US embassy cable - 05ACCRA1051

S E C R E T  ACCRA 001051 
 
SIPDIS 
 
 
E.O. 12958: DECL: 05/27/2025 
TAGS: EAIR, ECON, EFIN, ELAB, GH, KWMN, PGOV, PREL, PTER, MAS 
SUBJECT: SCENESETTER FOR PRESIDENT KUFUOR'S MEETING WITH 
PRESIDENT BUSH 
 
REF: A. ACCRA 892 
     B. ACCRA 658 
 
Classified By: AMBASSADOR MARY C. YATES FOR REASONS 1.5 D AND E. 
 
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Summary/Introduction 
-------------------- 
 
1. (C) 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 is five months into his 
second term which has so far been marked by intra-party 
tensions and sluggish decision making.  Ghana exerts regional 
leadership, strongly supports the Global War on Terrorism, 
and is a committed, major contributor to UN peace keeping 
operations. President Kufuor has met President Bush four 
times and has positive views of the United States.  Kufuor 
understands that economic growth is critical to continued 
political stability in Ghana.  Despite some concerns that his 
government has been slow to remove obstacles to foreign 
investment, Kufuor's administration has done an admirable job 
over the last four years of stabilizing the economy and 
fostering an environment for stronger growth. 
 
2. (C) This cable outlines U.S.-Ghana political, economic, 
military, and security relations.  It suggests issues that we 
may raise with Kufuor and those that he may raise with us. 
The Bush/Kufuor meeting may offer an opportunity to discuss 
our concerns related to trafficking in persons and 
corruption, and also congratulate Kufuor on excellent 
counter-terrorism and military cooperation.  Kufuor may raise 
MCA, civil aviation concerns, problems with the IMF, 
cocoa/child labor, and regional issues.  End Summary 
 
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U.S.-Ghana Relations 
-------------------- 
 
3. (SBU) 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 fifteen-year-old democracy, promotion of open 
markets, and the reduction of poverty.  Key components of the 
broad U.S.-Ghana relationship are: 
 
4. (SBU) 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.    Corruption is a concern.  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. 
 
5. (SBU) 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 $55 million in USAID 
grant assistance and food aid per year, with a focus on 
education, health, HIV/AIDS, environment, trade and 
investment, and democracy and governance.  The U.S. and Ghana 
have a relatively dynamic trade relationship.  Ghana is the 
fifth largest market in Africa for U.S. goods, and USTR 
recently named Ghana a "pacesetter" country, due to its 
relative success in taking advantage of AGOA. 
 
6. (S) Security:  Ghana provides us excellent cooperation in 
counter-terrorism and counter-narcotics efforts. 
Intelligence sharing is outstanding.  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.  During the recent Togo crisis, 
Ghana played a constructive, low-key role, in support of the 
Economic Community of West African States (ECOWAS).  Kufuor 
served as Chair of the ECOWAS for two terms, ending January 
2005.  The Executive Secretary of ECOWAS is Ghanaian 
(Mohammed Ibn Chambas).  Ghana has also been welcoming to 
 
 
refugees and currently hosts 44,000 refugees, mostly 
Liberian.  We support Ghana's regional role through USAID's 
West Africa Regional Program (WARP) and through our Refugee 
Coordinator Office, both based in Accra. 
 
---------------------------- 
Internal Political Situation 
---------------------------- 
 
7. (SBU) President Kufuor of the New Patriotic Party (NPP) 
won reelection for a second four-year term in the December 
2004 election, defeating John Atta Mills of the National 
Democratic Congress (NDC) party.   The NPP has a strong 
majority in parliament, but Kufuor's narrow (52%) victory in 
the presidential race opened the door to substantial internal 
party friction and an increasingly polarized political 
environment. 
 
8. (SBU) Kufuor began his second term with some positive 
momentum.  He clearly articulated three priorities:  1) 
human resource development, 2) private sector development, 
and 3) a continued emphasis on good governance.   He launched 
politically risky petroleum deregulation and selected a 
Cabinet which drew heavily on experience and loyalty.   He 
presented and received parliamentary vetting and approval of 
a solid budget. 
 
9. (SBU) However, over the past few months, this momentum has 
slowed and Kufuor has been on the defensive.   In April, the 
NPP lost a key parliamentary by-election in its heartland 
Ashanti Region.  The NPP has been distracted by intra-party 
wrangling over the party's choice to succeed Kufuor in the 
2008 election (eleven contenders, including many ministers, 
are already reportedly in the running).  The President called 
an emergency meeting to sort out tensions in the party. 
 
10. (C) The Kufuor government has also 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.  Over the past 
week, media allegations linked the President to a corrupt 
hotel deal and an extra-marital affair with an 
Iraqi-American.  (Kufuor denies involvement in the hotel, 
bought by his son, but the GOG has not commented on the other 
allegation). 
 
11. (C) Political decision making is sluggish in many areas. 
Parliament is in its second session of 2005 but has yet to 
pass one non-budget law.  Kufuor has defended his decision on 
petroleum deregulation but is reluctant to continue with the 
petroleum sector reforms required by the IMF.   The President 
has been criticized for being slow in selecting District 
Chief Executives and ambassadors.  On the other hand, on May 
20, Kufuor announced major changes in the top military 
hierarchy, in an expected rotation. 
 
12. (C) Continued, pointed verbal attacks between former 
President Rawlings (of the NDC) and NPP leaders, while not 
unusual in recent years, have further polarized Ghanaian 
politics over the past few months.  The opposition NDC has 
led four demonstrations this year, the latest on May 26, 
against recent petroleum price hikes.  NDC leaders are bitter 
about the recent election loss and perceived NPP 
vindictiveness and heavy-handedness in parliament.  While 
hopeful that the NPP and Kufuor's current problems will help 
the NDC in 2008 elections, the opposition has its own 
internal friction and financial difficulties. 
 
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Security 
-------- 
 
13. (SBU) Ghana's 8,000 strong military is characterized by 
its allegiance (at least over the past five 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 
Liberia, Sierra Leone and Cote d'Ivoire.  We provide support 
through our Excess Defense Articles (EDA) program, 
International Military Exchange Training (IMET) training, and 
African Contingency Operations Training and Assistance 
(ACOTA) program.  Ghana opened the Kofi Annan International 
Peacekeeping Training Center in 2004, the only center of its 
kind in West Africa. 
 
 
14. (SBU) Our mil-mil relationship also includes West Africa 
Training Cruises and Joint Combined Exchange Training.  Ghana 
is the newest member of the U.S. National Guard State 
Partnership Program, with North Dakota (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.  Ghanaians avidly participate in 
DOD's counterterrorism Fellows programs.  Military visits 
over the past year included two ship visits, nine General 
Officer or Flag Officer visits, and a regional coastal 
security conference. 
 
15. (S) Ghana is a strong ally in the Global War on 
Terrorism.   Ghana has signed all 12 UN terrorism conventions 
and a Customs Mutual Assistance Agreement.  We have excellent 
police contacts and good cooperation with the police and 
other security services, including the intelligence services, 
on matters related to terrorism.  We have also assisted 
Ghana's police, customs, and counter-narcotics agencies. 
RMAS and the Ghana Security Services cooperate closely on 
counterterrorism. 
 
-------------------- 
State of the Economy 
-------------------- 
 
16. (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. 
 
17. (SBU) The improved policy performance along with higher 
cocoa and gold prices since 2002 resulted in higher economic 
growth, reaching 5.2% in 2003 and 5.8% in 2004.  2004 
inflation fell to below 12%, interest rates to below 20%, and 
the cedi is stable.  Tight monetary policies have restored 
confidence in the economy, and the IMF calls the government's 
control of expenditures during the 2004 election year an 
"historic achievement." 
 
--------------------------------------------- --- 
Positive Economic Trends:  MCA and Regional Role 
--------------------------------------------- --- 
 
18. (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. 
 
19. (SBU) In May 2004, the Millennium Challenge Corporation 
(MCC) designated Ghana eligible for Millennium Challenge 
Account (MCA) funding.  In July 2004, Ghana reached 
Completion Point under the Heavily Indebted Poor Country 
(HIPC) Initiative, resulting in $4.2 billion debt relief. 
Ghana is also realizing large foreign remittance flows, as 
well as increasing foreign investment, including from U.S. 
companies such as Newmont and ALCOA.  The government has 
resolved many of the investment disputes that undermined 
U.S.-Ghana relations in recent years. 
 
20. (SBU) Ghana's impressive performance has not gone 
unnoticed.  Standard and Poor's assigned Ghana a relatively 
high "B " sovereign credit rating.  Fitch Rating Agency 
upgraded Ghana to a "B " 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 
--------------------------------------------- ------ 
 
21. (SBU) The government faces major challenges in its effort 
to reform the economy.  Inefficiencies in the energy sector 
could pose a risk to continued solid economic performance, 
and Ghana is having trouble 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 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 60 days, high compared to Ghana's 
peers.  The delays associated with establishing a business 
contribute 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 dependence on commodity 
exports leaves it highly vulnerable to external shocks. 
 
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Economic Outlook 
---------------- 
 
22. (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 possibly repeat or exceed the 5.8% 2004 growth level in 
2005. 
 
--------------------------------- 
Issues We Could Raise with Kufuor 
--------------------------------- 
 
23. (C) President Bush or others interlocutors could include 
the following issues in discussions with President Kufuor: 
 
-- TIP:    Ghana is a source, transit and destination country 
for trafficked persons and has an internal trafficking 
problem.   The GOG has taken steps to educate the public 
about trafficking and to provide assistance to victims and 
their families.  Nonetheless, Ghana received a Tier 2 
placement in the 2005 Trafficking in Persons Report.  This is 
a drop from Ghana's status in 2004 as the only country in 
Sub-Saharan Africa to be Tier 1.  Ambassador Yates raised 
with Kufuor on March 9 the need for Ghana to pass 
anti-trafficking legislation or face a drop in Tier status. 
In a May 27 meeting with the Ambassador, the Interior 
Minister said a draft anti-trafficking bill had just been 
passed by Cabinet and he was hopeful parliament would pass it 
into law by the end of July.  We should note to Kufuor that 
we are disappointed by this drop in Ghana's status.  We 
recognize Ghana has a commitment to fighting trafficking in 
persons, but needs to do more in protection, prosecution and 
prevention ) particularly through passage of pending 
anti-trafficking legislation. 
 
-- Counterterrorism and Mil-Mil:  We should commend Ghana for 
its excellent cooperation in counter-terrorism and 
intelligence sharing.  We should also express our 
appreciation to Ghana for the strong military-military 
relationship, particularly Ghana's peacekeeping role, and 
congratulate Kufuor on the National Guard State Partnership 
Program with North Dakota. 
 
-- Corruption:  We might note growing concerns raised by 
private business, NGOs, and others about corruption in Ghana. 
  Ambassador Yates raised this in a May 5 meeting (reftel). 
We can emphasize that corruption hurts American companies, 
undermines economic growth and development, and damages 
Ghana's reputation. 
 
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Issues Kufuor Might Raise 
------------------------- 
 
24. (C) Kufuor Might Raise the following issues.  We will 
meet with MFA contacts over the next week to see if there are 
other items the GOG expects to raise: 
 
-- Status of Ghana's MCA Program:  The MCC designated Ghana 
eligible for MCA assistance in FY04 and FY05.  The MCC and 
Ghana hope to complete a compact by fourth quarter 2005. 
Ghana's proposal is for approximately $290 million, and 
focuses on accelerating agri-business development.  Ghana's 
difficulty in assembling a staffed and funded MCA team 
delayed negotiations.  After Ambassador Yates demarched 
President Kufuor in March 2005 to speed up MCA preparations, 
he established a core team with a $500,000 budget necessary 
to hire technical consultants.  Kufuor closely monitors the 
talks and may raise MCA issues while in Washington.  The MCC 
will keep staff in Ghana over the next six months to ensure 
they make sufficient progress to sign a compact in 2005. 
 
 
--  FAA downgrade of Ghana to Category II:  On April 29, 
2005, FAA downgraded Ghana to Category II status due to air 
safety oversight concerns, and barred Ghanaian airlines from 
U.S. airspace.  In response to this decision, President 
Kufuor attached all civil aviation oversight to his office. 
Given his keen interest in civil aviation, President Kufuor 
may request assistance on regaining Category I.  Embassy and 
FAA have informed all appropriate government officials -- 
including President Kufuor -- of the measures needed to 
regain Category I status, and the FAA has offered technical 
assistance (for a fee) to assist the government to improve 
its safety oversight. 
 
-- Issues with the IMF:  The IMF and World Bank approved HIPC 
Completion Point in July 2004 following President Kufuor's 
promise to deregulate the petroleum sector -- ending state 
energy subsidies -- in February 2005.  The government took 
the difficult political decision to raise gasoline prices 50% 
in February.  However, it has delayed instituting an 
automatic process to adjust domestic prices to reflect 
changes in world petroleum prices, thus ensuring continuing 
full cost recovery.  The government must implement this 
automatic mechanism and also pass a new petroleum law prior 
to the next IMF Board meeting on June 13, or risk delays to 
IMF and other donor disbursements.  The government is 
concerned that a further 20% price increase is warranted, due 
to world price increases since February.  Kufuor is reluctant 
to increase prices again so soon, so may seek USG support to 
convince the IMF Board to show leniency. 
 
-- Cocoa and Child Labor:  Senator Tom Harkin and Congressman 
Elliot Engel are considering legislation to mandate that U.S. 
chocolate manufacturers comply with a child-labor free 
labeling requirement if cocoa cannot be certified as 
child-labor free by July 1. Industry says such a requirement 
would make it impossible for U.S. manufacturers to source 
cocoa from the region, which accounts for 70% of the world's 
supply.  U.S. chocolate manufacturers have been in Ghana over 
the past week to work with the GOG and local NGOs on this 
issue. 
 
-- Regional Issues:  Kufuor might ask for U.S. views on 
regional issues such as Liberia (especially Charles Taylor), 
Togo, and Cote d'Ivoire. 
YATES 
 
 
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