CHINESE INFLUENCE IN GHANA - AN UPDATE

C O N F I D E N T I A L SECTION 01 OF 02 ACCRA 000497

SIPDIS

SIPDIS

FOR AF/RSA DANIEL EPSTEIN

E.O. 12958: DECL: 02/28/2017
TAGS: CH ECON EFIN ENRG PGOV PREL XA XE GH
SUBJECT: CHINESE INFLUENCE IN GHANA - AN UPDATE

REF: A) STATE 024937 B) BEIJING 679 C) 04 ACCRA 621

Classified By: POLCHIEF SCOTT TICKNOR FOR REASONS 1.4 (B) AND (D)


1. (U) Summary: Chinese involvement in Ghana, dating from
the establishment of diplomatic relations in 1960, is strong
and growing. After independence, President Kwame Nkrumah
sought close ties with China, a relationship that continued
throughout the Rawlings years. The bilateral friendship
became more guarded after President Kufuor was elected in
2000, yet China and Ghana continue to interact across a wide
spectrum of activities. In particular, economic and
commercial ties are growing. Ironically, Ghana reportedly
contracted with China to supply a special "Ghana at 50"
fabric for the Jubilee celebrations next week. As requested
ref A, following is a summary of Chinese activities in Ghana
and potential areas for future U.S.-Chinese dialogue and
cooperation in Ghana. End summary.


Diplomatic, Political, and Military Activities
-------------- -


2. (SBU) The Chinese maintain a medium-sized mission in
Accra. Perhaps due to their policy of non-interference in
the internal affairs of other countries, the Chinese tend to
focus their efforts on the economic and commercial front.
They support Ghana's participation in various African
peacekeeping missions, including a $1.2 million grant for the
purchase of vehicles used in such operations. Ghana has just
taken delivery of two Chinese K8 Fighter jets; two more will
be delivered later. The Chinese have also rehabilitated
military barracks in Accra, built an administrative bulding
for the Ministry of Defense on the military base in Accra,
and donated ammunition for Ghana's Soviet-era equipment.
China hosts training for Ghanaian military personnel but
Ghana prefers the military training offered by the United
States. The GOG has, for example, requested that the U.S.
provide training for the pilots who will fly the K8 fighters.
The Ghana-China Friendship Association was launched in 2002
but because the ruling New Patriotic Party (NPP) had close
ties with Taiwan prior to coming to power in 2000, a degree
of reserve in Chinese-Ghanaian relations followed President
Kufuor's election. Nevertheless, Kufuor hosted a visit by
Chinese Premier Wen Jiabao in June 2006 and joined
representatives of 48 other African nations in attending a
Chinese summit in November 2006 that was designed to chart a
roadmap for cooperation between China and Africa for the
period 2007-09. During this summit, Kufuor was reportedly
very favorably impressed with China's offers of new loans and
assistance. Since the summit, there have been a series of
follow-up visits between the GOG and China to work on deals
discussed during the summit.


Economic and Commercial Activities
--------------


3. (SBU) China's general economic and commercial engagement
in Africa (ref b) is evident in Ghana. For example, China
has become Ghana's second-largest trading partner after
Nigeria, with two-way trade increasing in 2005 to $769
million, up 30% over the previous year. Ghana exported
timber, cocoa, scrap metal, wood products, salt, and fish
products valued at $79 million, a sum dwarfed by $690 million
of Chinese imports into Ghana, primarily light manufactured
goods, chemicals, and low-cost clothing. The clothing
imports are controversial since many Ghanaians believe that
the importation of items such as faux kente cloth have
damaged the domestic textile industry. Nevertheless, Ghana's
desire to cultivate closer relations with China was further
evidenced by its decision to give China the contract to print
the special "Ghana at 50" cloth for next week's Jubilee
celebrations.


4. (SBU) China has offered Ghana financing for a number of
high profile projects, most notably a $600 million loan to
finance construction of a 400-megawatt dam at Bui on
concessional terms yet to be finalized. Other infrastructure
loans said to be in the works include $70 million to expand
rural telephone service, $30 million to complete a fiber
optic grid, and additional funding for tilapia fish farms,
fishing piers, and cold storage facilities. In addition, the
Chinese are discussing the possibility of building a 140-200
megawatt power plant; executives from Shenzen Energy Group
have traveled to Ghana twice in the past six months.
Consequently, total new borrowing from China could exceed $1
billion. (Comment: These projects will address some of

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Ghana's major development challenges but they may not be the
best choices over the long term. Though concessional, these
deals would add to Ghana's debt and a cost/benefit analysis
of these specific projects compared to other options has not,
to our knowledge, been done. End Comment.) China also
provides grant and in-kind assistance, such as building a
large youth center in Kumasi and renovating the National
Theatre. These projects, typically employing hundreds of
Chinese contractors and using imported Chinese materials,
have generated a good deal of positive publicity for the
Chinese government.


5. (C) China competes aggressively with the U.S. and others
for deals with the GOG, often to the frustration of U.S.
businesses. Because China is not bound by the OECD Export
Credit Agency agreement nor international norms concerning
labor rights, environmental protection, and corruption, the
playing field is not level. Exacerbating the situation is
Ghana's own tradition of cronyism and lack of transparency in
procurement. The Procurement Act has loopholes allowing for
sole source contracting and the acceptance of unsolicited
offers that are fully financed. For example, after two years
of negotiations, Motorola recently lost out to a last-minute
Chinese offer to provide radios to the police, ostensibly
because the Chinese financing package was more attractive,
despite the fact that China's EXIM bank had not committed to
the project. Chinese nationals are also widely believed to
be involved in illegal logging and fishing. China was
unsuccessful, however, in its attempt to maneuver around
ALCOA and purchase raw Ghanaian bauxite.


Chinese Activities in Health
--------------


6. (SBU) China is planning to send medical teams to Ghana to
perform research and combat infectious diseases. China has
also donated some mosquito nets but has not, to date, been
involved with other donors in planning or coordination. The
Chinese did not participate in the multi-donor task forces on
avian flu or malaria and did not respond to an Embassy
request for information on activities to help inform the USG
as it prepares to implement the President's Malaria
Initiative.


Potential US-Chinese Cooperation
--------------


7. (C) U.S. assistance tends to focus on policy reform,
capacity building, health, and humanitarian work, while the
Chinese prefer to invest in splashier projects, such as roads
and buildings. This division of labor could be complementary
but China tends to keep its plans close-hold and has not
traditionally participated in donor coordination meetings.
This may be about to change. The Heads of Mission (HOM) in
Accra recently invited China (and India) to consider
participating in monthly HOM meetings. China's COM welcomed
the idea and said China would attend the next meeting on
April 5, where HOM's will discuss resources employed,
results, and harmonization of efforts in support of Ghana's
development. It remains to be seen whether China's
participation will be permanent, and if so, whether it will
lead to greater transparency or will simply provide China
with more information it can use to pursue its own interests
more effectively. Unfortunately, those interests may not be
in accord with ours, nor will they necessarily redound to
Ghana's long-term benefit.


8. (C) Areas of potential cooperation with the Chinese
include health issues and some elements of the MCA Compact,
such as infrastructure improvements and agricultural
development. As a developing nation with millions of small
farm plots, China is in a good position to work in a
complementary manner with us in increasing yields and helping
farmers to improve their standard of living. Their
willingness to work with us in these areas is less certain.
Nevertheless, we recommend continuing a dialogue with the
Chinese in hopes of leveraging our programs and moving the
Chinese incrementally toward greater support of our efforts
to promote transparency, the rule of law, and respect for
human rights in Ghana.
BRIDGEWATER