FINANCE MINISTER'S UPBEAT STATUS REPORT ON GHANA'S

UNCLAS SECTION 01 OF 02 ACCRA 002319 SIPDIS SENSITIVE MCC FOR ROD NORMAN TREASURY FOR ALEX SEVERENS STATE PASS OPIC FOR CONAL DUFFY E.O. 12958: N/A TAGS: KMCA EAID EINV EAGR EFIN GH OPIC MCA SUBJECT: FINANCE MINISTER'S UPBEAT STATUS REPORT ON GHANA'S MCA PLANNING REF: A. STATE 237954 ¶B. STATE 239160 ¶1. (SBU) Summary: Finance Minister Osafo Maafo gave an optimistic appraisal of Ghana's planning for the Millennium Challenge Act (MCA) during a November 22 meeting with Ambassador Yates. In response to concerns raised by the Millennium Challenge Corporation (MCC),Osafo Maafo reconfigured Ghana's MCA working group. The current GoG proposal focuses on agri-business, and Osafo Maafo predicted his team would submit its draft to the MCC by January 2005. The GoG's core MCA team now includes several private sector representatives and will deepen consultations with civil society over December. The GoG's objective is to use MCA funds to create a world-class agricultural sector in Ghana. End Summary ¶2. (SBU) Ambassador, USAID Country Director and EconChief met November 22 with Finance Minister Yaw Osafo Maafo and key advisors to congratulate the Minister in person on Ghana's inclusion among the 16 eligible countries for the second round of MCA funding (Note: Post delivered Ref A points via letter November 10). The Ambassador noted that several other countries were moving forward more rapidly in the process, even engaging in early due diligence discussions with the MCC. The Ambassador also commented that while Ghana was under no set timeline it would be useful to determine a realistic timeline for Ghana to complete its draft compact. The Ambassador also asked for an update on how the consultation process was progressing, an area of concern during the MCC visit in August. ¶3. (SBU) Osafo Maafo acknowledged that Ghana's early concept paper was unfocused -- "a maze of projects" -- and the consultation process inadequate. However, he argued that he started broadly on purpose. By using the economic priorities of the Ghana Poverty Reduction Strategy as a starting point, he achieved buy-in from other Cabinet members. Starting with a more specific concept would have been "political suicide." This created a situation where all Cabinet members were vying for inclusion of their own pet projects, and the initial draft concept paper reflected that. ¶4. (SBU) Osafo Maafo claimed he won President Kufuor's support to include non-government representatives on the MCA core working group to give credibility to his Ministry's efforts to focus Ghana's concept paper. (Note: Osafo Maafo added business sector representatives to the core team and also invited USAID-funded Sigma One Corporation to serve as an unofficial advisor to the core team, filling in information gaps and serving as a sounding board on key issues. End Note) The reconfigured core team eliminated many of the competing projects and eventually settled on agri-business as the prime focus of Ghana's MCA compact. ¶5. (SBU) Osafo Maafo subsequently elaborated in writing on his decision to revamp his MCA team (November 23 letter and proposal development schedule faxed to MCC). In his letter he states that his intent was to address the issues the MCC team raised in August: 1) the initial concept paper was unfocused; 2) the process to develop the proposal appeared so far to be heavily government driven; and 3) the GoG needed to deepen the consultative process. The restructured and private sector-driven core MCA team addressed these concerns by expanding consultations with stakeholders, which resulted in the selection of agri-business as the proposal focus. Osafo Maafo promises to continue with a robust consultation schedule to assist the GoG to continue to narrow down the proposal. ¶6. (SBU) The basis for the agri-business focus is that Ghana is rare in that a huge percentage -- 85 to 90 percent -- of its land is arable. Osafo Maafo stated the idea was to take advantage of this "natural endowment" by removing constraints to the sector and opening up agricultural areas to investment. He said the GoG's objective was to use MCA funds to "promote private sector-led growth through agri-business," with the end-goal to position Ghana as a world-class agricultural-based economy. He did not want to lose focus of the goal of poverty reduction, commenting that MCA funds would mostly be used in non-cocoa growing regions, which are already benefiting from huge cocoa crops and relatively high world cocoa prices. ¶7. (SBU) Osafo Maafo and Michael Ansah, who heads the GoG's core MCA team, both indicated that they understood that programs to promote the agricultural sector should concentrate on removing constraints rather than providing direct government supports to private and/or government-owned agriculture operations. As an example Osafo Maafo noted that wholly inadequate infrastructure is the main constraint facing the Affraim Plains region - which should be a "bread-basket" for Ghana and is thus a likely selection for MCA funding. Ansah stated that the GoG plans to use a "franchise approach," taking the same methodology they develop for the MCA proposal and applying it to develop other agricultural areas in Ghana -- such as in the northern region. ¶8. (SBU) Now that they have a focused program, the core team is working to complete an "initial draft proposal," which they will use in further consultations with civil society. The outcome of the consultations should be a more complete proposal, which Ansah hopes to submit to the MCC in late December. Osafo Maafo agreed that January is the more likely time frame. ¶9. (SBU) Comment: While Osafo Maafo insists that the MCA is still the most important recent development for Ghana's economy, the GoG effort to complete a compact clearly lost focus in the September-November period. The main reason is that Osafo Maafo and other principle Ministry of Finance and GoG officials are fully occupied with the upcoming Presidential and Parliamentary elections (on December 7). It is only recently that the core team has made progress, primarily because in early November project leader Michael Ansah moved from London to Ghana to manage the process through completion. Post is reassured that Ghana will develop a more effective, growth-based, private sector-driven proposal under his more dynamic leadership End Comment. YATES