US embassy cable - 04ACCRA2504

UNCLAS SECTION 01 OF 04 ACCRA 002504 
 
SIPDIS 
 
STATE PASS USTR/G (WILLIAM JACKSON, GLORIA BLUE) 
STATE FOR EB/MTA/MST 
 
E.O. 12958: N/A 
TAGS: ETRD, EFIN, ECON, GH 
SUBJECT: 2005 NATIONAL TRADE ESTIMATE REPORT FOR GHANA 
 
REF: STATE 240980 
 
1.  This message responds to reftel request for an update of 
the National Trade Estimate (NTE) report.  The following is 
Post's input to the 2005 NTE report for Ghana (Note: report 
also sent via email to USTR and State). 
 
TRADE SUMMARY 
 
The U.S. trade surplus with Ghana was USD 128 million in 
2003, an increase of USD 51 million from the USD 76 million 
surplus in 2002.  U.S. goods exports to Ghana in 2003 were 
USD 209 million, up 8.7 percent from the previous year; U.S. 
imports from Ghana were USD 82 million, down 29.6 percent. 
Ghana is currently the 91st largest export market for U.S. 
goods.  The stock of U.S. foreign direct investment (FDI) in 
Ghana in 2002 was USD 264 million, down from USD 295 million 
in 2001. 
 
IMPORT POLICIES 
 
Ghana has progressively eliminated or reduced its import 
quotas, tariffs, and import licensing requirements through 
the structural adjustment program it initiated in the early 
1980s.  The import licensing regime was eliminated in 1989, 
but some imports such as drugs, mercury, gambling machines, 
handcuffs, condensed or evaporated milk, arms and ammunition, 
and live plants and animals require special permits.  The 
tariff system has been simplified and harmonized to match the 
four tariff levels of the Economic Community of West African 
States (ECOWAS) trade liberalization program.  Under this 
system, there are four ad valorem import duties:  0 percent, 
5 percent, 10 percent, and 20 percent.  The standard rate of 
duty is 20 percent.  The zero-rate duty continues to apply to 
agricultural and industrial machinery, solar, wind, and 
thermal energy, and educational materials. A one percent 
processing fee applies to zero-rated goods, except on 
education, health, and agriculture sector goods.  In 2002, 
the government increased the duty from 0 percent to 5 percent 
for imported fish, selected commercial vehicles, and selected 
building materials.  .  Also in 2002, an additional one 
percent examination fee was levied on imported used vehicles. 
 Importers are charged 0.04 percent of the sum of the free on 
board (F.O.B.) value of goods and the value added tax (VAT) 
for the use of the automated clearing system, the Ghana 
Community Network (GCNet), although they have indicated they 
would prefer a flat fee on each transaction. 
 
In 2000, Ghana imposed an additional 0.5 percent ECOWAS levy 
on all goods originating from non-ECOWAS countries.  In 2001, 
under the Export Development and Investment Fund Act (Act 
582), Ghana instituted a 0.5 percent levy on all 
non-petroleum products imported in commercial quantities. 
Since the end of 1998, a 12.5 percent value added tax (VAT) 
has been tacked on the duty-inclusive value of all imports, 
with a few selected exemptions.  In August 2004, Ghana 
introduced the National Health Insurance Levy of 2.5 percent, 
which in effect increases the VAT to 15 percent. 
Additional excise taxes ranging between 5 percent and 140 
percent are applied to malt drink, water, beer, and tobacco 
products. 
 
In August 2002, Ghana abolished its 10 percent tax on 
selected "non-essential" imports in an effort to bring its 
tariff structure into harmony with ECOWAS and WTO provisions. 
In February 2003, the government considered adding 20 percent 
to the existing import duty on rice and poultry products but 
decided against it following consultations with its trading 
partners.  However, the government did increase import duties 
from 10 percent to 20 percent on some imported finished 
products for which locally manufactured products are 
available, such as cement, doors, windows and their frames, 
corrugated iron sheets, and nails. In August 2002, the ban on 
importing used vehicles that are more than 10 years old was 
replaced with a system of penalties ranging from 5 percent to 
50 percent of the C.I.F. (cost, insurance, freight) value. 
All communications equipment is subject to import 
restrictions.  Each year between May and October, there is a 
temporary ban on the importation of fish, except canned fish, 
to protect local fishermen during the Sardinella season. 
 
In May 2002, the WTO and Ghana's Customs Excise and 
Preventive Service (CEPS) signed an agreement on customs 
valuation and trade facilitation to simplify customs 
procedures and facilitate swift clearance of goods.  In April 
2000, Ghana transitioned from using pre-shipment inspection 
to a destination inspection scheme.  Four inspection 
companies currently have contracts with the government to 
perform the destination inspection. 
 
In order to develop competitive domestic industries with 
exporting capabilities, the Ghanaian government continues to 
support domestic private enterprise with financial incentives 
and tax holidays.  Nevertheless, Ghanaian manufacturers and 
producers contend that the country's relatively low tariff 
structure puts them at a competitive disadvantage vis--vis 
imports from countries that enjoy greater production and 
marketing economies of scale.  While tariff reductions have 
increased competition for local producers, the reductions 
have also reduced producer costs for imported raw materials 
and inputs so there is in fact some increasing demand for 
further tariff reductions, especially on inputs used by local 
businesses.  Ghana has responded by reducing the import duty 
on livestock ingredients and inputs for textiles production. 
Tariff information is available on the CEPS website 
(www.cepsghana.org). 
 
The Government of Ghana has indicated its intention to join 
other ECOWAS countries to begin the phased implementation of 
the Common External Tariff on January 1, 2005.  This will 
entail immediately harmonizing 5,100 tariffs (93 percent of 
all tariff lines) with little or no variation from the ECOWAS 
values.  For the remaining seven percent of tariff lines, it 
is likely that Ghana will pursue one or all of the following 
options:  1) phase in over a period of three years the 
remaining 400 tariff lines (constituting a large percentage 
of Ghana's overall customs revenues) to the slightly higher 
ECOWAS rates; 2) try to negotiate with ECOWAS a permanent 
exception to some or all of these disputed rates; or 3) agree 
to harmonize the rates over time, but in practice hold onto 
national rates. 
 
STANDARDS, TESTING, LABELING AND CERTIFICATION 
 
Ghana's domestic standards are currently mandatory.  Ghana 
has issued its own standards for most products under the 
auspices of its testing authority, the Ghana Standards Board 
(GSB), which subscribes to accepted international practices 
for the testing of imports for purity and efficiency.  The 
GSB has promulgated more than 250 Ghanaian standards and 
adopted more than 3,057 foreign standards for certification 
purposes.  The GSB determines standards for all products; 
authority for enforcing standards for food, drugs, cosmetics, 
and health items lies with the Food and Drugs Board.  Ghana 
intends to harmonize more with international standards and 
move away from its mandatory domestic standards, except for 
products that raise environmental or human health or safety 
concerns. 
 
Ghana prohibits the importation of meat with a fat content by 
weight greater than 25 percent for beef, 42 percent for pork, 
15 percent for poultry, and 35 percent for mutton.  It also 
restricts the importation of condensed or evaporated milk 
with less than 8 percent milk fat by weight, with the 
exception of imported skim milk in containers.  Imported 
turkeys must have their oil glands removed.  Coded expiration 
dates on U.S. products cause delays but are accepted by the 
GSB. 
 
GOVERNMENT PROCUREMENT 
 
Ghana is not a signatory to the WTO Agreement on Government 
Procurement.    However, in December 2003, Parliament passed 
a public procurement law that codified guidelines to enhance 
transparency and efficiency and give administration of 
procurement to a central body.  In August 2004, the 
government inaugurated the Public Procurement Board; tender 
committees and tender review boards are being formed and 
national dailies are publishing more public procurements. 
Section 60 of the procurement law allows procurement entities 
to give margin of preference to domestic suppliers of goods 
and services.  However, the government has not yet determined 
the margin of preference   or passed procurement regulations. 
 
 
EXPORT SUBSIDIES 
 
The Ghanaian government does not grant direct export 
subsidies but does use preferential credits and tax 
incentives to promote exports.  The Export Development 
Investment Fund administers financing on preferential terms 
using a 15 percent rate of interest, which is lower than 
market rates.  Agricultural export subsidies were eliminated 
in the mid-1980s.  The Export Processing Zone (EPZ) Law, 
enacted in 1995, leaves corporate profits untaxed for the 
first ten years of business operation in an EPZ, after which 
the tax rate climbs to 8 percent (the same as for non-EPZ 
companies); however, business producing traditional exports, 
e.g. cocoa beans, logs and lumber, remain untaxed.  The tax 
rate for non-exporting companies is 32.5 percent. 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
Ghana is a party to the Universal Copyright Convention and a 
Member of the World Intellectual Property Organization 
(WIPO), the African Regional Industrial Property 
Organization, and the World Trade Organization.  Holders of 
intellectual property rights have access to local courts for 
redress of grievances, although few trademark, patent, and 
copyright infringement cases have been filed in Ghana in 
recent years. In December 2003, Parliament passed five of the 
six bills designed to bring Ghana into compliance with TRIPS 
requirements.  The new laws are: Trade Marks, Patents, 
Layout-Designs (Topographies) of Integrated Circuits, 
Geographical Indications, and Industrial Designs.  The 
government expects Parliament to pass the remaining Copyright 
bill in 2005.  In cases where trademarks have been 
misappropriated, the price and quality disparity is usually 
readily apparent.  Computer software bootlegging does take 
place, but there are no data available to measure this 
practice.  Pirating of videotapes may affect U.S. exports, 
but the evidence suggests that such piracy is not done on a 
large scale.  There is no significant export market for 
books, cassettes, or videotapes pirated in Ghana. 
 
SERVICES BARRIERS 
 
The investment code excludes foreign investors from 
participating in four economic sectors:  petty trading, the 
operation of taxi and car rental services with fleets of 
fewer than ten vehicles, lotteries (excluding soccer pools), 
and the operation of beauty salons and barber shops. 
Provision of services by professionals such as lawyers, 
accountants, and doctors requires membership in a 
professional body.  Requirements for membership are identical 
for both Ghanaians and non-Ghanaians. 
 
Ghana has committed to offering access to foreign 
telecommunications providers for most basic services but has 
required that these services be provided through joint 
ventures with Ghanaian nationals.  The government has allowed 
a duopoly to dominate both domestic and international 
services but in 2004 announced plans to open up the market by 
allowing additional carriers.  The government has adopted a 
reference paper on regulatory principles, which obliges 
Ghana, among other things, to ensure cost-oriented 
interconnection with its major suppliers.  The National 
Communications Authority, established to regulate the market, 
has yet to become an effective mechanism to resolve 
complaints of anticompetitive practices by Ghana Telecom, the 
partially state-owned national telecommunications operator. 
 
Ghana allows up to 60 percent foreign ownership in the 
insurance sector.  This cap does not apply to auxiliary 
insurance services.  Ghana requires a high capital 
requirement for foreign firms to participate in the insurance 
sector but allows them to provide a full range of services. 
 
There are no limits on foreign participation in banking and 
other financial services.  However, shares held by a single 
non-resident foreigner and the total number of shares held by 
all non-resident foreigners in one security listed on the 
Ghana Stock Exchange may not exceed 10 percent and 74 
percent, respectively.  The Central Bank must issue licenses 
for banking and leasing.  For securities trading, a license 
is required from the Securities Regulatory Commission. 
Foreign-owned banking businesses face higher capital 
requirements than Ghanaian-owned banks (50 billion cedis 
versus 25 billion cedis, approximately USD 5.6 million and 
USD 2.8 million, respectively). 
 
INVESTMENT BARRIERS 
 
The 1994 Investment Code (Act 478) eliminated the need for 
prior approval of foreign investor projects by the Ghana 
Investment Promotion Center.  Investment registration, which 
the government undertakes essentially for statistical 
purposes, is supposed to be accomplished within five working 
days.  However, the World Bank and IFC funded Foreign 
Investment Advisory Service (FIAS) conducted an 
"Administrative and Regulatory Cost Survey" in 2003 showing 
that the actual time reported by respondents averaged two 
weeks.  The World Bank reported in its "Doing Business 2004" 
report that the total time to start a business in Ghana was 
85 days, an improvement from 129 days prior to 2003 but still 
significantly longer than many of Ghana's peers. 
 
Investment incentives are no longer subject to official 
discretion; they have been made automatic through 
incorporation into the corporate tax and customs codes. 
Incentives include exemption from import tariffs for plant 
inputs and equipment and generous tax breaks.  Work visa 
quotas for businesses, though relaxed, remain in effect.  The 
following minimum equity requirements apply, in the form of 
either cash or its equivalent in capital goods, for 
non-Ghanaians who want to invest in Ghana:  1) USD 10,000 for 
joint ventures with a Ghanaian; 2) USD 50,000 for enterprises 
wholly-owned by a non-Ghanaian; 3) USD 300,000 for trading 
companies (firms that buy/sell finished goods) either wholly 
or partly-owned by non-Ghanaians.  Trading companies must 
also employ at least ten Ghanaians. 
The Ghanaian government at one point controlled more than 350 
state-owned enterprises, but nearly 300 had been privatized 
by the end of 2000 under the privatization program of former 
President Rawlings.  The Kufuor government has reconstituted 
the Divestiture Implementation Committee, and by the end of 
2003, total divestiture transactions numbered 318. 
Thirty-six remaining state-owned enterprises are slated for 
divestiture. 
 
U.S. direct investment in Ghana is predominantly in the 
mining and energy sectors, but there is also significant U.S. 
investment in seafood, telecommunications, chemicals, and 
wholesale trade sectors.  Wage rates in the mining sector are 
substantially higher than in other industries in the Ghanaian 
economy.  U.S. and other foreign firms in Ghana are required 
to adhere to Ghanaian labor laws, including restrictions on 
the number of expatriates employed. 
 
Several U.S. investors operating in Ghana continue to 
struggle with longstanding investment or trade disputes that 
are both exhausting and expensive.  However, most investors 
do not encounter such disputes. 
 
ELECTRONIC COMMERCE 
 
Barriers to electronic commerce are mainly due to a financial 
infrastructure that is inadequate for electronic commerce to 
thrive.  The payment system in Ghana is largely cash-based. 
The legalization of foreign exchange bureaus has made foreign 
currency readily available for small transactions.  Local 
banks can facilitate the transfer of foreign payments abroad. 
 Transfers of large quantities of foreign currency, however, 
can run into significant delays. 
 
OTHER BARRIERS 
 
U.S. businesses interested in Ghana should also be aware of 
other barriers such as limited and costly credit facilities 
for local importers and freight rates that are higher than 
those for potential European competitors. Limited Ghanaian 
purchasing power dampens demand for U.S. goods and services. 
There are frequent problems related to the complex land 
tenure system, and establishing clear title can be difficult. 
 Non-Ghanaians can have access to land on a leasehold basis. 
Frequent backlogs of cargo at the port also hurt the business 
climate.  The Customs Service is still phasing in an 
automated customs declaration system that was established in 
the last quarter of 2002 to facilitate customs clearance.  It 
has not yet had the desired impact because complementary 
services from government agencies, banks, destination 
inspection companies, and security services are not up to 
speed. 
 
The high cost of local financing (with short-term interest 
rates currently above 25 percent) is a significant 
disincentive for local traders, inhibiting the expansion of 
most Ghanaian businesses from their current micro-scale 
operations and constraining industrial growth.  The residual 
effects of a highly regulated economy and occasional lack of 
transparency in government operations create an element of 
risk for potential investors.  Bureaucratic inertia is 
sometimes a problem in government ministries, and 
administrative approvals take longer than they should. 
Entrenched local interests sometimes have the ability to 
derail or delay new entrants, and securing government 
approvals may depend upon an applicant's local contacts.  The 
political leanings of the Ghanaian partners of foreign 
investors are often subject to government scrutiny. 
 
Corruption historically has been an issue with which foreign 
firms have had to contend.  However, in keeping with his 
intent to make Ghana an investor-friendly country, President 
Kufuor has instituted a policy of "zero tolerance" for 
corruption, and has confirmed his commitment to free markets 
and trade, saying, "Ghana is open for business." 
 
LANIER