VZCZCXRO6622
RR RUEHMA RUEHPA
DE RUEHAR #1141/01 1361657
ZNR UUUUU ZZH
R 161657Z MAY 06
FM AMEMBASSY ACCRA
TO RHMFISS/CDR USEUCOM VAIHINGEN GE
RUEHC/SECSTATE WASHDC 1329
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 04 ACCRA 001141 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON GH MARR MCAP PGOV PREL
SUBJECT: SCENESETTER FOR VISIT TO GHANA OF GENERAL JONES 
 
-------------------- 
Summary/Introduction 
-------------------- 
 
¶1. (SBU) Ghana is democratic, market-oriented, pro-American, 
and has one of the best human rights records in Africa. 
President John Kufuor is in his second term.  Ghana is on the 
UN Security Council and the IAEA Board of Governors this 
year.  As the first sub-Saharan country to achieve 
independence (in 1957), Ghana will celebrate its 50th 
anniversary of independence next year.  Ghana exerts regional 
leadership in West Africa and is a major contributor to UN 
peacekeeping operations.  President Kufuor has met President 
Bush six times, most recently in April 2006, and has positive 
views of the United States. 
 
¶2. (SBU) Although Kufuor understands that economic growth is 
critical to continued political stability in Ghana, his 
government has been slow in reducing obstacles to foreign 
investment.  His administration, however, has done an 
admirable macroeconomic job, and has built a relatively 
stable economy that promotes an environment for stronger 
growth. 
 
¶3. (SBU) This message outlines U.S.-Ghana political, 
economic, military, and security relations.  End Summary 
 
-------------------- 
U.S.-Ghana Relations 
-------------------- 
 
¶4. (SBU) Ghana is a reliable, democratic partner for the U.S. 
in peacekeeping, conflict resolution, counter-terrorism, and 
economic development. U.S. interests include maintaining 
Ghana's fourteen-year-old democracy, greater opening of 
markets and overall economic liberalization, and the 
reduction of poverty.  Key components of the broad U.S.-Ghana 
relationship are: 
 
¶5. (SBU) Democracy:  Ghana's December 2004 parliamentary and 
presidential election, the fourth election under the 1992 
constitution, was free, fair and generally peaceful.  Ghana 
has an open, 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 yet certain and democratic 
institutions are weak.  While Ghana scores better than many 
countries in Africa on Transparency International's 
Corruption Perception Index (65th globally on the CPI), 
corruption remains a serious concern.   Anti-corruption 
institutions are weak and under-resourced.  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, customs, and the media. 
 
¶6. (SBU) Development Assistance and Trade:  USG assistance to 
Ghana is approximately $75 million annually, including one of 
USAID's largest programs in Sub-Saharan Africa.  Ghana will 
receive approximately $65 million in USAID grant assistance 
and food aid per year in FY2006, with focus on education, 
health, HIV/AIDS, environment, trade and investment, and 
democracy and governance.  This includes a $22 million per 
year Food for Peace program which will be phased out by 
FY2009.  Overall trade is growing, as U.S. exports to Ghana 
in 2004 increased to $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. 
 
¶7. (SBU) Security Cooperation:  We have a robust mil-mil 
relationship, in part growing from Ghana's outstanding 
contribution as the seventh largest contributor to UN 
peacekeeping forces worldwide, and its role in supporting 
regional stability.  Ghana was key to peace efforts in 
Liberia and Cote d'Ivoire.  Ghana plays a constructive, 
low-key role, in support of the Economic Community of West 
African States (ECOWAS).  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 hospitable to refugees and currently hosts about 60,000 
refugees, mostly Liberian.  We support Ghana's regional role 
through USAID's West Africa Regional Program (WARP) and 
through our Refugee Coordinator Office, both based in Accra. 
 
¶8. (U) People-to-people relations:  This is at the core of 
our strong bilateral relationship.  We were the second 
country (after the UK) to recognize Ghanaian independence in 
1957, and opened our first Peace Corps program in the world 
in Ghana in 1961  which has continued uninterrupted since 
 
ACCRA 00001141  002 OF 004 
 
 
opening.  Hundreds of thousands of Ghanaians live in the 
U.S., and we issue more immigrant visas in Accra than 
anywhere else in Africa, i.e. more Ghanaians are entering the 
U.S. legally to establish residence than from any other 
African country. U.S. visas are highly-prized and there is 
considerable fraud in applications for U.S. visas. 
 
---------------------------- 
Internal Political Situation 
---------------------------- 
 
¶9. (SBU) President Kufuor is 15 months into his second term 
and has shown continuity in his ministerial appointments, his 
priority themes, and his deliberate approach to governance. 
On April 27, 2006 the President reshuffled his Cabinet, 
sacking six ministers, eliminating three ministries and 
shifting some major portfolios.  The reshuffle penalized 
perceived disloyalty within his ranks and reasserted his 
control over his Cabinet.  It also took out of the Cabinet 
one of the major presidential aspirants for the ruling party 
ticket, Minister of Education Yaw Osafo-Maafo. 
 
¶10. (SBU) In response to rising global oil prices and IMF 
pressure, Kufuor raised petrol prices and established a 
National Petroleum Authority.  The GOG is making strides 
toward signing a Millennium Challenge Account (MCA) 
agreement, has already passed a trafficking in persons law, 
and guaranteed free primary education for the first time. 
Kufuor also offered Ghana as the first country to be reviewed 
in the New Partnership for Africa (NEPAD) Peer Review 
Mechanism. 
 
¶11. (SBU) Ghanaian politics remain highly polarized.  The New 
Patriotic Party (NPP) and National Democratic Congress Party 
(NDC) are closely matched (numerically) in parliament. NDC 
parliamentarians complain that the NPP uses its narrow 
majority to merely force through laws.  Tensions between the 
two parties will likely worsen as they prepare for District 
Assembly elections later in 2006 and 
presidential/parliamentary elections in 2008.  There are 
several competitors within the NPP hoping to succeed Kufuor, 
including ministers and the Vice President, all of which is 
causing some friction at the top of the administration.  The 
NDC held its national convention in December.  It remains 
divided and financially weak.  Former President Rawlings 
still exerts a strong influence on the party but many in the 
party (including former presidential candidate John Atta 
Mills) want to distance themselves from the ex-president. 
Neither party has a strong ideological focus, although the 
NPP is clearly more pro-business and pro-American. 
 
¶12. (SBU) In Kufuor's second term, Ghana's free media has 
made new charges of corruption against his government. Energy 
Commission Members were forced out under a cloud of 
allegations, and the Administration was criticized for 
corruption in the creation of Ghana International Airlines. 
There was little transparency in either of these actions, 
fueling suspicion about malfeasance. The Commission on Human 
Rights and Justice (CHRAJ) recently exonerated the President 
of alleged corruption in a corrupt hotel deal involving an 
Iraqi-American woman who claims she had an extra-marital 
affair with the President.  Two opinion polls in 2005 
revealed the perception that corruption is growing in Ghana. 
Corruption will continue to be an issue for the foreseeable 
future. 
 
-------- 
Security 
-------- 
 
¶13. (SBU) Ghana's 10,000 strong military is now distinguished 
by its allegiance (over the past five years) to elected 
civilian leadership, its 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 and 2,584 Ghanaians are 
currently deployed in the Democratic Republic of Congo, 
Lebanon, Liberia and Cote d'Ivoire.  We have supported the 
Ghanaian military 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) now has a liaison 
officer stationed at the KAIPTC and has provided 
 
ACCRA 00001141  003 OF 004 
 
 
approximately $1 million in funding support. 
 
¶14. (SBU) Our mil-mil relationship also includes West Africa 
Training Cruises and Joint Combined Exchange Training.  Ghana 
is only the second sub-Saharan African country (after South 
Africa) to be a member of the State Partnership Program 
(SPP), partnered with the North Dakota National Guard, which 
will further strengthen mil-mil and civilian-military ties. 
Ghana participates as an African Fuel Initiative Hub country, 
and permitted the construction of an Exercise Reception 
Facility (ERF) at Accra Air Base under an addendum of a 
Technical Arrangement (TA) signed in 2005.  Ghanaians avidly 
participate in DOD's Counterterrorism Fellowship program 
(CTFP).  Military visits over the past year included six ship 
visits (most recently from the USS Emory S. Land), twelve 
General Officer or Flag Officer visits, and two regional 
maritime and coastal security conferences. 
 
-------------------- 
State of the Economy 
-------------------- 
 
¶15. (SBU) In 2000, the Kufuor government inherited 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.  President 
Kufuor has strengthened fiscal and monetary policies 
considerably, reining in spending and borrowing, and cutting 
subsidies by imposing badly needed energy and water price 
increases. 
 
¶16. (SBU) The improved policy performance along with higher 
cocoa and gold prices since 2002 resulted in higher economic 
growth, reaching 5.2% in 2003 and 5.8% in 2004.  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 GOG's policies, inflation 
fell from over 30% in mid-2003 to below 12% for 2004.  The 
annual inflation rate is now about 10-11%, mostly due to high 
world oil prices.  Key short-term interest rates have also 
fallen to below 10%.  The cedi has been relatively stable 
against the dollar for two years. 
 
--------------------------------------------- --- 
Positive Economic Trends:  MCA and Regional Role 
--------------------------------------------- --- 
 
¶17. (SBU) Ghana has become the gateway to West Africa due to 
its political stability, economic reforms, and the persistent 
turmoil elsewhere in the region.  Trade and investment flows 
to and through Ghana are increasing. Businesses, embassies, 
NGOs, and international organizations are increasing their 
presence, choosing Ghana as a regional hub. 
 
¶18. (SBU) In May 2004, Ghana became eligible for Millennium 
Challenge Account (MCA) funding, based on its performance in 
competition with other developing countries.  We expect a 
compact to be signed in July 2006.  Ghana has a $500 million 
draft proposal, focused on agri-business, one which promises 
to deliver on both poverty reduction and economic growth. 
 
¶19. (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 G-8 debt relief. 
Ghana is also receiving large foreign remittance flows, 
estimated at $4.77 billion in 2005, as well as increasing 
foreign investment from companies such as Newmont Mining and 
ALCOA from the U.S.  The government has resolved many of the 
investment disputes that undermined U.S.-Ghana relations in 
recent years, but the investment climate is often still 
unwelcoming for foreign firms. 
 
¶20. (SBU) Standard and Poor's assigned Ghana a relatively 
high "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 
--------------------------------------------- ------ 
 
¶21. (SBU) The government faces major challenges in its 
economic reform effort.  While the Finance Ministry and 
Central Bank have credibly implemented 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, 
 
ACCRA 00001141  004 OF 004 
 
 
and attacking corruption (especially in the ports).  The 
overall challenge now is to translate economic reform into 
improved living standards for Ghanaian citizens.  Pressure 
has increased on President Kufuor to increase spending and 
delay politically difficult reforms. 
 
¶22. (SBU) High energy costs undermine the recent real gains 
in economic growth.    Also, despite Kufuor's promise of a 
"Golden Age of Business," Ghana remains a difficult place to 
do business.  Contract sanctity and difficulty in obtaining 
clear land title are huge concerns and Ghana's congested 
courts make it difficult to resolve disputes.  The average 
time to start a business exceeds 80 days, which contributes 
to corruption, as the heavy paperwork and licensing 
requirements create incentives to bypass normal channels. 
Kufuor's ability to reduce poverty for ordinary Ghanaians 
will probably be the decisive issue in the 2008 election. 
Finally, not only is Ghana's infrastructure in poor 
condition, but its slow progress toward diversification and 
dependence on commodity exports leaves it highly vulnerable 
to external shocks. 
 
¶23. (SBU) Ultimately, history and culture are also in part 
barriers to reform, as Ghana was the home of Pan African 
Socialism and many Ghanaians view American-style capitalism 
and the quest for private wealth as destructive of national 
harmony. They expect the government to provide a basic 
standard of living for all, and many do not fully understand 
the necessity for sustainable private enterprises. Rather 
they continue to place their confidence in job creation 
through state-owned enterprises.  The growing private sector 
focus of the last five years has created new tensions and 
underpins the opposition's egalitarian rhetoric. Yet despite 
these areas of concern, 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 growth levels above 5.0%. 
 
BRIDGEWATER