Fourth Steering Committee Meeting

MENA Transition Fund

Fourth Steering Committee Meeting

December 4 - 5, 2013 (Brussels, Belgium)

Meeting Minutes

Key Decisions

1)Cash available on December 5, 2013 was US$25.8 million, includingfunds from the UK and investment income. Anticipated contributions through December 31, 2013 include a paymentof US$10 million from the United States under its signedContributionAgreement and a potential contribution of about US$1.8 million (DKK 10 million) fromDenmark. The following projects were fully approved (green), to be funded with uncommitted cash , for a total of US$23,813,700:

• Jordan Enhancing Governance and Strengthening the Regulatory and Institutional Framework for MSME Development for US$3,235,000;
• Libya Finance and Private Sector Development Technical Assistance for US$3,437,400;
• Tunisia Enhancing Domestic Resource Mobilisation through Effective Tax System Design and Improved Transparency and International Cooperation for US$4,401,800;
• Yemen Accountability Enhancement Project for US$6,480,500;
• Regional: Promoting Financial Inclusion via Mobile Financial Services (Egypt, Jordan, and Morocco) for US$2,459,000
• Regional: TRANSTARC for Tunisia Activities for US$ 3,800,000

2)The following projects (orange) were approved conditionally upon funding availability (e.g., receipt of sufficient cash contributions from the US and potentially Denmark) through December 31, 2013and are ranked accordingly for a total of US$10,720,920:

• Reinforcing the Rule of Law: Developing the Capacities of the Judiciary in Yemen for US$3,000,000;
• Regional Affordable Housing Project (Morocco and Tunisia) for US$4,220,920; and
• Libya Leading the Way Program: Pilot for Developing Leadership Capacity to Support Libya’s Transition for US$3,500,000

3)The World Bank (along with Jordan, Morocco and Tunisia)were asked to scale back the SME Virtual Market Place project(which ranked last)from the submitted amount of US$5,821,500 to an amount of up to US$3 million. It should however be noted that the exact amount available for the project depends on whether potential Danish funds actually reach the Trustee by December 31, 2013 and whether the amount is sufficient to fund the revised amount. The project can be resubmitted for virtual approval once SC comments have been addressed (see below).

4)The SC agreed to allow funding of project preparation costs and project costs beyond the current six-month timeline for this specific round of approvals (December 5-6) and the previous round, on an exceptional basis (see language in Section 7 below).

5)The SC endorsed the terms of reference and budget for the results framework feasibility assessment for the Transition Fund. An allocation of US$65,000 was set aside for this purpose. The SC requested that the study produce clear options for it to consider at the next SC meeting, planned for May 12, 2014.

6)The lead-time for circulation of project proposals will in future give the SC an additional 5 working days, in orderto allow SC members more time to read proposals and provide more specific guidance to transition countries.

7)The progress report template will be amended to include a section on additional funds leveraged, status of indirect costs, and provide an upfront summary of progress for ease of reference this will include a schedule of actual disbursement against planned disbursements. and show the ‘status marking’ (satisfactory / moderately satisfactory etc.).

8)The Annual Report will be updated as of December 31, 2013 for public disclosure in early 2014.ISAs were asked to provide an update as of December 31, 2013 in early Januaryfor this purpose.

9)The next SC meeting will take place on May 12 and 13, 2014 (tbc) in Cairo, (as long as there is at least $30m to allocate).

10)The co-Chairmanship of the Transition Fund will be handed over by Jordan and the UK to Canada and Egypt as of January1, 2014.

Summary of Meeting

1)Opening Remarks

The fourth meeting of the Transition Fund SC took place in Brussels, Belgium on December 4 and 5, 2013. A list of meeting participants is presented in Annex 1. The meeting commenced with remarks fromthe co-Chairs, Jordan and the United Kingdom (UK). The UK Ambassador to Belgium, H.E. Jonathan Brenton, opened the meeting with remarks on behalf of the UK (see Annex 2). Jordan introduced the agenda (enclosed in Annex 3 and outlined some key topics for discussion including mechanism to address project delays; status of new pledges and contributions by donors; and,lessons learned from implementation of Transition Fund (MENA TF) projects by Implementation Support Agencies (ISAs).

2)Trustee Presentation

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

• Total pledgesreceived to date amount to US$201.4 million.Denmark announced that it is considering making a pledge of approximately US$1.8 million.

• An additionalcash contributionof £16 million (US$25.4 million equivalent) was received from the UK bringing total cash contributions to US$128.4 million. Sixcountries have contributed the full amount of their pledges: Canada, France, Kuwait, Qatar, Turkey and the UK.

• Funding decisionstotaling US$102.9 million have been taken as of Dec 4, 2013, including for both projects and Coordination Unit and Trustee budgets.

• Current cash available, net of funding decisions, is US$25.8 million.

• Acash payment of US$10 million is expected during the week of Dec 9, 2013, from the United States.

• Financial Procedures Agreements (FPAs) with the Arab Monetary Fund and the International Monetary Fund have been signed.All FPAs are now signed.

3)Coordination Unit Presentation

The Executive Secretary also gave a brief presentation outlining the 10 projects (or 15 projects if regional projects are considered by country) that were submitted totaling US$40.4 million. The presentation is provided in Annex 5. The presentation also outlined emerging trends in the Transition Fund portfolio mainly:

• the lagging allocations for Libya at 3% and Yemen at 9% compared to an average of 20%+ for other transition countries;
• the importance of advanced procurement preparation by the time of project submission, and of knowing the timing of SC meetings at least 4 months ahead of the submission deadline to give sufficient preparation time;
• the increase in number of ISA executed activities; and
• the relatively good progress that has been made in this round on under-represented recipients, but of which parliaments, CSOs and media are still not sufficiently engaged.

4)Leveraging IFI Investment Financing with Transition Fund Projects

The IFI Coordination Platform indicatedthat ISAs are well aware of the various limitations in transition countries and trying to work as best as possible within these constraints. ISAs will now focus on working with transition countries to improve implementation speed. The IFI CP also highlighted the importance of ensuring the Transition Fund can play a role in scaling up investment financing for the region. In this regard, presentations were made by Arab Fund for Social and Economic Development, Arab Monetary Fund, European Investment Bank, and Islamic Development Bank on how Transition Fund projects can be catalytic in scaling up funds. The presentations will be shared with SC members separately. Finally, IsDB announced it will be handing over the IFI Coordination Platform to EBRD at the end of December.

5)Project Progress Reports

ISAs updated the SC on project performance. Disbursements from ISAs have been fairly slow with less than 1% of committed funds disbursed to date, but there are a number of mitigating factors: (i) uncertainty about SC decision on funding prevents advanced preparation of procurement aspects; and (ii) technical assistance projects tend to disburse slowly at first as downpayments are made to mobilize consultants, but accelerate later as deliverables are met. The CU invited specific comments from donors and transition countries on the annual and progress reports.

Transition country focal points suggested ISAs keep them informed on missions and on project progress on an on-going basis to ensure they are well placed to handle remedial actions if needed. Many donors indicated that disbursement delays are expected due to unpredictable country environments but more efforts need to be put in place to move projects forward. Donors called on IFIs to strengthen in country management and support to better facilitate effective project implementation and for the TCs to ensure communication of the TF project information across a wide spectrum of national stakeholders; including inclusion of relevant data on appropriate government web sites.

The SC agreed that going forward, more attention will be paid to progress reporting, and adaptive measures for projects that are not moving forward will be considered, including possible cancellation. Project progress, and possible specific actions where projects are not performing, will be considered in depth at the next SC in May 2104.

Donors also suggested that the progress report template be amended to include a section on additional funds leveraged, as well as status of indirect costsand disbursement against plan. The CU agreed to take into account comments received on the progress report template and reformulate it in an appropriate manner including incorporating summary schedules of key progress data to enable better comparison across the whole TF portfolio.

The Steering Committee also asked the CU to update the annual report as of December 31, 2013 for public disclosure in early 2014.

6)Feasibility Assessments for Results Framework

The CU put forward a terms of reference for a results framework feasibility assessment for the MENA Transition Fund as required in paragraph 23(m) of the Operations Manual. The feasibility assessment will provide recommendations for structuring and implementing a results framework. Clear options, with assessment of costs and benefits, will be presented to the SC in May. Both DFID and Canada (and Denmark) expressed interest to be involved at a technical level with the Study. The CU indicated that the budget for this work will have to be deducted from the contribution in hand ahead of project approvals and requested the SC to keep in mind future budgetary requirements that may be needed to take the work forward. It also indicated the feasibility assessment will include consultations with donors, transition countries and ISAs to ensure all viewpoints are taken into account. The TOR is provided in Annex 6.

The SC expressed support for the feasibility assessment and no objections were received on the TOR. An allocation of US$65,000 was approved for the work. It also encouraged the CU to ensure the assessment is ready ahead of the next SC meeting in mid-May so that a decision on taking the work forward can be made at that time. This is separate from the mid-term review, which would be commissioned in mid-2014.

7)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 December 5, 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 December 5, 2013, expenditures incurred as of six months prior to such conditional approval may be paid retroactively with ISA Funds.

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.

8)Fourth Call Project Approvals

TCs submitted 10 proposals amounting to US$40,356,120. Using a similar “traffic light” approach as used at the May 15, 2013 SC meeting, the SC ranked the proposed projects as illustrated in Annex 7.Cash available on December 5, 2013 was US$25.8 million, includingfunds from the UK and investment income. Anticipated contributions through December 31, 2013 include a paymentof US$10 million from the United States under its signedContributionAgreement and a potential contribution of about US$1.8 million (DKK 10 million) fromDenmark.

The following projects were fully approved (green), to be funded with uncommitted cash for a total of US$23,813,700:

• Jordan Enhancing Governance and Strengthening the Regulatory and Institutional Framework for MSME Development for US$3,235,000;
• Libya Finance and Private Sector Development Technical Assistance for US$3,437,400;
• Tunisia Enhancing Domestic Resource Mobilisation through Effective Tax System Design and Improved Transparency and International Cooperation for US$4,401,800;
• Yemen Accountability Enhancement Project for US$6,480,500;
• Regional: Promoting Financial Inclusion via Mobile Financial Services (Egypt, Jordan, and Morocco) for US$2,459,000
• Regional: TRANSTARC for Tunisia Activities for US$ 3,800,000

The following projects (orange) were approved conditionally upon funding availability (e.g., receipt of sufficient cash contributions from the US and potentially Denmark) through December 31, 2013and are ranked accordingly for a total of US$10,720,920:

• Reinforcing the Rule of Law: Developing the Capacities of the Judiciary in Yemen for US$3,000,000;
• Regional Affordable Housing Project (Morocco and Tunisia) for US$4,220,920; and
• Libya Leading the Way Program: Pilot for Developing Leadership Capacity to Support Libya’s Transition for US$3,500,000

The World Bank (along with Jordan, Morocco and Tunisia)was asked to recast and scale back the SME Virtual Market Place project from US$5,821,500up to US$3 million, and resubmit it for virtual approval. It should however be noted that the exact amount available for the project depends on whether potential Danish funds actually reach the Trustee by December 31, 2013 and whether the amount is sufficient to fund the revised amount. The project was ranked last by the SC, and the lack of a reform orientation and the project not being transformationalwere cited as key reasons by some donors. Addressing those comments will obviously be fundamental to any resubmission.

SC members also requested that the following specific comments be addressed ahead of re-submission: How will export ready SMEs be found and selected? What are the selection criteria? The sustainability of the project is not very clear, i.e. what mechanisms will be used to ensure the selected SMEs stay on board for the duration of the project? What is the scalability of the project, i.e.will other SMEs be able to benefit and if yes, how can they be included? What risk factors/categories will be used to assess success/failure of project? Client ownership of the project is in question and the proposal needs to be strengthened to reflect this. Why is the project focusing only on SMEs and not on improving the accountability environment in transition countries? The project document is also not clear on how the overall level of demand is assessed. Finally, the ITC was also involved in an enhancement of Arab trade capacity project with CIDA, yet there is no mention of this in the proposal. The project could benefit from lessons learned from the CIDA/ITC project and should be looked into.

9)Date of Next SC Meeting and Closing Remarks

The SC decided the next (fifth) meeting will take place on May 12 and 13, 2014 in Cairo (Egypt to reconfirm dates by December 12th). The deadline for project submissions would therefore be April 9, 2014.In addition, the SC indicated that ideally future Transition Fund meetings will take place only if at least US$30 million is available for allocation, and with at least four months’ notice for project planning purposes. The incoming Chairs indicated that they expected to hold a sixth TF SC Meeting in the autumn of 2014.

With this being the last meeting under Jordan and UK co-Chairmanship of the Transition Fund, the co-Chairs expressed appreciation for the teamwork among SC members, the collaboration with the IFI Coordination Platform and ISAs, and the CU and Trustee for their support. As of January1, 2014, the co-Chairmanship of the Transition Fund will hand over to Canada and Egypt. Mr. Dave Metcalfe, Director General of the Europe and Middle East Bureau in CIDAmade some closing remarks outlining Canada’s strategic priorities for the Transition Fund in the coming year: (i) resourcing to US$250m and even beyond in 2014, including seekingnew sovereign and non-sovereigncontributions; (ii) ensure more time and more predictability on project preparations; (iii) reaching out to new actors in project selection and design; and (iv) focusing on the development of a results framework.

Annex 1: List of Participants

Annex 2:Opening Remarks

Deauville Transition Fund Steering Committee Meeting

4th December 2013

Good morning ladies and gentleman, I am very pleased to be with you today to open the fourth Steering Committee Meeting of the Deauville MENA Transition Fund. On behalf of the UK and our Jordanian co-chairs of the Fund, I’d like to thank the World Bank for their work in organising and hosting today’s meeting.