Identifier
Created
Classification
Origin
05ACCRA2036
2005-10-04 18:05:00
SECRET
Embassy Accra
Cable title:  

SCENESETTER FOR A/S FRAZER

Tags:  EAIR ECON EFIN ELAB KWMN PGOV PREL PTER GH MAS 
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S E C R E T SECTION 01 OF 05 ACCRA 002036 

SIPDIS

E.O. 12958: DECL: 10/02/2025
TAGS: EAIR ECON EFIN ELAB KWMN PGOV PREL PTER GH MAS
SUBJECT: SCENESETTER FOR A/S FRAZER

REF: A. STATE 182604


B. ACCRA 892

C. ACCRA 658

Classified By: Ambassador Pamela E. Bridgewater for reasons 1.5 d and e

--------------------
Summary/Introduction
--------------------

S E C R E T SECTION 01 OF 05 ACCRA 002036

SIPDIS

E.O. 12958: DECL: 10/02/2025
TAGS: EAIR ECON EFIN ELAB KWMN PGOV PREL PTER GH MAS
SUBJECT: SCENESETTER FOR A/S FRAZER

REF: A. STATE 182604


B. ACCRA 892

C. ACCRA 658

Classified By: Ambassador Pamela E. Bridgewater for reasons 1.5 d and e

--------------
Summary/Introduction
--------------


1. (C) Ghana is a democratic, market-oriented, and
pro-American country. It has one of the best human rights
records in Africa and has made significant efforts to combat
trafficking in persons. President John Kufuor is nine months
into his second term, which has been marked by intra-party
tensions and sluggish decision-making, but finally appears to
be gaining some momentum. Ghana exerts regional leadership,
strongly supports the Global War on Terrorism, and is a
committed, major contributor to UN peacekeeping operations.
President Kufuor has met President Bush five times and has
positive views of the United States.


2. (SBU) Kufuor understands that economic growth is
critical to continued political stability in Ghana, and has
done an admirable job of stabilizing the economy and
fostering an environment for stronger growth. His
government, however, has been slow in reducing obstacles to
foreign investment.


3. (SBU) Having just arrived September 30, I have not yet
met with President Kufuor or Foreign Minister Akufo-Addo.
However, both have been accessible to the Mission. Your
visit will be followed on October 14 by a brief visit to
Ghana of former President Carter. This cable outlines
U.S.-Ghana political, economic, military, and security
relations. End Summary

--------------
U.S.-Ghana Relations
--------------


4. (SBU) Ghana is a reliable, democratic partner for the U.S.
in peacekeeping, conflict resolution, counter-terrorism, and
economic development. U.S. interests center on supporting
Ghana's thirteen-year-old democracy, promoting open markets,

and reducing poverty. Key components of the broad U.S.-Ghana
relationship are:


5. (SBU) Democracy: Ghana's December 2004 parliamentary and
presidential elections, the fourth under the 1992
constitution, were 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 had the best score
between the Sahara and the Kalahari on Transparency
International's Corruption Perception Index (Ghana ranks 64
globally on the CPI),corruption remains a serious concern.
We supported the 2004 election with Mission observers and
$1.3 million in election assistance. We have programs to
strengthen parliament, the judiciary, the police and the
media.


6. (SBU) Development Assistance and Trade: Annual USG
assistance to Ghana is approximately $75 million, including
one of USAID's largest programs in Africa. Ghana receives
approximately $55 million in USAID grant assistance and food
aid per year, focusing on education, health, HIV/AIDS,
environment, trade and investment, and democracy and
governance. The U.S. and Ghana have a relatively dynamic
trade relationship. U.S. exports to Ghana in 2004 increased
to approximately $300 million, a 50% increase over 2003, and
Ghana is consistently the fifth or sixth largest market in
Africa for U.S. goods. USTR considers Ghana a "pacesetter"
country, due to its relative success in diversifying its
exports under AGOA.


7. (S) Security: Ghana provides excellent cooperation in
counter-terrorism and counter-narcotics efforts.
Intelligence sharing is outstanding. 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. During the recent TOGO crisis,
Ghana played a constructive, low-key role, in support of the
Economic Community of West African States (ECOWAS). 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 USAID's West Africa Regional Program
(WARP) and our Refugee Coordinator Office, both based in
Accra.
--------------
Internal Political Situation
--------------


8. (SBU) President Kufuor is now almost nine months into his
second term. This term has been marked by continuity in his
ministerial appointments, his priority themes, and his slow
approach to governance. In the first half of this term, the
GOG was distracted by corruption allegations and turmoil in
TOGO and was slow to get organized.


9. (SBU) In recent months, the GOG has regained some
momentum. In response to rising global oil prices and IMF
pressure, Kufuor raised petrol prices and established a
National Petroleum Authority. The GOG recently made strides
toward signing a Millennium Challenge Account (MCA)
agreement, submitted a trafficking in persons law to
parliament, and guaranteed free primary education for the
first time. Kufuor offered Ghana as the first country to be
reviewed in the NEPAD Peer Review Mechanism.


10. (SBU) The Ghanaian political party structure, however,
remains highly polarized. The New Patriotic Party (NPP) and
National Democratic Congress Party (NDC) are closely matched
in parliament. Leaders of the two major parties dislike
each other intensely. NDC parliamentarians complain that the
NPP throws its weight around in parliament, using its
majority to force through laws. The NDC retained
parliamentary seats in hotly contested by-elections in
Asawase (Ashanti Region) in April and Odododiodio (Accra) in
August, which did not change the overall political equation.


11. (SBU) Tensions between the NDC and NPP could worsen as
both parties prepare for District Assembly elections in 2006
and presidential/parliamentary elections in 2008. The NPP
will have its national convention in November to select new
party leadership and discuss strategies. Although this
convention will not decide on the presidential candidate,
there are already a number of competitors within the NPP in
the running to succeed Kufuor, including several ministers
and the Vice President. The result is friction at the top
levels of the bureaucracy.


12. (SBU) The NDC, which is holding its national convention
in December, is divided and financially weak. Rawlings still
exerts a strong influence on the party but there are many in
the party (including the camp of former NDC presidential
candidate John Atta Mills) who want to distance themselves
from the ex-president. Some believe these tensions will
eventually split the party.


13. (SBU) The Kufuor government has faced new charges of
corruption, 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, alleged by
an Iraqi-American named Gizelle Yadji, who also claims she
had an extra-marital affair with the President. (Kufuor
denies involvement in the hotel, bought by his son, but the
GOG has not commented on the other allegation). Two recently
published public opinion polls found that there is a growing
perception that corruption is on the rise, especially by the
president and his office.


14. (U) Parliament reconvenes in October and is expected to
take up legislation on domestic violence and disabilities, as
well as whistleblower and mining laws. It will also likely
consider a controversial People's Representation Bill, which
will allow Ghanaian citizens living abroad to vote in Ghana's
elections.


15. (SBU) Corruption and governance will continue to make
news, with the likely release of the NEPAD Peer Review report
in October/November. Key to the NPP's electoral prospects in
2008 will be the Kufuor government's ability to respond to
corruption allegations and its success in translating
macroeconomic performance into poverty reduction for the
masses.

--------------
Security
--------------


16. (SBU) Ghana's 8,000 strong military is characterized by
its allegiance (at least over the past five 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, Sierra Leone
and Cote d'Ivoire. We provide, or have provided, support
through our Excess Defense Articles (EDA) program; the
International Military Exchange Training (IMET) program; the
Foreign Military Sales (FMS) and Foreign Military Funding
(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
likely receive even more support under the Global Peace
Operations Initiative (GPOI). 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 liaison officer who is attached for duty at the
KAIPTC, and has provided approximately $1 million in funding
support.


17. (SBU) 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. 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 (most recently
from the Coast Guard Cutter Bear),ten General Officer or
Flag Officer visits, and a regional maritime and coastal
security conference.


18. (S) Ghana is a strong ally in the Global War on
Terrorism. Ghana has signed all 12 UN terrorism conventions
and a Customs Mutual Assistance Agreement. We have excellent
police contacts and good cooperation with the police and
other security services, including the intelligence services,
on matters related to terrorism. We have assisted Ghana's
police, customs, and counter-narcotics agencies, including
ongoing basic training for the police. RMAS and the Ghana
Security Services cooperate closely on counterterrorism.

--------------
State of the Economy
--------------


19. (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.


20. (SBU) The improved policy performance along with higher
cocoa and gold prices since 2002 resulted in higher economic
growth, reaching 5.2% in 2003 and 5.8% in 2004. Tight
monetary policies since mid-2003 restored confidence in the
economy, and the IMF calls 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% in mid-2003 to below 12% for

2004. The annual inflation rate is slightly higher as of
September 2005, at about 15%, due to high world oil prices,
but prices have stabilized in recent months. Key short-term
interest rates have also fallen to below 15%. The cedi has
been relatively stable against the dollar for two years.

-------------- ---
Positive Economic Trends: MCA and Regional Role
-------------- ---


21. (SBU) Ghana is a gateway to West Africa, due in part to
its political stability and economic reforms, but also due to
turmoil elsewhere in 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.

22. (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 was sidelined by the 2004
election campaign. President Kufuor has pressed the MCC to
expedite completion of the Compact negotiations, but the
recently reorganized Ghana MCA team understands the priority
is to complete a quality Compact. With the agreement signed
August 11 with the MCC for $3 million of 609(g) funding, the
GoG now has the adequate resources and personnel to complete
the job. Its $290 million proposal, focused on
agri-business, promises to deliver on both poverty reduction
and economic growth.


23. (SBU) In July 2004, Ghana reached Completion Point under
the Heavily Indebted Poor Country (HIPC) Initiative,
resulting in $4.2 billion debt relief. This achievement also
ensured Ghana's eligibility for further G-8 debt relief.
Ghana is also realizing large foreign remittance flows, which
may exceed $4 billion in 2005, as well as 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.


24. (SBU) Ghana's impressive performance has not gone
unnoticed. Standard and Poor's assigned Ghana a relatively
high "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: Slow Reforms, Business Climate, External Shocks
-------------- --------------


25. (SBU) The GoG faces major challenges in its effort to
reform the economy. Ghana has been 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, lowering trade
barriers, improving the investment climate, and attacking
corruption. Economic reform lost considerable momentum
during the 2004 election year. Many NPP leaders were
concerned that the reform effort had not translated into
improved living standards for Ghanaian citizens, so pressure
increased on President Kufuor to increase spending and delay
politically difficult reforms.


26. (SBU) Despite Kufuor's promise of a "Golden Age of
Business," Ghana remains a difficult place to do business.
Contract sanctity and difficulty in obtaining clear land
title are problems. Ghana's congested courts make it
difficult to resolve disputes. The average time to start a
business exceeds 80 days, high compared to Ghana's peers.
This contributes to 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
impact of new investment on economic growth and reducing
poverty. Finally, Ghana's dependence on commodity exports
leaves it vulnerable to external shocks, and high energy
costs could undermine the recent real gains in economic
growth.

--------------
Economic Outlook
--------------


27. (SBU) Despite these concerns, the overall outlook is
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 possibly repeat or exceed the 5.8% 2004 growth level in
2005..
BRIDGEWATER