USAID CONFERENCE HIGHLIGHTS OPPORTUNITIES FOR

UNCLAS SECTION 01 OF 03 ACCRA 000829

SIPDIS

SIPDIS

STATE PASS USAID
TREASURY FOR LUKAS KOHLER
USTR FOR LAURIE-ANN AGAMA

E.O. 12958: N/A
TAGS: EINV ECON ETRD EFIN GH
SUBJECT: USAID CONFERENCE HIGHLIGHTS OPPORTUNITIES FOR
INCREASED REMITTANCES AND TRADE IN WEST AFRICA


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Summary
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1. USAID sponsored a conference and technology fair in Accra,
March 30-31, 2006, to disseminate research highlighting the
opportunities and issues for increased remittances and trade
into and within West Africa. The conference goal was to
discuss ways for the private sector to access more of the $10
billion dollar estimated remittances and trade settlement
market in Ghana, Mali, Nigeria and Senegal, and to increase
the net and gross flows of remittances to Ghana and enhance
their development impact. Over 200 individuals representing
the financial services sector, government, donors, academia,
and business and trade associations, participated in the
conference. West African participants from the financial
sector showed great interest in the research and market
opportunities presented, but emphasized that governments in
the region must create the appropriate environment. The
conference highlighted the serious challenges traders and
private individuals face when trying to conduct international
financial transactions. The text of speeches given and
research papers presented at the conference will be posted on
the watradehub.com website. End Summary.


2. From March 30-31, 2006, Accra was host to "The Accra
Regional Forum on Remittances and Trade." USAID sponsored
the conference, and the GoG and Economic Community of West
African States (ECOWAS) co-hosted. The conference goal was
to engage financial sector actors, policy makers and donors
in discussing the issues and opportunities for increased
remittances and trade into and within West Africa,
specifically Ghana, Mali, Nigeria, and Senegal, and to
increase the net and gross flows of remittances to Ghana,
enhancing their development impact.


3. USG participation included opening remarks by Ambassador
Bridgewater and closing remarks from the USAID West Africa
Mission Director. USAID, State, and Treasury officials based
in Ghana and Senegal attended the conference. West African
Government officials, representatives from the UNDP and the
International Migration Office, as well as international
donors such as the UK's DFID also attended. However the
overwhelming attendance was from the private sector,
representing national and international commercial banks,
money transfer companies, microfinance institutions, and
trade associations interested in expanding their operations.


4. Ambassador Bridgewater opened the conference citing U.S.
assistance to Africa in support of financial sector reform
and trade, and highlighting key research findings including
that 10% of West Africans work outside their country of
origin and conduct an estimated $10 billion in remittances
and trade settlements each year in the region, mostly outside
of the formal economy. Ghana receives more than $1 billion a
year in remittances from private individuals living abroad,
and these remittances are unique in that the amounts sent
continue to grow over time. The Ambassador ended her remarks
with a request for the conference participants to focus on
concrete steps to create the right environment to funnel more
financial resources into the private sector so they can play
a more significant role in West Africa's development.


5. Other opening ceremony speakers included The Ambassador of
the Netherlands to Ghana, the Governor of the Bank of Ghana,
Togo's National Director of the Central Bank of West African
States, and the Director General of the West African Monetary
Institute. The President of Ghana was represented by Ghana's
Minister of Interior. Opening ceremony speakers covered
topics including the connection between migration and
economic development, the need to implement policies that
will mitigate migration by reducing poverty and increasing
economic growth, the need to understand how remittances can
be used to support development, costs related to money
transfers and financial transactions in the region, the pace
of regional economic integration, data needs on remittances
and financial transactions, and the political will required
for reform.


6. In side sessions, USAID-sponsored researchers presented
the findings of research conducted on remittances to Ghana
from the U.S., Europe and Canada, and on remittances and
trade settlements between the countries of Ghana, Mali,
Nigeria and Senegal. Conference working groups developed
recommendations on policies and actions to pursue to enable
the private sector to attract more remittances and trade

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settlement transactions. The technology fair allowed money
transfer companies from Latin America, Europe, West Africa
and the U.S. to demonstrate the latest technology used to
transfer money internationally.

RESEARCH FINDINGS: ENABLING ENVIRONMENT HINDERING FORMAL
TRADE SETTLEMENTS AND REMITTANCE FLOWS
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7. The researchers presented two sets of findings at the
conference. The first was specific to remittances to Ghana
from Germany, U.S., and UK, and the second was based on
research on remittances and trade within the West African
countries of Ghana, Mali, Nigeria and Senegal.


8. (U) The Ghana-specific research focused on the legal and
regulatory framework in Ghana that controls the remittances
market, the financial institutions that process remittances
to Ghana, and characteristics of remittance senders and
receivers. Dr. Manuel Orozco of Inter-American Dialogue, one
of the world's premiere remittance experts, pointed out that
remittances are not a solution for economic growth in
developing economies, and that the ability to use remittances
productively in a country increases with improved economic
structures. Ghana's immigrants are unique in that they
remain more engaged in their home country in comparison with
other immigrant groups, with many owning property in Ghana
and most sending more money to recipients over time. Income,
age and level of engagement in the home country are the
primary determinants of the amount of funds sent home.


9. Regional research on remittances and trade showed that the
value of financial transactions between Ghana, Mali, Nigeria
and Senegal amounts to $2 billion annually in remittances
from migrant laborers and perhaps as much as $8 billion in
trade settlements. Overly restrictive government policies,
the inconvertibility of currencies in the region, and
corruption have the effect of driving most of this
potentially legitimate business into the informal economy.


10. Small and medium-sized businesses have the most
difficulty gaining access to formal mechanisms and
institutions that could provide business loans and financial
settlements services. Microfinance institutions and credit
unions that service part of this market are operating under
financial regulations that make it difficult to service the
full needs of their clients, with the settlement of regional
transactions particularly difficult. Technology may provide
options that will encourage greater use of formal systems.
Researchers noted the irony of low levels of regional
integration given traditionally high levels of migration and
mobility of traders within the region. They charged
government and private institutions with neglecting the
financial needs of regional traders and individuals in the
region.


11. The report provided new insight into the impact of
corruption on trade. Businesses in Ghana and Nigeria
estimated that 10% or more of their costs go to
under-the-table payments and kickbacks to government
officials. The report also found evidence that officials in
Ghana who are reluctant to accept bribes at first eventually
come to rely on bribes to make up for low salaries.

RECOMMENDATIONS: ENCOURAGE COMPETITION, FINANCIAL SECTOR
POLICY REFORM, IMPROVED PRODUCTS, PILOT PROGRAMS
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12. For Ghana, researchers suggested that new banking
products, banking reform, formation of an industry clearing
house, and encouraging hometown associations of Ghanaians
overseas could increase the gross and net flows of
remittances to Ghana, and enhance their developmental impact.
Specific recommendations included improving rates on savings
instruments, steering away from exclusive arrangements with
banks by remittance companies, liberalizing foreign exchange
policy and allowing for savings accounts in different
currencies.


13. Regional research identified short and long-term
recommendations. Short-term recommendations included
increasing government and financial institution awareness of
regional traders and migrants demand for financial services,
raising awareness through successful pilot projects for cross
border payments, providing financial education to financial
services providers and migrants, liberalizing foreign

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exchange policies at a national and regional level using
Ghana's new foreign exchange law as a possible model for the
region, and encouraging currency convertibility between
countries that conduct significant trade with each other
(such as Ghana and Nigeria). Longer-term recommendations
included improving data to measure the flow of money
resulting from trade settlements and remittances regionally,
and streamlining documentation to facilitate trade within the
region.

COMMENT: CONFERENCE EXEMPLIFIES THE CHALLENGES DISCUSSED
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14. Unwittingly, the conference and technology fair
demonstrated some of the challenges under discussion that
hinder both investment in the financial service sector and
trade in West Africa. The internet service at the hotel was
too slow for some of the money transfer firms to demonstrate
their technology. The electricity went out twice during the
event. Conference participants were shocked to be advised
against using credit or ATM cards anywhere in Ghana due to
fraud. Despite these challenges, the conference was a
positive step forward. It provided the private sector and
governments in the region with data needed to understand the
motivations behind remittance senders and receivers. It also
highlighted the market opportunity for financial services for
the regional remittance and trade markets, and the policy
reforms needed to change the status quo. Private companies
thanked USAID for conducting the research and engaging
governments in discussions on needed financial sector reform.
Activities supporting increased remittance flows to Ghana,
as well as financial sector reform that supports regional
formal trade and remittances, are both clearly needed to
allow the private sector to take advantage of the enormous
financial service opportunity that exists and is growing in
West Africa. End Comment.
LANIER