VZCZCXYZ0006
RR RUEHWEB

DE RUEHAR #1324/01 2841223
ZNR UUUUU ZZH
R 101223Z OCT 08
FM AMEMBASSY ACCRA
TO SECSTATE WASHDC 7104

UNCLAS ACCRA 001324 
 
SIPDIS 
 
STATE FOR AF/EPS-MALLORY AND BREITER; STATE PASS TO USTR 
 
E.O. 12958:N/A 
TAGS: ECON ETRD GH
SUBJECT: Ghana: Input for AGOA Eligibility Review 
 
REF: A) STATE 85086 
 
Country Background Summary 
-------------------------- 
 
¶1.  Ghana is a country of 22 million people with a constitutional 
democracy dominated by a strong presidency.  President John Kufuor 
has governed since assuming office democratically in January 2001, 
succeeding Jerry Rawlings, who ruled for 19 years.  Presidential 
elections are scheduled for 2008. 
 
¶2.  The Bank of Ghana estimated 2007 GDP to be $15.2 billion.  The 
Government of Ghana (GoG) is pursuing generally sound monetary and 
fiscal policies, but increased spending to address strong growth 
constraints and rising oil prices have weakened macroeconomic 
stability in 2008.  Real GDP growth has exceeded 5% annually 
starting in 2003 and was an estimated 6.3% in 2007.  The growth has 
been accompanied by a significant decrease in poverty.  In 1991, 
51.7% of Ghana's population lived in poverty; for 2005/2006, the 
figure is 28.5%.  Ghana is on track to be the first sub-Saharan 
African country to reach the Millennium Development Goal of reducing 
the percentage of people living in poverty by 50%. 
 
¶3.  Ghana reached HIPC Completion Point in July 2004 and is a 
beneficiary of the Multilateral Debt Relief Initiative (MDRI). 
Total debt relief under HIPC and MDRI is expected to total more than 
$215 million in 2008. 
 
¶4.  Overall U.S. trade with Ghana increased in 2007 compared to 
¶2006.  U.S. exports to Ghana in 2007 were $404 million and imports 
were $199 million.  Imports under AGOA (including GSP) also 
increased to $69 million from $45 million in 2006.   The first half 
of 2008 shows an increasing trend.  Total trade increased about $142 
million (from about $290 million to about $432 million) compared to 
the same period in 2007 and imports under AGOA plus GSP decreased 
slightly from $40.2 million to $37.3 million. 
 
------------------------------------ 
Comments on Eligibility Requirements 
------------------------------------ 
 
Market-based Economy 
-------------------- 
 
¶5.   Major Strengths Identified 
 
-- Ghana has a market-based economy with fewer policy barriers to 
trade and investment relative to other countries in the region. 
-- The GoG strengthened fiscal and monetary policies considerably 
over the past 10 years, reining in spending and borrowing, 
eliminating price controls and cutting subsidies but over the last 
year inflation and the fiscal deficit have risen sharply as oil 
prices and government spending have increased. 
-- Increased cocoa and gold prices since 2002, along with relatively 
good macro-economic management, helped bring stronger growth rates. 
-- The government turned over the regulation of fuel prices to an 
independent authority and prices now reflect costs.  The government 
has committed to cost-recovery tariffs for utilities and made 
significant increase in 2007.  In 2008, however, the government only 
raised tariffs for mining companies, while other users are 
subsidized. 
-- According to the July 2008 Bank of Ghana Monetary Policy 
Committee Report, private remittances (transfers from NGOs, 
religious groups, and individuals) increased about 33% to $4.2 
billion for January-June 2008 compared to the same period in 2007. 
Of the total, about 19%, or $790 million accrued to individuals. 
-- Encouraging foreign investment is a government priority.  Ghana 
has attracted $1.5 billion in foreign direct investment since the 
beginning of the Kufuor Administration in January 2001.  According 
to Bank of Ghana balance of payments data, Ghana attracted about 
$466 million in foreign investment in 2007, compared to $435 million 
in 2006. 
-- In June 2008, Standard & Poor's affirmed Ghana's B plus sovereign 
debt rating, first issued in September 2003 and Fitch Rating Agency 
raised its rating to B plus in March 2005.  However, in 2008 Fitch 
cut the outlook on Ghana's sovereign B plus credit rating to stable 
from positive, citing rising external financing needs and a widening 
current account gap.  The ratings serve as useful benchmarks to 
measure economic progress in Ghana. 
-- The World Bank Doing Business Indicators published in 2007 showed 
that Ghana was one of the world's top ten reformers in 2006-2007. 
-- The IMF projects that the recent oil discovery is expected to 
generate additional fiscal revenue of about 3 Q 4 of percent of GDP 
annually for the next 20 to 30 year period. 
 
 
¶6.   Major Issues/Problems Identified 
 
-- The GOG faces serious challenges in continuing structural reforms 
and translating macro stability into widely shared prosperity. 
Income inequality is rising. 
Labor productivity is low; most jobs generated over the last 15 
years are characterized by low pay and low productivity. 
-- The fiscal deficit increased to more than 9% of GDP in 2007 in 
part due to investment to address energy supply bottlenecks, 
above-budget spending on the public sector wage bill, and increased 
utility subsidies. 
-- Ghana has privatized the majority of its parastatal companies. 
Two telecom companies were privatized in 2008, but progress has been 
slow on divestiture of the Tema Oil Refinery. 
-- Domestic credit and subsidies to public utilities continue to 
present quasi-fiscal problems and the GoG has yet to resolve the 
management problems and inefficiencies in the state-owned utility 
companies. 
-- U.S. firms have expressed concerns regarding the lack of 
transparency in government procurement, although there have been no 
formal complaints to the GoG.  The concerns are mainly related to: 
1) undefined timeframes for rendering decisions; 2) unclear bidding 
requirements; and 3) allegations of favoritism. 
-- The business and investment climate, while improving at a good 
rate, remains challenging. 
-- The GoG continues to pursue a practice of intervention in the 
economy.  Investors typically cannot move forward without engaging 
the government at its highest levels. 
Land tenure issues compound investment challenges. 
-- GhanaQs infrastructure is inadequate to support more rapid 
development and the needs of the private sector.  Energy and water 
are often in short supply and major roads are poorly maintained and 
congested.    Failure to address infrastructure needs sustainably 
will undermine Ghana's growth prospects and attractiveness to 
investors. 
 
Political Reforms/Rule of Law/Anti-Corruption 
--------------------------------------------- 
 
¶7.   Major Strengths Identified 
 
-- The Kufuor Administration has pledged a commitment to ensuring 
the rule of law.  Ghana has passed important anti-corruption 
legislation, including public procurement, audit, financial, and 
whistleblower laws. 
-- The presidential elections of 2004 were peaceful, free, and 
transparent. Democracy continues to be vibrant, with the two major 
parties vigorously contesting each other, and with a lively, free 
media and civil society.  The Electoral Commission certified two new 
political parties in August 2006. Presidential and Parliamentary 
elections are scheduled to take place in December, 2008. 
-- The GoG worked to reduce the backlog in its courts by 
establishing a commercial court and automating High Courts 
authorized to hear cases involving banks, investors, human rights, 
electoral petitions, government revenue, specified commercial and 
industrial cases and certain criminal cases. 
 
¶8.   Major Issues/Problems Identified 
 
-- Police use of excessive force resulted in the deaths of several 
suspected criminals as well as in the deaths and injuries of several 
innocent bystanders.  Members of the police beat suspects in 
custody, and police arbitrarily arrest and detain persons. 
-- Vigilante justice has increased sharply, due in part to delays in 
prosecuting suspects, rumors of police collaboration with criminals, 
and a widespread perception of police ineptitude. 
-- Court delays persist, even in the "Fast Track" automated courts. 
At least one American investor encountered more than three years of 
repeated delays before a judgment was finally rendered. 
-- The integrity of the judicial system is compromised by corruption 
and a severe lack of financial, human, and material resources. 
-- Corruption is pervasive among all branches of government.  Police 
set up barriers to extort money from motorists, and judicial 
officials accept bribes in exchange for expedited or postponed cases 
or for losing records. 
-- Arbitrary arrest and detention, and prolonged pretrial detention, 
remain problems. 
Prison conditions continue to be harsh and life-threatening. 
Juvenile detainees are not housed in separate facilities. 
-- Anti-corruption institutions are weak.  A 2005 survey conducted 
by the local chapter of Transparency International revealed that 92 
percent of respondents considered corruption a serious problem in 
Ghana. Significant oil and gas discoveries have the potential to 
exacerbate institutional corruption. 
-- Parliament is weak; it does not have independent financial 
authority and is heavily influenced by the executive branch. 
 
Poverty Reduction 
----------------- 
 
¶9.   Major Strengths Identified 
 
-- Ghana's poverty reduction strategy is set out in its Growth and 
Poverty Reduction Strategy (GRPS) II, 2006-2009, which builds on 
GPRS I.  The central objective of GPRS II is to increase growth to 8 
percent annually in order to accelerate the pace of poverty 
reduction and progress toward achievement of other MDGs, and reach 
middle income status by 2015. 
-- Coordination with and among donors in support of poverty 
reduction is relatively strong, helping to minimize duplication and 
inefficiencies. 
-- Poverty declined, from about 42 ercent in 1997 to 28.5 percent 
in 2005/2006. 
-- Debt relief under HIPC and the MDRI will make about 1.3 billion 
available during the GPRS II period (2006-2009) primarily for 
support of goals under GPRS II. 
 
¶10.   Major Issues/Problems Identified 
 
-- Ghana continues to have significant levels of poverty, 
particularly in certain regions where rural poverty tops 90 percent, 
and income inequality is increasing. 
-- The government's actual commitments do not always back up the 
rhetoric.  For example, education and health spending as a 
percentage of GDP is flat and donors pick up about 90 percent of the 
water and sanitation development budget which includes 
infrastructure, training and capacity building. 
-- GhanaQs aggressive move to take full advantage of the apparel 
benefit under AGOA is facing serious problems.  Major apparel 
factories have not made significant exports in 2008.  Apparel 
exports decreased in 2007 and exports at end of June 2008 was $0.7 
million compared with $5.2 million in the same period in 2007. 
 
Workers' Rights/Child Labor/Human Rights 
---------------------------------------- 
 
¶11.  Major Strengths Identified 
 
-- Labor unions have legal protections in Ghana and operate in both 
the public and private sectors. 
-- Ghana is a signatory to ILO convention 182 on the worst forms of 
child labor. 
The 2006 Ghana Poverty Reduction Strategy II commits to intensifying 
efforts to combat the worst forms of child labor and continues to 
implement the 2006-2011 National Plan for Elimination of Child Labor 
in Ghana.  The government is also collaborating with ILO-IPEC on a 
4-year, $4.75 million USDOL-funded QTimeboundQ program, which 
establishes timeframes for progress on the elimination of selected 
worst forms of child labor in Ghana. 
-- The National Labor Commission, an independent body that 
arbitrates labor disputes, was established to bring Ghana's labor 
laws into conformity with the ILO Convention and became operational 
in 2005. 
-- In October 2005, the newly-created Union of Industry, Commercial 
and Financial Workers (UNICOF) was incorporated, representing the 
interests of workers at Ghana Commercial Bank, Standard and 
Chartered Bank, Ghana National Procurement Agency, and Agricultural 
Development Bank, among others. 
-- The GoG has increased its efforts to fight trafficking in persons 
through cooperation with NGOs and international organizations to 
identify and return internally trafficked children.  In February, 
the GoG successfully prosecuted a trafficking case for the first 
time. 
-- Ghana is working closely with the U.S. and other donor countries 
to assess the extent of cross-border trafficking. 
-- In spite of some problems on its human rights record, the GoG 
continues efforts to improve its human rights practices. 
-- Police received training in tactics of non-lethal force and human 
rights protection. 
The GoG passed the Domestic Violence Bill in February 2007, which 
defines domestic violence and provides greater protection to its 
victims.  The GoG also strengthened the Domestic Violence Victim 
Support Unit to aid women and children who have been victims of 
domestic violence, and the courts increasingly gave longer prison 
sentences for those crimes. 
-- In June 2007, the law was amended to confer jail sentences on 
convicted practitioners of female genital mutilation (FGM). 
 
¶12.  Major Issues/Problems Identified 
 
-- While the law allows unions to conduct most of their activities 
without interference, only unions that represented the majority of 
workers in a given company can obtain a Collective Bargaining 
Certificate, which is required to engage in collective bargaining. 
-  While there was an increase in the minimum wage, it did not 
provide a decent standard of living for a worker and family. 
Violation of the minimum wage law is widespread. 
Forced and bonded child labor is a problem and is common in the 
agricultural and fishing industries, domestic work, and quarries. 
-- Women and children continued to be trafficked for forced labor 
especially in the informal sector.  In some cases the situation can 
lead to the sexual exploitation of women (who are trafficked for 
forced labor). 
-- Violence against women and children continues to be a problem. 
Domestic abuse was rarely prosecuted and the cases were often on 
trial for three years or more. 
FGM is practiced, particularly in the northern regions of the 
country. 
Societal discrimination against women, persons with disabilities, 
homosexuals, and persons with HIV/AIDS occurred throughout the 
country, particularly in rural areas. 
 
International Terrorism/U.S. National Security 
--------------------------------------------- - 
 
¶13.  Major Strengths Identified 
 
-- The GoG has been explicit in its sympathy and support for the 
United States regarding September 11 and the fight against 
terrorism.  It has ratified or acceded to all international 
anti-terrorism conventions. 
 
¶14.  Major Issues/Problems Identified 
 
-- Narcotics trafficking and financial crime are serious and growing 
problems. 
-- GOG police and counterterrorism institutions are weak.  Ghana 
lacks terrorism finance legislation. 
 
 BROWN