Monday, 27 September 2010

President Mills's Asian sojourn and diplomatic choice

New York, 21 September

Dear Confidentialers,

The decision of Ghana's President John Evans Atta Mills to tour China and Japan instead of attending this week's development summit at the United Nations headquarters in New York points to some of the economic realities that the summiteers here should discuss. Most of all, it is a sharp reminder of how the eastwards shift of economic power changes everyone's diplomatic calculations.

Diplomats and activists here in New York say that President Mills will be much missed, mainly because Ghana is an example of a country that has taken the UN's Millennium Development Goals seriously and has achieved some success since the programme was launched in 2000.

Indeed, Britain's Overseas Development Institute and other think-tanks reckon that Ghana is on course to achieve just over half of the eight goals by 2015. It has made substantial progress in cutting the numbers of chronically poor people and the rate of infant mortality while increasing the numbers of its children in primary school. But it will struggle to achieve the targets on cutting maternal mortality, environmental degradation and improving the quality of aid.

So the developmentistas wanted Ghana and Mills in New York to ‘encourage the others’, to show what can be done with determined partnerships with the UN and the predominantly Western backers of the MDG programme. The Ghana model, with copious infusions of foreign aid over the past three decades and its liberalisation of investment rules for foreign mining and oil companies, has set down some markers for development thinking.

But the case is by no means proven, and that might be why Mills is in Beijing and Tokyo this week – and not New York. For example, the tripling of Ghana's national income in the past decade is the key to its success in bringing down levels of poverty per head, the first MDG and arguably the one on which most other targets for health and educational improvements have to be based.

So there is some logic in Mills's decision to pass up the UN summit for a visit to China – whose feat of bringing 300 million people out of poverty in the past three decades – has forced many development economists to rethink. Ideally, Mills could have done both New York and Asia: the opportunity to commune with many of the other 53 leaders in Africa and 140 other heads of state and government is important regardless of the formal summit agenda.

Perhaps it was the limits or Mills’s own diary or indeed President Hu Jintao's tight schedule. But it seems odd that after Mills and Hu met in Beijing on 19 September and signed an agreement for Ghana to borrow $3 billion for energy development that President Hu took a flight to New York for the UN summit, and President Mills stayed put in Beijing, left in the care of Hu's cabinet ministers.

There are certainly vital things for Mills and his team, which includes the energetic Trade Minister Hannah Tetteh, to discuss with China's officials. Top of the list, as this month's Africa-Asia Confidential reports, is China's offer to finance a bid by the Ghana National Petroleum Corporation to buy up the stake held in Ghana's Jubilee field by Texas-based Kosmos Energy.

After the United States' ExxonMobil withdrew from its bid to buy Kosmos's stake in Jubilee last month, there has been uncertainty about the next steps. Kosmos says it is prepared to go it alone, and its private equity backers Warburg Pincus and Blackstone suggest they may back an initial public offering for Kosmos, which would raise enough finance to stay in Ghana's oil industry without increasing the private equity exposure.

Officials in GNPC and the Ghana government think otherwise. They would like Kosmos, whose relations with Accra have deteriorated badly this year, to sell up for the market price and let Ghana take over. There are several financing plans on the table but the key to most of them is money from Asia: specifically, China and Japan which have both put offers on the table, but also from South Korea which is also eyeing Ghana's oil and gas reserves with interest.

So as the summiteers critique and praise the achievements of the development goals programme, President Mills will have a narrower remit. He has to find finance for Ghana's oil and gas fields ahead of the start up of commercial production this year. After Beijing, he is heading for Tokyo where he will meet Prime Minister Naoto Kan and call on Emperor Akihito, before talks with the Japan Federation of Economic Organisations.

Navigating those competing offers and relations in Asia will prove more diplomatically demanding for Mills and his team than the talks in New York, and the results will probably be more critical for his country's future.

Best regards,

Patrick Smith

Editor, Africa Confidential

P.S. For the full story on Ghana's growing relations with Beijing and Tokyo, turn to this month's Africa-Asia Confidential.

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