SCENESETTER FOR VISIT TO GHANA OF CODEL PELOSI

UNCLAS ACCRA 000439

SIPDIS

SENSITIVE
SIPDIS

PLEASE PASS TO CODEL PELOSI

E.O. 12958: N/A
TAGS: AMGT ECON GH OREP OTRA PGOV PREL
SUBJECT: SCENESETTER FOR VISIT TO GHANA OF CODEL PELOSI

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Summary/Introduction
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1. (SBU) Ghana is a democratic, market-oriented, pro-American
country in a region marked by conflict and authoritarian
rule. It has one of the best human rights records in Africa
and has made significant efforts to combat trafficking in
persons. President John Kufuor just completed the first year
of his second term, which has so far been marked by solid
economic performance and continued political stability,
despite intra-party tensions and corruption scandals. Ghana
exerts regional leadership, strongly supports the Global War
on Terrorism, and is a committed, major contributor to UN
peace keeping operations. Ghana is a member of the IAEA and
has a non-permanent seat on the UN Security Council.
Bilateral relations are excellent and broad-ranging.
President Kufuor has met President Bush six times, met with
former President Carter for the second time in October and
recently hosted the successful visit to Ghana of First Lady
Laura Bush. Ghana is eligible for U.S. assistance under the
Millennium Challenge Account (MCA) and hopes to sign an MCA
Compact by mid-2006. End Summary.

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U.S.-Ghana Relations
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2. (U) Ghana is a reliable, democratic partner for the U.S.
in peacekeeping, conflict resolution, counter-terrorism, and
economic development. U.S. interests center on support for
Ghana's fourteen-year-old democracy, promotion of open
markets, and the reduction of poverty. Key components of the
broad U.S.-Ghana relationship are:


3. (U) Democracy: Ghana's December 2004 parliamentary and
presidential election, the fourth election under the 1992
constitution, was seen as 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
rule of law. However, the long-term success of Ghana's
constitutional democracy is not guaranteed and democratic
institutions are weak. While Ghana scores better than many
countries in Africa on Transparency International's
Corruption Perception Index (Ghana ranks 65 globally on the
CPI),corruption is a growing concern. Anti-corruption
institutions are weak. 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.


4. (U) Development Assistance and Trade: Annual USG
assistance to Ghana is approximately $75 million. This
includes one of USAID's largest programs in Sub-Saharan
Africa. Ghana receives approximately $50 to $60 million in
USAID grant assistance and food aid per year, with a focus on
education, health, HIV/AIDS, 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.


5. (U) Security: Ghana provides us excellent cooperation in
counter-terrorism and counter-narcotics efforts. 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. Kufuor served as Chair of the
ECOWAS for two terms, ending January 2005. ECOWAS Executive
Secretary Mohammed Ibn Chambas is Ghanaian. Ghana has also

SIPDIS
been welcoming to refugees and currently hosts about 60,000
refugees, mostly Liberian. We support Ghana's regional role
through our mil-mil activities, USAID's West Africa Regional
Program (WARP) and our Refugee Coordinator Office, all based
in Accra.

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Internal Political Situation
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6. (SBU) President Kufuor is now just over one year into his
second term. This term has been marked by major continuity,
in his ministerial appointments, his priority themes, and his
cautious approach to governance. 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 eliminated all school fees,
thus guaranteeing free primary education for the first time.
Kufuor offered Ghana as one of the first two countries to be
reviewed in the NEPAD African Peer Review Mechanism.


7. (SBU) The backdrop of Ghanaian politics, however, remains
highly polarized. The New Patriotic Party (NPP) and
opposition National Democratic Congress Party (NDC) are
closely matched in parliament, the result of a very close
2004 national election result. Leaders of these two major
parties intensely dislike each other. NDC parliamentarians
complain that the NPP throws its weight around in parliament,
using its majority to force through laws. The NDC has
boycotted parliament, alleging the NPP does not show them the
proper respect and protesting the NPP,s desire to pass a
controversial law enabling Ghanaians residing overseas to
vote. The NPP and NDC both suffer from intra-party
divisions. Tensions between and within the two parties could
worsen as both parties prepare for District Assembly
elections in 2006 and presidential/parliamentary elections in

2008. There are six other smaller parties in Ghana which
also face significant internal divisions as they prepare for
the 2008 election.


8. (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, as
revealed by an Iraqi-American named Gizelle Yadji, who 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 public
opinion polls this year found that there is a growing
perception that corruption is on the rise, especially by the
president and his office. In November, the Enquirer
newspaper revealed a secretly-recorded tape in which the NPP
Party Chairman alleged that government contractors pay
kickbacks to the president and his staff. The scandal
resulted in the resignation of the party chairman. The
Minister of Roads and Transport is currently being
investigated for corruption.

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Security
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9. (SBU) Ghana's 8,000 strong military is characterized by
its allegiance (at least over the past six 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.


10. (U) 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, ten General
Officer or Flag Officer visits, and a regional maritime and
coastal security conference.


11. (SBU) Ghana is a strong ally in the Global War on
Terrorism. Ghana has signed 12 of 13 UN terrorism
conventions and a Customs Mutual Assistance Agreement. We
have excellent police contacts and good cooperation with the
police and other security services. There is narcotics and
illegal arms trafficking through Ghana, as well as rising
concerns about crime and fraud. We have assisted Ghana's
police, customs, and counter-narcotics agencies, including
ongoing basic training for the police.

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State of the Economy
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12. (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.


13. (SBU) The improved policy performance along with higher
cocoa and gold prices since 2002 resulted in higher economic
growth, reaching 5.2% in 2003, 5.8% in 2004, and projected at
over 5% for 2005. 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. Although the annual inflation rate rose to
14.8% in 2005 due to high world oil prices, Ghana's Central
Bank expects it to fall to single digits for 2006. Key
short-term interest rates have also fallen to below 15%. The
cedi has been relatively stable against the dollar for over
two years.

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Positive Economic Trends: MCA and Regional Role
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14. (SBU) Ghana is becoming a gateway to West Africa, due in
part to its political stability and economic reforms, but
also due to turmoil 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.


15. (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 languished for months,
sidelined by the 2004 election campaign and subsequent
reorganization of the cabinet in early 2005. President
Kufuor has pressed the MCC to expedite completion of the
Compact negotiations, but the Ghana MCA team, reorganized in
June 2005, understands the priority is to complete a quality
Compact within a realistic timeline. Ghana now has adequate
resources to do the job, with its own $500,000 budget and the
agreement signed August 11, 2005, with the MCC for $3 million
of 609(g) funding. The Ghanaians also now have the right
personnel in place, and the $517 million draft proposal,
focused on agri-business, promises to deliver on both poverty
reduction and economic growth. The MCC and Ghana MCA team
hope to complete a signed and approved Compact by mid-2006.


16. (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 debt relief under the
G8's Multilateral Debt Relief Initiative (MDRI),unveiled in
June 2005. Ghana is also realizing large foreign remittance
flows, estimated at approximately $4 billion in 2005, as well
as increasing foreign investment, including from U.S.
companies such as Newmont Mining and ALCOA. The government
resolved many of the investment disputes that undermined
U.S.-Ghana relations in recent years.


17. (SBU) Ghana's impressive performance has not gone
unnoticed. Standard and Poor's assigned Ghana a relatively
solid "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.

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Concerns: Energy, Business Climate, External Shocks
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18. (SBU) The government faces major challenges in its effort
to reform the economy. Ghana has a reputation as 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 (especially in the ports). 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.


19. (SBU) High energy costs could undermine the recent real
gains in economic growth, and Ghana has had difficulty
fulfilling its commitment to the IMF to deregulate the
petroleum market. Also, despite Kufuor's promise of a
"Golden Age of Business," Ghana remains a difficult and risky
place to do business. Contract sanctity and difficulty in
obtaining clear land title are concerns. Ghana's congested
courts make it difficult to resolve disputes. Due to
excessive bureaucracy the average time to start a business
exceeds 80 days, high compared to Ghana's peers (i.e., other
top performers). This contributes to widespread 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 potential impact of new
investment on economic growth and reducing poverty. Finally,
Ghana's infrastructure is in poor shape, and its dependence
on commodity exports (gold, cocoa, timber) leaves it highly
vulnerable to external shocks.

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Economic Outlook
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20. (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 continue to grow at the rate of 5 to 6% per year.
BRIDGEWATER