African Institute for Remittances (AIR) Project

African Institute for Remittances (AIR) Project Bank Executed Trust Fund (BETF - TF071207) Minutes of the 5 th Conference of AU Ministers of Finance (CAMF) 21 st 28 th March 2012, Addis Ababa, Ethiopia 1. The World Bank mission was led by: Ms. Soheyla Mahmoudi, Senior Operations Officer and Task Team Leader for AIR Project. The mission included Mr. Kai Schmitz, Senior Financial Sector Specialist; Mr. Don Terry, Global Remittances Expert and Project Consultant, and Mr. Hailu Kinfe, AIR project Consultant in Addis Ababa. The mission met with AIR project partners, Ambassador Olawale Maiyegun, Director of Social Affairs (AUC), Mr. Philip Bob Jusu, Migration Officer (AUC); Mr. Ron Hendrix, Policy Officer, Migration, Mobility and Employment, EU Delegation to the AU (EC); Mr. Charles Kwenin, Senior Regional Adviser for Sub Saharan Africa (IOM); Mr. Josiah Ogina, Head of Mission and Rep to AU/ECA/IGAD (IOM), Mr. Bruk Asmellash, Program Coordinator for MIDA (IOM); and Dr. Floribert Ngaruko, African Development Bank (AfDB). The mission also met with the speakers of the side event: Mr. Kenneth Coates (PhD), Former Director of the Center for Latin American Monetary Studies (CEMLA); Mr. Pedro De Vasconcelos, Director of International Fund for Agriculture Development, Financing Facility for Remittances (IFAD-FFR); and Mr. Alexandre Rodrigues, Postal Financial Services Expert, Universal Postal Union (UPU) to discuss the procedures to be followed at the AU Conference of Ministers of Finance and the side events scheduled for 22-27 March 2012 to leverage the sessions for the benefit of the AIR. 2. Ms. Mahmoudi gave a short briefing on the preparatory project activities and the purpose of the Panel Discussion to the speakers of the Experts Panel Discussion on March 24, 2012. 3. In his opening remarks, Director outlined the logical sequence of the process undertaken and the next steps to be taken for the establishment of the institute, including: a) The preparatory project implementation report and recommendations on the establishment of AIR have been submitted to the AU Executive Council, which has equal status with the Conference of AU Ministers of Finance (CAMF), and the Council have made a decision (EX.CL/Dec.683(XX); acknowledged the usefulness of the Institute and requested the AUC to submit the draft reports to the CAMF for final endorsement; b) The CAMF is expected to decide that AIR as a specialized office of the AUC, accountable to it through the AUC; c) The decision together with proposed organizational structure report and assessment report of the candidate hosting countries will be forwarded to the concerned Sub-Committees of the Permanent Representative Committee(PRC); d) The final proposal will be approved by the Heads of States Summit in July 2012; and the summit will request the AU Commission to sign hosting agreement with the best suitable candidate country; e) Then the institutional setup, recruitment and others will be continued; which might take 12 18 months from practical experience of AUC (Ron added that this is also the case in Europe). f) Funding for this startup period will be secured from the host country and the Institute will also aim to mobilize program funds through other means. 4. With regard to hosting of the Institute, the following questions were raised: i) What would be the decision if only one country expressed interest to host AIR; ii) What is the mechanism to inform all the 54 member states about AIR; and iii) Is there any minimum hosting criteria? 1

5. Director explained that there are specific AUC criteria to host an AU organ. In addition, due to the technical nature of AIR, additional technical criteria have been developed, but these can only be considered if there is more than one country fulfilling the minimum requirements. However, the Heads of States Summit has the discretionary right to decide the location by overruling any recommendations made by the PRC. The AIR issue was presented at the January Heads of State Summit, attended by nearly all Member States. 6. Speakers commented on the future role of AIR. Accordingly they all agreed that AIR should focus on existing research findings and recommendations, to carefully select demonstrable best practices and share it within African countries. AIR should also focus on statistical institutions and Central Banks in improving remittances measurement. 7. Director requested the World Bank to develop a Business Plan, if possible, that would articulate the goals and set priorities as a blue print. The mission took note of the request and agreed to look into the possibility of developing the Business Plan. 8. The mission attended the Meeting of the Committee of Experts of the 5 th Joint Annual Meetings of the AU Conference of Ministers of Economy and Finance and ECA Conference of African Ministers of Finance, Planning and Economic Development where the AIR was scheduled for discussion as part of the statutory issues. The Chairperson of the meeting highlighted the two side events on AIR and invited participants to actively participate in the deliberation process. 9. There were two side events organized by the AUC. a. The first Side Event was an Expert Level Panel Discussion under the title: The Role, Activities and Organizational Structure of AIR. b. The second one was a High Level Ministerial Panel Discussion under the title: Leveraging Remittances for Social Development. Both events were co-financed by AUC and the World Bank (AIR project covered airfare of participants, panelists and speakers) Discussions of the Side Events The Role, Activities and Organizational Structure of AIR and Leveraging Remittances for Social Development: March 24 and 25, 2012 Role, Activities and Organizational Structure of AIR; 10. Meeting was chaired by Director and panel included the Bank s mission team. The Bank s IFC representative based in Addis Ababa made a statement during the opening session. There was an interactive discussion with more than 20 1 delegations making interventions. AfDB, Egypt and Kenya expressed interest in hosting AIR, but were still undertaking internal consultations prior to a formal expression of interest. 11. Mauritius presented an offer to host the AIR, and also distributed a concept document (see attached) for making the institute operational by September 2012. Mauritius indicated it would underwrite the 1 Algeria, Angola, Cameroon, Chad, Comoros, Congo, D.R. Congo, Egypt, Eritrea, Ethiopia, Kenya, Mauritius, Mauritania, Nigeria, Senegal, South Africa, South Sudan, Swaziland, Tanzania, Togo, Uganda, and Zimbabwe 2

operational costs, adding that projects would be funded through donor and project fund-raising schemes. 12. The meeting supported the ownership of AIR by AU Member States with a lean structure, managed and administratively overseen by the AUC. Consideration should also be given to combining the technical and Advisory bodies. The involvement of the Regional Economic Communities (RECs), the Diaspora, the private sector and civil society was also proposed for consideration. It was also suggested that the functions and roles of the AIR, as well as measureable indicators of achievements should be established before the take-off of the institute. Suggestion was also made to incorporate functions of the AIR into the existing institutions, i.e. the Association of African Central Banks (AACB) and the AfDB instead of creating new institute; as well as involving them further into the implementation process. Another opinion was not to narrow the focus to central banks, but to initially maintain the focus within the domain of the Ministers of Finance in order to ensure wide and appropriate scope. 13. While the top priority should remain the reduction of remittance costs, the following priority areas were also suggested: the impact of remittances on M/S balance of payments; financial sector development (including the financing of rural development); the establishment of a Continental database; Continental advocacy; Diaspora involvement, intra-africa vs. outgoing remittances; remittances in-kind; intra-operability; the AIR mandate/legitimacy to work on the remittances (as it is actually individual s money); dual nationality; existing best practices; infrastructure building and involvement of the RECs. Beyond AIR, the aforementioned areas should also be addressed within Africa s development agenda. 14. Participants of the panel discussion acknowledged the work of the preparatory project, and it was noted that following the consensus reached at the July 2011 Consultative Forum on the roadmap for the establishment of the AIR, a Progress Report had been submitted to the AU Policy Organs - the Permanent Representative Committee (PRC) and the Executive Council - that resulted in EX.CL/Dec.683 (XX) of January 2012. 15. Consideration was given that Africa is still the most expensive region for remittances, and the longer we delay in taking action the more migrants would be out-of-pocket. There is a need for data, and much has been researched. The next logical step would be for the creation of the AIR to take the data to the next level and expand the research. The international issue of African remittances warrants an exclusive focus by an African-led, African-owned and Africa-based institute with a sole focus on this matter. The Chair explained that sufficient research and on line discussions had been completed during the past two years in respect of the overall organizational structure of the AIR. However, comments still were welcomed and would be incorporated in the draft report on the overall organizational structure. The draft will be shared with the AU member states for their final review and comments. 16. The side event was attended by more than 150 participants from more than 30 AU member states and other stakeholders. Leveraging Remittances for Social Development: 17. The High Level Ministerial Panel Discussion was organized by the AUC under the title: Leveraging Remittances for Social Development. The Side Event provided a forum for all stakeholders including Ministers 2, Senior Officials, relevant national and regional financial institutions, Diaspora 2 The side event was attended by the ministers of Algeria, Burundi, Cameroon, DR Congo and Tanzania 3

Organizations and International Partners 3 to share experiences and learn from each other on ongoing programs and activities on remittances in Africa, and on best practices in Migration and Development. The meeting provided the opportunity to review progress made in the implementation of the preparatory phase of the establishment of AIR, and also made recommendations on the most cost-effective and efficient structure and location for the AIR. 18. It was envisaged as a forum to provide AU Member States, RECs, development partners and other stakeholders, the opportunity to: a) Sensitize on the implementation of the preparatory phase of the AIR, and inform on the roadmap towards the creation of AIR. b) Foster effective ways of networking, coordination and cooperation among AU Member States and partners to address remittances issues in a more strategic and programmatic manner. c) Focus on promoting the importance of remittances for economic and social development, reducing poverty, and helping to foster a sense of financial democracy in Africa. The side event aimed at galvanizing support for activities undertaken by the AU Commission towards a more synergized and coordinated actions to leverage remittances for development. d) Learn from experiences in Latin/South America and Asia. e) Discuss the most cost-effective and efficient structure and location for the proposed AIR. 19. In their welcome address, Her Excellency Adv. Bience Gawanas, AUC Commissioner for Social Affairs and Mr. Abdoullie Janneh, Under Secretary General Executive Secretary of UNECA, challenged the panel to propose solutions that would practically curtail the high costs of official remittances. 20. Given that the cost of remittances to sub-saharan Africa is much higher than anywhere else, the moderator raised a discussion point on How can remittance transfer costs be reduced? A first response was to improve the legal and regulatory environments and promote competition and innovative financial products, while also investigating incorporation of remittances into national economic strategies and respecting international and national legislation and the protection of people. 21. In addition, the meeting suggested that Member States should actively partner with remittance recipients in order to ensure that funds are not only being invested in consumer goods, but also utilized as tools for social developmental initiatives at both national and community level, once basic needs have been addressed. This should be established by building the capacity of senders and recipients, using available technologies, sharing information broadly, and placing the issue on national agendas. The meeting was reminded that the creation of the AIR, as a Continental response, should not be reactive, but rather well-considered and structured to respond to the challenges effectively. Concluding remarks and way forward guidance 3 AfDB, AUC, Constituency for Africa (CFA), EC, ECOWAS, International Catholic Migration Commission, IFC, IOM, Pan-African Postal Union (PAPU), UPU, UN-Women, and World Bank 4

22. The meeting served to remind member states that remittances are mainly composed of small cash transfers by migrant workers to their home-based families for the purpose of daily sustenance and covering basic expenses. a) There exists a pressing need for more research and advocacy into making these remittance transfers cheaper, faster and safer in order to have maximum value of money as well as investigating the productive use of these funds for the purpose of social development and economic empowerment. b) There exists many interests and approaches for focusing on remittances and the AIR should endeavor to be as inclusive as possible in its research in order to include the complete arena of role-players. c) The role and impact of remittances in recovering and post conflict Member States also warrant investigation since no research has been undertaken in that area. d) Three proposed priorities were articulated: 1) the need to formalize remittances as income, 2) make the system customer-driven, and 3) include participation from the civil sector in the banking system. e) The proposed AIR is needed and the creation of the AIR should proceed with the required urgency since the dialogue must continue. 23. The side event was attended by Ministerial representatives from 42 4 AU Member States and seven international partners. Participants to the side event, in principle, strongly supported the establishment of the AIR. 5 th Joint Annual Meetings of AU Conference of Ministers of Economy and Finance and the Economic Commission for Africa (ECA) March 26-27, 2012 24. The mission, accompanying the Bank Country Director for Ethiopia who represented the Bank Africa Region Vice Presidency, attended the opening session of the 5 th Joint Annual Meetings of the African Union (AU) Conference of Ministers of Economy and Finance and the Economic Commission for Africa (ECA) Conference of African Ministers of Finance, Planning and Economic Development. 25. The consideration and adoption of the draft Ministerial Statement and draft resolution, which includes a resolution on AIR, were scheduled for second and last day of the conference. The draft resolution on the establishment of AIR was presented by the chair person and opened for comments from member states. 26. The Minister of Finance of the Republic of Chad requested the conference to drop the resolution claiming that i) the conference had not been provided with sufficient information on AIR; ii) Member States are not in a position to create additional institute given the current financial situation of Member States; iii) Member States are facing difficulties in covering even AUC s operational and related costs. In response, the delegations of Egypt, Mauritius, Kenya and AUC Commissioner of Economic Affairs explained that AIR had been under discussion for more than two years and enough 4 Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Chad, Comoros, Congo, DR Congo, Cote d Ivoire, Djibouti, Egypt, Equatorial Guinea, Ethiopia, Eritrea, Gambia, Ghana, Guinea Conakry, Guinea, Liberia, Kenya, Madagascar, Lesotho, Malawi, Mali, Mauritania, Mauritius, Mozambique, Niger, Nigeria, Rwanda, Sao Tome & Principe, Senegal, Sierra Leone, South Africa, South Sudan, Sudan, Swaziland, Tanzania, Tunisia, Togo, Uganda, Zambia and Zimbabwe 5

documentation had been availed for Member States necessitating the establishment of remittances institute for Africa. In addition, the Member States could provide supports in term of in kind contribution rather than direct financial support. With this those delegates requested the conference to adopt the draft resolution on the establishment of AIR. Consequently the resolution was adopted. Mauritius provided its offer; Djibouti, Egypt and Kenya formally expressed interests to host the AIR. Wrap up meeting 27. The mission met with Director and his staff and Mr. Hendrix to discuss the way forward to the establishment of AIR, given that the CAMF could not reach an agreement to endorse the resolution as was anticipated, but instead took note of the AU Executive Council s decision. While several of the CAMF participants cited the lack of information on AIR, it is also important to note that only few regarding participants to the July 2011 Consultative and Experience Sharing Forum attended the Side Events in March, thus contributing to the resolution not being endorsed. Furthermore, the Executive Council decision (EX.CL/Dec.683(XX)) was not disseminated to all the Member States prior to the meeting, hence they did not have time to properly review the documents to help them make informed decisions on the subject matter. 28. However the Director observed that, even if the Decision had been endorsed, due to the elections for the new AUC leadership, a new timeframe would have to be decided as it was unlikely that final approval could be sought from the AU Heads of States Summit in July 2012. 29. Nonetheless, the Bank mission, EC and AUC were pleased with the outcomes of the side events and the conference since constructive and valuable comments regarding the overall organizational structure were received and four countries officially expressed their interest to host AIR. 30. Regarding the way forward, agreement was reached to: take opportunity of this extra time to make adequate preparation of the Resolution at next year's Finance Ministerial meeting (tentative date March - April 2013); revise the overall Organizational structure report to incorporate comments from the side events and share with the Member States for their final review/comments; develop a mini Business plan; undertake awareness raising and assessment missions to interested countries as well as some selected countries of the five AU sub-regions; conduct awareness of the AIR whenever the opportunity occur, e.g. World Diaspora Summit on 25 May 2012 in South Africa, GFMD in Mauritius, the meeting of Social Affairs Ministers in September 2012 and other events; and organize a sensitization session at the January 2013 Summit. 31. The Bank s mission also had a bilateral meeting with IOM representatives, Mr. Kwenin, Mr. Ogina, and Ms. Naomi Shiferaw, Liaison Officer IOM / AU/ECA/IGAD. The meeting was called by Mr. Kwenin to discuss the possibility of funding, from the AIR project, a workshop for African Diaspora organizations in Europe and Africa. The purpose of the proposed two days workshop is awareness creation on the AIR, challenges on remittances, to address Diaspora concerns and to create networking between the AIR and the Diaspora. 32. The mission took note of the usefulness of the envisaged workshop and advised IOM to organize the workshop if possible before the upcoming Diaspora Summit to be held 25 May 2012 in Pretoria, South Africa; so that the AIR agenda could be included on the summit. 6

33. The following agreements were reached: i) by April 2012, IOM would submit a proposal clearly stating objective, target audience, the expected output/outcome, linkages to AIR project activities and expected results and the budget highlighting contributions from the IOM and what is expected from the AIR project; and ii) Number of participants should be 40-50. Upon receipt of the proposal, the Bank will review and consider funding. 34. To further discuss the issue, an audio conference should be organized after the submission of proposal by the IOM. Attachments: Annex 1: Mauritius Offer Annex 2: Ministerial Statement Annex 3: Resolution Web address: AU-ECA 5 th Conference of Ministers of Finance: http://www.uneca.org/cfm/2012/index.htm Minutes prepared by Hailu Kinfe and cleared with AUC, EC, and WB. 7