VZCZCXYZ0036
PP RUEHWEB

DE RUEHAR #2808/01 3261619
ZNR UUUUU ZZH
P 221619Z NOV 06
FM AMEMBASSY ACCRA
TO SECSTATE WASHDC PRIORITY 3056

UNCLAS ACCRA 002808 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR AF/W: EMILY PLUMB; 
STATE PASS TO HUD: REBECCA PEMBERTON 
 
E.O. 12958: N/A 
TAGS: ECON GH OTRA PGOV PREL
SUBJECT: SCENESETTER FOR VISIT TO GHANA OF HUD SECRETARY 
JACKSON 
 
REF: ACCRA 2706 
 
-------------------- 
Summary/Introduction 
-------------------- 
 
¶1. (SBU) Ghana is a democratic, market-oriented, pro-American 
country in a region marked by conflict and authoritarian 
rule.  In 2007, Ghana will celebrate 50 years of 
independence.  President John Kufuor is nearly two years into 
his second four-year 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 
International Atomic Energy Agency (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 seven times, met with former President 
Carter for the second time in October 2005, and hosted the 
successful visit to Ghana of Mrs. Laura Bush in January 2006. 
 Ghana signed a five-year, $547 million Millennium Challenge 
Account (MCA) Compact on August 1, 2006, which focuses on 
accelerating growth and reducing poverty through private 
sector-led agri-business.  Ghana hopes to showcase itself at 
several upcoming events.  March 6, 2007, its independence 
day, will be marked with a major Jubilee celebration.  In 
June and July 2007, Ghana will host the African Union Summit 
and the African Growth and Opportunity Act (AGOA) Forum, 
respectively.  In February 2008, Ghana will host the African 
Cup of Nations soccer tournament.  End Summary/Introduction. 
 
-------------------- 
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 building blocks 
of the broad U.S.-Ghana relationship are: democracy; 
development assistance and trade; and Ghana,s regional 
leadership. 
 
¶3. (U) Democracy:  Ghana's December 2004 parliamentary and 
presidential election, the fourth election under the 1992 
constitution, and September 2006 local elections were 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 the 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 (CPI), Ghana slipped from 65 to 70 globally in 2006, 
its lowest ranking since 1999. Corruption is a growing 
concern.   Anti-corruption institutions are weak.  The United 
States has programs to help strengthen parliament, the 
judiciary, the police, and the media. 
 
¶4. (U) Development Assistance and Trade:  In 2006, the USG 
expects to provide about $75 million in assistance to Ghana, 
not including support related to Millennium Challenge Account 
Compact development.  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 2005 increased to approximately $338 million, a 9 
percent increase over 2004; Ghana is consistently the fifth 
or sixth largest market in Africa for U.S. goods, and is the 
eighty-ninth largest market globally.  U.S. imports are equal 
to about $14 per capita, which is equivalent to about 3.5 
percent of GDP per capita. 
 
¶5. (U) Regional Leadership:  Ghana provides solid 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.  Ghana was elected to 
serve a two-year term (2006 and 2007) as a non-permanent 
member of the United Nations Security Council.  Kufuor served 
as Chair of the ECOWAS for two terms, ending January 2005. 
 
ECOWAS Executive Secretary Mohammed Ibn Chambas is Ghanaian. 
Ghana has also 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 nearly halfway through his 
second four-year term.  This term has been marked by 
continuity in his priority themes and his cautious approach 
to governance.  Kufuor dropped two prominent ministers and 
made other minor changes during an April 2006 Cabinet 
reshuffle.  In response to rising global oil prices and IMF 
pressure, Kufuor raised petrol prices to cost-recovery levels 
with minimal political repercussions, and established a 
National Petroleum Authority.  The GoG introduced a 
Capitation Grant to pay for individual education costs, and 
began to provide transit and food to school children to 
increase enrollment.   Ghana was one of the first two 
countries to submit itself for review under the New 
Partnership for Africa,s Development (NEPAD) African Peer 
Review Mechanism, which evaluates political economic, and 
social governance. 
 
¶7. (SBU) Ghnaian politics is highly polarized.  The New 
Patiotic Party (NPP) and opposiion National Democratic 
Congress Party (NDC) are nearly evenly matched in parliament, 
the result of a very close 2004 national election.   Leaders 
of these two major parties intensely dislike each other.  NDC 
parliamentarians complain that the NPP throws its weight 
around, using its majority to force legislation through the 
system.  The NPP and NDC both suffer from intra-party 
divisions, which are increasing in the run-up to party 
conventions in December and presidential/parliamentary 
elections in 2008.  There are nine smaller established 
parties in Ghana, including two recently formed ones. 
 
¶8. (SBU) The Kufuor government has faced recurring charges of 
corruption over the past two years, 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, although he was later exonerated.  While probably 
more the result of poor institutional capacity than 
corruption, Ghana is currently under considerable 
international pressure to address allegations that conflict 
diamonds from Cote D,Ivoire are passing through Ghana, 
despite checks under the Kimberley Process.  Two public 
opinion polls last year found a growing perception that 
corruption is on the rise, especially by the president and 
those in his office.  The recently released Transparency 
International Corruption Perception Index offers further 
evidence of public perceptions that corruption is worsening. 
In November 2005, the Enquirer newspaper revealed a 
secretly-recorded tape in which the NPP Party Chairman 
 
SIPDIS 
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 resigned in October after being found guilty of 
abuse of government office following an investigation for 
corruption.  The GoG has also been grappling with a cocaine 
trafficking scandal implicating some senior police and former 
counternarcotics officials. 
 
-------- 
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, and Cote 
d'Ivoire.  We provide, or have provided, support through: our 
Excess Defense Articles (EDA) program; the International 
Military Education and Training (IMET) program; the Foreign 
Military Sales (FMS) and Foreign Military Financing (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 
continue to receive increasing amounts of support under the 
 
Global Peace Operations Initiative (GPOI), launched in 2004, 
in the form of peace support operations training, 
administered through ACOTA.  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 full-time 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.  In October 2006, as part 
of &Med Flag 06,8 the North Dakota National Guard and the 
U.S. Air Force Europe provided medical care at two sites in 
northern Ghana and one site in Accra, and the U.S. Navy 
provided training for Ghanaian military nurses on board 
U.S.S. Elrod.  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 Terror. 
 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.  We have serious concerns about 
growing narcotics trafficking (especially cocaine) and 
financial 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, with growth rates exceeding 5 percent each year since 
¶2003.  In 2006, the growth rate is expected to be about 6.2 
percent. Tight monetary policies since mid-2003 restored 
confidence in the economy, and the IMF called 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 percent in mid-2003 to 
less than 15 percent from 2004 onwards.  The prime rate has 
also fallen to below 15 percent.  The cedi has been 
relatively stable against the dollar for more than two years. 
 However, the strong macro-economic performance has yet to 
translate into widespread prosperity for Ghanaians. More than 
35 percent live on less than $1 per day. 
 
--------------------------------------------- --- 
Positive Economic Trends:  MCA and Regional Role 
--------------------------------------------- --- 
 
¶14. (SBU) Ghana is a gateway to West Africa, due in part to 
its political stability and economic reforms, but also 
because of turmoil in other parts of 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.  Once the GoG 
got the right personnel in place, the process moved along 
 
well and a Compact was signed August 1, 2006.   The 
five-year, $547 million Compact will be carried out in 23 
districts in three  zones,: northern area; central Afram 
Basin area; and southern horticultural belt area.  More than 
one million Ghanaians are expected to benefit, directly and 
indirectly, from the program.  The Compact activities are 
designed to: 1) Enhance the profitability of commercial 
agriculture among small farmers; 2) Expand transportation 
infrastructure affecting agricultural commerce at 
sub-regional and regional levels; and 3) Strengthen the 
availability of basic community services and rural 
institutions that provide services complementary to, and 
supportive of, agricultural and agri-business development. 
Ghana created the Millennium Development Authority through an 
act of Parliament to implement the Compact.  A key challenge 
regarding the Compact is managing expectations.  The Compact 
has not entered into force (expected in early 2007) and 
results will not show significantly until 2008. 
 
¶16. (SBU) In July 2004, Ghana reached Completion Point under 
the Heavily Indebted Poor Country (HIPC) Initiative. This 
achievement also ensured Ghana's eligibility for further debt 
relief under the G-8-led Multilateral Debt Relief Initiative 
(MDRI), announced in June 2005.  According to the World Bank, 
in 2006, Ghana will benefit from combined HIPC and MDRI debt 
relief in the amount of $364 million, and total estimated 
benefits are estimated at $1.3 billion between 2006 and 2009. 
 Ghana is also realizing large foreign remittance flows. 
According to the Bank of Ghana, private individuals 
transferred $996.08 million in remittances between January 
and August 2006. Ghana is also experiencing increasing 
foreign investment, including from U.S. companies such as 
Newmont Mining and ALCOA.  The government has 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, civil service reform, 
improving the investment climate, and attacking corruption 
(especially in the ports).  While fiscal discipline held 
relatively steady, economic reform lost considerable mometum 
during the 2004 lection year.  Many NPP leaers were 
concerned that the reform effort had no translated into 
improved living standards for Ghanaian citizens, so pressure 
increased on President Kufuor to delay politically difficult 
reforms. 
 
¶19. (SBU) Ghana,s failure to make adequate investments into 
energy production is a constraint on growth and productivity. 
It is estimated Ghana will need to acquire an additional 500 
megawatts of generation capacity over the next five years. 
Ghana experienced record low water levels in the Akosombo Dam 
(which provides 65 percent of Ghana,s hydroelectric power) 
in August 2006.  The GoG began mandatory load shedding at 
that time, causing rotating 12-hour electricity outages.  Yet 
this &crisis8 is no surprise.  There is no short-term fix, 
and the World Bank estimates that energy shortages could 
reduce Ghana,s real GDP by 1 to 5 percent per year. The 
government may be starting to respond. The 2007 budget 
includes approximately $102 million for energy investment. 
The West Africa Gas Pipeline, which is scheduled to be online 
in 2007, will enable Ghana to reduce energy costs by 
substituting some natural gas for petroleum. 
 
¶20. 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 
---------------- 
 
¶21. (SBU) Despite these concerns, the overall outlook is 
fairly 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 percent per year.  The GoG goal is 7 to 8 percent growth in 
order to reach middle-income status by 2015. 
BRIDGEWATER