VZCZCXYZ0014
RR RUEHWEB

DE RUEHAR #0439/01 0481451
ZNR UUUUU ZZH
R 171451Z FEB 06
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 0518
INFO RUEHKH/AMEMBASSY KHARTOUM 0012
RUEHRO/AMEMBASSY ROME 0733

UNCLAS ACCRA 000439 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
PLEASE PASS TO CODEL PELOSI 
 
E.O. 12958: N/A 
TAGS: AMGT ECON GH OREP OTRA PGOV PREL
SUBJECT: SCENESETTER FOR VISIT TO GHANA OF CODEL PELOSI 
 
-------------------- 
Summary/Introduction 
-------------------- 
 
¶1. (SBU) Ghana is a democratic, market-oriented, pro-American 
country in a region marked by conflict and authoritarian 
rule.  It has one of the best human rights records in Africa 
and has made significant efforts to combat trafficking in 
persons.  President John Kufuor just completed the first year 
of his second term, which has so far been marked by solid 
economic performance and continued political stability, 
despite intra-party tensions and corruption scandals.  Ghana 
exerts regional leadership, strongly supports the Global War 
on Terrorism, and is a committed, major contributor to UN 
peace keeping operations.  Ghana is a member of the IAEA and 
has a non-permanent seat on the UN Security Council. 
Bilateral relations are excellent and broad-ranging. 
President Kufuor has met President Bush six times, met with 
former President Carter for the second time in October and 
recently hosted the successful visit to Ghana of First Lady 
Laura Bush.  Ghana is eligible for U.S. assistance under the 
Millennium Challenge Account (MCA) and hopes to sign an MCA 
Compact by mid-2006.  End Summary. 
 
-------------------- 
U.S.-Ghana Relations 
-------------------- 
 
¶2. (U) Ghana is a reliable, democratic partner for the U.S. 
in peacekeeping, conflict resolution, counter-terrorism, and 
economic development.  U.S. interests center on support for 
Ghana's fourteen-year-old democracy, promotion of open 
markets, and the reduction of poverty.  Key components of the 
broad U.S.-Ghana relationship are: 
 
¶3. (U) Democracy:  Ghana's December 2004 parliamentary and 
presidential election, the fourth election under the 1992 
constitution, was seen as free, fair and generally peaceful. 
Ghana has a free, lively media and civil society, a largely 
independent judiciary and Electoral Commission, and an 
apolitical military.  It generally respects human rights and 
rule of law.  However, the long-term success of Ghana's 
constitutional democracy is not guaranteed and democratic 
institutions are weak.  While Ghana scores better than many 
countries in Africa on Transparency International's 
Corruption Perception Index (Ghana ranks 65 globally on the 
CPI), corruption is a growing concern.   Anti-corruption 
institutions are weak.  We supported the 2004 election with 
Mission observers and $1.3 million in election assistance. 
We have programs to strengthen parliament, the judiciary, the 
police and the media. 
 
¶4. (U) Development Assistance and Trade:  Annual USG 
assistance to Ghana is approximately $75 million.  This 
includes one of USAID's largest programs in Sub-Saharan 
Africa.  Ghana receives approximately $50 to $60 million in 
USAID grant assistance and food aid per year, with a focus on 
education, health, HIV/AIDS, trade and investment, and 
democracy and governance.  The U.S. and Ghana have a 
relatively dynamic trade relationship.  U.S. exports to Ghana 
in 2004 increased to approximately $300 million, a 50% 
increase over 2003, and Ghana is consistently the fifth or 
sixth largest market in Africa for U.S. goods.  USTR 
considers Ghana a "pacesetter" country, due to its relative 
success in diversifying its exports under AGOA. 
 
¶5. (U) Security:  Ghana provides us excellent cooperation in 
counter-terrorism and counter-narcotics efforts.  We have a 
robust mil-mil relationship, in part a recognition of Ghana's 
outstanding contribution to peacekeeping (Ghana is the fourth 
largest contributor to UN peacekeeping forces worldwide) and 
to regional stability.  Ghana was key to peace efforts in 
Liberia and Cote d'Ivoire.  Kufuor served as Chair of the 
ECOWAS for two terms, ending January 2005.  ECOWAS Executive 
Secretary Mohammed Ibn Chambas is Ghanaian.  Ghana has also 
 
SIPDIS 
been welcoming to refugees and currently hosts about 60,000 
refugees, mostly Liberian.  We support Ghana's regional role 
through our mil-mil activities, USAID's West Africa Regional 
Program (WARP) and our Refugee Coordinator Office, all based 
in Accra. 
 
---------------------------- 
Internal Political Situation 
---------------------------- 
 
¶6. (SBU) President Kufuor is now just over one year into his 
second term.  This term has been marked by major continuity, 
in his ministerial appointments, his priority themes, and his 
cautious approach to governance.  In response to rising 
global oil prices and IMF pressure, Kufuor raised petrol 
prices and established a National Petroleum Authority.  The 
GOG recently made strides toward signing a Millennium 
Challenge Account (MCA) agreement, submitted a trafficking in 
persons law to parliament, and eliminated all school fees, 
thus guaranteeing free primary education for the first time. 
 Kufuor offered Ghana as one of the first two countries to be 
reviewed in the NEPAD African Peer Review Mechanism. 
 
¶7. (SBU) The backdrop of Ghanaian politics, however, remains 
highly polarized.  The New Patriotic Party (NPP) and 
opposition National Democratic Congress Party (NDC) are 
closely matched in parliament, the result of a very close 
2004 national election result.   Leaders of these two major 
parties intensely dislike each other.  NDC parliamentarians 
complain that the NPP throws its weight around in parliament, 
using its majority to force through laws.  The NDC has 
boycotted parliament, alleging the NPP does not show them the 
proper respect and protesting the NPP,s desire to pass a 
controversial law enabling Ghanaians residing overseas to 
vote.  The NPP and NDC both suffer from intra-party 
divisions.  Tensions between and within the two parties could 
worsen as both parties prepare for District Assembly 
elections in 2006 and presidential/parliamentary elections in 
¶2008.  There are six other smaller parties in Ghana which 
also face significant internal divisions as they prepare for 
the 2008 election. 
 
¶8. (SBU) The Kufuor government has faced new charges of 
corruption, highlighted by Ghana's free media.  Energy 
Commission Members were forced out under a cloud.  The 
Administration was attacked for alleged corruption in the 
creation of Ghana International Airlines.  Media allegations 
have linked the President to a corrupt hotel deal, as 
revealed by an Iraqi-American named Gizelle Yadji, who claims 
she had an extra-marital affair with the President.  (Kufuor 
denies involvement in the hotel, bought by his son, but the 
GOG has not commented on the other allegation).  Two public 
opinion polls this year found that there is a growing 
perception that corruption is on the rise, especially by the 
president and his office.  In November, the Enquirer 
newspaper revealed a secretly-recorded tape in which the NPP 
Party Chairman alleged that government contractors pay 
kickbacks to the president and his staff.  The scandal 
resulted in the resignation of the party chairman.  The 
Minister of Roads and Transport is currently being 
investigated for corruption. 
 
-------- 
Security 
-------- 
 
¶9. (SBU) Ghana's 8,000 strong military is characterized by 
its allegiance (at least over the past six years) to elected 
civilian leadership, as well as a rich peacekeeping tradition 
and a close relationship to the United States.  Since 1960, 
over 80,000 Ghanaian soldiers and police have participated in 
peacekeeping missions worldwide, including currently in the 
Democratic Republic of Congo, Lebanon, Liberia, Sierra Leone 
and Cote d'Ivoire.  We provide, or have provided, support 
through our Excess Defense Articles (EDA) program; the 
International Military Exchange Training (IMET) program; the 
Foreign Military Sales (FMS) and Foreign Military Funding 
(FMF) programs; the Enhanced International Peacekeeping 
Capabilities (EIPC) program; the African Contingency 
Operations Training and Assistance (ACOTA) program; and a 
robust DoD Humanitarian Assistance (HA) program.  Ghana will 
likely receive even more support under the Global Peace 
Operations Initiative (GPOI).  Ghana opened the Kofi Annan 
International Peacekeeping Training Center (KAIPTC) in 2004, 
the only center of its kind in West Africa.  The United 
States European Command (EUCOM) provides direct support in 
the form of a liaison officer who is attached for duty at the 
KAIPTC, and has provided approximately $1 million in funding 
support. 
 
¶10. (U) Our mil-mil relationship also includes West Africa 
Training Cruises and Joint Combined Exchange Training.  Ghana 
is the newest member of the State Partnership Program (SPP), 
partnered with the North Dakota National Guard (only the 
second in Sub-Saharan Africa), which will further strengthen 
mil-mil and civilian-military ties.  Ghana participates as an 
African Fuel Initiative Hub country, and allowed the 
construction of an Exercise Reception Facility (ERF) at Accra 
Air Base under an addendum of that Technical Arrangement (TA) 
signed in 2005.  Ghanaians avidly participate in DOD's 
Counterterrorism Fellowship program (CTFP).  Military visits 
over the past year included three ship visits, ten General 
Officer or Flag Officer visits, and a regional maritime and 
coastal security conference. 
 
¶11. (SBU) Ghana is a strong ally in the Global War on 
Terrorism.  Ghana has signed 12 of 13 UN terrorism 
conventions and a Customs Mutual Assistance Agreement.  We 
have excellent police contacts and good cooperation with the 
police and other security services.  There is narcotics and 
illegal arms trafficking through Ghana, as well as rising 
concerns about crime and fraud.  We have assisted Ghana's 
police, customs, and counter-narcotics agencies, including 
ongoing basic training for the police. 
 
-------------------- 
State of the Economy 
-------------------- 
 
¶12. (SBU) In 2000, the Kufuor government inherited a 
distressed economy: high debt levels, accelerating inflation 
and interest rates, a plummeting currency (the "cedi"), all 
exacerbated by declining world cocoa and gold prices (the 
main foreign exchange earners), and rising crude oil prices. 
Kufuor's government strengthened fiscal and monetary policies 
considerably, reining in spending and borrowing, and cutting 
subsidies by imposing badly needed energy and water price 
increases. 
 
¶13. (SBU) The improved policy performance along with higher 
cocoa and gold prices since 2002 resulted in higher economic 
growth, reaching 5.2% in 2003, 5.8% in 2004, and projected at 
over 5% for 2005.  Tight monetary policies since mid-2003 
restored confidence in the economy, and the IMF calls the 
government's control of expenditures during the 2004 election 
year an "historic achievement."  As a result of the improved 
policies, inflation fell from over 30% in mid-2003 to below 
12% for 2004.  Although the annual inflation rate rose to 
14.8% in 2005 due to high world oil prices, Ghana's Central 
Bank expects it to fall to single digits for 2006.  Key 
short-term interest rates have also fallen to below 15%.  The 
cedi has been relatively stable against the dollar for over 
two years. 
 
--------------------------------------------- --- 
Positive Economic Trends:  MCA and Regional Role 
--------------------------------------------- --- 
 
¶14. (SBU) Ghana is becoming a gateway to West Africa, due in 
part to its political stability and economic reforms, but 
also due to turmoil in the region.  Trade and investment 
flows to and through Ghana are increasing, and businesses, 
Embassies, NGOs, and international organizations are 
increasing their presence in Ghana, using it as a regional 
hub. 
 
¶15. (SBU) In May 2004, the Millennium Challenge Corporation 
(MCC) designated Ghana eligible for Millennium Challenge 
Account (MCA) funding.  The Ghanaians were slow to organize 
their MCA team and the process languished for months, 
sidelined by the 2004 election campaign and subsequent 
reorganization of the cabinet in early 2005.  President 
Kufuor has pressed the MCC to expedite completion of the 
Compact negotiations, but the Ghana MCA team, reorganized in 
June 2005, understands the priority is to complete a quality 
Compact within a realistic timeline.  Ghana now has adequate 
resources to do the job, with its own $500,000 budget and the 
agreement signed August 11, 2005, with the MCC for $3 million 
of 609(g) funding.  The Ghanaians also now have the right 
personnel in place, and the $517 million draft proposal, 
focused on agri-business, promises to deliver on both poverty 
reduction and economic growth.  The MCC and Ghana MCA team 
hope to complete a signed and approved Compact by mid-2006. 
 
¶16. (SBU) In July 2004, Ghana reached Completion Point under 
the Heavily Indebted Poor Country (HIPC) Initiative, 
resulting in $4.2 billion debt relief.  This achievement also 
ensured Ghana's eligibility for further debt relief under the 
G8's Multilateral Debt Relief Initiative (MDRI), unveiled in 
June 2005.  Ghana is also realizing large foreign remittance 
flows, estimated at approximately $4 billion in 2005, as well 
as increasing foreign investment, including from U.S. 
companies such as Newmont Mining and ALCOA.  The government 
resolved many of the investment disputes that undermined 
U.S.-Ghana relations in recent years. 
 
¶17. (SBU) Ghana's impressive performance has not gone 
unnoticed.  Standard and Poor's assigned Ghana a relatively 
solid "B plus" sovereign credit rating.  Fitch Rating Agency 
upgraded Ghana to a "B plus" rating in March 2005, citing 
HIPC Completion Point, improved economic indicators, and 
fiscal restraint through the election cycle. 
 
--------------------------------------------- ------ 
Concerns: Energy, Business Climate, External Shocks 
--------------------------------------------- ------ 
 
¶18. (SBU) The government faces major challenges in its effort 
to reform the economy.  Ghana has a reputation as a slow and 
steady reformer, and GoG leaders do not appear to be taking 
full advantage of the current opportunities.  While the 
Finance Ministry and Central Bank have done an admirable job 
of implementing macroeconomic reforms, the GoG has been slow 
to implement the politically sensitive next level of reforms, 
including privatization of utilities, lowering trade 
barriers, improving the investment climate, and attacking 
corruption (especially in the ports).  Economic reform lost 
considerable momentum during the 2004 election year.  Many 
NPP leaders were concerned that the reform effort had not 
translated into improved living standards for Ghanaian 
citizens, so pressure increased on President Kufuor to 
increase spending and delay politically difficult reforms. 
 
¶19. (SBU) High energy costs could undermine the recent real 
gains in economic growth, and Ghana has had difficulty 
fulfilling its commitment to the IMF to deregulate the 
petroleum market.  Also, despite Kufuor's promise of a 
"Golden Age of Business," Ghana remains a difficult and risky 
place to do business.  Contract sanctity and difficulty in 
obtaining clear land title are concerns.  Ghana's congested 
courts make it difficult to resolve disputes.  Due to 
excessive bureaucracy the average time to start a business 
exceeds 80 days, high compared to Ghana's peers (i.e., other 
top performers).  This contributes to widespread corruption, 
as the heavy paperwork and licensing requirements create 
incentives to bypass normal channels.  While the corruption 
damages Ghana's reputation, it also scares away legitimate 
investors and diminishes the potential impact of new 
investment on economic growth and reducing poverty.  Finally, 
Ghana's infrastructure is in poor shape, and its dependence 
on commodity exports (gold, cocoa, timber) leaves it highly 
vulnerable to external shocks. 
 
---------------- 
Economic Outlook 
---------------- 
 
¶20. (SBU) Despite these concerns, the overall outlook is 
positive.  If Ghana maintains fiscal and monetary discipline, 
world oil prices stabilize, and favorable external conditions 
continue for gold and cocoa, the economy should remain stable 
and continue to grow at the rate of 5 to 6% per year. 
BRIDGEWATER