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Report of the Eighth Session of the Coordination Committee on Multilateral Payments Arrangements and Monetary Co-Operation Among Developing Countries

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Report of the Eighth Session of the Coordination Committee on Multilateral Payments Arrangements and Monetary Co-Operation Among Developing Countries Distr. GENERAL UNCTAD/ECDC/245 24 August 1994 Original: ENGLISH ENGLISH, FRENCH AND SPANISH ONLY UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT REPORT OF THE EIGHTH SESSION OF THE COORDINATION COMMITTEE ON MULTILATERAL PAYMENTS ARRANGEMENTS AND MONETARY CO-OPERATION AMONG DEVELOPING COUNTRIES Held at Santa Cruz de Tenerife, Canary Islands, Spain, from 28 February to 1 March 1994 GE.94-53549 Contents Paragraphs I. INTRODUCTION AND ORGANIZATIONAL MATTERS . 1 - 10 A. Introduction . 1 - 2 B. Opening ceremony . 3 - 8 C. Election of officers . 9 D. Adoption of the agenda . 10 II. CONFERENCE DELIBERATIONS . 11 - 22 A. Review of recent developments in multilateral payments and clearing arrangements and assessment of currency convertibility and its implications . 11 - 18 B. Discussion of modalities of institutional cooperation among African and Latin American clearing and payments arrangements . 19 - 20 C. Venue and arrangements for the ninth session of the Committee and other business . 21 D. Adoption of the report . 22 III. WORK PROGRAMME OF THE COMMITTEE . 23 Annexes I. Attendance II. Agenda and programme of activities III. Speeches and presentations 3 I. INTRODUCTION AND ORGANIZATIONAL MATTERS A. Introduction 1. The eighth session of the Coordination Committee on Multilateral Payments Arrangements and Monetary Cooperation among Developing Countries, organized in collaboration with Promociones Exteriores Canarias (PROEXCA) and the Official Chamber of Commerce, Industry and Shipping of Santa Cruz de Tenerife, was held at the auditorium of the head offices of the said Chamber of Commerce, from 28 February to 1 March 1994. 2. The session was attended by 31 participants, including nine representatives of seven multilateral payments and monetary cooperation arrangements, two representatives of international financial institutions, five representatives of Central Banks and five observers. The attendance list is to be found in annex I. B. Opening ceremony 3. The session was opened at 10.30 a.m. on Monday, 28 February 1994. 4. In his opening statement, Mr. Mohammad Agha Ghavam, General Manager of the Asian Clearing Union (ACU) and Chairman of the seventh session of the Committee, welcomed the participants to the eighth session and also thanked the host Government, particularly PROEXCA, for the excellent facilities provided for the session. He noted that, since the Committee's last session in 1990, the international economic environment had undergone important changes, which had not always been favourable to developing countries' cooperation efforts. He said that the current session offered a unique opportunity for representatives of multilateral payments arrangements among developing countries to discuss their recent experience and to explore new avenues for enhancing their mutual cooperation. He then handed over the Chair to the co-Chairmen, Mr. Mathias Mbonela, Executive Secretary of the Preferential Trade Area of Eastern and 4 Southern African States (PTA) Clearing House and Mr. Cheikh Saad-Bouh Diao, Executive Secretary of the West African Clearing House (WACH). 5. Mr. Mbonela welcomed the participants to the session and noted the mixed results of payments arrangements against the backdrop of the international economic environment. He called for the optimum use of time available during the session for presentations and discussions. He also called on the United Nations Development Programme (UNDP) and the United Nations Conference on Trade and Development (UNCTAD) to assist in giving impetus to the payments and clearing arrangements. 6. Mr. Mbonela joined Mr. Ghavam in thanking PROEXCA for the excellent facilities provided for the session and the people of Tenerife for their hospitality. 7. Mr. Michael Sakbani, UNCTAD secretariat, made a statement on behalf of the Secretary-General of UNCTAD. (For the text, see annex III of this report). 8. Mr. Antonio J. Rivero Suarez, President of PROEXCA, welcomed the participants to Tenerife. He highlighted the role of the Canary Islands as a bridge between Africa and Latin America and drew attention to some imminent legislation (for the liberalization of telecommunication and transportation services, the creation of an offshore financial centre, etc) which would facilitate the fulfilment of that vocation. C. Election of officers 9. The Bureau of the session consisted of the two co-Chairmen elected at the seventh session and Mr. Ghavam, who was elected Rapporteur. 5 D. Adoption of the agenda 10. The provisional agenda, prepared in the light of the decisions of the seventh session, was adopted. The agenda and the programme of activities of the eighth session are to be found in annex II. II. CONFERENCE DELIBERATIONS A. Review of recent developments in multilateral payments and clearing arrangements and assessment of currency convertibility and its implications 11. This item was discussed in two parts, (a) and (b). Under sub-item 4 (a). (Review of recent developments in multilateral payments and clearing arrangements and monetary cooperation among developing countries), the UNCTAD secretariat presented a report entitled "Clearing and payments arrangements among developing countries: recent developments, long-term policy considerations" (UNCTAD/ECDC/238), whose part I served as a sessional document. The report assessed the performance and the recent trends in, the activities of the multilateral clearing and payments arrangements against the background of developments in the international economic environment. The report pointed out that the major performers were concentrated in Asia and Latin America, with savings of foreign exchange accruing mostly to the members of the corresponding two schemes. It reviewed some of the most recent innovations in the payments and clearing arrangements, such as the ACU Currency Swap Arrangement (1989); the amendment of the Latin American Integration Association's (LAIA) Reciprocal Payments and Credit Agreement with a two-tier automatic payments programme (1991) and with the incorporation of a mechanism for deferred payments by instalments; the mechanism to channel triangular trade payments through the LAIA system; the PTA travellers cheques introduced in 1988; and the PTA Reserve Fund approved in 1994. The report considered also plans for the future in view of the conversion of WACH to a specialized agency of the Economic Community of West African States (ECOWAS) and ACU's efforts to increase its membership. 6 12. The representatives of the clearing houses and credit institutions made presentations reviewing the performance of their respective organizations (see annex III). 13. Some of the participants highlighted changes which were too recent to be reflected in the UNCTAD report. The representative of the Clearing House of the Economic Community of Central African States (CHCAS) reported on a recent agreement to offer a long-term payment schedule of the intra-grouping debt. The representative of the PTA Clearing House described a recent floating of PTA Bank commercial paper in New York and the activities of the PTA Re-insurance Company, based at Nairobi. He also informed participants about the technological upgrading of the Clearing House in order to accommodate future trade transactions once the grouping is enlarged. The representative of the Caribbean Community (CARICOM) Clearing Facility described the functioning of CARICOM travellers cheques until their suspension in 1993. Finally, the representative of LAIA informed participants that, all member central banks had recently put the channelling of transactions onto a voluntary basis. The last member country had abandoned mandatory channelling at the beginning of 1994. Thanks to the implementation of the Automatic Payments System in 1991, the stock of intra- grouping debts had recently dropped significantly (from a peak of US$ 5 billion to US$ 700 million); and from 1991, there had been no delays in payments. 14. In addition to describing clearing and payments arrangements, the representative of the Arab Monetary Fund made a presentation on his institution and on the Arab Trade Financing Programme (ATFP). 15. The review of the recent performance of clearing and payments arrangements and the discussion which followed it, contributed to the stock of ideas and initiatives to strengthen the arrangements and to link the payments systems with other elements of monetary cooperation. 16. At the end of the general debate, a representative of the UNCTAD secretariat made a summary of the debate which was accepted by all participants as a balanced summation: 7 (a) It was noted that the impact of external factors on the operations of the payments system is quite significant. These factors include, inter alia, the development of the world economy, political factors, the external debt problem and the foreign exchange constraints of developing countries. (b) The differences in the scope of the various schemes were also noted, for example, the inclusion of oil in eligible transactions of ACU, which has had a very positive impact on the expansion of transactions, and its exclusion from the operations of WACH, which has hindered the effectiveness of that scheme. The same observation was made regarding the inclusion or exclusion of non-trade transactions (services and, eventually, investment) in the clearing mechanism. Another element in the scope of schemes concerns the correct choice of payments arrangements partners which offer the optimum prospects for trade complementarities. The Committee noted that geographic proximity
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