AMBASSADOR'S TOUR D'HORIZON ON ECONOMIC ISSUES

C O N F I D E N T I A L SECTION 01 OF 03 ACCRA 000833

SIPDIS

SIPDIS

STATE PASS USAID, USTR

E.O. 12958: DECL: 04/09/2011
TAGS: EFIN ETRD PREL ELAB ENRG KTFN GH
SUBJECT: AMBASSADOR'S TOUR D'HORIZON ON ECONOMIC ISSUES
WITH FINANCE MINISTER

REF: A. STATE 50397


B. ACCRA 636

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

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

1. (SBU) Ambassador Bridgewater met March 24 with Finance
Minister Kwadwo Baah-Wiredu to press for action on a number
of pending issues: 1) the Minister's participation in
USAID's March 30 remittance conference; 2) terrorism finance
prenotifications (Ref A); 3) status of the money laundering
law; 4) GoG support for CMS Energy (Ref B); 5) the need for a
permanent Ghana IRS Commissioner, as support for U.S.
Treasury tax advisors; 6) GoG support for a Ghanaian Customs
Internal Affairs Unit; and 7) GoG support for a child labor
monitoring system in the cocoa sector. Although the Minister
did not appear fully informed on many of the issues, he
promised action on all items. He also requested U.S.
assistance for both Customs and the Ghana Statistical
Service. End Summary.

USAID Remittances Conference
--------------

2. (SBU) USAID, ECOWAS, and the GoG sponsored the "Accra
Regional Forum on Remittances and Trade in West Africa" on
March 30-31 (septel). Its purpose was to engage the private
sector, policy makers, and donors in discussing the issues
and opportunities for increased remittances and trade
settlement flows in West Africa. The Ambassador invited
Baah-Wiredu to participate in the conference, but also
questioned him on recent press reports that he favors taxing
remittances.


3. (SBU) The Minister said the press had misinterpreted his
remarks. He commented that remittances of $4.77 billion in
2005 had not impacted the economy as government had hoped,
and he suggested applying a small "transfer fee" on the
portion of remittances directed to projects for which the
government would have to provide services (e.g., water,
electricity, and roads for new housing developments). He
said he was open to further discussion as he realized the
quotes had caused a stir.


4. (SBU) The Ambassador sympathized with his concerns, but
said taxing remittances was not the way to pay for services,
rather property taxes and appropriate utility tariffs should
be the means to cover such costs. She also commented that
such a tax would discourage remittances and encourage
corruption and use of informal channels. The Ambassador also
expressed concern that the Minister's idea would result in
double taxation on persons remitting from U.S. (and
elsewhere),a seemingly unfair burden.

Terrorism Finance Prenotifications
--------------

5. (SBU) The Ambassador delivered Ref A points and explained
that now that Ghana was on the UN Security Council, the U.S.
would prenotify Ghana of USG intentions to freeze assets of
individuals and organizations involved or suspected of
involvement in terrorism financing. She noted that in the
past we notified the GoG after the fact. She commented that
the prenotifications, which Post would deliver in person to
the Foreign Affairs and Finance Ministries, as well as to the
Central Bank (Bank of Ghana),were extremely sensitive.

Financial Crimes and Anti-Money Laundering Bill
-------------- --

6. (SBU) The Ambassador noted Baah-Wiredu's recent statements
to the press that the GoG will address financial crimes, and
inquired about the status of anti-money laundering
legislation, which had been pending for over two years.
Baah-Wiredu said the GoG had decided to merge the draft money
laundering bill with legislation creating the Financial
Investigations Unit (which will implement the money
laundering law). He promised to submit it to Cabinet soon.
(Note: Post has requested INL funds to support money
laundering/financial crimes training for GoG law enforcement
agencies and the private sector. End Note).


7. (SBU) Baah-Wiredu also stated that he would soon pass the
Credit Reporting Bill (which will provide a legal and
regulatory framework for credit reporting in Ghana) and the
Foreign Exchange Bill (which will liberalize the financial
sector) to Cabinet. These two laws, in addition to the
Central Securities Depositary Bill (already in Cabinet),will
form the legal framework for the GoG to pursue its goal of

ACCRA 00000833 002 OF 003


transforming Ghana into a regional Financial Services Center.

GoG Support for CMS Energy Expansion Project
--------------

8. (SBU) The Ambassador urged the Minister to support the
$215 million CMS Energy thermal power plant expansion project
(reported Ref B). She argued that it is critical to Ghana's
energy needs and the quickest and cheapest available option
to increase power generation. The Minister did not dispute
that Ghana needs additional power, but argued that the deal
needed to be improved, especially aspects related to total
project cost, the current take-or-pay power purchase
agreement with CMS, and the government guarantee of the loan
from the IFC-led lenders group. Nevertheless, he said he
remained open to working with CMS and IFC to find a win-win
solution. (Note: The Ambassador spoke at a Post-hosted
single company promotion event for CMS April 6 to bring all
stakeholders Q) including Baah-Wiredu -- together to discuss
the deal and agree on a way forward. End Note).

Ghana IRS Commissioner
--------------

9. (SBU) The Ambassador noted that U.S. Treasury Tax Advisors
have helped Ghana's revenue agencies make significant
progress in increasing revenue collection, but the continued
absence of a permanent IRS Commissioner is blocking further
progress. The Minister said the naming of a new commissioner
was imminent. He expressed appreciation for the Treasury
advisors' work, and agreed with them that IRS has had trouble
recently meeting revenue targets. (Note: Treasury spent
over $1 million in technical assistance to Ghana's IRS and
VAT agencies since 2002, which directly contributed to record
level tax revenues. However, the IRS has been without a
permanent Commissioner for over a year, and the Acting
Commissioner does not have authority to implement much needed
reforms. End Note).

Customs Internal Affairs (IA) Unit
--------------

10. (SBU) The Ambassador said the Embassy had tried
unsuccessfully for over a year to establish an IA unit in
Ghana Customs, with INL and DHS funding. However, despite
the support of the Customs Commissioner, we have not provided
the assistance because Ghana Customs has not been able to
secure a location for the unit. The Ambassador urged the
Minister to work with Customs to make this happen (Note: The
Finance Ministry oversees Ghana Customs, so Baah-Wiredu's
support is key. End Note).


11. (SBU) The Minister agreed that the IA unit was necessary,
commenting that he was concerned about leakages and
corruption in the Tema and Takoradi ports. He instructed
Customs staff to contact the Embassy to discuss arrangements
to get the unit established. (Comment: corruption is
particularly bad at Tema port, where the GoG collects 80% of
total customs revenue. End Comment). Baah-Wiredu noted that
the GoG was interested in installing closed circuit TVs to
monitor the sea and airports, and requested USG assistance
with this project. (Note: On April 3, U.S. Customs began a
training course on anti-narcotics, trafficking in persons,
and document fraud (all World Customs Organization
requirements) for Ghana Customs. They have two more training
sessions in the pipeline, but it will be difficult to justify
these additional trainings if Ghana Customs does not
establish the IA unit. End Note).

Child Labor Monitoring System in Cocoa Sector
--------------

12. (SBU) The Ambassador stated that the U.S. cocoa industry
was ready to help Ghana develop a child labor certification
system, and urged the Minister to coordinate with industry
reps Q) led by the World Cocoa Foundation -- in order to meet
the 2008 goal of 50% coverage of all farms in Ghana and Cote
d'Ivoire. The Minister responded that the U.S. must be
careful to distinguish between children who work on family
cocoa farms, like he did, and those who work on large
plantations and are exploited. He and other Ghanaian
children worked with their families on small farms as a
routine way of life, not like on the large plantations in
Cote d'Ivoire. (Comment: While we agree forced child labor
is not common in Ghana's cocoa sector, the GoG must engage in
this initiative to allay the perception of a problem.
Despite cocoa industry lobbying, GoG leaders still seem
reluctant to recognize the damage they could inflict on the
sector by failing to implement an adequate monitoring system.
End Comment).


ACCRA 00000833 003 OF 003


Minister's Request for TA on Data Collection
--------------

13. (SBU) The Minister complained that one of the GoG's main
weaknesses is statistical collection, which complicates
efforts to calculate the size of the economy and implement
appropriate policies. He requested U.S. technical support
for the Ghana Statistical Service (GSS),which the Ambassador
agreed to explore. Donors including the IMF and USAID
already provide technical support to GSS, and DfID has
established a pooled fund to which other donors can
contribute. It will support an Evidence-Based Policy Making
(EBPM) project, with GSS, Finance Ministry, National
Development Policy Commission, and Office of the President
each receiving about $400,000 per year. USAID also funds the
GSS to conduct demographic and health surveys every 4-5
years. There is no question that the GoG's data quality is
poor, especially with regards to regional trade and
agriculture. Post will explore ways the U.S. might assist
with capacity building so the GoG can collect data more
effectively.

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

14. (C) We hope this meeting will result in action on issues
we have been pushing at lower levels for months, particularly
CMS Energy, the IRS Commissioner, and the Customs IA unit.
However, the meeting also served to highlight Baah-Wiredu's
idiosyncratic and unpredictable behavior. He often comes
across as uniformed on critical issues, and the remittance
tax issue is just the latest of a series of poorly thought
out statements to the press, often on second tier,
low-priority issues. This signals that Baah-Wiredu may not
fully comprehend the key role of Finance Minister in
reassuring capital markets and explaining and representing
GoG economic policy to the public. The IMF, other donors,
and even Finance Ministry staff generally consider him weak
and lacking influence, and there is a feeling that no one is
directing Ghanaian economic policy. Nevertheless, he
reportedly has the trust of the President, and the rumor is
he will escape the expected, upcoming cabinet reshuffle.
Fortunately for Ghana, the Central Bank is strong and
effective, and by itself is reassuring the public and
investors that GoG macroeconomic policies will stay on
course. End Comment.
LANIER