COM/TCM/MF/IV/2
Page 13
A. INTRODUCTION
1. The Fourth Meeting of COMESA Ministers of Finance was held on 27th August, 2001 in Nairobi, Kenya.
B. ATTENDANCE, OPENING OF THE MEETING, ELECTION OF THE BUREAU AND ORGANISATION OF WORK
Attendance
2. The meeting was attended by delegates from Burundi, Egypt, Ethiopia, Eritrea, Kenya, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe. The following COMESA institutions attended the meeting: Eastern and Southern African Trade and Development Bank (PTA Bank), COMESA Clearing House, PTA Reinsurance Company (ZEP-RE), and the Africa Trade Insurance Agency (ATI). The Indian Ocean Commission (IOC), the African Development Bank, the World Bank, the European Union, and the International Monetary Fund (IMF) also attended the meeting.
Opening of the Meeting (Agenda item 1)
3. The meeting was officially opened by the Vice-President and Minister of Home Affairs of the Republic of Kenya, Honourable Professor George Saitoti. In his opening statement, the Vice-President, on behalf of the Kenyan Government, welcomed the delegates to Nairobi. He alluded to the importance of the role that COMESA was playing in the realization of the African Union. He pointed out that COMESA countries had progressed because they shared a common political and economic vision.
4. Professor Saitoti stated that COMESA Ministers of Finance had a critical role to play in advancing the process of market integration in the region. In this regard, he pointed out that the basic objective of the COMESA fiscal and monetary harmonization programme which fell within the purview of Finance Ministers was to create a zone of monetary stability which was necessary to facilitate economic integration and increased economic growth.
5. The Vice-President expressed satisfaction at the progress being made by COMESA in economic integration, citing the launching of the Free Trade Area and the establishment of the Customs Union with a Common External Tariff by the year 2004 as notable examples. However, he emphasized the need to speed up implementation of the Monetary Harmonization Programme which was adopted by the Heads of State and Government in 1992, in order to realize the full benefits of integration.
6. The Vice-President also expressed his appreciation at the implementation of the Regional Trade Facilitation (RTFP) and the establishment of the Africa Trade Insurance Agency (ATI) and the African Commerce Exchange (ACE). He also commended the Regional Integration Facilitation Forum (RIFF) for being instrumental in accelerating the macro-economic policy reform and thus contributing to various regional economic and co-operation initiatives.
7. In concluding, he wished the delegates fruitful deliberations, a pleasant stay in Kenya and declared the meeting officially opened.
8. Earlier on, Mr Erastus Mwencha, Secretary General of COMESA, made a statement. In his statement, he thanked the Vice-President for taking time to open the meeting. He also thanked His Excellency President Moi and the Government of Kenya for hosting the meeting and for Kenya's support to COMESA which was a testimony of Kenya’s commitment to regional integration.
9. The Secretary General outlined the progress that COMESA had made towards monetary co-operation. He noted that balance of payment problems acted as constraints to intra-regional trade expansion. He recalled that the Sixth Meeting of the Committee of Central Bank Governors recommended the establishment of a regional payments system to address the foreign exchange problem.
10. In concluding, Mr Mwencha emphasized the importance of monetary co-operation for COMESA to achieve its objectives.
11. Dr Michael Gondwe, President of the Eastern and Southern African Trade and Development Bank (PTA Bank) also addressed the meeting. In his statement, he underscored the importance of the various economic integration initiatives being implemented by COMESA. However, he pointed out that in order to derive the full benefits of these initiatives, there was need to promote factor mobility, co-operation in industrial development and sound financial structure, in addition to establishing a common external tariff.
12. In order to support the COMESA integration arrangement, Dr Gondwe stated that the PTA Bank would continue to:
· finance projects that will broaden the export/import substitution base of the member States;
· finance trade activities that will promote intra- and extra-regional trade;
· undertake resource mobilization and stringent financial management of the Bank’s resources; and
· review the implementation processes with a view to consolidating successes and eliminating weaknesses.
13. In a vote of thanks Honourable Godfrey Simasiku, Deputy Minister of Finance and Economic Development of the Republic of Zambia thanked the Vice-President for having opened the meeting and for the warm hospitality extended to all the delegates. He also thanked the COMESA Secretariat and the PTA bank for organizing the meeting.
14. Honourable Simasiku stated that the meeting was yet another milestone in the COMESA regional integration. He noted that the strides that COMESA had made such as the establishment of the PTA Bank and the launching of the Free Trade Area in October, 2000 and the Africa Trade Insurance Agency in August 2001, reflected the seriousness of COMESA member States in regional integration, which, he pointed out, would assist the countries to face the challenges of globalization.
Election of the Bureau (Agenda item 2)
15. The meeting elected the following to serve on the Bureau for one year:
Chairman - Kenya
Vice Chairman - Swaziland
Rapporteur - Malawi
Adoption of the Agenda and Organization of Work (Agenda item 3)
16. The meeting adopted the following Agenda:
1. Opening of the meeting.
2. Election of the Bureau.
3. Adoption of the Agenda and Organization of Work.
4. Report of the Sixth Meeting of the COMESA Committee of Central
Bank Governors focusing on:
(i) Report of the Acting Executive Secretary of the Clearing House on the Activities of the Clearing House and the Budget for the Year 2001/2002;
(ii) Report of the Meeting of International Payment Experts on Payment Arrangements for the Promotion of Intra-COMESA Trade;
(iii) Report of the Brainstorming Meeting of Experts on Macro-economic Programming for Eastern and Southern Africa;
(iv) Policy and Operational Issues in the Management of Foreign Exchange Market in the COMESA Member Countries;
(v) Collective Credit Guarantee Scheme;
(vi) Activities of PTA Trade and Development Bank;
(vii) Activities of PTA Reinsurance Company (ZEP-RE);and
(viii) Activities of the COMESA Bankers' Association;
5. Any Other Business
6. Adoption of the Report and closure of the meeting
17. The meeting agreed on the following working hours:
09:00 – 13:00
17:00 – 18:00
C. ACCOUNT OF PROCEEDINGS
CONSIDERATION OF THE REPORT OF THE SIXTH MEETING OF THE COMMITTEE OF CENTRAL BANK GOVERNORS (Agenda item 4)
18. Mr E. Tumusiime-Mutebile, Governor of the Bank of Uganda and Chairman of the COMESA Committee of Central Bank Governors, presented the report of the Sixth Meeting of the Committee of Central Bank Governors to the Fourth Meeting of Finance Ministers. The Ministers considered the report and decided as follows:-
Report of the Outgoing Chairman
19. The Ministers noted the salient activities undertaken by the Bureau of the Committee of Central Bank Governors during the period April 2000 – March 2001, on the Regional Trade Facilitation Project (RTFP) that had seen the creation of the African Trade Insurance Agency (ATI); the African Commerce Exchange (ACE) which was in the process of implementation; and COMPASS which was yet to be completed.
20. The Ministers also noted regarding the Smart Card Project that the Bureau of Governors had, after a thorough analysis of the project, instructed the PTA Bank to end the various agreements it entered into with Mondex without the authorisation of the Committee of Central Bank Governors and the proposal that the PTA Travellers Cheques Fund be surrendered by the PTA Bank and placed in an account in a bank to be decided by the Bureau of Governors to be used for advancing ongoing COMESA projects such as the new cross border payment scheme, COMTEL and ACE.
Decisions
21. The Ministers agreed that:
(i) The Bureau of Governors decides on where the PTA Travellers Cheques Fund (about US$3.5 million) should be deposited; and
(ii) The PTA Travellers Cheques Fund be utilised for COMESA Projects. Proposals must be submitted to the Bureau of Governors for consideration and approval.
Report of the Acting Executive Secretary of the Clearing House and the Budget for 2001/2002
22. The Finance Ministers noted the following:
a) Regional Trade Facilitation Project
(i) The Agreement establishing the African Trade Insurance Agency (ATI) came into force on 20th January 2001 and started operations with the meeting of the First General Assembly held in Nairobi, Kenya, on 19th and 20th February 2001. ATI was formally launched by the African Heads of State on 20 August 2001, in Uganda.
(ii) Mr Bernard de Halderang had been appointed Managing Director.
(iii) Negotiations for IDA credits were held among representatives of the participating states, the African Trade Insurance Agency and the International Development Association at the World Bank’s Resident Mission in Kenya from 21 to 22 February 2001 and the allocation of credit proceeds was as follows:
Burundi US$ 7.5 million
Kenya US$ 25.0 million
Malawi US$ 15.0 million
Rwanda US$ 7.5 million
Tanzania US$ 15.0 million
Uganda US$ 20.0 million
Zambia US$ 15.0 million
ATI US$ 5.0 million (for its operating costs).
TOTAL US$110.0 million
(iv) On 3 April 2001, the Board of the World Bank approved the project and the credits to participating countries. The World Bank was willing to provide funding for countries wishing to participate in ATI.
(v) This project having been completed and the Agency launched, brought to a conclusion the responsibility of the Clearing House which had been working on the RTFP.
(b) COMESA Payment and Settlement System
23. Work on COMPASS was being undertaken in earnest and a clear way forward had been mapped out by the Meeting of International Payments Experts from Central Banks of the COMESA region.
(iii) African Commerce Exchange
24. The African Commerce Exchange was launched during the Summit of Heads of States, in May 2000 in Mauritius to provide a SWIFT Service Bureau and an Electronic Communication Bureau. Since then, considerable progress has been made and road shows have been held in several countries in the region to explain the operations of ACE and the advantages it will bring to the financial sector.
Decisions
25. The Ministers agreed as follows:
(i) All COMESA countries should take advantage of the financial resources made available by the World Bank through IDA credit so that the facility can widen its membership.
(ii) The Chairman should communicate appreciation of the Committee to all institutions that contributed to the success of ATI, namely, World Bank, EU, Japanese Government, ECA, and OAU/PASU.
(iii) The COMESA Clearing House and the COMESA Bankers’ Association should continue to assist the ACE with regard to the introduction of its services to all banks in member States and in its negotiations with IFC to secure resources including possible participation in equity.
Report of the Meeting of International Payment Experts on Payments Arrangements for the Promotion of Intra-COMESA Trade
26. The Finance Ministers were informed about a proposal for a cross-border payment and settlement system designed to enable users to make and receive payments in their home currencies, while minimizing the amount of convertible currency reserves required to fund the payments. The proposed system includes features of the existing bilateral arrangements between Central Banks of Kenya, Tanzania and Uganda, but would operate multilaterally through a central Clearing House.
27. The Ministers noted that the Sixth Summit of the COMESA Heads of State and Government held in Cairo, Egypt, in May, 2001 had decided that the COMESA cross border payments scheme should be open to all countries in the region. In this connection, the Ministers noted the re-designation of COMPASS to Regional Payment and Settlement System (REPSS).
Decisions
28. The Ministers underlined the need for more work to focus on unresolved issues taking into account that markets are liberalized and decided that:
(i) Consultations be held with key players (Central Banks, large, medium sized and small local banks, importers and exporters) to ascertain their business requirements;
(ii) A high level Statement of Business Requirements be produced and agreed with key players. The Business Requirements should include:
· statements of the responsibilities of each group of participants (Central Banks, commercial banks, the Clearing House);
· guiding principles for bilateral and multilateral debit caps;
· guiding principles for interest payments on overnight balances;
· accounting issues;
· message flows;
· information requirements for each group of participants;
· daily timetable;
· an analysis of potential problems and failures and (high level) procedures for handling failures;
· procedures for end of day netting;
· procedures for payments by ‘deficit’ banks:
(iii) Upon agreement of the Statement of Business Requirements, an initial Process Design be developed to be used for producing a first estimate of costs;
(iv) The demand projections take into account the way trade will change as a result of COMESA’s Free Trade Area. The availability of a new cross-border payment system will in itself change payment volumes and patterns;
(iv) Based on the Statement of Business Requirements, the demand survey and the initial Process Design, a statement of technical requirements be developed;
(v) That the designing and implementation of the Scheme should be done and completed within a period of one year;
(vi) A Project Technical Committee (PTC), comprising stakeholders and key players, be set up to oversee the direction of the work and resolve key issues, including questions of ownership, governance and funding;
(vii) A Project Team - consisting of the COMESA Secretariat, the Clearing House, specialists from Central Banks and commercial banks and appropriate technical experts - be set up to oversee the project; and
(viii) Technical Working Committees (TWC) – composed of National Bankers’ Associations, Chambers of Commerce/Industry, Export/Import Associations, Investment Promotion Agencies, Ministries of Finance, Trade and Industry - be set up at national level to provide advice on technical issues and structures in areas such as design, bank operations, legal, etc. The Technical Working Committees will be under the chairmanship of the respective Central Bank. The Committees will review proposals from the Project Team and give advice to it.