African Union: Building Institutions and Systems to Harness and Realize Agenda 2063 Project (BIASHARA) (P180117); (Grant No. E202-3A) Implementation Support Mission - November 14-20, 2023 Aide Mémoire I. INTRODUCTION 1. A World Bank team comprising Roberto Echandi (Senior Trade Specialist) and Peter Kusek (Senior Economist) conducted an implementation support visit to the African Continental Free Trade Area (AfCFTA) Secretariat in Accra, Ghana during November 14-20, 2023. The visit covered activities in Component 2 of the BIASHARA project related to the AfCFTA. The Project was approved on June 1, 2023, and became effective on October 12, 2023. This Aide Memoire discusses the progress and key findings as well as the agreed actions and next steps (Annex 1). A list of officials met is at annex 2. II. IMPLEMENTATION PROGRESS AND KEY FINDINGS 2. The discussions focused on the areas of trade in services and investment. The team met with Secretariat officials working on trade in goods and dispute settlement, and discussed progress and challenges related to implementation of the AfCFTA Treaty in these two areas. The following is a summary of key findings and next steps. A. Trade in services 3. The Secretariat updated the team on progress in implementation of the Trade in Services Protocol and the negotiation of pending annexes (such as the schedules of specific market access commitments, the negotiation of specific regulatory frameworks for certain services sectors including financial and communication services) and the preparation to launch the Guided Trade Initiative for Services in 2024. The Secretariat informed the team that as of November 2023, 48 countries (i.e., all the Member States which have already ratified the AfCFTA Treaty) have submitted their initial offers of country schedules of specific market access commitments. However, only 22 of these countries1 have submitted final offers which have been verified and adopted by the AfCFTA Committee on Trade in Services. Making progress in the number of verification and adoption of final schedules of services market access commitments remains a priority of the Secretariat for 2024. 4. The Secretariat is preparing and will publicize verified final offers to State Parties and the private sector by December 2023. This is aimed at fostering effective implementation of the market access commitments, enhance transparency, and enable an analysis of gaps between of commitments undertaken by countries and their level of openness to services trade. 5. To complement the general disciplines included in the AfCFTA Trade in Services Protocol, in addition to a specific dedicated chapter on digital trade, AfCFTA countries agreed to negotiate regulatory frameworks for five priority sectors: Financial, transport, communications, tourism and business services. While negotiations have already started most of the progress, however, has been in communications and financial services. The Secretariat aims to conclude these two regulatory frameworks the end of 2024. 6. The Secretariat informed the team that its focus is on the implementation of already undertaken commitments. In this regard, the Secretariat is preparing to launch the GTI on Services in May 1 These countries include CEMAC (6 countries) EAC (5 countries) as well as Eswatini, Lesotho, DRC, Egypt, Djibouti, Malawi, Mauritius, Namibia, Seychelles, Zambia and Zimbabwe. 1 2024. The Services GTI will facilitate the generation of trade transactions among private sector across different subregions of the African continent. Since the idea is to generate a demonstrative effect of the effective implementation of AfCFTA, all 22 countries which have already verified and adopted their final schedules of services market access commitments are invited to participate in this initiative. 7. The team updated the Secretariat on the Bank’s work on trade in services, precisely to explore synergies in the work of both institutions. Such agenda includes the global update of the Services Trade Policy Database that was recently concluded. In addition, the team briefed the Secretariat on the work on developing the Preferential Services Trade Restrictiveness Index, which will quantify the gap between commitments undertaken by countries in their preferential trade agreements and applied level of openness resulting from existing laws and regulations in each country. In this regard, the AfCFTA Secretariat expressed interest in working together with the WBG /WTO team in undertaking that exercise for the AfCFTA trade in services protocol. 8. To ensure effective implementation of the trade in services protocol at the national level, the team discussed the importance of designing a monitoring instrument (e.g., a barometer or scorecard) to track effective implementation of commitments as well as the critical role of establishing well- functioning focal points in each of the State Parties. The AfCFTA Secretariat expressed interest in working with the WBG to develop a methodology to achieve this objective. 9. In summary, the discussion between the team and the Secretariat on trade in services led to the identification of at least three milestones for 2024: (i) an increase in the number of countries with final offers verified and adopted by the AfCFTA trade in services committee, (ii) the publication in an user- friendly format of the summary of the trade in services specific commitments undertaken by at least the 22 countries which already have legally binding commitments, and (iii) the launch of the trade in services GTI. B. Investment 10. The Secretariat gave an update on the status of the Investment Protocol and its implementation. The Protocol, adopted in February 2023, represents a significant stride towards harmonizing investment regulations across the continent, creating a more predictable and attractive investment environment. Specifically, the Protocol seeks to provide a cohesive framework to streamline the diverse rules governing investments across African countries. The Protocol’s objective is to promote, facilitate, protect, and retain investments that are aligned with sustainable development goals. By standardizing investment regulations, the Protocol aims to alleviate investor concerns and attract a broader spectrum of potential investors to various African markets. 11. The Protocol was adopted in February 2023 and is currently awaiting technical finalization of two specific provisions. The Secretariat expects conclusion of this process by the May 2024 Council of Ministers meeting. Subsequently, ratification by a minimum of 22 State Parties is needed for the Protocol to enter into force. In parallel, work will continue to finalize the two associated Annexes of the Protocol on establishing a Pan-African Trade and Investment Agency and on dispute settlement. In addition to finalizing the full adoption of the Protocol, efforts of the Secretariat to date have focused on supporting the State Parties in providing technical assistance, sensitization, awareness raising, and advocacy. The overall objective has been to assist the State Parties in implementation of the Protocol. 12. The Secretariat has published a compilation of Investment Snapshots Country Infographics with the objective of providing a panoramic view for investors in Africa. This 1st edition of the Snapshots is based on a compilation of publicly available information primarily accessible through the websites of the countries’ investment promotion agencies. 2 13. The World Bank team updated the Secretariat on the ongoing support and technical assistance to various State Parties that have commenced implementation efforts concerning the Investment Protocol, in particular Rwanda and Zambia. The team also noted the upcoming work in Togo and Ghana. These countries’ efforts have primarily focused on assessing their domestic and international policies, and legal frameworks for investment to determine areas for alignment with the obligations of the Investment Protocol (i.e., “gap analysis”). The team discussed the interest of these State Parties in peer-to-peer exchanges to showcase their progress and to share lessons of experience in designing and implementing their efforts. 14. To ensure effective implementation of the protocol at the country level, the team and Secretariat discussed the importance of a monitoring instrument (e.g., Scorecard) to track compliance, as well as the critical role of establishing well-functioning focal points in each of the State Parties. The Scorecard should be designed to benchmark State Parties’ progress in implementing the protocol, including designation of an accurate baseline against which progress can be measured. On the other hand, Focal Points should be responsible not only for investment promotion, but also for investment policy, regulations, and negotiations. The Secretariat agreed that these actions would constitute key next steps for 2024. 15. The discussions also touched on the importance of reliable data and statistics, including on bilateral investment flows. Since one of the overarching objectives of the AfCFTA is to increase intra- regional investment, monitoring progress on this goal will require robust statistics. The Secretariat noted that the African Export Import Bank recently presented a new initiative on improved FDI statistics. C. Dispute settlement and trade in goods 16. In the area of trade in goods, the Secretariat updated the team on the progress in the implementation of the AfCFTA tariff concessions. The Secretariat noted the challenge of many countries to “nationalize” and incorporate the effective tariff concessions already agreed under the AfCFTA in their national customs schedules. In addition to this basic commitment, the issue of the implementation of certificates of origin was also addressed. A key milestone for during 2024 would be for Customs authorities to fully apply tariff concessions and applicable rules of origin.2 In the area of dispute settlement, the team met with the Director of the Dispute Settlement Division, who mentioned that the main challenge as the lack of information and capacity among country-level officials and the private sector on the AfCFTA mechanism. The agreed key objectives for 2024 include: (i) training of the members of the AfCFTA Dispute Settlement Body on good practices on dispute settlement systems (levering the experience of the World Trade Organization), and (ii) developing educational materials for private sector players to understand the importance of and how to use the dispute settlement mechanisms, especially for non-litigious negotiations. III. AGREED ACTIONS AND NEXT STEPS 17. The agreed activities for 2024 aimed at achieving progress in meeting the targets related to the Project Development Objective (PDO)-level results indicator on “Increased compliance of State Parties with AfCFTA Treaty obligations” are set out in Annex 1. 2 At least for the 90 percent of tariff lines for non-sensitive products already agreed. 3 Annex 1: Proposed 2024 Work Program for Project Activities in Trade in Services and Investment Action / Next step Target date A: Trade in Services 1. Verification and adoption by the Trade in Services Committee of the highest number Throughout possible of schedules of services specific commitments among the 26 remaining 2024 AfCFTA members 2. Organize, with the assistance of the World Bank, activities showcasing the potential Throughout benefits of adopting as soon as possible the final version of services commitments in 2024 key selected AfCFTA Members 3. Support capacity building, awareness raising, advocacy and sensitization of the State Throughout Parties, in particular through planned technical missions by the Secretariat staff to 2024 each of the sub-regions of the continent 4. Design a “barometer” or “scorecard,” to measure State Parties’ compliance with the Throughout Trade in Services Protocol 2024 5. AfCFTA Secretariat to prepare selected countries (both government and private sector) February-April to participate in the Services GTI showcasing concrete means to implement the Trade 2024 in Services Protocol 6. Publication of the Specific Services Commitments Adopted by 22 AfCFTA Members April 2024 7. Developing user-friendly tools (such and internet application) for the private sector May 2024 and governments to access and understand the terms of the Specific Commitments on market access adopted by AfCFTA countries 8. Launching of the Trade in Services Guided Trade Initiative May 2024 9. Identification of the gaps between AfCFTA members adopted services commitments July 2024 and existing laws and regulations as applied in 2023 10. Conclusion of the Regulatory Frameworks for Communication and Financial Services December 2024 B: Investment 1. Adoption of the complete text of the Investment Protocol May 2024 2. Organize a virtual peer-to-peer learning event, with the assistance of the World Bank, May-June 2024 showcasing progress of select State Partner in implementing the Investment Protocol 3. Drafting and negotiations of the Protocol Annexes Throughout 2024 4. Support capacity building, awareness raising, advocacy and sensitization of the State Throughout Parties, in particular through planned technical missions by the Secretariat staff to 2024 each of the sub-regions of the continent 5. Design Scorecard, with the assistance of the World Bank, to measure State Parties’ Throughout compliance with the Protocol obligations 2024 6. Support State Parties in conducting gap analysis of their policy and regulatory Throughout frameworks for investment 2024 7. Conduct outreach to State Parties to confirm designation of focal points Throughout 2024 8. Update Investment Snapshots (version 2.0) by having the Snapshot information Throughout reviewed and validated by the State Parties 2024 4 Annex 2: List of officials met Name of Officer AfCFTA Secretariat Position Email Address Prudence Sebahizi Director, Directorate of Prudence.Sebahizi@au-afcfta.org Institutional Matters and Programs Coordination (DIMPC) Emily Njeri Mburu-Ndoria Director Trade in Services, Emily.Ndoria@au-afcfta.org Investment, Intellectual Property and Digital Trade Beatrice Claudia Chaytor Head of Division, Trade in Beatrice.Chaytor@au-afcfta.org Services Desire Loumou Expert Senior, Trade in Desire.Loumou@au-afcfta.org Services Daphine Natacha Lekipaika Trade in Services Division Daphine.Lekipaika@au-afcfta.org Siobhan Kweiba Sam Trade in Services Division Siobhan.Sam@au-afcfta.org Roslyn Ngeno Expert Senior, Investment Roslyn.Ngeno@au-afcfta.org Patience Okala Investment Expert Patience.Okala@au-afcfta.org Sandra Akite Investment Expert Sandra.Akite@au-afcfta.org Balkissou Alfa Hassan Sido Kabo Head Dispute Settlement Balkissou.kabo@au-afcfta.org Division Kamel Waidou Program Associate, Dispute Kamel.waidou@au-afcfta.org Settlement Division Dzigbodi Soglo Program Associate, Dispute Dzigbodi.soglo@au-afcfta.org Settlement Division Mohamed Ali Director, Trade in Goods and Mohamed.Ali@au-afcfta.org Competition Poonam D. Mahoun Head of Non-Tariff Measures Deneswaree.mohun@au-afcfta.org Division 5