Identifier
Created
Classification
Origin
05ACCRA2267
2005-11-04 13:17:00
UNCLASSIFIED
Embassy Accra
Cable title:  

GHANA'S AGOA ELIGIBILITY: POST'S SUBMISSION

Tags:  AGAO ETRD ECON XA GH 
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UNCLAS SECTION 01 OF 04 ACCRA 002267 

SIPDIS

E.O. 12958: N/A
TAGS: AGAO ETRD ECON XA GH
SUBJECT: GHANA'S AGOA ELIGIBILITY: POST'S SUBMISSION

REF: A. A) SECSTATE 170577


B. B) LANDBERG - TRIMBLE EMAIL 9/30/2005

UNCLAS SECTION 01 OF 04 ACCRA 002267

SIPDIS

E.O. 12958: N/A
TAGS: AGAO ETRD ECON XA GH
SUBJECT: GHANA'S AGOA ELIGIBILITY: POST'S SUBMISSION

REF: A. A) SECSTATE 170577


B. B) LANDBERG - TRIMBLE EMAIL 9/30/2005


1. Mission's submission regarding Ghana's continuing
eligibility for the African Growth and Opportunity Act(AGOA)
is formatted at requested in ref a. Submission was
originally transmitted in ref. b.


2. Begin eligibility paper:

TPSC SUBCOMMITTEE ON AGOA IMPLEMENTATION
2005 COUNTRY ELIGIBILITY RECOMMENDATIONS
STATE DEPARTMENT SUBMISSION

Country: GHANA

Current AGOA Status: Eligible

Post reccomends continuing eligiblility.

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. The UN estimates Ghana's population for 2005 at 22
million. The World Bank estimate for 2004 GDP was $8.8
billion, and per capita GDP was $435. Gold, cocoa, and
timber are the traditional sources of export earnings,
although non-traditional exports are increasingly rapidly.
The Government of Ghana (GoG) is pursuing sound monetary and
fiscal policies and completed successful IMF and World Bank
reviews in June 2005. It has succeeded in gaining measurable
control over the budget and has improved transparency and
accountability in use of public resources. The GoG is above
target for tax revenue collection through August 2005, but
below target for overall revenues due to delays in donor
disbursements. It is unlikely to meet expenditure targets
due to high oil prices. Maintaining fiscal discipline
continues to be is a top economic priority. Real GDP growth
increased from 5.2% in 2003 to 5.8% 2004, and the IMF
projects a similar growth rate for 2005. Favorable external
markets for cocoa and gold in 2004 and into 2005, as well as
record level remittance flows, have supported the stability
of the cedi and increased foreign exchange reserves. The
annual inflation rate was 14.9% at the end of July 2005.
Ghana reached HIPC Completion Point in July 2004, paving the
way for approximately $4.2 billion in debt forgiveness.
Total U.S. exports were $300 million and imports were $140
million in 2004, with imports under AGOA (including GSP)
increasing by 85% to $74 million.



Comments on Eligibility Requirements


I. Market-based Economy

Major Strengths Identified
--------------

-- Ghana has a market-based economy with few barriers to
trade and investment.

-- The GoG strengthened fiscal and monetary policies
considerably under its IMF Poverty Reduction and Growth
Facility, reining in spending and borrowing, eliminating
price controls and cutting subsidies. The IMF called the
GoG's control of expenditures during the 2004 election year
an "historic achievement."

-- The improved policy performance, along with higher cocoa
and gold prices since 2002, resulted in higher economic
growth, falling inflation and interest rates, a stable
currency, and approximately $1.6 billion foreign exchange
reserves (as of September 2005).

-- In May 2004, the Millennium Challenge Corporation
designated Ghana as one of 16 countries eligible for
Millennium Challenge Account (MCA) funding.

-- Private remittances ) transfers from NGOs, religious
groups, individuals ) increased 55.6% to $2.35 billion for
January-July 2005 compared to $1.51 billion for the same
period in 2004. Of the total, individuals transferred 28.5
percent or $666.2 million.

-- Ghana enjoyed significant reductions in hard currency debt
payments after reaching HIPC Decision Point in 2002, and will
receive approximately $4.2 billion in official debt relief
after reaching HIPC Completion Point in 2004.

-- 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 $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 sovereign debt
rating on September 5, 2003 and Fitch Rating Agency raised
its rating to B plus in March 2005. Although the GoG does
not benefit directly from these ratings, the private sector
has easier access to credit and foreign exchange and the
ratings have encouraged increased foreign and domestic
investment. The ratings also serve as useful benchmarks to
measure economic progress in Ghana.

Major Issues/Problems Identified
--------------
-- The GOG faces serious challenges in continuing structural
reforms. It has privatized the majority of its parastatal
companies, but the GoG has delayed the controversial
divestitures of its most prominent SOEs, including Ghana
Commercial Bank, Ghana Water Company Limited, Ghana Telecom
and the energy utilities.

-- GoG ostensibly turned over control of fuel prices to an
independent authority in March 2005. Since that time,
however, domestic prices have increased less than 2 percent,
while world prices have increased over 20 percent.

-- 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 settled disputes with both Kaiser Aluminum and
Western Wireless international by purchasing the Ghanaian
assets of both companies. Although, in the end, both
companies willingly agreed to sell, their assets -- an
aluminum smelter and a fixed-line telephone company -- had
been seriously devalued as a result of the protracted
negotiations and numerous delays.

-- 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 World Bank reported in 2005 that the average time to
start a business in Ghana exceeded 80 days, although this is
an improvement over the 126 days reported in 2003.

-- The GoG continues to pursue a policy of intervention in
the economy. When a textile company recently closed due to
flagging sales in the face in increase competition from Asia,
government decided to purchase the company in order to keep
it open. Investors typically cannot move forward without
engaging the government on its highest levels.

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

Major Strengths Identified
--------------

-- The Kufuor Administration has pledged commitment to the
rule of law. The President has established an Office of
Accountability to oversee the performance of senior
government functionaries.

-- 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. These "Fast Track" courts,
however, can still be delayed. One American investor waited
over a year for a hearing.

-- Presidential elections of 2004 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.

Major Issues/Problems Identified
--------------

-- Despite the Kufuor Administration's purported policy of
"zero tolerance" for corruption, no significant investigation
or prosecution of high-ranking government officials has
occurred since 2001. Apart from the recent arrest of two
mid-level tax officials for extortion, there has been little
serious pursuit of corruption. In contrast, a recent survey
done by the local affiliate of Transparency International
revealed that 92 percent of respondents considered corruption
a serious problem in Ghana.

-- There is little oversight of HIPC funds. A Deputy
Minister of Finance recently admitted that the expenditure of
over $3 million from the HIPC fund could not be accounted
for.

-- The integrity of the legal system is compromised by a
severe lack of financial, human, and material resources.

-- There are serious problems with 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 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

Major Strengths Identified
--------------

-- Ghana has a poverty reduction plan, which the GoG is in
the process of revising and updating in preparation for the
November 2005 Consultative Group meeting with development
partners. 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. Most importantly, the plan
seeks to integrate the poverty reduction efforts of all
donors and the government to avoid duplication of efforts.

-- 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 $4.2 billion of debt
forgiveness from official creditors. This achievement also
made Ghana automatically eligible for further G8 debt relief.

Major Issues/Problems Identified
--------------

-- Ghana has a significant level of poverty, and most
socio-economic indicators are relatively low.

IV. Labor/Child Labor/Human Rights

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. It became operation in 2005.

-- 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.

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.

-- Some 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.

-- Police use of excessive force resulted in several
extra-judicial killings as well as injuries. Corruption among
police, who set up barriers to extort money from motorists,
and judicial officials, who accept bribes in exchange for
expedited or postponed cases or losing records, remained a
serious problem.

-- Child labor is a problem in the informal sector, and
forced child labor and trafficking in persons are problems.


V. International Terrorism/U.S. National Security

Major Strengths Identified
--------------

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

Major Issues/Problems Identified
--------------

-- None.
BRIDGEWATER