MENA Transition Fund

Third Steering Committee Meeting

May 15, 2013 (London, United Kingdom)

Meeting Minutes

Key Points

  • The SC agreed to approve projects in three tiers: (a) projects approved for immediate funds transfer and implementation (by Transition Fund rules, such projects could be approved only up to the amount of cash available to the Trustee on May 15, 2013); (b) projects that are approved conditionally upon incoming cash availability; and (c) projects that are not approved (but can in principle be redesigned and resubmitted at a later date). A system of “traffic lights” was used, with categories (a), (b) and (c) labeled “green”, “orange”, and “red” respectively (see Annex 3).
  • For lack of time in the meeting, the ISAs did not give the oral update on project progress, and the SC asked the CU to compile by end-June brief written inputs from the ISAs (while acknowledging that projects were approved very recently, and therefore substantial progress can be expected to be reported only when full progress reports are prepared for the first time at end-2013).
  • Cash available on May 15, 2013 was US$34.33 million and anticipated contributions over the coming months amount to about US$18.5 million.
  • The following projects were fully approved (green) for a total of US$33,142,200:
  • Egypt’s Green Growth: Industrial Waste Management and SME Entrepreneurship Hub with the African Development Bank for US$2,000,000
  • Egypt’s Energy/Social Safety Nets Sector Reforms Technical Assistance Project with the World Bank for US$7,097,200
  • Jordan’s Support to Building Active Labor Market Program with the World Bank for US$5,000,000
  • Libya’s SME Strategy Development with the OECD for US$2,616,000
  • Morocco’s Local Government Support Program with the World Bank for US$5,045,000
  • Tunisia’s Social Protection Reforms Support Project with the World Bank for US$5,055,000
  • Yemen’s Preparation and Implementation Support Project for the Special Industrial Zone Project in Hodeida with the Islamic Development Bank for US$3,239,000
  • Partial funding for the Morocco and Jordan Regional Integration through Trade and Transport Corridors (TRANSTRAC) with the European Investment Bank for US$3,090,000 (Jordan: US$1,315,000; and Morocco: US$1,775,000)
  • The following projects were approved conditionally upon funding availability and are ranked accordingly as funds become available (orange) for a total of US$19,481,000:
  • The remaining funding for the Egypt, Jordan, and Morocco Regional Integration through Trade and Transport Corridors (TRANSTRAC) with the European Investment Bank for US$7,320,000 (Egypt: US$4,230,000; Jordan: US$1,315,000; and Morocco: US$1,775,000).
  • Tunisia’s Energy Reform Plan (TUNEREP) with the OPEC Fund for International Development for US$3,836,000 (a revised results framework is to be submitted as part of the first full progress report on the project, based on the SWOT analysis to be carried out under the project).
  • Tunisia’s Strengthening the Employability of Youth during Tunisia’s Transition to a Green Economy with the Islamic Development Bank and OECD for US$4,475,000 (IsDB: US$3,950,000; and OECD: US$525,000)
  • Jordan’s SME Growth Program with the European Investment Bank for US$3,850,000
  • The following projects were not approved (red):
  • Egypt’s Building institutional capacity for open government and transparency through Good Governance with the OECD
  • Morocco’s SME Observatory with the OECD.
  • The SC approved the Trustee and CU budget for January to June 2014 for a total of US$409,655 (see Annex 6).
  • The SC acknowledged the Trustee’s statement that it will use the discretion provided for in the Financial Procedures Agreements to honor individual Cash Transfer Requests from ISAs for amounts up to the total Project budget approved by the SC.
  • The SC agreed to allow funding of project preparation costs and project costs beyond the current six-month timeline for this round of approvals and the next round, on an exceptional basis (see language in Section 9 below).
  • The SC encouraged TCs and ISAs to bring forward proposals that include underrepresented eligible recipients including parliaments and judiciaries, as well as partnerships with CSOs, media, academic institutions, etc.
  • The next deadline for submissions is October 23, 2013 for a SC meeting on November 19 and 20, 2013. The next Call for Proposals will be announced at after the final approval of these minutes.

Summary of Meeting

1) Opening Remarks

The third meeting of the Transition Fund SC took place in London, the United Kingdom on May 15, 2013. The meeting commenced with opening remarks from Mr. Alan Duncan, Minister of State, UK Department for International Development. Mr. Duncan indicated that the Transition Fund is a top priority for the UK as president of the Deauville Partnership. He highlighted some of the key areas of successful economic development that the Transition Fund is funding, noting after this SC meeting, the Transition Fund would have approved over US$100 million in projects in less than a year. He announced that the UK will be making a substantive new pledge in the Autumn and in the meantime, will call on other G8 countries, Turkey and Gulf donors, as well as non-Deauville donors, to demonstrate their support to transition countries through the Transition Fund. The opening remarks are provided in Annex 1.

Canada also announced the expectation that it will be making an additional pledge in 2013, and Saudi Arabia confirmed its full support to the activities of the TF and indicated that, based on the progress of the TF, it may consider in the future the possibility of a further pledge and/or acceleration of contributions. However, Saudi Arabia stated that it is important to always keep in mind that the TF is only complementing other types of Aid provided to the transition countries through other channels and programs.

The Jordan co-Chair outlined the struggles of transition countries to achieve stability and economic development. Governments are facing high expectations and demands from citizens, but meeting difficulties in addressing all the demands. The importance of introducing new donors and/or funding was highlighted.

2) Agenda and Executive Secretary Remarks

The Executive Secretary of the SC provided an overview of the agenda (enclosed in Annex 2) and indicated 13 proposals were received for the current round of approvals amounting to US$58.26 million. Annex 3 provides a list of project proposals received.

3) Trustee Presentation

The Trustee presented the Transition Fund’s current funding status and outlook. The presentation is provided in Annex 4.

  • Total pledges received to date amount to US$176 million. Both Turkey and the United Arab Emirates formally pledged US$5 million each after the February 2013 meeting in Rabat. The Trustee welcomed indications from donors of potential additional pledges and acceleration of contributions.
  • In addition to the previously signed Contribution Agreements (CAs) with Canada, France, Japan, Kuwait, Qatar, Russia, Saudi Arabia and the UK (totaling US$116 million), the Trustee has, since the Rabat meeting, signed CAs totaling US$60 million from Turkey (US$5 million), the UAE (US$5 million) and the United States (up to US$50 million and up to 20% of the total funds pledged), so that the full amount pledged (US$176 million) is now under signed CAs.
  • Contributions have been received from Canada (US$15 million), France (US$7 million), Kuwait (US$10 million), Qatar (US$3 million), Russia (US$4 million), Saudi Arabia (US$10 million), UK (US$25 million), and US (US$10 million) for a total of US$84 million. Of this amount, US$34 million has been received since the Rabat meeting, from Kuwait (US$5 million), Saudi Arabia (US$10 million), the UK (US$9 million) and the United States (US$10 million). Three countries have contributed the full amount of their pledges: Canada, Kuwait, and the UK.
  • Funding decisions totaling US$49.96 million have been taken to date, including the Tunisia Leadership Capacity Development Project with the African Development Bank approved virtually on April 1, 2013 for US$1.6 million.
  • Current cash available, net of funding decisions taken up to May 14, 2013, is US$34.33 million.
  • Additional cash contributions of US$12 million are expected over the coming weeks from Japan (US$4 million), Qatar (US$2 million), Turkey (US$5 million), UAE (US$1 million), and €5 million (approximately US$6.5 million) from France between now and the end of 2013. The actual amount of cash available at the next SC meeting will obviously depend on new donors, accelerating contributions, and additional new funding from current donors. In addition, donors have indicated expected contributions of US$28 million in the first quarter of 2014.
  • Financial Procedures Agreements (FPAs) with the Arab Monetary Fund and the International Monetary Fund are under discussion/finalization.

The Trustee sought the SC’s views on a request made by several ISAs that the Trustee honor individual Cash Transfer Requests up to the full Project budget amounts approved by the SC, in order to enable the ISAs to more effectively manage Transition Fund projects.

The Trustee explained that the FPA grants the Trustee the discretion to accommodate such requests, and that other trust funds which it manages provide precedents for this approach. In light of this, the Trustee indicated that it is prepared to accommodate the ISAs’ request, specifically, to honor individual Cash Transfer Requests from ISAs up to the full Project budget amounts approved by the SC. No objections were raised by the SC.

4) Coordination Unit Presentation

The Executive Secretary also gave a brief presentation which is provided in Annex 5, mainly to highlight emerging trends in the portfolio of the Transition Fund, i.e. ISA execution is permitted only on an exceptional basis but is increasing, competitiveness and integration projects are lagging, and that a number of anticipated categories of project proponents are underrepresented, including parliaments and judiciaries. Discussions centered around how to introduce projects for underrepresented groups as well as increasing partnership opportunities with CSOs, academic institutions, media, etc. The SC indicated it would very favorably consider projects submitted that include underrepresented recipients and new partnership opportunities, and requested that the CU propose options for how to facilitate and incentivize that.

5) Trustee and CU Budgets

The Trustee and CU presented their respective budgets for January-June 2014 for SC approval. The SC had previously approved budgets for the period up to December 31, 2013. As indicated during the last SC meeting, the Trustee and CU now presented a budget covering the first half of 2014 in order to align the budget period with the Transition Fund’s fiscal year (July 1-June 30). The total proposed budget, US$409,655 for the period January 1, 2014 to June 30, 2014, was approved by the SC. See Table 1 below for a breakdown and Annex 6 for the budget paper.

Table 1. Trustee and CU Budget Breakdown

6) Project Approvals

TCs submitted 13 proposals amounting to US$58,263,800. Given the funding constraints and a shortfall of about US$24 million, between submissions and current cash available, the SC agreed to also approve some projects conditionally upon additional expected cash contributions. The SC therefore agreed to a methodology for ranking projects: (i) projects that are fully approved (green); (ii) projects that are conditionally approved contingent upon cash contributions to be received (orange); and (iii) projects not approved (red), but which could be resubmitted after redesign.

The SC approved seven projects and partial funding for one project (TRANSTRAC Jordan and Morocco activities) totaling US$33,142,200 and conditionally approved three projects and the remaining funding for the TRANSTRAC project (Egypt, Jordan and Morocco activities) for a total of US$19,481,000 (this amount may change based on currency conversion factors once actual cash contributions are received). The SC also rejected two projects.

7) Donor mobilization

The UK indicated there may be interest from some non-DP countries, in view of the transformational role played by the Fund and the added value of providing technical assistance for sustained reform implementation, but more work needs to be done to reach out to donors. Canada suggested TCs also reach out to donors to mobilize funding.

8) Transition Country, IFI Coordination Platform and Donor Comments

TCs indicated that they want to be briefed on the flow of funds for their projects and requested periodic updates on the disbursement of funds. The CU agreed that these updates will be included in the bi-annual progress reports.

The IFI Coordination Platform indicated three primary issues in the running of the Transition Fund: (a) the lack of predictability of funds hinders IFI ability to go out and target projects as preparation costs are expensive and the efforts to identify and prepare projects are time consuming; (b) the lack of funding constrains the actual preparation process, which does not allow for sufficient time to prepare projects and the relevant documentation; and (c) ISAs are comforted and pleased by macro-level donor engagement on projects but would prefer the SC to focus on macro aspects of project and not get into the details of project design.

Donor countries in the meantime encouraged TCs and ISAs to focus on transformational projects that include eligible recipient entities such as parliaments and judiciaries as well as other stakeholders such as CSOs, media, academic institutions, etc. through partnership arrangements.

9) Project Preparation Costs

The Transition Fund rules allow for coverage of project preparation costs, usually limited to those incurred up to six months before Steering Committee approval of the project in question (see Para. 46 of the Operations Manual and Para. 4.3 of the FPA). However, the SC has the discretion to change that period, as both clauses include the qualifying phrase, "unless otherwise approved by the Steering Committee". The CU foresees two circumstances in 2013/2014 when the exercise of this discretion is/will be necessary.

One such circumstance is that any project approved conditionally at the May 15, 2013 Steering Committee meeting would only be actually approved once the cash becomes available to fund it. To address this eventuality the Steering Committee hereby decides that for any Project conditionally approved by the Steering Committee at this meeting on May 15, 2013, expenditures incurred as of six months prior to such conditional approval may be paid retroactively with ISA Funds.

The second such circumstance is that the 4th Call for Proposals has been announced to have an October 2013 project submission date, but the date of the corresponding Steering Committee approvals is not yet clear. In addition, the time between the 3rd and 4th Steering Committee meetings is likely to be significantly longer than the three months normally envisaged, even though preparation for some projects to be submitted in the 4th Call may have already started.

To address this eventuality the Steering Committee hereby decides that for any Project approved or conditionally approved by the Steering Committee at the 4th meeting, the date as of which expenditures may be retroactively paid is extended to nine months plus the amount of time between the date when the Steering Committee meeting would normally have been held (i.e. 17 business days after the project submission date) and the actual date of the Steering Committee meeting.

In addition, for any project not yet approved six months after its submission, due to delays in holding the Steering Committee meeting or to funding not having been received for those projects conditionally approved, the Coordination Unit will request the transition country and ISA(s) to reconfirm the validity of the submission.

10) Date of Next SC Meeting

With the UK and other donors indicating likely substantial new pledges before the end of the year, it was agreed that another Call for Proposals will be announced in early June. The details of this are now confirmed. The next deadline for project submissions is October 23, 2013 for a SC meeting on November 19 and 20, 2013. The next SC meeting will take place over a day and a half to allow for wider discussion of strategic issues, project results and possibly a thematic issue. The location will be announced, once confirmed.

Annex 1: Minister of State Opening Remarks

Deauville Transition Fund Steering Committee Meeting

15th May 2013

It is with great pleasure that I open the third Steering Committee Meeting of the Deauville MENA Transition Fund. As we have frequently said, the Fund is the UK’s top priority for our G8 Deauville Partnership Presidency this year.

What a long way this Fund has come since it was announced, almost a year ago to the day. It is testament to your commitment and cooperation that we have built an idea - born under the US presidency - into an effective instrument in such a short time.

This Fund is, in many ways, a unique mechanism. It puts Arab transition countries into the driving seat. The Deauville Partnership set up the Fund to support successful economic and political transitions. I have heard first-hand during trips to Libya and Jordan, and in meetings with participating International Financial Institutions, how you are using this Fund to meet that objective.

Trade is one of the UK’s three top G8 priorities and we know that there is no better engine for growth. Two great projects focussing on regional integration for trade have already been proposed. Projects will also improve the business environment: in Tunisia the Fund will help improve investment strategies and promote public private partnerships. In Morocco, Egypt and Yemen, it is supporting the development of Small and Medium Sized Enterprises.