MENA Transition Fund

Ninth Steering Committee Meeting

May29 and 30, 2016 (Rabat, Morocco)

Meeting Minutes

Key Decisions

1)Before the SC meeting took place, TCs canceled the following projects (and associated amounts):

  • The Egypt EIB Financial Inclusion via Mobile Banking Services ($0.84 million);
  • The Tunisia AfDB Leading the Way Program: Pilot project for developing leadership capacity to support Tunisia’s transition($1.6 million);
  • The Yemen IsDB Special Industrial Zone in Hodeidah ($2.9 million);
  • The Yemen IsDB Education for Employment Project ($2.5 million); and
  • The Yemen IFC Education for Employment Project ($1.6 million).

2)All TCs with funds available from cancellations agreed to reallocate all (Egypt and Tunisia) or part (Yemen) of the cancelled funds to current project submissions.

3)Cash available on May 30, 2016 was $24.3 million, including funds from Germany ($10.6 million),Netherlands ($5 million),project cancellations in Tunisia ($1.6 million) and Yemen ($6.9 million), andinvestment income ($0.2 million). Projected cash available in June 2016, which is the amount available for SC funding decisions,is $26.1 million, including payment from UAE ($1 million) and cancelled project funds from Egypt ($0.84 million). The following projects were fully approved, to be funded with uncommitted cash, for a total of $14.9 million:

  • Egypt WB Enhancing Social Housing Governance for $2.5 million.
  • Jordan WB Strengthening municipal financial management systems to sustain service delivery in municipalities affected by the refugee crisis for $3.05 million.
  • Tunisia AfDB/OECD Supporting the Design and Implementation of Economic and Social Reforms for $3.9 million, which includes an allocation of $1.6 million from cancelled project funds.
  • Tunisia OECD Towards inclusive and open government: Promoting women’s participation in parliament, local councils and policy-making for $0.85 million
  • Yemen IFC Crisis Support to Microfinance Institutions for $0.7 million
  • Regional OECD Youth in Public Life: Towards open and inclusive youth engagement (Jordan, Morocco, Tunisia) for $3.87 million

4)The SC conditionally approved the following two projects:

  • The Egypt EBRD Supporting PPP Execution Project totaling $2.4 million. If approved, $0.84 million from cancelled project funds will be committed to this project. The project will be fully approved on a 10-day no objection basis upon EBRD’s submission of a revised capacity building and training plan including a work-plan for the 1st year. The project should also reflect an inventory of other donors’ PPP support, and focus on EBRD’s competitive advantage in transaction-based technical assistance.
  • The Yemen IsDBBusiness Resilience Assistance for Value-adding Enterprises not exceeding $6 million.If approved, part of the cancelled amounts available to Yemen will be committed to fully fund this project. The project will be fully approved on a 10-day no objection basis virtually if the project is scaled-down to focus on the implementation of Phase-1 only.

5)Due to the conflict in Yemen, the meeting decided that funds from the cancelled project in Yemen totaling $6.9will remain assigned to the country for an additional period of up to 9 months, beyond the current 6 months, up to July 26, 2017 (the “End Date”). Ifnew submissions are not received by the End Date, the funds will become available for allocation to projects from other TCs.

6)In lieu of the cancelled funds from the Tunisia AfDB Holistic Social Business Project, the SC virtually approved the Tunisia AfDB Work Readiness Program for $2.56 million virtually on January 21, 2016.

7)The SC agreed to defer the preparation of the final Evaluation Report of the Fund until FY18.

8)The SC approved the FY17 administrative budget of the Trustee and Coordination Unit totaling $411,000 (this amount does not include the $150,000 proposed allocation for the final Evaluation Report).

9)The SC also approved the following closing date extension requests:

  • The Jordan EIB Promoting financial inclusion via mobile financial services to November 30, 2016 (approved virtually on May 2, 2016).
  • The Morocco EIB Promoting financial inclusion via mobile financial services to July 31, 2016 (approved virtually on May 2, 2016).
  • The Libya AfDB Leading the Way Project to March 31, 2018.
  • The Tunisia AfDB/OECD Operationalizing PPPs Project toJune 30, 2018.
  • The Regional TRANSTRAC to December 31, 2018. For TRANSTRAC, the principle was approved that residual budgets, mainly stemming from savings made during the tendering processes, could be recycled for new TA operations, subject to them being eligible for the Transition Fund/TRANSTRAC support and associated restructuring notes being submitted and approved by the SC.

10)Co-Chairs, Morocco and Japan, will announce the date of the next SC meeting by October 2016.

Summary of Meeting

1)Opening Remarks

The ninth meeting of the Transition Fund Steering Committee (SC) took place in Rabat, Morocco on May 29 and 30, 2016. A list of meeting participants is presented in Annex 1. The meeting commenced with welcome remarks fromJapan. Ms. FaouziaZaaboul, Director of Treasury at the Moroccan Ministry of Economy and Finance, followed with opening remarks (see Annex 2). The Executive Secretary of the SC introduced the agenda (enclosed in Annex 3).

2)Trustee Presentation

The Trustee presented the Transition Fund’s current funding status and outlook (see Annex 4).

  • Total pledges received at the time of the SC meeting amounted to $228.5 million. This includes a new contribution of $10.6 million received from Germany.
  • Total cash contributions received to date amount to $226.5 million, includingcontributions of $10.6 million from Germany and $5 million from the Netherlands. All countries have contributed the full amount of their pledges. Investment income earned to date amounts to $1.39million, bringing the total funding to $227.9 million.
  • Funding decisionstotaling $203.6million werebefore the SC meeting for projects and administrative budgets.
  • Cash available in May is $24.3million including payments received from Germany ($10.6 million) and the Netherlands ($5 million), the funds from cancelled projects in Tunisia ($1.6 million) and Yemen ($6.9 million), and investment income ($0.2 million).
  • A cash payment of $1 million was received from the UAE in June 2016.
  • Cash available in June is 26.1 million including the UAE payment and the fundsfrom the cancelled project in Egypt(approximately$0.84 million).
  • Estimatedadministrative costs for the Trustee and the Coordination Unit in FY16 (July 1, 2015-June 30, 2016) are projected at $496,500, which is $36,500below the approved budget. The proposed FY17 budget for the Trustee and Coordination Unit is$411,000. The SC approved a transfer of the full FY17 budget (see table below).

Total Budget Approved FY16 / Total Estimated Expenditures* FY16 / Estimated Underspent FY16 / Proposed Budget for FY17
Trustee / 253,000 / 253,000 / 0 / 258,000
Coordination Unit / 280,000 / 243,500 / 36,500 / 153,000
Total Budget / 533,000 / 496,500 / 36,500 / 411,000

*Actual expenditures through April 2016 and estimated expenditures for May and June 2016

3)Coordination Unit Presentation

The Executive Secretary gave a brief presentation providing a financial and portfolio updated and outlining the 20 country projects – or 16 projects if regional projects are grouped together – that were submitted totaling $44.7 million (see presentation in Annex 5). The presentation outlined key highlights on the status of the Fund and portfolio-related progress issues mainly:

  • Overall disbursement status as of December 31, 2015 increased to 18% from 15% since June 2015;
  • Additional funds leveraged to co-finance Transition Fund projects amounted to $22.9 million;
  • On average, as of May 2016, 77% of the portfolio was rated satisfactory; 14% was flagged for closer monitoring; and 9% of the portfolio was not yet effective.[1]

The Executive Secretary also indicated that the performance of the portfolio of the Transition Fund will be re-assessed during the next progress update due in late July/early August 2016.

4)IFI Coordination Platform Comments

The IFI Coordination Platform (IFI CP), chaired by the OECD as of April 1, 2016,thanked the EIB for a fruitful chairmanship during which the IFI CP has strengthened its role as a useful forum to coordinate the work of IFIs and the OECD in the region as well as a voice in the ongoing transformation of the Deauville Partnership. The IFI CP noted that IFIs positively evaluate the performance of the Transition Fund over the last year. Notable progress has been made in addressing two of the recommendations of the Fund’s 2013 mid-term review aimed at improving value for money:

  • Over the last year, ISAs and Transition Countries (TCs) have stepped up efforts to improve the effectiveness and the performance of existing projects. Corrective actions taken have translated into an improvement in the quality of the current portfolio (re-cap provided in Section 8 below). Greater attention to quality-at-entry through technical reviews of all projects is also expected to further enhance performance.
  • Likewise, there has been increased emphasis on actual results. The Fund’s Results Framework was strengthened to better measure and track the impact of the projects.

The IFI CP also expressed concern about the possibility that the Fund may not meet its original capitalisation target of $250 million. Unless new pledges are made, the May SC meeting could be the last one for approving projects. This would not be a desirable outcome for several reasons:

  • First, Transition Fund projects are a key tangible outcome of the Deauville process and its main instrument to support reforms in TCs through technical assistance and capacity building. While these projects are relatively small in scale, they play a catalytic role and have produced tangible results in supporting the reform process in areas such as SME and private sector development, youth and women inclusion, tax reform or good governance. This assistance is also complementary to larger financing initiatives launched by IFIs and other development partners. The Transition Fund therefore remains a valuable and useful tool to support policy reforms in TCs, as highlighted explicitly by the G7 Leaders Declaration at the end of the recent G7 IseShimaSummit.
  • Second, the IFI CP indicated that there is a significant unmet demand from TCs. The current call for proposals is a good example. TCs have submitted 20 project proposals worth almost $45 million – nearly three times the amount of cash availability. These figures do not include a number of other important projects for TCs, not submitted for consideration in this round.

In conclusion, the IFI CP invited donor countries to meet the target that Deauville Partners set for the Fund. Pledges made by Germany and the Netherlands in 2015 are very positive developments, but only an additional $11.5 million is needed for the US conditional contribution of $10 million to kick-in, ultimately enabling the Fund to meet its $250 million target. Going forward the IFI CP encouraged donor countries to consider the future sustainability of the TF as a tool to contribute to policy reforms in the region.

5)Future Funding Prospects

Japan acknowledged the importance of reaching the initial capitalization target of $250 million for the Transition Fund, indicating that donors will continue their effort towards mobilizing additional resources including from potential new donors who have not yet contributed to the Fund. Donors also acknowledged the important role the Fund has been playing as a platform to facilitate project formulation in TCs.

The UK indicated it is looking into the possibility of contributing additional funds, but cannot confirm yet whether this is likely to happen or when. Germany noted its support for reaching the target highlighting that it is both important for the credibility of the Deauville Partnership as well as the continuation of an excellent platform that has brought together donors, IFIs and TCs around issues of critical relevance and importance to TCs. Saudi Arabia raised a question on what happens to the Fund if new contributions are not made despite the 2-year extension of the commitment period. The CU responded that this would essentially mean an early termination of that extension which would be sub-optimal.

Meanwhile, Canada stated that even if additional contributions do not materialize, the Fund and its work should still be considered a success. Both Canada and the UK encouraged IFIs to connect with their Embassies to see how work together can be leveraged.In closing, Japan outlined that the focus is now to reach the capitalization target and to deliver concrete results from approved projects.

6)Project Cancellations and Reallocation of Cancelled Funds

Before the SC meeting took place, TCs canceled the following projects (and associated amounts):

  • The Egypt EIB Financial Inclusion via Mobile Banking Services ($0.84 million);
  • The Tunisia AfDB Leading the Way Program: Pilot project for developing leadership capacity to support Tunisia’s transition ($1.6 million);
  • The Yemen IsDB Special Industrial Zone in Hodeidah ($2.9 million);
  • The Yemen IsDB Education for Employment Project ($2.5 million); and
  • The Yemen IFC Education for Employment Project ($1.6 million).

Due to the conflict in Yemen, the meeting decided that funds from the cancelled project in Yemen totaling $6.95 millionwill remain assigned to the country for an additional period of up to 9 months, beyond the current 6 months, up to July 26, 2017 (the “End Date”). If new submissions are not received by the End Date, the funds will become available for allocation to projects from other TCs.

All countries with funds available from cancellations agreed to reallocate all or part of the cancelled funds to current project submission.

7)Ninth Call Project Approvals

The SC fully approved six projectstotaling $14.88 million (see Annex 6 for a full list of projects submitted and those approved). The following projects were fully approved:

  • Egypt WB Enhancing Social Housing Governance for $2.5 million.
  • Jordan WB Strengthening municipal financial management systems to sustain service delivery in municipalities affected by the refugee crisis for $3.05 million.
  • Tunisia AfDB/OECD Supporting the Design and Implementation of Economic and Social Reforms for $3.9 million, which includes an allocation of $1.6 million from cancelled project funds.
  • Tunisia OECD Towards inclusive and open government: Promoting women’s participation in parliament, local councils and policy-making for $0.85 million
  • Yemen IFC Crisis Support to Microfinance Institutions for $0.7 million
  • Regional OECD Youth in Public Life: Towards open and inclusive youth engagement (Jordan, Morocco, Tunisia) for $3.87 million

The SC conditionally approved the following two projects:

  • The Egypt EBRD Supporting PPP Execution Project totaling $2.4 million. If approved, $0.84 million from cancelled project funds will be committed to this project. The project will be fully approved on a 10-day no objection basis upon EBRD’s submission of a revised capacity building and training plan including a work-plan for the 1st year. The project should also reflect an inventory of other donors’ PPP support, and focus on EBRD’s competitive advantage in transaction-based technical assistance.
  • The Yemen IsDBBusiness Resilience Assistance for Value-adding Enterprises not exceeding $6 million. If approved, part of the cancelled amounts available to Yemen will be committed to fully fund this project. The project will be fully approved on a 10-day no objection basis virtually if the project is scaled-down to focus on the implementation of Phase-1 only. If approved, the cancelled amounts available to Yemen will be committed to fund this project.

The SC advised that if/when funds become available and a new call for proposalsis issued, TCs and ISAs with projects that were not approved in this roundmay consider submitting these projects for SC consideration. This is however conditional upon TCs and ISAs taking into account the comments received from the SC and Roster of Experts in the revised proposals.

Finally, in lieu of the cancelled funds from the Tunisia AfDB Holistic Social Business Project, the SC approved the Tunisia AfDB Work Readiness Program for $2.56 million virtually on January 21, 2016.

8)Project Implementation Progress

The CU gave a brief presentation on red-flagged projects that were slow performing in the December 2015 progress update (see Annex 7). TCs and ISAs presented an update on these projects to help better assess implementation bottlenecks. Currently, only 14 percent of the portfolio is rated Moderately Unsatisfactory or Unsatisfactory. Below is a brief re-cap of actions to be taken by TCs/ISAs to advance projects on the red-flag list:

  • EIB indicated that the Regional TRANSTRAC Project has achieved savings from lower than expected costs for some of the contracts. As a result, a restructuring of the projectis anticipated to utilize savings. Disbursement are also expected to double in the coming two months for the Jordan project. On the whole, the next progress report update will demonstrate increased disbursement. All countries confirmed the importance of the TRANSTRAC project, indicating their approval for a future restructuring after the finalization of discussions with EIB on the scope of new TA activities that can be supported by the project. EIB expects these discussions to conclude around September/October 2016 after which restructuring papers will be submitted for SC approval.
  • EIB clarified that the regional Logismed project has not disbursed as expected because the project has staggered disbursements first for the EC co-financed activities. The Transition Fund’s allocation for the project are therefore back-loaded and disbursements will only be achieved once the EC funds disburse. The EIB and respective TCs however confirmed that the project is progressing well.
  • Egypt and AfDB indicated that the Support to Parliament: Building Capacity and Mainstreaming Inclusive Growth and Decentralization Project is progressing well now that the grant is signed. A 20% disbursement is expected by the end of 2016. The delays faced by the project are mainly linked to the country’s delay in establishing the Parliament.
  • The WB and Jordan confirmed that Jordan has already submitted a formal restructuring request for the National Unified Registry and Outreach Worker Program for Targeting Social Assistance. The new scope of the project has already been agreed to and a formal request will be submitted to the SC for approval in due course.
  • The Jordan IFC Integrated Inspection Management System has already committed $1.6 million through a contract with the IT vendor. The Ministry of Trade has already approved the software IP agreement and no issues expected. Progress is well on track.
  • The AfDB outlined that the selection criteria for candidate training has been agreed to for the Libya Leading the Way Leadership Capacity Building Pilot Project. The project is expected to disburse about 40% of the funds allocated by the end of 2016. Moreover, the results framework will be re-designed and submitted to the SC for approval once completed.
  • While the OECD Libya SME Strategy Project is not red-flagged, the OECD indicated that the diagnostic report has been issued but project is still on hold. It indicated that discussions are underway with Libya to either introduce a restructuring (with a closing date extension) or cancellation of the undisbursed balance given the difficulties to complete some of the activities originally envisaged in the prevailing country context.
  • The WB Electricity Sector Reform Programmatic Technical Assistance has faced delays due to the context in Libya. A natural gas study and LNG technical assistance activity has been added and the WB will now initiate actions to select consultants for the agreed activities as soon as possible.
  • Despite the challenges in fiduciary aspects, the Morocco WB Strengthening Micro-Entrepreneurship for Disadvantaged Youth in the Informal Sector Project is both transformational and complex (working with 200 youth centers, local associations, etc.). As of today, (mid-way point) beneficiaries have gone through pre-selection for boot camps, trainings are underway, and 700 beneficiaries have benefited from entrepreneurship prospects. Disbursements stand at 54% and ratings will be upgraded in next couple of months as this positive trend continues on the implementation side.

The SC also approved the following closing date extension requests: