Statement
by Mr. R. Basant Roi, Governor Bank of Mauritius
Mr
Chairman
COMESA
Secretary General, Mr Erastus J.O. Mwencha
Distinguished
Delegates
Representatives
of Regional and International Organisations
Ladies and
Gentlemen
I feel privileged to have this
opportunity of making a statement on the occasion of the Fifth Meeting of the
Monetary and Financial Co-operation Committee of Experts from Ministries of
Finance and Central Banks in COMESA.
On behalf of the Bank of Mauritius
and on my own behalf, I wish to extend to you a warm welcome to Mauritius. I hope you will enjoy your stay in
Mauritius.
Your meeting is taking place at a
time when COMESA is making preparations to launch the Free Trade Area (FTA) on
31 October 2000. Under the FTA, trade
among the COMESA member States will be conducted free of customs duties,
provided, of course, the goods concerned meet the requirements of the COMESA Rules
of Origin.
COMESA also envisages a customs
union with a common external tariff by the year 2004. The main objective is to achieve a fully integrated and
internationally competitive and unified economic area within which goods and
services, capital and labour are able to move freely. The creation of a single economic space will link our national
economies closely together and significantly increase the degree of economic
integration of the region. This will not only strengthen economic
inter-dependence among our countries, but also reduce the room for independent
policy making and amplify the positive cross-border effects of developments
originating in each member country.
Effective policy co-ordination among the member countries, including the
pursuit of policies in support of a broadly balanced development to complement
the creation of the unified market, will be essential in this process. In particular, the creation of a zone of
monetary stability will be necessary, if the region is to reap maximum benefits
from its economic integration. Monetary co-operation among the member States is
therefore imperative.
You will recall the COMESA Heads of
State and Governments adopted a Phased Monetary Harmonization Programme
designed to culminate in the establishment of a monetary union. Since 1992, the
COMESA member countries have been implementing the first phase of this
programme, which is aimed at achieving macroeconomic convergence among our
countries. This phase was planned to be
completed by 1996. We are now in the
Year 2000, the year we were supposed to have completed the second phase of
limited currency convertibility which was planned to commence at the beginning
of 1997.
I have stated that COMESA will be
launching its Free Trade Area in October this year. This will in effect create, for all practical purposes, a huge
market of 380 million people, with a combined GDP of US$170 billion. The COMESA
region has been declared by the Authority a common investment area in order to
take advantage of this huge market.
The degree of economic integration
achieved so far warrants acceleration of our monetary integration arrangement
through progress in the implementing of our monetary harmonization programme.
The benefits of the Free Trade Area can be maximized only if we can make
progress on the monetary integration front.
The achievement of macroeconomic
harmony among the member States and the implementation of appropriate monetary
and fiscal policies are key steps in the promotion of greater regional trade and
investment. The maintenance of a stable and predictable set of policies will
send important signals to investors.
The first phase of our monetary
harmonization programme was intended to enable us achieve macroeconomic
convergence among our countries. With
the implementation of similar economic policies, the first Phase of the
Monetary Harmonization Programme has been met. It is imperative that we move expeditiously to implement the
Second Phase of the programme, namely the introduction of limited currency
convertibility, which is programmed to be achieved by the end of year 2000. At
our meeting in Arusha, Tanzania, in February, last year, we agreed that the
implementation of limited currency convertibility should be voluntary. Given
the progress we have achieved towards the attainment of a Free Trade Area in
October, this year, the stand on implementation of currency convertibility
amongst our countries has to be reviewed.
We all need to implement limited currency convertibility in order to
maximize the benefits that we can derive from the Free Trade Area.
The COMESA region needs to raise
both its domestic saving and investment effort. Higher savings and investment
ratios will come only by extending reforms beyond the short-term to incorporate
consistent measures for stabilization, adjustment, economic restructuring, and
capacity building so as to ensure sustainable long-term economic
development. In this regard, I would
like to urge your meeting to review exhaustively the progress made by our
member States in the area of financial, fiscal and monetary systems and make
recommendations which would enable COMESA to attain high growth rates.
One of the major factors for the low
level of trade among our countries is the lack of adequate finance for investment
and trade as well as an appropriate cross-border payment mechanism to promote
trade exchanges. It was for this reason that in 1984 we set up the COMESA
Clearing House to promote the use of our national currencies in the settlement
of payments for intra-COMESA trade.
However, with the abolition of exchange controls in our countries, it
became necessary for us to restructure the Clearing House to offer new
services, namely a political risk guarantee facility to be provided by the
Regional Trade Facilitation Project (RTFP); a COMESA Payments System (COMPASS);
and an African Commerce Exchange.
Significant progress has been made
towards the establishment of the Regional Trade Facilitation Project.
(RTFP). It is my firm believe that this
will bring in significant benefits to the region by guaranteeing political
risks, making available export credit guarantees for viable export transactions
in the region and reducing borrowing costs on the international money market
which is often too high for Africa. This will help to attract foreign
investment, which are currently deterred by the negative connotations
associated with risk in the region, the archaic method of trade finance, and
the resultant high cost of doing business. This will make the region highly competitive
in the international market.
In
this regard, I wish to express sincere thanks to the World Bank for the
assistance it is offering to COMESA in establishing the RTFP.
The progress made in the setting up
of the COMESA Payment and Settlement System (COMPASS) is very much appreciated.
This will significantly lower transaction costs, and result in higher certainty
and speed of payments to exporters and reduce risk associated with currency
convertibility, thereby increasing the volume of regional trade among our
countries. I wish to express our thanks The International Monetary Fund (IMF)
for its technical assistance in the establishment of COMPASS
The modernization of national and
cross-border payment systems is essential for increased intra-regional trade
exchanges. I am, therefore, glad to
note that you have on your agenda a proposal for improving the national
payments system. I believe this is crucial for sound financial market
development and for meeting the needs of a market economy in the broader
context of globalization. I, therefore,
look forward for the migration of the payment system from cash based modes of
payment to modern modes of payment in our region at the earliest possible. The creation of a National Payment System
Modernization Committee in each of the COMESA member States would go a long way
towards this objective.
Mr. Chairman, I believe that the
task before you is formidable. I am confident that you will lead today’s
meeting successfully. I trust you will make concrete recommendations to the
Fifth Meeting of COMESA Central Bank Governors and Third Meeting of Ministers
of Finance, for moving the process of monetary and economic integration
forward.
Mr. Chairman, it is now my pleasure
to declare the meeting officially open. I wish you fruitful deliberations.
Thank you.