GHANA: AGOA ELIGIBILITY REVIEW UPDATE

UNCLAS SECTION 01 OF 03 ACCRA 001837

SIPDIS

STATE FOR AF/W. AF/EPS (AKUETTEH),EB/TPP/BTA/ANA (WHITAKER)
COMMERCE FOR ITA (VINEYARD)
STATE PASS USTR (HAMILTON)

E.O. 12958: N/A
TAGS: ELAB ETRD PHUM PREL GH AGOA
SUBJECT: GHANA: AGOA ELIGIBILITY REVIEW UPDATE

REF: SECSTATE 168472


1. PER REFTEL, POST SUBMITS THE FOLLOWING UPDATE ON GHANA'S
AGOA ELIGIBILITY:


2. BEGIN TEXT,

TPSC SUBCOMMITTEE ON AGOA IMPLEMENTATION
2004 COUNTRY ELIGIBILITY RECOMMENDATIONS
STATE SUBMISSION


Country: GHANA
Current AGOA Status: Eligible
State recommends continued AGOA eligibility for Ghana.

Country Background Summary: Ghana is a constitutional
democracy dominated by a strong presidency. President John
Kufuor has governed since taking power democratically in
January 2001, succeeding Jerry Rawlings who ruled for 19
years. Ghana,s population in 2003 was approximately 20.1
million. 2003 GNI was USD 6.5 billion, and per capita GNI was
USD 320. Gold, cocoa, and timber are the traditional sources
of export earnings. The Government of Ghana (GoG) is pursuing
sound monetary and fiscal policies and completed successful
IMF and World Bank reviews in September 2003. It has
succeeded in getting the budget under control and has
improved transparency and accountability in use of public
resources. The GoG is on target for revenue collection
through August 2004, but is unlikely to meet expenditure
targets due to high oil prices. Maintaining fiscal
discipline continues to be is its top economic priority. Real
GDP growth increased from 4.5 percent in 2002 to 5.2 percent
in 2003. The cedi has remained relatively stable,
depreciating by 3.5 percent in 2003. Favorable external
markets for cocoa and gold in 2003 supported the stability of
the cedi and increased foreign exchange reserves. The annual
inflation rate has declined from 30 percent in April 2003 to
11.2 percent at the end of May 2004. Ghana reached HIPC
completion point in July 2004, paving the way for
approximately USD 3.5 billion in debt forgiveness.

Comments on Eligibility Requirements


I. Market-based Economy


A. Major Strengths Identified
Ghana has a market-based economy with few barriers to trade
and investment. The GoG has made strides in the structural
reform agenda, particularly in eliminating price controls and
subsidies. The GoG is expected to fully liberalize crude oil
imports and cede control of petroleum prices after December

2004.
Ghana has enjoyed significant reductions in hard currency
debt payments since reaching HIPC decision point in 2002.
Private property rights are protected by law, though disputes
over land ownership are common. Judicial tribunals, long a
source of abuse, have been abolished, and High Courts in
major cities are now automated to expedite review of major
commercial cases as well as of high-profile corruption cases.
Encouraging foreign investment is a central part of economic
policy. Ghana has received nearly USD 250 million in direct
foreign investment since the beginning of the Kufuor
Administration in January 2001
Standard and Poor's issued Ghana a B plus/B sovereign debt
rating on September 5, 2003 and Fitch Rating Agency issued a
B rating with positive outlook. Although the GoG does not
benefit directly from this rating, the private sector already
has due to easier access to credit and foreign exchange and
increased foreign and domestic investment flows into Ghana.
The rating also serves as a useful benchmark to measure
economic progress in Ghana.
The GoG passed five of six proposed IPR bills in December of

2003. The last -a copywrite bill- is still pending in
Parliament.
The World Bank announced in a March 2004 report that Ghana,s
&Time to Start a Business8 had decreased by 34 percent
since 2003.


B. Major Issues/Problems Identified
The GOG faces serious challenges in continuing structural
reforms. It has privatized 300 of 350 parastatal companies,
but the GoG has delayed divestitures of Ghana Commercial Bank
and Ghana Water Company Limited.
In anticipation of the upcoming presidential election the GOG
has not raised fuel prices to cost recovery levels. This is
causing parastatal losses of USD10 million per month.
Domestic credit and subsidies to public utilities continue to
present quasi-fiscal problems. The GoG has yet to resolve the
management problems and inefficiencies in the state owned
utility companies. It has accumulated large arrearages in the
energy sector, which pose a potential threat to macroeconomic
stability.
The GoG has cleared the CMS Energy dispute by paying arrears
and has shown a good faith effort to make scheduled payments.
Western Wireless' Ghanaian subsidiary Westel was able to meet
directly with President Kufuor and has agreed to pay a USD 25
million fine to settle their dispute with the GoG. The
matter has been complicated by the application of a
retroactive spectrum fee of USD 26.5 million. According to
the GoG the fee is being applied equally to all wireless
operators in the country. Post has no indication the fee has
not been applied evenhandedly. Westel contends that their
license was paid as part of their original agreement with the
GoG. Westel has stated their intention to file for
international arbitration to settle the matter, but holds
hope that an agreement can still be reached through direct
negotiation.
The GoG decided to settle its disputes with U.S. firm Kaiser
Aluminum by purchasing Kaiser's large Valco facility.
Unfortunately the sale has yet to close and the GoG and
Kaiser are engaged in parallel processes of international
arbitration and direct negotiation to resolve the sale.
US 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.

II. Political Reform/Rule of Law/Anti-Corruption


A. Major Strengths Identified
The Kufuor Administration has pledged commitment to the rule
of law and appears to be living up to that ideal. The
President has established an Office of Accountability to
oversee the performance of senior government functionaries.
Several corruption prosecutions are underway and a former
minister is now in jail. Cabinet Ministers recently approved
&Whistle Blower8 legislation to protect citizens who report
corruption.
The GoG worked to reduce the backlog of its courts by
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. The GoG also drafted legislation
to promote Alternative Dispute Resolution (ADR).
Presidential elections of 2000 were peaceful, free, and
transparent. Democracy continues to be vibrant, with the two
major parties vigorously contesting each other and the press
enjoying unprecedented freedom.


B. Major Issues/Problems Identified
The integrity of the legal system is compromised by a severe
lack of financial, human, and material resources.
There are serious problems with large numbers of remand
prisoners detained for three to ten or more years before
going to trial.
There continue to be credible reports that members of the
police beat suspects in custody, and that police and some
elements of the military arbitrarily arrest and detain
persons. Police corruption is a problem.
Prolonged pretrial detention remains a problem. Juvenile
detainees are housed in separate facilities. Inadequate
resources and a system vulnerable to political and economic
influence compromises the integrity of the overburdened
judicial system.
At times the Government restricts freedom of assembly, and
police forcibly disperse some demonstrations.
Some observers question the GoG,s commitment to an
evenhanded application of the rule of law given the energetic
scrutiny and investigation of former government officials on
corruption charges while comparatively few from Kufuor,s
party are targeted.

III. Poverty Reduction


A. Major Strengths Identified
Ghana has a poverty reduction plan. Key to this is
increasing growth rates in agriculture through exports of
processed goods. Ghana plans to take advantage of AGOA
provisions to boost exports of agricultural products to the
U.S.
Ghana has aggressively moved to take full advantage of the
apparel benefit. Ghana received its textile visa in Mid-2002,
and, received its Category 9 certification for hand loomed
rugs, scarves, placemats and tablecloths, effective September
15, 2003. Ghana-based textile firms already have contracts
with U.S. distributors and are seeking more.
Ghana reached its HIPC completion point in July 2004, which
will result in approximately USD 3.5 billion of debt
forgiveness from official creditors.


B. Major Issues/Problems Identified
None

IV. Labor/Child Labor/Human Rights


A. Major Strengths Identified
Despite some problems in its human rights record, the GoG
continues to improve its human rights practices. Police
received training in tactics of non-lethal force and human
rights protection.
The GoG has increased its efforts to suppress the trafficking
in persons through cooperation with NGOs and international
organizations to identify and return internally trafficked
children.
Ghana is a signatory to ILO convention 182 on the worst forms
of child labor. The GoG has made combating child labor and
trafficking a high priority. Several Ministries worked
closely with the ILO to conduct studies on child labor
exploitation and regional trafficking, including the Ghana
Statistical Service, which published an ILO-financed survey
of child labor in Ghana in March 2003.
NGOs, local and national government participate in West
Africa Cocoa/Agriculture Project (WACAP),an international,
public-private effort to eliminate the worst forms of child
labor from the cocoa industry.
In conjunction with ILO/IPEC, IOM has successfully freed
hundreds of children as young as four years old from forced,
hazardous labor in the Lake Volta fishing industry.
Ghana is working closely with the U.S. and other donor
countries to assess the extent of the problem of
international trafficking in women. The GoG and local NGOs
are continuing on an extensive public education campaign
begun last year against domestic violence, contributing to
public debate about draft domestic violence legislation. The
GoG also strengthened the Women and Juvenile Unit of the
Police to combat crimes against women and children and the
courts increasingly gave longer sentences for those crimes.
Labor unions enjoy substantial legal protections in Ghana,
and many operate in both the public and private sectors.
Various affiliates of the Trade Union Congress are actively
involved in organizing workers in the informal sector around
issues of health and safety, hours of work, annual leave, and
medical care.
In July 2003, the National Labor Commission, an independent
body that arbitrates labor disputes, was established to bring
Ghana,s labor laws into conformity with ILO Convention.
In October a new union, the Union of Industry, Commercia and
Financial Workers (UNICOF) was incorporated, representing the
interests of workers at Ghana Commercial Bank, Standard and
Chartered Bank, Ghana National Procurement Agency, Ghana
Airways Pilots Association, and Agricultural Development
Bank, among others.


B. Major Issues/Problems Identified
There were reports that the GOG was intolerant of opposing
views and reacted by bringing dissenters in for questioning
by the Bureau of National Investigations or the National
Security Agency. Children as young as four years old are
forced into dangerous work in the fishing industry via
arrangements in which their parents get around $180 per year
for their service. Aided by international organizations, the
GoG is working to eliminate this practice, and the incidence
of this practice is declining, but the GoG still has not
passed an anti-trafficking law despite drafting a bill for
well over two years.
Police use of excessive force resulted in several
extra-judicial killings as well as injuries. Corruption
amongst police, who set up barriers to bribe motorists, and
judicial officials, who accept bribes in exchange for
expedited or postponed cases or losing records, remained a
serious problem.
Child labor was a problem in the informal sector, and forced
child labor and trafficking in persons were problems.
Trokosi, a traditional form of ritual servitude, was
practiced on a limited scale in one region of the country.


V. International Terrorism/U.S. National Security


A. Major Strengths Identified
The GoG has been explicit in its sympathy with the U.S. over
September 11, and has since ratified or acceded to all
international anti-terrorism conventions.


B. Major Issues/Problems Identified
None
YATES