SYNOPSIS. Denmark Ghana: Country Policy Paper

1 25 March 2013 SYNOPSIS. Denmark Ghana: Country Policy Paper 2014-2018 Overall Vision and Objectives Ghana is in the midst of a transition. The country has gained lower middle income status and is an emerging economy in Africa. But the impact of growth is uneven and progress may not be smooth. That is the backdrop for a major shift in the bilateral relations between Ghana and Denmark. Denmark will enter a strategic partnership with Ghana which will reflect Denmark s new strategic and multifaceted approach to the African continent. This approach will apply all aspects of Danish foreign policy from development cooperation to foreign and security policy instruments and commercial relations. Particular attention will be given to increased political and commercial cooperation. Investments and other financial flows may soon outpace aid in Ghana. In this new setting it is the shared vision of the Government of Ghana and the Government of Denmark that Ghana will gradually become less dependent on aid. The Danish development cooperation with Ghana will be adjusted to respond to this situation. In a transition period the development cooperation between Ghana and Denmark will be reduced while giving an increased priority to commercial and political partnerships. Focus in the relationship between Denmark and Ghana will shift from development cooperation to an economic partnership based on increased investments and trade, and a political partnership based on a communality of values and interests. Over the coming years, it is the expectation that political and commercial cooperation will have reached a high level and will be expanding, and that there will be synergy between the various instruments. Development cooperation will gradually become less significant, and focus will be on sustainability, human rights, equality and national ownership and in keeping with the Compact of 2012 between Ghana and its development partners. The overriding objectives will be: (i) promotion of shared values founded in human rights, (ii) increased commercial cooperation, and (iii) promotion of sustainable, equitable and inclusive green growth with job creation. The strategic partnership will throughout encourage Ghana s active engagement in regional cooperation, in particular with regards to security and peace but also economically and politically. The overriding objectives will be achieved by reaching tangible results within a number of strategic focus areas to be finally identified based on the present hearing process of the synopsis. The National Context Historical and Political Context A particular feature of relations between Ghana and Denmark is the Danish participation in the Transatlantic slave trade from around 1650 to 1802 and the investments in plantations until

2 1850. A number of historic sites still exist, in particular the Christiansborg Castle in Accra. Denmark was among the first countries to recognise Ghana as an independent country in 1957, and soon after development cooperation was established. Ghana was the first African country to gain independence from colonial rule. President Nkrumah strongly promoted pan-africanism and was a key figure in the African fight against colonialism and Apartheid. After a turbulent period with military rule Ghana introduced democracy in 1992 and has successfully maintained it since. The country is an island of democratic rule, peace and stability in an otherwise fragile and conflict-ridden region. A major challenge is to maintain this situation through active engagement in regional cooperation, conflict prevention and conflict resolution. The National Democratic Congress (NDC) government that won the 2012 elections shows signs of a more active foreign and security policy, also at continental and regional levels through the AU and ECOWAS. Since 1992 the country has conducted relatively peaceful, free and fair elections, with the quality of the election process improving over the period. Ghana was one of the first African countries to make use of a biometric system in the 2012 election. Even though peaceful and described as generally free and fair by international and domestic observers, the 2012 elections are being challenged by the losing party, New Patriotic Party (NPP), which is also the main opposition party. The party has filed a petition to the Supreme Court contesting the results. The ongoing court case initiated by NPP, who chose legal action instead of political violence, is a sign of democratic maturity. However, the outcome and the wider consequences of the court case remain to be seen. Political challenges and opportunities The executive arm of Government is much stronger than the legislature and the judiciary. Challenge: to create a better balance. Opportunity: a comprehensive report of 2012 by the Constitutional Review Commission and the Government s White Paper on this report can form the basis of work towards a better balance, and indications are that the President is positively interested in taking the process further. Ghana is a de facto two party state. The political culture leans towards winner takes all, which sharpens political antagonism in spite of the fact that the two dominant political parties do not differ much in substance. Challenge: to introduce more inclusiveness and involvement of the losing party in pursuit of national reconciliation. Opportunity: the possible strengthening of Parliament could give the losing party a better platform to control and influence Government. In parallel with the modern secular state Ghana has maintained the institution of Chieftaincy. The Chiefs often have control over land ownership and authority to settle disputes outside the formal legal system. Challenge: the existence of Chieftaincy is a challenge to modern democracy, the rule of law and women s rights and equality as well as to commercial utilisation

3 of land. Also conflicts about succession are common and sometimes violent, leading to instability in certain parts of the country. Civil and political rights are widely respected in Ghana. However, progress within economic, social and cultural rights is slower. Challenges: corruption in the legal system, harmful cultural practices, gender inequality, violence against women and children. The under-resourced Human Rights Institutions need to be strengthened. The issue of rights of the lesbian, gay, bisexual and transgender community (LGBT) is contentious. Opportunity: a gradually more assertive civil society and a free press are pressing for improvements. A new progressive Minister for Gender, Children and Social Protection gives opportunity to institute a dialogue with regards to women s sexual and reproductive health and rights, sexual orientation and human rights. Economic context Ghana has seen steady economic growth in recent years, and in 2011 the growth rate exceeded 14 pct., the highest growth rate globally. After a rebasing of the GDP in 2010 Ghana became a lower middle income country overnight. Growth is expected to continue at a level of 7 pct. p.a. The recent high growth is driven by oil exploration, traditional sectors (cocoa and timber) and mining of commodities such as gold, and the service sector, while the manufacture sector is stagnating or even diminishing. The high gold prices have led to a sharp increase in illegal mining with negative effects such as degradation of the environment, depletion of natural resources, collapse of social structures and conflicts between foreign miners and the local population. Also, the high growth has not led to any significant job creation for Ghanaians. In 2011, the oil contribution to growth was 6.1 pct. End September 2012 data shows that oil is contributing to less than 1 pct. growth but this could well change when end-2012 data is factored in, since by end December 2012 oil production has grown by almost 9 pct. Economic challenges and opportunities These factors constitute serious challenges to the long-term development of the economy and even to peace and stability. Other challenges include: a weak education system, insufficient skills levels and generally poor competiveness, corruption, and an inefficient public sector. Opportunities: the government s increased focus on private sector development, job creation, Public Private Partnerships and public sector reform can be seen as an opportunity to improve the situation. The first Private Sector Development Strategy provided for a better enabling environment. The second phase of the strategy has the structures in place to promote the development of a thriving private sector creating jobs. Climate change is expected to have serious negative consequences in Ghana, but significant opportunities exist to introduce climate solutions in both the private and the public sectors (off grid solar energy, mini hydros and wider technology and knowledge transfer programs, etc.).

4 Population growth is still high this is both an opportunity and a long term threat to natural resources and the environment. Until end 2011 the macroeconomic situation has been relatively positive with i.a. the inflation and the fiscal balance being kept under control. However, the election year 2012 brought about some serious challenges: a fiscal deficit of around or above 12 pct. depreciation of the Cedi, increased deficit on the balance of payment, and increased debt stock. A sharp increase in salaries of public servants, substantial fuel subsidies etc. have left little room for investments and services. Opportunity: the new government s focus on these issues can be seen as an opportunity. The rapid economic growth in the Southern part of the country has led to inequality, a North/South divide, large scale immigration to urban centers and unregulated urbanisation. This has increased the occurrence of pockets of poverty in the cities. Gender inequality is another major concern. Challenge: if the inequalities are not overcome, there is a risk of destabilizing peace, violating rights and undermining growth. Opportunity: the government is well aware of the risks involved in inequality and operates schemes to alleviate these problems such as the Savannah Accelerated Development Authority, SADA that targets the deprived areas in the North. The government has established a set of national strategies and plans to increase growth and fight poverty. The Compact of 2012 between Ghana and its development partners presents a variety of priorities for development cooperation. The DAC donors still dominate the scene when it comes to partnerships with Ghana, but increasingly the BRICS countries, in particular China, and other emerging donors play a role as sources of financing and investment. Strategic Choices As a long-term and respected partner Denmark is well-placed to further develop our cooperation with Ghana, in the interest of both countries and based on experiences, results achieved and an overall mutual vision for the future. Ghana s position as a stable democracy with a free market economy makes the country an obvious choice for a strategic partnership. Shared values such as human rights, democracy, good governance, security, and regional integration will be promoted through close political cooperation at multilateral, regional and bilateral levels, focusing on a limited number of core issues of shared political priority. Promotion of sustainable, equitable, and inclusive green growth with job creation will take place through increased commercial cooperation. This will include expansion of trade through the EU Economic Partnership Agreement and promotion and expansion of investments by Danish companies in water, energy, environment, climate, food and health. Synergies between development cooperation and commercial activities will be strengthened through Trade

5 Council interventions together with the Private Sector Development Program, Danida s business instruments and the Investment Fund for Developing Countries (IFU). Cultural cooperation will be used more strategically in commercial cooperation and be based on Denmark s new strategy for culture and development The Right to Art and Culture, aligned with the goal of enhancing economic growth through creative industries. During the period development cooperation to promote growth, social progress, human rights, and equality will continue, though within a gradually reduced financial framework. Green growth will be a key concept and will include climate change interventions as part of the support to the private sector. The Danida Business Partnership Program will continue, but will be phased out towards the end of the period, and be replaced by Trade Council support. The Danida Business Finance scheme will expand and increasingly focus on green growth investments in infrastructure. General budget support to Ghana will increase. A larger share of the budget support program will target public financial management reforms such as tax revenue reforms and anticorruption measures. In the policy dialogue under the budget support Denmark will stress private sector development, job creation, equality, the fight against corruption, human rights, public financial management, and governance. Promotion of equality in various dimensions will be one of the cornerstones in the development program, based on a human rights based approach focusing on those MDG s where Ghana is lagging behind, in particular with regards to maternal and child health. Danida supported research programs will give more emphasis to south driven research cooperation and better alignment with the different streams in the planned strategic partnership. A transition program is foreseen to be implemented as of 2016. The specific objectives and scope of the program will be defined in the years leading up to 2016. Cooperation with the EU will be strengthened. EU will be the main and preferred partner, politically, in development cooperation and in the area of commercial and trade policy. Ghana is a pilot country for EU Joint Programming. The Multi-Annual Indicative Program 2013-2016 should be seen as the start of a process of joint programming. A mid-term review of EU assistance to Ghana will be conducted in 2015/16 and a new round of jointly programmed assistance should start its implementation as from 2017. Cooperation with the UN agencies, the World Bank and the African Development Bank will be strengthened i.a. with a view to ensure cohesion between bilateral and multilateral interventions. Denmark will be part of efforts to promote fruitful cooperation between the DAC donor community and new emerging actors, in particular China. Suggested Areas of Interventions

6 Political cooperation At multilateral level (UN) and regional/continental level (ECOWAS and AU) continue and expand alliance building with a focus on key issues of mutual high political priority, sufficient international controversy and prospects for making a difference. Themes could include: (i) Responsibility to Protect (R2P) with cooperation already ongoing, (ii) Sexual and Reproductive Health and Rights, (iii) illicit financial flows, and (iv) Ghana s role in the region, in particular Sahel, with regards to security, peace keeping etc.; also, increased bilateral consultations on political issues at various levels. Opportunity: goodwill and mutual interest. Challenge: identification of subjects, resource constraints. Development cooperation - General budget support. Opportunity: so far well-functioning and a key avenue to exercise influence on various policy areas. Challenges/risks: Macro- economic indiscipline, decreasing relevance for Ghana, other donors leaving. - Private sector programme, Danida Business Instruments, and IFU, with increasing focus on green growth and climate. Opportunities: high priority for Government of Ghana and thus good chances of positive results; prospects for mutual synergy as well as synergy with commercial activities. Challenges: weak institutions, difficult to identify good partners. - Right to Services and Good Governance program. Opportunity: continue to build on experience and results of existing support within human rights and decentralisation; strengthened civil society. Challenges/risks: weak government institutions and statutory bodies, ensure sustainability after phasing out. - Health Sector Support. Opportunity: build upon the good results reached so far; synergy with commercial opportunities. Challenges: enable sustainability after phase-out, in a situation with fragmentation of the sector. Within development cooperation Ghana enjoys a relatively well functioning set-up with widespread coordination among donors and government, coordination within EU (Joint Programming), harmonisation and alignment with Government s priorities and systems. In a situation where development assistance will be less significant it will be a challenge for Denmark to remain a relevant and sufficiently interesting partner and to enable consolidation of results and sustainability. To uphold strategic significance, Denmark should focus on general budget support and promotion of human rights in the proposed transitional program commencing in 2016. Commercial cooperation Opportunity: economic growth and increasing demand for consumer and investment goods, a relatively investor-friendly environment, growing interest for Africa among Danish businesses,

7 experiences, goodwill and knowledge gained through development cooperation, recent Ghanaian focus on renewable energy, energy efficiency, and green growth; strength of Danish businesses in these and other areas of interest for Ghana. Challenges/risks: still deficiencies in investment climate, playing field not entirely level, low skills level, unreliable power supply, weak infrastructure, lack of transparency of business conditions, corruption, difficult to find partners. It will be all-important to establish solid and up-to date knowledge of the most promising sectors, products, and companies and their real commitment and capacity on both sides and to strengthen the Embassy s capacity with Trade Council expertise. Corporate Social Responsibility (CSR) is important from both a developmental and commercial viewpoint and should provide rich opportunities for synergy; also potential for strengthened EU cooperation in this area. Research and culture Research and culture cooperation Opportunity: many years of substantial Danida-financed cooperation in these two areas. Challenge: to emphasize more south driven research cooperation and establish more strategic connection between research/culture and Danish interests in development and the commercial field. Results, indicators and monitoring At the overall level the planned strategic partnership between Ghana and Denmark will outline the most important and pertinent objectives and results aimed at. The follow-up of undertakings in the partnership could be on an annual basis and discussed among the two countries. Both at this level and within the below-mentioned areas existing monitoring systems should be used as much as possible. No parallel and cumbersome systems will be established. Political cooperation. At the multilateral and regional levels results could be: Tangible results defined within the Ghanaian-Danish partnership. Indicator: assessment by the relevant Missions. At the bilateral level progress can be measured by the number of meetings and visits at both political and officials level and a qualitative assessment of the outcome of these meetings. Development cooperation. Results and indicators from the existing Danida Performance Assessment Framework at component, program, and country level will be utilised with an increasing focus on sustainability, consolidation, and successful phasing-out. More examples of expertise in development cooperation leading to commercial activities (synergy). Make use of EU Joint Programming results framework, if feasible. Commercial cooperation. Results: increased trade, more Danish companies established in Ghana, growing investment volume, increased number of commercially viable partnerships established, increased number of partnerships drawing upon experiences in development cooperation

8 (synergy). This could be supplemented by customer satisfaction survey and possibly other tools from the Trade Council tool box. Research and culture. Results: increased research capacity in Ghanaian research institutions, more strategic and focused cultural cooperation in commercial work. Apart from the results and monitoring methods of the projects and programs themselves, monitoring of the increased connection to other Danish activities could be done in some simple light-weight fashion. Communication The long-standing bilateral cooperation between Denmark and Ghana is an excellent example of a rewarding and fruitful relationship with tangible results in the areas of social, political and economic development; an example of a bilateral relationship where development cooperation has had a very positive impact. Ghana represents an interesting narrative about today s Africa. A continent still faced with a number of demanding challenges, but also a continent, which includes countries and organizations taking a significant political and economic responsibility. The Ghanaian-Danish relations can be told as a success story if only the opportunities are grasped and the challenges overcome. A story which shows that development cooperation has a positive impact and is not necessary forever should be of interest in Denmark to the general public, the political system, and the business community alike. It will probably also be very well received by Ghanaian audiences and an opportunity for Public Diplomacy undertakings. The concept of Green Growth should be of particular interest as an issue which is equally important in both countries. One possibility of communicating the policy paper in Ghana could be to have a public seminar arranged by the think tank Institute of Economic Affairs. This institute will be involved in the preparation of the Country Policy Paper and has very strong connections at all relevant levels in Ghana, and is publicly well known and respected. A visit of Danish ministers to Ghana could provide an excellent opportunity for communication around the highlighted story. The visit could also be utilized to launch the new strategic partnership between Ghana and Denmark. The areas of research and in particular culture should lend themselves well to good public diplomacy on the bilateral relationship. Opportunities for involving beneficiaries of the cultural cooperation should be looked into. Likewise Danish civil society organizations with a track record in Ghana could be involved in this communication of the paper and the overall future cooperation.

9 Eight Step Time Line for the Preparation of Country Policy Papers GHANA PROCESS TIMELINE 1. PUBLIC HEARING IN DENMARK; ROUNDTABLE DISCUSSIONS IN GHANA ORG. BY THE THINK TANK INSTITUTE FOR ECONOMIC AFFAIRS (IEA) 2. SUBMISSION TO PROGR. COMMITTEE 3. SUBMISSION TO RELEVANT MINISTERS March/April 2013 18 April 2013 End April/ Beginning May 4. SUBMISSION TO UPR 30 May 2013 5. SUBMISSION TO URU August/ September 6. SUBMISSION TO CORPORATE MANAGEMENT 7. APPROVAL BY MINISTERS (UM, UVM, HIM) October October 8. FINAL VERSION TO URU FOR INFO November SYNOPSIS FULL VERSION