US embassy cable - 05ACCRA2036

S E C R E T SECTION 01 OF 05 ACCRA 002036 
 
SIPDIS 
 
E.O. 12958: DECL: 10/02/2025 
TAGS: EAIR, ECON, EFIN, ELAB, KWMN, PGOV, PREL, PTER, GH, MAS 
SUBJECT: SCENESETTER FOR A/S FRAZER 
 
REF: A. STATE 182604 
 
     B. ACCRA 892 
     C. ACCRA 658 
 
Classified By: Ambassador Pamela E. Bridgewater for reasons 1.5 d and e 
 
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Summary/Introduction 
-------------------- 
 
1. (C) Ghana is a democratic, market-oriented, and 
pro-American country.  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 nine months 
into his second term, which has been marked by intra-party 
tensions and sluggish decision-making, but finally appears to 
be gaining some momentum.  Ghana exerts regional leadership, 
strongly supports the Global War on Terrorism, and is a 
committed, major contributor to UN peacekeeping operations. 
President Kufuor has met President Bush five times and has 
positive views of the United States. 
 
2.  (SBU)  Kufuor understands that economic growth is 
critical to continued political stability in Ghana, and has 
done an admirable job of stabilizing the economy and 
fostering an environment for stronger growth.  His 
government, however, has been slow in reducing obstacles to 
foreign investment. 
 
3.  (SBU)  Having just arrived September 30, I have not yet 
met with President Kufuor or Foreign Minister Akufo-Addo. 
However, both have been accessible to the Mission.  Your 
visit will be followed on October 14 by a brief visit to 
Ghana of former President Carter.  This cable outlines 
U.S.-Ghana political, economic, military, and security 
relations.  End Summary 
 
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U.S.-Ghana Relations 
-------------------- 
 
4. (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 supporting 
Ghana's thirteen-year-old democracy, promoting open markets, 
and reducing poverty.  Key components of the broad U.S.-Ghana 
relationship are: 
 
5. (SBU) Democracy:  Ghana's December 2004 parliamentary and 
presidential elections, the fourth under the 1992 
constitution, were 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 
the rule of law.  However, the long-term success of Ghana's 
constitutional democracy is not guaranteed and democratic 
institutions are weak.  While Ghana had the best score 
between the Sahara and the Kalahari on Transparency 
International's Corruption Perception Index (Ghana ranks 64 
globally on the CPI), corruption remains a serious 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. 
 
6. (SBU) Development Assistance and Trade:  Annual USG 
assistance to Ghana is approximately $75 million, including 
one of USAID's largest programs in Africa.  Ghana receives 
approximately $55 million in USAID grant assistance and food 
aid per year, focusing on education, health, HIV/AIDS, 
environment, 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. 
 
7. (S) Security:  Ghana provides 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.  ECOWAS Executive Secretary Mohammed Ibn Chambas is 
Ghanaian.  Ghana has also been welcoming to refugees and 
currently hosts about 60,000 refugees, mostly Liberian.  We 
support Ghana's regional USAID's West Africa Regional Program 
(WARP) and our Refugee Coordinator Office, both based in 
Accra. 
---------------------------- 
Internal Political Situation 
---------------------------- 
 
8.  (SBU) President Kufuor is now almost nine months into his 
second term.  This term has been marked by continuity in his 
ministerial appointments, his priority themes, and his slow 
approach to governance.   In the first half of this term, the 
GOG was distracted by corruption allegations and turmoil in 
Togo and was slow to get organized. 
 
9.  (SBU) In recent months, the GOG has regained some 
momentum.  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 guaranteed free primary education for the 
first time.   Kufuor offered Ghana as the first country to be 
reviewed in the NEPAD Peer Review Mechanism. 
 
10.  (SBU)  The Ghanaian political party structure, however, 
remains highly polarized.  The New Patriotic Party (NPP) and 
National Democratic Congress Party (NDC) are closely matched 
in parliament.   Leaders of the two major parties dislike 
each other intensely.  NDC parliamentarians complain that the 
NPP throws its weight around in parliament, using its 
majority to force through laws.  The NDC retained 
parliamentary seats in hotly contested by-elections in 
Asawase (Ashanti Region) in April and Odododiodio (Accra) in 
August, which did not change the overall political equation. 
 
11.  (SBU)  Tensions between the NDC and NPP could worsen as 
both parties prepare for District Assembly elections in 2006 
and presidential/parliamentary elections in 2008.  The NPP 
will have its national convention in November to select new 
party leadership and discuss strategies.  Although this 
convention will not decide on the presidential candidate, 
there are already a number of competitors within the NPP in 
the running to succeed Kufuor, including several ministers 
and the Vice President.  The result is friction at the top 
levels of the bureaucracy. 
 
12.  (SBU)  The NDC, which is holding its national convention 
in December, is divided and financially weak.  Rawlings still 
exerts a strong influence on the party but there are many in 
the party (including the camp of former NDC presidential 
candidate John Atta Mills) who want to distance themselves 
from the ex-president.  Some believe these tensions will 
eventually split the party. 
 
13.  (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, alleged by 
an Iraqi-American named Gizelle Yadji, who also 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 recently 
published public opinion polls found that there is a growing 
perception that corruption is on the rise, especially by the 
president and his office. 
 
14.  (U)  Parliament reconvenes in October and is expected to 
take up legislation on domestic violence and disabilities, as 
well as whistleblower and mining laws.  It will also likely 
consider a controversial People's Representation Bill, which 
will allow Ghanaian citizens living abroad to vote in Ghana's 
elections. 
 
15.  (SBU)  Corruption and governance will continue to make 
news, with the likely release of the NEPAD Peer Review report 
in October/November.  Key to the NPP's electoral prospects in 
2008 will be the Kufuor government's ability to respond to 
corruption allegations and its success in translating 
macroeconomic performance into poverty reduction for the 
masses. 
 
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Security 
-------- 
 
16. (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 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. 
 
17. (SBU) 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 (most recently 
from the Coast Guard Cutter Bear), ten General Officer or 
Flag Officer visits, and a regional maritime and coastal 
security conference. 
 
18. (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 assisted Ghana's 
police, customs, and counter-narcotics agencies, including 
ongoing basic training for the police.  RMAS and the Ghana 
Security Services cooperate closely on counterterrorism. 
 
-------------------- 
State of the Economy 
-------------------- 
 
19. (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. 
 
20. (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.  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.  The annual inflation rate is slightly higher as of 
September 2005, at about 15%, due to high world oil prices, 
but prices have stabilized in recent months.  Key short-term 
interest rates have also fallen to below 15%.  The cedi has 
been relatively stable against the dollar for two years. 
 
--------------------------------------------- --- 
Positive Economic Trends:  MCA and Regional Role 
--------------------------------------------- --- 
 
21. (SBU) Ghana is a gateway to West Africa, due in part to 
its political stability and economic reforms, but also due to 
turmoil elsewhere 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. 
22. (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 was sidelined by the 2004 
election campaign.  President Kufuor has pressed the MCC to 
expedite completion of the Compact negotiations, but the 
recently reorganized Ghana MCA team understands the priority 
is to complete a quality Compact.  With the agreement signed 
August 11 with the MCC for $3 million of 609(g) funding, the 
GoG now has the adequate resources and personnel to complete 
the job.  Its $290 million proposal, focused on 
agri-business, promises to deliver on both poverty reduction 
and economic growth. 
 
23. (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 G-8 debt relief. 
Ghana is also realizing large foreign remittance flows, which 
may exceed $4 billion in 2005, as well as increasing foreign 
investment, including from U.S. companies such as Newmont 
Mining and ALCOA.  The government has resolved many of the 
investment disputes that undermined U.S.-Ghana relations in 
recent years. 
 
24. (SBU) Ghana's impressive performance has not gone 
unnoticed.  Standard and Poor's assigned Ghana a relatively 
high "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. 
 
--------------------------------------------- ------------ 
Concerns: Slow Reforms, Business Climate, External Shocks 
--------------------------------------------- ------------ 
 
25. (SBU) The GoG faces major challenges in its effort to 
reform the economy.  Ghana has been 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.  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. 
 
26. (SBU) 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 problems.  Ghana's congested courts make it 
difficult to resolve disputes.  The average time to start a 
business exceeds 80 days, high compared to Ghana's peers. 
This contributes to 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 
impact of new investment on economic growth and reducing 
poverty.  Finally, Ghana's dependence on commodity exports 
leaves it vulnerable to external shocks, and high energy 
costs could undermine the recent real gains in economic 
growth. 
 
---------------- 
Economic Outlook 
---------------- 
 
27. (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.. 
BRIDGEWATER