US embassy cable - 05ACCRA2267

UNCLAS SECTION 01 OF 04 ACCRA 002267 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: AGAO, ETRD, ECON, XA, GH, economy 
SUBJECT: GHANA'S AGOA ELIGIBILITY: POST'S  SUBMISSION 
 
REF: A. A) SECSTATE 170577 
 
     B. B) LANDBERG - TRIMBLE EMAIL 9/30/2005 
 
1.  Mission's submission regarding Ghana's continuing 
eligibility for the African Growth and Opportunity Act(AGOA) 
is formatted at requested in ref a.  Submission was 
originally transmitted in ref. b. 
 
2.  Begin eligibility paper: 
 
TPSC SUBCOMMITTEE ON AGOA IMPLEMENTATION 
2005 COUNTRY ELIGIBILITY RECOMMENDATIONS 
STATE DEPARTMENT SUBMISSION 
 
Country:  GHANA 
 
Current AGOA Status:  Eligible 
 
Post reccomends continuing eligiblility. 
 
Country Background Summary:  Ghana is a constitutional 
democracy dominated by a strong presidency.  President John 
Kufuor has governed since taking power democratically in 
January 2001, succeeding Jerry Rawlings, who ruled for 19 
years.  The UN estimates Ghana's population for 2005 at 22 
million.  The World Bank estimate for 2004 GDP was $8.8 
billion, and per capita GDP was $435.  Gold, cocoa, and 
timber are the traditional sources of export earnings, 
although non-traditional exports are increasingly rapidly. 
The Government of Ghana (GoG) is pursuing sound monetary and 
fiscal policies and completed successful IMF and World Bank 
reviews in June 2005.  It has succeeded in gaining measurable 
control over the budget and has improved transparency and 
accountability in use of public resources.  The GoG is above 
target for tax revenue collection through August 2005, but 
below target for overall revenues due to delays in donor 
disbursements.  It is unlikely to meet expenditure targets 
due to high oil prices.  Maintaining fiscal discipline 
continues to be is a top economic priority.  Real GDP growth 
increased from 5.2% in 2003 to 5.8% 2004, and the IMF 
projects a similar growth rate for 2005.  Favorable external 
markets for cocoa and gold in 2004 and into 2005, as well as 
record level remittance flows, have supported the stability 
of the cedi and increased foreign exchange reserves.  The 
annual inflation rate was 14.9% at the end of July 2005. 
Ghana reached HIPC Completion Point in July 2004, paving the 
way for approximately $4.2 billion in debt forgiveness. 
Total U.S. exports were $300 million and imports were $140 
million in 2004, with imports under AGOA (including GSP) 
increasing by 85% to $74 million. 
 
 
Comments on Eligibility Requirements 
 
I. Market-based Economy 
 
Major Strengths Identified 
-------------------------- 
 
-- Ghana has a market-based economy with few barriers to 
trade and investment. 
 
-- The GoG strengthened fiscal and monetary policies 
considerably under its IMF Poverty Reduction and Growth 
Facility, reining in spending and borrowing, eliminating 
price controls and cutting subsidies.  The IMF called the 
GoG's control of expenditures during the 2004 election year 
an "historic achievement." 
 
-- The improved policy performance, along with higher cocoa 
and gold prices since 2002, resulted in higher economic 
growth, falling inflation and interest rates, a stable 
currency, and approximately $1.6 billion foreign exchange 
reserves (as of September 2005). 
 
-- In May 2004, the Millennium Challenge Corporation 
designated Ghana as one of 16 countries eligible for 
Millennium Challenge Account (MCA) funding. 
 
-- Private remittances ) transfers from NGOs, religious 
groups, individuals ) increased 55.6% to $2.35 billion for 
January-July 2005 compared to $1.51 billion for the same 
period in 2004.  Of the total, individuals transferred 28.5 
percent or $666.2 million. 
 
-- Ghana enjoyed significant reductions in hard currency debt 
payments after reaching HIPC Decision Point in 2002, and will 
receive approximately $4.2 billion in official debt relief 
after reaching HIPC Completion Point in 2004. 
 
-- Judicial tribunals, long a source of abuse, have been 
abolished, and High Courts in major cities are now automated 
to expedite review of major commercial cases as well as of 
high-profile corruption cases. 
 
-- Encouraging foreign investment is a central part of 
economic policy.  Ghana has received nearly $250 million in 
direct foreign investment since the beginning of the Kufuor 
Administration in January 2001. 
 
-- Standard and Poor's issued Ghana a B plus sovereign debt 
rating on September 5, 2003 and Fitch Rating Agency raised 
its rating to B plus in March 2005.  Although the GoG does 
not benefit directly from these ratings, the private sector 
has easier access to credit and foreign exchange and the 
ratings have encouraged increased foreign and domestic 
investment.  The ratings also serve as useful benchmarks to 
measure economic progress in Ghana. 
 
Major Issues/Problems Identified 
-------------------------------- 
-- The GOG faces serious challenges in continuing structural 
reforms.  It has privatized the majority of its parastatal 
companies, but the GoG has delayed the controversial 
divestitures of its most prominent SOEs, including Ghana 
Commercial Bank, Ghana Water Company Limited, Ghana Telecom 
and the energy utilities. 
 
-- GoG ostensibly turned over control of fuel prices to an 
independent authority in March 2005.  Since that time, 
however, domestic prices have increased less than 2 percent, 
while world prices have increased over 20 percent. 
 
-- Domestic credit and subsidies to public utilities continue 
to present quasi-fiscal problems. The GoG has yet to resolve 
the management problems and inefficiencies in the state owned 
utility companies.  It has accumulated large arrearages in 
the energy sector, which pose a potential threat to 
macroeconomic stability. 
 
-- The GoG settled disputes with both Kaiser Aluminum and 
Western Wireless international by purchasing the Ghanaian 
assets of both companies.  Although, in the end, both 
companies willingly agreed to sell, their assets -- an 
aluminum smelter and a fixed-line telephone company -- had 
been seriously devalued as a result of the protracted 
negotiations and numerous delays. 
 
-- U.S. firms have expressed concerns regarding the lack of 
transparency in government procurement, although there have 
been no formal complaints to the GoG.  The concerns are 
mainly related to 1) undefined timeframes for rendering 
decisions, 2) unclear bidding requirements, and 3) 
allegations of favoritism. 
 
-- The World Bank reported in 2005 that the average time to 
start a business in Ghana exceeded 80 days, although this is 
an improvement over the 126 days reported in 2003. 
 
-- The GoG continues to pursue a policy of intervention in 
the economy.  When a textile company recently closed due to 
flagging sales in the face in increase competition from Asia, 
government decided to purchase the company in order to keep 
it open.  Investors typically cannot move forward without 
engaging the government on its highest levels. 
 
II. Political Reform/Rule of Law/Anti-Corruption 
 
Major Strengths Identified 
-------------------------- 
 
-- The Kufuor Administration has pledged commitment to the 
rule of law.  The President has established an Office of 
Accountability to oversee the performance of senior 
government functionaries. 
 
-- The GoG worked to reduce the backlog of its courts by 
automating High Courts authorized to hear cases involving 
banks, investors, human rights, electoral petitions, 
government revenue, specified commercial and industrial cases 
and certain criminal cases.  These "Fast Track" courts, 
however, can still be delayed.  One American investor waited 
over a year for a hearing. 
 
-- Presidential elections of 2004 were peaceful, free, and 
transparent.  Democracy continues to be vibrant, with the two 
major parties vigorously contesting each other and the press 
enjoying unprecedented freedom. 
 
Major Issues/Problems Identified 
-------------------------------- 
 
-- Despite the Kufuor Administration's purported policy of 
"zero tolerance" for corruption, no significant investigation 
or prosecution of high-ranking government officials has 
occurred since 2001.  Apart from the recent arrest of two 
mid-level tax officials for extortion, there has been little 
serious pursuit of corruption.  In contrast, a recent survey 
done by the local affiliate of Transparency International 
revealed that 92 percent of respondents considered corruption 
a serious problem in Ghana. 
 
-- There is little oversight of HIPC funds.  A Deputy 
Minister of Finance recently admitted that the expenditure of 
over $3 million from the HIPC fund could not be accounted 
for. 
 
-- The integrity of the legal system is compromised by a 
severe lack of financial, human, and material resources. 
 
-- There are serious problems with prisoners detained for 
three to ten or more years before going to trial. 
 
-- There continue to be credible reports that members of the 
police beat suspects in custody, and that police arbitrarily 
arrest and detain persons. 
-- Police corruption is a problem. 
-- Prolonged pretrial detention remains a problem.  Juvenile 
detainees are housed in separate facilities. Inadequate 
resources and a system vulnerable to political and economic 
influence compromises the integrity of the overburdened 
judicial system. 
At times, the Government restricts freedom of assembly and 
police forcibly disperse some demonstrations. 
 
-- Some observers question the GoG,s commitment to an 
evenhanded application of the rule of law given the energetic 
scrutiny and investigation of former government officials on 
corruption charges while comparatively few from Kufuor,s 
party are targeted. 
 
III. Poverty Reduction 
 
Major Strengths Identified 
-------------------------- 
 
-- Ghana has a poverty reduction plan, which the GoG is in 
the process of revising and updating in preparation for the 
November 2005 Consultative Group meeting with development 
partners.  Key to this is increasing growth rates in 
agriculture through exports of processed goods. Ghana plans 
to take advantage of AGOA provisions to boost exports of 
agricultural products to the U.S.  Most importantly, the plan 
seeks to integrate the poverty reduction efforts of all 
donors and the government to avoid duplication of efforts. 
 
-- Ghana has aggressively moved to take full advantage of the 
apparel benefit.  Ghana received its textile visa in 
Mid-2002, and, received its Category 9 certification for hand 
loomed rugs, scarves, placemats and tablecloths, effective 
September 15, 2003.  Ghana-based textile firms already have 
contracts with U.S. distributors and are seeking more. 
 
-- Ghana reached its HIPC Completion Point in July 2004, 
which will result in approximately $4.2 billion of debt 
forgiveness from official creditors.  This achievement also 
made Ghana automatically eligible for further G8 debt relief. 
 
Major Issues/Problems Identified 
-------------------------------- 
 
-- Ghana has a significant level of poverty, and most 
socio-economic indicators are relatively low. 
 
IV. Labor/Child Labor/Human Rights 
 
Major Strengths Identified 
-------------------------- 
 
-- Despite some problems in its human rights record, the GoG 
continues to improve its human rights practices.  Police 
received training in tactics of non-lethal force and human 
rights protection. 
 
-- The GoG has increased its efforts to suppress the 
trafficking in persons through cooperation with NGOs and 
international organizations to identify and return internally 
trafficked children. 
 
-- Ghana is a signatory to ILO convention 182 on the worst 
forms of child labor. The GoG has made combating child labor 
and trafficking a high priority.  Several Ministries worked 
closely with the ILO to conduct studies on child labor 
exploitation and regional trafficking, including the Ghana 
Statistical Service, which published an ILO-financed survey 
of child labor in Ghana in March 2003. 
 
-- NGOs, local and national government participate in West 
Africa Cocoa/Agriculture Project (WACAP), an international, 
public-private effort to eliminate the worst forms of child 
labor from the cocoa industry. 
 
-- In conjunction with ILO/IPEC, IOM has successfully freed 
hundreds of children as young as four years old from forced, 
hazardous labor in the Lake Volta fishing industry. 
 
-- Ghana is working closely with the U.S. and other donor 
countries to assess the extent of the problem of 
international trafficking in women.  The GoG and local NGOs 
are continuing on an extensive public education campaign 
begun last year against domestic violence, contributing to 
public debate about draft domestic violence legislation.  The 
GoG also strengthened the Women and Juvenile Unit of the 
Police to combat crimes against women and children and the 
courts increasingly gave longer sentences for those crimes. 
 
-- Labor unions enjoy substantial legal protections in Ghana, 
and many operate in both the public and private sectors. 
-- Various affiliates of the Trade Union Congress are 
actively involved in organizing workers in the informal 
sector around issues of health and safety, hours of work, 
annual leave, and medical care. 
 
-- In July 2003, the National Labor Commission, an 
independent body that arbitrates labor disputes, was 
established to bring Ghana,s labor laws into conformity with 
ILO Convention.  It became operation in 2005. 
 
-- In October a new union, the Union of Industry, Commercia 
and Financial Workers (UNICOF) was incorporated, representing 
the interests of workers at Ghana Commercial Bank, Standard 
and Chartered Bank, Ghana National Procurement Agency, Ghana 
Airways Pilots Association, and Agricultural Development 
Bank, among others. 
 
Major Issues/Problems Identified 
-------------------------------- 
 
-- There were reports that the GOG was intolerant of opposing 
views and reacted by bringing dissenters in for questioning 
by the Bureau of National Investigations or the National 
Security Agency. 
 
-- Some children as young as four years old are forced into 
dangerous work in the fishing industry via arrangements in 
which their parents get around $180 per year for their 
service.  Aided by international organizations, the GoG is 
working to eliminate this practice, and the incidence of this 
practice is declining. 
 
-- Police use of excessive force resulted in several 
extra-judicial killings as well as injuries. Corruption among 
police, who set up barriers to extort money from motorists, 
and judicial officials, who accept bribes in exchange for 
expedited or postponed cases or losing records, remained a 
serious problem. 
 
-- Child labor is a problem in the informal sector, and 
forced child labor and trafficking in persons are problems. 
 
V. International Terrorism/U.S. National Security 
 
Major Strengths Identified 
-------------------------- 
 
-- The GoG has been explicit in its sympathy and support for 
the U.S. over September 11, and has since ratified or acceded 
to all international anti-terrorism conventions. 
 
Major Issues/Problems Identified 
-------------------------------- 
 
-- None. 
BRIDGEWATER