Identifier
Created
Classification
Origin
06ACCRA303
2006-02-03 13:35:00
CONFIDENTIAL
Embassy Accra
Cable title:  

AMBASSADOR'S COURTESY CALL ON GHANA'S SENIOR

Tags:  EFIN ENRG EINV PGOV GH 
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C O N F I D E N T I A L SECTION 01 OF 02 ACCRA 000303 

SIPDIS

E.O. 12958: DECL: 02/02/2011
TAGS: EFIN ENRG EINV PGOV GH
SUBJECT: AMBASSADOR'S COURTESY CALL ON GHANA'S SENIOR
MINISTER


Classified By: EconChief Chris Landberg for Reasons 1.5 (B and D)

Summary
-------
C O N F I D E N T I A L SECTION 01 OF 02 ACCRA 000303

SIPDIS

E.O. 12958: DECL: 02/02/2011
TAGS: EFIN ENRG EINV PGOV GH
SUBJECT: AMBASSADOR'S COURTESY CALL ON GHANA'S SENIOR
MINISTER


Classified By: EconChief Chris Landberg for Reasons 1.5 (B and D)

Summary
--------------

1. (C) On January 24, 2006, Ambassador Bridgewater paid a
courtesy call on GoG Senior Minister J.H. Mensah. Mensah
said the GoG aimed beyond the basic poverty reduction
framework of the Millennium Development Goals (MDGs) with its
new Growth and Poverty Reduction Strategy. The goal is to
increase investment, but Mensah complained that Ghana and
West Africa's negative image, along with inadequate
infrastructure and education, limit foreign interest. He
noted the energy sector as a constraint to growth and asked
Ambassador to help expedite the IFC financed expansion of the
CMS Energy thermal plant. End Summary.


2. (C) Senior Minister Mensah, older brother of President
Kufuor's wife, has extensive government experience and plays
an oversight role in the Cabinet -- organizing the economic
ministries -- and runs Ghana's National Development Planning
Commission (NDPC),the National Governance Program. He holds
influence over other Ministers and with the President.
Nevertheless, as NDPC Chair he led the GoG's important and
somewhat flawed effort to develop GPRS II, the second
generation of Ghana's Poverty Reduction Strategy Paper
(PRSP).

Status of Growth and Poverty Reduction Strategy (GPRS)
-------------- --------------

3. (C) Minister Mensah and the GoG presented GPRS II at the
Consultative Group meeting between government and donors in
November 2005. At the time, donors largely felt the document
needed work: it was disorganized, failed to incorporate key
initiatives -- such as the action plan that resulted from the
NEPAD peer review -- and did not adequately connect
development initiatives with (donor) funding requests.
Mensah responded to these criticisms by agreeing to continue
work on the document with a March 2006 deadline for the final
report.


4. (C) In his meeting with the Ambassador, Mensah
acknowledged that the GPRS II was not a perfect document, but
declared that the government had decided to leave it as is.
He said the GPRS was just a part of the overall "National

Development Plan," and instead of perfecting it he was
focusing resources on developing specific plans for key
sectors, such as power, roads, water, and higher-level
education. (Note: The World Bank and most donors have
accepted this plan, deciding to work with what they have and
make improvements along the way. The overall goal is to
transform the GPRS process into a rolling, or ongoing,
process, dubbed the "Ghana Partnership Strategy." End Note).


5. (C) The original GPRS was focused on attaining the MDGs,
which Mensah claimed were a little outdated for an economy
like Ghana's that has achieved decent economic stability.
The goal of GPRS II, according to Mensah, is to move beyond
the poverty alleviation framework of the MDGs. Mensah stated
that a direct attack on poverty is insufficient, so the GPRS
II focuses more on addressing the constraints to achieving
higher rates of economic growth. Mensah's two areas of focus
are improving the quality of manpower through higher-level
education and improving infrastructure, primarily in the
power and water sectors.

Mensah: Focus Resources on Tertiary Education
-------------- -

6. (C) Mensah argued to Ambassador that Ghana was too far
behind in skills and technology to attain the 8 to 10% real
growth rate needed to reach lower middle-income status
($1,000 plus GDP/capita). He said focusing on primary levels
was too slow yielding, and supported instead investing in
tertiary level training, especially in technical skills,
which he argued could have an immediate payoff. His goal is
to create a "Korea-style situation, where the majority
completes secondary school," and he noted that, fortunately
for Ghana, there is a national consensus in Parliament to
increase taxation to pay for improvements to the education
system.

Energy Sector Concerns and CMS Energy
--------------

7. (C) Mensah said Ghana needed to expand the focus beyond
roads, especially to improving power and water
infrastructure. He pointed out that demand for power has
been increasing 5 to 8% per year, and the current power
system is not capable of handling the load. He argued that
the government should care as much about power outages as
about poverty in rural areas, as reliable power is critical
to growing the economy and creating jobs -- which eliminates
poverty.


8. (C) Mensah argued that the expansion of the CMS Energy
thermal power plant from single-cycle 220 MW to
combined-cycle (including steam component) 330MW, is a
crucial part of expanding power supply and bringing down
costs. He noted that negotiations have gone on for years,
and worried that even after so much work the major financier,
IFC, is raising concerns that could scuttle or further delay
the project. He asked for the Ambassador's assistance to
push the project forward through USG channels, arguing that
the IFC's concerns about the reorganization of the energy
sector -- a major impediment to date -- should not delay the
project and can be dealt with in parallel. (Note: the
Ambassador agreed to look into it, and Econoffs will meet
with CMS reps to determine next steps. End Note).
Lack of Foreign Investment
--------------

9. (C) Mensah complained that aside from infrastructure and
education, Ghana's (and the region's) poor general image is
the main impediment to foreign investment. He argued for
greater business promotion to bring in more investment and
also "brand Ghana," pointing out that at the moment the
President is the only regular salesman for Ghana. The Ghana
Investment Promotion Council (GIPC) theoretically has this
purpose, but has never been adequately funded. Mensah said
he had not yet been successful in convincing other Ministers
to increase funding in the budget for GIPC and other means of
promoting private investment.


10. (C) Mensah pointed to the Financial Times-hosted
investment seminar in London last fall as an example of
Ghana's failure to take advantage of promotional
opportunities. He accused the government of doing inadequate
advance work to attract potential new investors, so they only
succeeded in attracting companies already invested or doing
business in Ghana. He implored the Ambassador to help to
sell Ghana, and also asked help to create linkages with U.S.
business groups, such as the American Chamber of Commerce.

Comment
--------------

10. (C) We applaud Mensah's focus on creating wealth as
critical to reducing poverty. We also agree with him that
Ghana's severe structural deficiencies, especially in the
power sector, are debilitating to economic growth and a major
limitation on Ghana's ability to improve the living standards
of poor Ghanaians. Nevertheless, he exposed a blind spot we
find typical of high-level GoG officials. They focus more on
large and expensive aid projects as the means to increase the
rate of economic growth, and tend to downplay government's
regulatory role in decreasing investment risks. They also
overemphasize the importance of the sales pitch, while
de-emphasizing more fundamental investment climate issues,
such as ensuring rule of law and property rights.


11. (C) The World Bank's Doing Business Report highlights
such areas: time to start a business, lengthy court cases,
inadequate protection of property rights, and corruption.
Ambassador highlighted the importance of these reforms as
essential to her efforts to sell Ghana and bring in U.S.
investors. We are also aware that attendees at the Financial
Times seminar mentioned excessive red tape and the need for
property reform. According to our sources, however, these
comments fell on mostly deaf ears. End Comment.
BRIDGEWATER