Chapter

Annex 2: JSA JOINT JAPAN-IMF FIELD VISITS

Author(s):
International Monetary Fund
Published Date:
July 2005
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Purpose

The purpose of these visits is to provide the Japanese authorities with a firsthand view as to how JSA funding is being used in the field. These visits are designed to assess (1) how the authorities value the work of experts who are being funded; (2) whether the authorities are making effective use of the assistance; and (3) whether the technical assistance is making a contribution to the reform process. Discussions also sometimes touch on more generic TA policy and operational issues such as (1) the relative effectiveness of long-term and short-term expert assignments; (2) identification of TA needs; (3) integration of TA into IMF-supported programs; and (4) the role of resident representatives and TA experts in coordinating assistance from other donors.

Formal

The joint mission usually comprises two Japanese officials (a representative of the Ministry of Finance and a representative of the Japanese Executive Director’s Office) and an IMF staff member.

Countries and projects selected for review are based on a number of considerations that are illustrative of different levels of economic development and structural reform and variation between regions and subject areas.

Following receipt of briefing notes and/or briefing of mission members at IMF headquarters, the mission members visit recipient countries where TA is provided and, where possible, meet separately with the senior representatives of the host institution (usually the Minister of Finance, Governor of the Central Bank, or Chairman of the Central Statistical Organization), the immediate counterparts of the expert (usually department heads), and the expert himself/herself. In the case of seminars or training courses, meetings are also held with participants in the respective sessions or courses as well as with officials in charge of human resources development at the relevant training institutions. Meetings are typically held with other concerned donors to seek their views.

Findings

To date, 11 visits have been made (covering 17 countries, two regional training institutes, and the Pacific Financial Technical Assistance Center) since this practice was introduced in FY 1996. The field visits have found that JSA funding is well administered and effectively used. In all the visits, the authorities were well aware and fully recognized the importance of, and expressed their appreciation for, Japan’s financial support to the IMF’s TA program. The positive firsthand view gained by the Japanese authorities has contributed to the continued strong support by Japan, through their contributions to the JSA, for the IMF’s TA program. A list of all field visits carried out and the summary report of the of the field visits that took place in FY2004 are provided below. Reports on earlier field visits can be found in previous JSA Annual Reports.

Joint Field Visits in FY1996-FY2004

1. Fiji and Western Samoa (Pacific Financial Technical Assistance Center—PFTAC), March 1996

2. Kazakhstan and the Kyrgyz Republic, June 1996

3. Zambia and Zimbabwe, December 1996

4. Russian Federation, July 1997

5. Bulgaria and Lithuania, June 1998

6. Indonesia, Singapore Training Institute, and Thailand, June/July 1999

7. Belarus and Slovenia, June 2000

8. Azerbaijan and the Joint Vienna Institute, June 2001

9. Cambodia and the IMF-Singapore Regional Training Institute, June 2002

10. Mongolia and Timor-Leste, September 2002

11. Indonesia and Fiji, December 2003

Joint Field Visits in FY2004

Indonesia, December 2003

Following the Asian financial crisis in 1997, the IMF has provided a significant amount of TA to Indonesia to assist the authorities to restore confidence in the banking sector. This TA, totaling around $2.25 million to date and primarily financed by the JSA, has focused on improving supervisory standards, strengthening regulations, and bringing supervision practices in line with international standards. As part of this continuing assistance, the JSA is currently financing (1) a long-term advisor on bank supervision at the Bank of Indonesia to assist with strengthening consolidated supervision and risk-based examinations; and (2) peripatetic expert assistance for the development of Indonesia’s AML/CFT supervisory framework to ensure compliance by banks with AML/CFT regulations.

As a result of the TA provided, the Bank of Indonesia (BI) was able to adopt a Master Plan in 2000 to improve bank supervision and bring its regulations and supervisory practices in line with the Basel Core Principles. A recent IMF review and BI self-assessment found that much progress had been made in improving the capabilities of bank supervision staff, implementing new regulations, strengthening analytic capabilities, and enhancing financial reporting. Nevertheless, there are still significant areas that need to be addressed under the Master Plan that will require continued TA, including the need for regulations requiring consolidated financial reporting and supervision, and the strengthening of the management structure of bank supervision.

In the course of their visit, the joint review team met with senior officials in the Bank of Indonesia, the JSA-funded advisors, commercial bank representatives, and the IMF Resident Representative. The Indonesian authorities indicated that the contribution of IMF experts had been extremely important in restoring the health of the banking system and expressed appreciation for Japan’s support and the hope that this assistance would continue to be provided to enable them to complete the implementation of the Master Plan. The positive view of developments in the banking sector was confirmed by the commercial bank representatives who noted that BI officials’ interactions with banks had become much more professional and focused and that they appeared more capable and confident in their discussions.

The Japanese members of the review team expressed satisfaction with the technical assistance provided to the Bank of Indonesia with JSA funding. The assistance had been effective and had played a critical role, first, in helping with “firefighting” following the crisis and, thereafter, with developing regulations and supervisory tools, and with the strengthening of the capacity of BI officials.

Fiji, December 2003

Since FY1999, Japan has financed some $9 million of IMF technical assistance to the Pacific Island Countries (PICs) in all four core areas of the IMF’s expertise through a combination of long-term advisors, short-term expert services, and training. In their visit to Fiji, the joint review team focused on the activities of the Pacific Financial Technical Assistance Center (PFTAC) and regional projects to strengthen macroeconomic statistics systems and the financial sector, including strengthening the AML/CFT framework, currently financed by the JSA. In the course of their review, the team met with senior officials of the Reserve Bank of Fiji, Ministry of Justice, Bureau of Statistics, Pacific Island Forum Secretariat, the United Nations Office on Drugs and Crime, as well as the JSA-funded long-term advisors on tax and customs administration, economic and financial statistics, and AML/CFT.

PFTAC. The center was established in 1993 as a cost-efficient way to provide assistance to the Pacific Island Countries to build skills and institutional capacity for effective economic and financial management. To meet this objective, PFTAC provides advisory services and training in public financial management, tax and customs administration and policy, financial sector regulation and supervision, and macroeconomic and financial statistics. Currently JSA is financing the two IMF advisors on tax and statistics based at PFTAC. In the review meetings, the authorities had nothing but praise for PFTAC, particularly for the quality of its assistance, the capabilities and professionalism of its advisors, its responsiveness to urgent requests, and its ability to act as a trouble shooter and resource “help desk” when the small island countries did not know where to turn to for assistance.

Pacific Island GDDS Project The regional project’s objective is to improve the capacity of participating PICs to produce and disseminate reliable and timely macroeconomic and socio-demographic statistics in keeping with international standards. The design and implementation of the project take into account the particular circumstances of the PICs, their small size, and the rudimentary stage of their statistical systems. JSA finances a group of peripatetic experts who work in coordination with the PFTAC statistics advisor as well as provide workshops, seminars, and other forms of training. While progress has been slower than anticipated, this regional mechanism for assistance was seen by the authorities to be an effective way to support them in their efforts to participate in the GDDS.

Regional financial sector assistance. The joint review team also looked at JSA-funded assistance for strengthening the financial sector in the PICs where progress was noted in the following areas: in Fiji, the development of a framework for the prudential supervision of insurance companies and the National Provident Fund; in the Federated States of Micronesia, strengthening of on-site examination skills in the Banking Commission; in the Marshall Islands, setting up of a Capital Adequacy Scheme under the Basel Capital Accord; in Palau, setting up of the Financial Institutions Commission, drafting of regulations, and establishing of off-site surveillance procedures; in Samoa, the Solomon Islands, and Tonga, improved monetary operations; and, in Vanuatu, bank supervision capacity strengthened to cover off-shore banks.

The above technical assistance to the Pacific Island countries received high praise from the authorities and other TA providers and was viewed as very important for helping the PICs in their efforts to meet international standards. The Japanese representatives on the review team expressed their strong satisfaction with the work of PFTAC and the other TA activities reviewed and agreed that IMF TA for the PICs deserved continued support. The Japanese representatives noted the importance of having a TA center in the Pacific region because its needs might otherwise be overlooked, or the region might suffer from lack of coordinated assistance.

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