoG reform efforts.  Ref G discusses the 
potential impact in Ghana of ending the AGOA third country 
fabric provision. 
 
US TRADE CAPACITY BUILDING EFFORTS 
---------------------------------- 
¶11. USAID's West Africa Regional Program (WARP) provides 
technical assistance to both WAMZ Common Currency and ECOWAS 
Common External Tariff negotiations. 
 
¶12. In March 2003, the U.S. inaugurated the West African 
Trade Hub, which reinforces regional efforts to enhance trade 
competitiveness.  The USAID/WARP-financed Trade Hub focuses 
on enhancing the potential of West African producers to sell 
to the U.S. market under the Administration's Africa trade 
initiative, thereby permitting the region to take greater 
advantage of the increased trading opportunities provided 
through AGOA. 
 
¶13. The Global Trade and Technology Network (GTN) is a USAID 
funded program that links companies around the world through 
an electronic/internet-trading platform to establish 
international trade and business linkages in the form of 
joint ventures, direct sales or direct purchases, 
agent/distributorships, licensing and franchise agreements. 
 
¶14. Growth through Engendering Enterprise in ECOWAS Countries 
(ECOGEE) is a three-year USAID/WARP-funded project that began 
in September 2002.  ECOGEE supports West African women's 
efforts to overcome barriers to business development and 
regional trade. 
 
¶15. The U.S. Trade and Development Agency (USTDA) advances 
economic development and U.S. commercial interests in Ghana 
by funding various forms of technical assistance, feasibility 
studies, training, orientation visits and business workshops 
that support the development of a modern infrastructure and a 
fair and open trading environment 
 
¶16. West Africa International Business Linkages (WAIBL) is a 
USAID/WARP-funded program to increase commercial partnerships 
between U.S. and West African businesses.  These 
relationships can take many forms including export/import 
agreements, joint ventures, and equity partnerships. 
 
¶17. USAID/Ghana's Trade and Investment Reform Program (TIRP) 
is a 5-year activity aimed at improving the investment 
environment and technical/managerial capacity of Ghanaian 
enterprises, reforming regulations that adversely impact 
international competitiveness in sectors with the best export 
potential and promoting non-traditional exports, including 
tourism. 
 
¶18. USAID/WARP is supporting a USDA-APHIS advisor, to be 
based in Ghana and working in the West Africa region.  The 
advisor will work with WATH, ECOWAS, WAEMU, West African 
governments, and private businesses to assist agricultural 
producers in preparing their products for export to the U.S. 
market.  Such assistance will include the facilitation of the 
design and submission of Pest Risk Assessments, improving 
regional capacity to analyze plant health risks, augmenting 
the trade capacity of regional producers and governments, and 
the dissemination of information regarding U.S. regulations 
on the importation of agricultural goods and the Sanitary and 
Phyto-Sanitary (SPS) regulations of the U.S. and WTO. 
 
¶19. The USAID/WARP funded Market Information System project 
aims to enhance economic growth in West Africa through 
increased intra-regional trade in agricultural commodities 
and inputs.  This will be accomplished by strengthening 
networks of market information systems and traders' 
organizations.  This activity will provide critical market 
information like commodity prices through radio broadcasts 
and mobile-phone subscriptions to traders and producers to 
spur trade.  The end result of this effort will be increased 
regional economic integration in West Africa through closer 
economic ties and improved food security. 
 
¶20. The Department of Treasury also participates in 
capacity-building assistance through the U.S. Customs and 
Border Protection, which in May 2003 conducted a customs 
operation and training needs assessment to assess Ghana's 
compliance with AGOA and identify areas that could benefit 
from additional training.  Treasury's Debt and Tax teams 
provide resident and intermittent advisors to the GoG.  The 
tax team provides management training to Ghana's IRS and VAT 
agencies, and assists with improving customer service and 
taxpayer assistance, expanding the taxpayer base and 
improving delinquent collections. 
 
¶21. The Treasury debt team's resident advisor supports and 
advises the Finance Ministry and Central Bank on domestic 
debt issues.  Projects have included coordinating with the 
rating agencies for Ghana's first sovereign credit ratings, 
revising government debt auction procedures, implementing a 
cash forecasting system for use by the GoG, and creating and 
introducing new debt securities to help with the transition 
to a more efficient capital market.  The debt team has also 
provided technical assistance to help design and implement a 
new central depository system for government securities and 
equities. 
YATES