VZCZCXYZ0004
RR RUEHWEB

DE RUEHAR #1483/01 1871726
ZNR UUUUU ZZH
R 061726Z JUL 07
FM AMEMBASSY ACCRA
TO SECSTATE WASHDC 4836

UNCLAS ACCRA 001483 
 
SIPDIS 
 
STATE PASS TO USAID, USTR, NSC, USDA; AF/EPS FOR MJ WILLS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ETRD ECON EAGR AMGT GH
SUBJECT: SCENE SETTER FOR THE AGOA FORUM-JULY 18-19, 2007 
 
 
¶1.  (U) Summary:  On March 6, Ghana celebrated its fiftieth 
anniversary as sub-Saharan Africa's first independent country. 
Ghana has emerged from a turbulent history into a period of 
stability, democracy and sustained economic growth.  Ghana and the 
United States have enjoyed strong, positive ties for the past decade 
that are now at an all-time high.  Ghana is a reliable, democratic 
partner for the United States in peacekeeping, conflict resolution, 
counter-terrorism, and economic development.  U.S. interests center 
on support for Ghana's fifteen-year-old democracy, the promotion of 
open markets and poverty reduction, security cooperation, and 
enhanced people-to-people ties.  Our bilateral relationships will be 
increasingly important in light of Ghana's growing global leadership 
position.  Despite its many successes, Ghana still struggles with 
persistent poverty, political divisiveness, corruption, and 
governance and security challenges.  This document will give you an 
overview of the history of Ghana, including its political and 
economic situation.  It will also discuss Ghana's international 
leadership position and what to expect for the upcoming AGOA Forum. 
End Summary. 
 
Historical Context 
------------------ 
¶2.  (U) Nkrumah as President:  The contributions of Ghana's first 
President Kwame Nkrumah were numerous.  He laid the foundation of 
Ghana's foreign policy based on four enduring pillars: Ghana's 
strong commitment to multilateral organizations, its commitment to 
the Non-Aligned Movement, its leadership in promoting African unity, 
and its partnership with neighboring states. 
 
¶3.  (U) Difficult Years:  Beginning in 1961, Ghana became a 
socialist state and its foreign policy agenda followed suit. 
Nkrumah was a founding member of the Non-Aligned Movement.  Ghana 
gained a reputation for being independent-minded in foreign affairs 
and vocal on international issues.  Although Ghana officially 
remained within the Non-Aligned Movement, it developed close ties to 
the Soviet Union, China and Cuba. 
 
¶4.  (U) Eventually, Nkrumah abolished regional assemblies, banned 
ethnic, religious and regional parties, and put in place the 
Prevention Detention Act used to imprison thousands of his 
opponents.  By 1964, he had created a one-party state and declared 
himself president for life.  His economic and internal security 
policies contributed to his ouster in a military coup in 1966, 
although today he is still revered by many Ghanaians. 
 
¶5. (U) The following decades brought five military coups and 
numerous coup attempts, a revolution, thousands of cases of human 
abuses, and almost two decades of economic decline that nearly ended 
in financial ruin.  There were also periods of serious violence, 
including the 1979 execution of three former heads of state, the 
1982 murder of three Supreme Court judges and a retired army major, 
and the 1994 "Guinea Fowl" ethnic war in the north, which left an 
estimated 2,000 dead. 
 
Building stability 
------------------ 
 
¶6.  (U) Although Nkrumah's socialist vision and lack of ethnic bias 
did much to unify Ghana, the credit for stabilizing Ghana goes more 
to former president J.J. Rawlings.  Despite his autocratic style and 
early revolutionary tendencies, over a period of almost twenty years 
he led Ghana through a democratic transition, which ultimately 
steadied the rudder of Ghanaian politics.  He strengthened grass 
roots organizations, empowered the judiciary, and gradually reduced 
the role of the military.  Rawlings created a system of local 
government and forged a new constitution.  He allowed political 
party competition, private media development, and competitive 
elections.  Faced with economic disaster, in 1983 he embraced 
IMF-led economic reforms which helped lay the foundation for food 
security, improved social infrastructure and strengthened the 
stability of many sectors of society. 
 
¶7.  (U) In December 2000, John Agyekum Kufuor became president.  He 
built on this stability, strengthening civil liberties and governing 
institutions, further opening the political space and improving the 
economy.  In 2004, he initiated a National Reconciliation 
Commission, which helped move the country beyond its often-turbulent 
past. 
 
Democracy in Ghana 
------------------ 
 
¶8.  (U) Ghana's political success today is reflected in several 
prominent surveys.  Ghana scores well on the Freedom House Index of 
Political Rights, going up from a score of 2 to 1 in 2006 because of 
the 2004 free and fair elections and a "general maturing of 
electoral institutions."  Ghana ranks among the best in the 2006 
Fund for Peace Global Failed States Index, with only South Africa 
and Mauritius scoring better in Africa.  (The index tracks such 
factors as demographic pressures, economic decline, criminalization, 
violation of human rights, and factionalism.)  In addition, Standard 
and Poor and Fitch give Ghana a B-plus sovereign credit rating, 
which reflects an assessment of limited political and economic risk 
of default. 
 
¶9.  (U) Other surveys give Ghana somewhat weaker political marks. 
The Economist Intelligence Unit's new 2006 democracy index ranks 
Ghana a "hybrid regime," 95th out of 167 countries.  Its overall 
score of 5.35 out of 10 ranks below eight other countries in 
sub-Saharan Africa and incorporates lower-than-average scores in the 
categories of "functioning government," "political participation," 
and "political culture."  The World Bank's "Governance Matters 2006" 
report listed Ghana as a reformer, citing the country's progress on 
governance.  Nonetheless, it ranked Ghana seventh in Africa on good 
governance, with a score of only 38 out of 100 on corruption.  The 
2005 NEPAD African Peer Review report on Ghana praised Ghana's 
democratic progress as "remarkable, albeit fragile in some 
respects."  The review identified the problems of low governance 
capacity, corruption, and weak intuitions as "likely to diminish the 
sustainability of democratic politics." 
 
Democracy Taking root 
--------------------- 
 
¶10.  (U) After 15 years of democratic governance, Ghanaians are 
committed to democracy.  Voter turnout has been high in three 
consecutive national, free and fair elections.  The Center for 
Democratic Development (CDD)'s 2005 Afrobarometer survey found that 
since 1999 Ghanaians have overwhelming supported democratic 
government. 
 
¶11.  (U) Ghana has long had significant space for opposition and 
debate, starting with its lively multiparty competition prior to 
independence, and carrying on to some extent even during periods of 
military rule.  Civilians had an important role in almost all of 
Ghana's military governments.  While parliament has become 
increasingly polarized, there is still political space for the 
opposition, with almost half of parliament in the hands of the main 
opposition National Democratic Congress (NDC) party.  This helps 
keep inter-party friction within reasonable boundaries. 
 
¶12.  (U) Civil society groups, including religious associations, are 
well organized.  The majority of Ghana's educated elites studied in 
ethnically mixed boarding schools, which helped build ethnic 
tolerance.  There is a lively, free media, which allows people to 
vent frustrations and concerns. 
 
Economics in Ghana 
------------------ 
 
¶13.  (U) Ghana's economy was relatively stable and prosperous at 
independence, but fell into steady decline starting in the mid-1960s 
as a result of political infighting, economic mismanagement and a 
collapse in cocoa prices.  Per capita GDP fell by 24 percent from 
1970 to 1981, when inflation reached 116 percent.  By 1983, the 
economy was on the brink of collapse.  With IMF and World Bank 
support, Rawlings implemented significant reforms, including 
removing trade barriers and exchange rate controls.  While the 
reforms caused substantial hardship in some sectors, particularly 
agriculture and textiles, the overall effect was positive and helped 
bring about a measure of economic stabilization and recovery. 
However, a big drop in world cocoa and gold prices hurt growth and, 
in the face of pending elections, spurred government spending, 
leading to an increased deficit, falling currency and high inflation 
at the time Kufuor took office in 2000. 
 
¶14.  (U) The economy has performed well under the Kufuor 
administration but Ghana's fundamental vulnerabilities remain.  The 
Kufuor administration has continued the economic stabilization begun 
under Rawlings, but major debt relief, large inflows of donor 
resources and relatively high cocoa and gold prices have been key to 
the steady improvements in the real GDP growth, which in 2004 topped 
5 percent for the first time in a decade and reached an estimated 
6.2 percent in 2006.  Further debt relief, continued large aid 
inflows, favorable commodity prices, and $4 billion in gross annual 
remittances (note: this includes remittances from individuals as 
well as NGOs and embassies; individual remittances are estimated at 
about $1.8 billion in 2006) put Ghana in a stronger balance of 
payment position than at the end of the Rawlings years. 
 
¶15.  (U) Ghana was recognized for its economic and democratic 
achievements in 2006, when it signed a five-year, $547 million 
anti-poverty Compact with the United States Millennium Challenge 
Corporation.  The Compact focuses on accelerated growth and poverty 
reduction through agriculture and rural development.  The Compact 
has three main components: enhancing the profitability of commercial 
agriculture among small farmers; reducing the transportation costs 
affecting agricultural commerce through improvements in 
transportation infrastructure; and expanding basic community 
services and strengthening rural institutions that support 
agriculture and agri-business.  The Compact is expected to 
contribute to improving the lives of one million Ghanaians. 
¶16.  In close coordination with other donors, USAID/Ghana supports 
the Government of Ghana's poverty reduction strategy by 
strengthening decentralized governance systems, promoting private 
sector competitiveness, improving health care delivery, enhancing 
access to quality basic education, and increasing food security. 
Funding levels have averaged around $37 million per year from 2004 
to 2007, plus an additional $22.5 million in food aid. 
 
Economic and Health Challenges 
------------------------------ 
 
¶17.  (U) While Ghana's macroeconomic management has been good, 
significant problems remain.  Ghana is highly vulnerable to price 
shocks in cocoa, gold, and to a lesser extent, timber (which 
together account for 70 percent of exports).  It remains heavily 
dependent on foreign inflows of aid and on remittances (which 
largely go into nonproductive activities, such as housing 
construction, but have probably helped keep the currency relatively 
stable). 
 
¶18.  (U) There has been little growth in the formal job sector, 
which accounts for as little as 20 percent of employment.  Seventy 
percent of Ghanaian companies are micro-enterprises, with few 
entrepreneurs possessing the capacity or resources to expand. 
Financial services are growing but Ghana remains largely a cash 
society and access to credit is difficult, short-term and expensive. 
 Infrastructure necessary to support growth is poor, particularly 
power generation and water supply.  The country is currently 
experiencing a full-blown energy crisis with scheduled 12 hour power 
outages every second day. 
 
¶19.  (U) The poverty rate has dropped to 28.5 percent in 2005/2006, 
down from 40 percent in 1998/99, and many social indicators have 
shown steady improvement over the past few decades.  Nonetheless, 
progress has been slower than hoped.  Stability and GDP growth have 
not yet translated into broad-based prosperity and well-being, and 
income inequality is growing.  Per capita gross national income was 
$450 in 2005 compared to an average of $745 for low-income 
sub-Saharan African countries, according to the World Bank's 2007 
World Development Report. 
 
¶20.  (U) Maternal and infant mortality rates are well below levels 
in the 1980s but remain high and have not changed in ten years. 
While access to education has grown, quality is a major challenge. 
Results from Ghana's National Education Assessment indicate that 
less than 15% of Ghana's youth attain proficiency in Grade 6 
English, and only 5% attain proficiency in Grade 6 mathematics.  GOG 
census data shows a slight drop in overall adult literacy from 58 
percent in 1984 to 54 percent in 2000, below average for sub-Saharan 
Africa.  Although overall hunger levels have been reduced 
significantly, food insecurity and malnutrition are problems in some 
areas, with child malnutrition levels stagnant over the past decade. 
 Guinea worm infection has re-emerged while malaria remains endemic. 
 In the past few years, the quality of basic social services has 
deteriorated. 
 
The Dissatisfied poor 
--------------------- 
 
¶21.  (U) Most Ghanaians reportedly do not feel they have benefited 
from the country's macroeconomic success, according to several 
recent studies.  According to the Center for Democratic 
Development's 2005 Afrobarometer survey, 53 percent of respondents 
thought their standard of living had declined over the previous 
year, compared to 38 percent in a similar survey in 2002. 
Respondents in 2005 were significantly gloomier than 2002 about 
their economic future. 
 
Other Challenges 
---------------- 
 
¶22.  (U) In his New Year's address to the nation, Kufuor noted 
Ghana's main challenges in 2006: high oil prices, road and boat 
accidents, narcotics trafficking, an increase in violent crime, and 
power shortages.  These developments "failed to destabilize the 
society and economy to the extent that was feared," he concluded, 
crediting the openness of social discourse, efficient macroeconomic 
management and a gradual but steady improvement in law and order. 
 
¶23.  (U) Ghana's politics remain highly polarized between the ruling 
New Patriotic Party (NPP) and main opposition National Democratic 
Congress (NDC) party (there are also nine smaller parties). 
Increasingly, Ghanaian politics is focused on the presidential and 
parliamentary election of 2008, which is already causing significant 
inter- and intra-party friction.  The NDC has chosen its candidate, 
former Vice President John Atta Mills, who is actively campaigning. 
 
 
¶24.  (U) The NPP has almost 20 presidential aspirants and will 
choose its presidential candidate in a National Convention in 
December 2007.  President Kufuor recently asked the eight sitting 
ministers who are also presidential aspirants to resign.  While it 
is unclear at this point if they will resign immediately, those who 
are serious about running for president will likely resign or be 
forced out of office in the coming months, including Foreign 
Minister Nana Akufo-Addo, Defense Minister Addo Kufuor and Trade and 
Industry Minister Alan Kyerematen. 
 
¶25.  (U) Corruption and cronyism are problems.  Ghana also faces a 
range of security challenges, including a rise in violent street 
crime, a proliferation of small arms, and an increase in narcotics 
trafficking, including trafficking of cocaine and heroin to the 
United States. 
 
U.S. - Ghana Relations 
---------------------- 
 
¶26.  (U) U.S. - Ghana relations are excellent and broad-gauged.  The 
U.S. Mission in Ghana is the third-largest U.S. Mission in Africa. 
It includes the oldest Peace Corps program in the world and our 
development assistance program began with Ghana's independence.  The 
United States has strong commercial, political, military-military, 
and people-to-people relations with Ghana.  The Embassy moved into a 
new $100 million complex in June. 
 
Internationalism: The AGOA Forum in Context 
------------------------------------------- 
 
¶27.  (U) Ghana is playing an increasingly significant global 
leadership role, as a non-permanent member of the UN Security 
Council, member of the Board of the International Atomic Energy 
Agency, active member of the Economic Community of West African 
States (ECOWAS) and recently selected chair of the African Union. 
 
¶28.  (U) Ghana's role as co-host of the AGOA Forum reflects this 
expanded international profile.  The Government of Ghana took the 
lead to define the structure and agenda of this year's Forum.  The 
Minister for Trade, Industry, Private Sector and President's Special 
Initiatives, Alan Kyerematen argued forcefully that the Forum should 
belong to the Africans and has been personally involved in every 
substantive decision related to the Forum.  The agenda for the Forum 
is designed to produce discussion of practical benefit to 
AGOA-eligible countries.  It is meant to:  provide a realistic 
assessment of how AGOA has been implemented so far; look at key 
sectors which have been identified as of interest to Africans; and 
identify tools Small and Medium Sized Enterprises (SMEs) can use to 
overcome challenges to maximizing benefits available to them under 
AGOA. 
 
¶29.  (SBU) In order to foster dialogue and practical outcomes, the 
GoG decided the private sector and civil society would be integrated 
into the main forum, rather than run parallel events as has occurred 
in the past.  Implementing the GoG vision of a unified Forum has 
presented coordination challenges; representatives from the private 
sector and civil society representatives have expressed concern that 
they have not been consulted or included as fully as they would have 
liked. 
 
¶30.  (SBU) Minister Kyerematen has been the driving force behind the 
African Trade Ministers consultative group and has pushed for the 
African regional economic communities to develop strategic AGOA 
implementation plans.  However, at the request of President Kufuor, 
all ministers aspiring to run for President, including Minister 
Kyerematen, have submitted their resignations.  Kufuor has accepted 
the resignations but they will not become effective until 
replacements are in place.  We expect Kyerematen to stay on through 
the Forum.  Nevertheless, Kyerematen's near-term resignation means 
he will not be able to drive follow-up; it is not clear who among 
the African ministers will pick up the reins. 
 
Bridgewater