%AADRL D FLANK
DEVELOPMENT COMMITTEE
(Joint Ministerial Committee
of the
Boards of Governors of the Bank and the Fund
on the
Transfer of Real Resources to Developing Countries)
NINETY-NINTH MEETING
WASHINGTON, D.C. - APRIL 13, 2019
DC/S/2019-0001
April 13, 2019
Statement by
Abdulrahman Al-Hamidy
Director General Chairman of the Board
Arab Monetary Fund


ARAB MONETARY FUND
Statement by
Abdulrahman Al-Hamidy
Director General Chairman of the Board
99th Meeting of the Development Committee
April 13, 2019
Washington, D.C.
"Cross-Border Payments in a Changing World: The Role of Regional Arrangements"
It gives me great pleasure to attend this year's the 99th meeting of the Development Committee in my
capacity as an observer member and, on behalf of the Arab Monetary Fund (AMF), I would like to express
my sincere thanks and gratitude to the World Bank for this kind invitation.
I would like to take this invaluable opportunity to discuss the subject of cross-border payments that are not
only becoming increasingly important in the functioning of the global economy but also simultaneously
being more complex due to the rapid developments in payment technologies and services. This note aims
also at sharing the efforts exerted by the Arab countries in addressing industry-related challenges and to
contribute to fostering a modern, rules-based and equitable multilateral trading system, with the ultimate
objective of supporting and boosting inclusive and integrated growth, a key requirement to achieving the
Sustainable Development Goals (SDGs) by 2030.
The Evolving Landscape of Cross-Border Payments
International payments have been instrumental in the emergence of today's global economy. The demand
for cross-border payments is expected to continue to steadily grow in the future, driven by the increase of
international trade, internationalization of production and the growth of cross-border e-commerce. This is
displayed by the current global annual average cross-border transactions of 0.7 per capita, up from 0.5 in
2014; and the average value of total cross-border payments which has grown to 1.8 times the global nominal
GDP.
Nevertheless, payments sent from one country to another are less efficient in terms of cost and time than
domestic payments, partly because the former are more complex, riskier, and differently regulated and
exhibit lower economies of scale and scope. These are compounded by policy specific factors such as


increasing compliance requirements, growing trade restrictions as well as ongoing business uncertainty,
mounting cyber risks and declining correspondent banking relationships, all of which are all adding to the
cost and complexity of offering cross-border payments services.
Today, the global cross-border payment landscape is experiencing a number of key trends that could
fundamentally change global competitive dynamics, including shifting regulatory and sanctions
frameworks, accelerating international commercial activities, changing customer demands and increasing
pressure from emerging and disruptive technologies.
The Growing Importance of the Arab Region in the Global Economy
The Arab region has been able to effectively diversify its economic activities, grow and integrate into the
world economy, yet the traditional economic sectors are no longer able to generate sufficient employment
opportunities to overcome growing unemployment. Therefore, countries are turning towards the digital
economy, particularly fintech and ICT, that is prevailing as a new growth model, boosting productivity
levels and increasing regional growth potential.
In addition, the economic and financial trends in the region point towards an acceleration of payment flows,
with cross-border payments among Arab countries forecasted to increase to 6.9 Million transactions in
2021, corresponding to a total value of USD 3.4 trillion. This trend is expected to continue due to the multi-
lateral policy initiatives aimed at enhancing intra-Arab economic growth.
However, these cross-border payments landscape is changing. There is a greater push towards lower costs
and faster payments, given the emergence of disruptive technologies and new business models that are
attracting new customers. Consequently, the banking sector is witnessing an unprecedented transformation
where traditional channels and tools, including banking services, are now facing risks and challenges from
fast-growing technology companies looking to increase their market share.
To this end, new technology and regional arrangements may complement the traditional channels and
provide a more inclusive and efficient gateway to payments and cross-border remittances for both
individuals and businesses alike. Fintech is seen as an opportunity to create viable business opportunities
in the region whilst simultaneously acting to reduce the costs associated with cross-border transfers.
Remittances in the region are forecasted to reach a record-level high of USD 53 billion in 2018 and financial
technology is seen as a key tool to help decrease their cost from 7.4%, to levels much closer to the SDG
target of 3%.
Responses to Increasing Expectations
Driven by these pressing trends and in line with the Arab Monetary Fund's (AMF) vision and continuous
efforts to increase the efficiency, harmonization and integration of trade and economic activities both
regionally and internationally, the AMF, under the leadership and support of the Arab Central Banks and
Monetary Authorities' Governors, seeks to provide the region with a solution that fosters cross-border
payments. It has thus conceived the establishment of an Arab Regional Payment System (ARPS), a simple
and efficient payment clearing and settlement system.
ARPS was envisioned with clear objectives that would create significant macroeconomic impact and has
been designed as a simple, low-cost and risk-controlled payment clearing and settlement system that will
pursue and promote the accelerating payment flows across the Arab region. The system will adopt a
centralized model, consisting of a single, multi-currency and pre-funded platform with a focus on increasing
the efficiency of cross-border payments in the region, with respect to reduced duration of transaction
completion, decreased liquidity requirements, reduced costs and minimized disruption for market
participants. Further, the system designed in line with international standards such as the CPMI-IOSCO
2


PFMIs, will also leverage the latest technologies while ensuring and strengthening compliance with
sanctions and AML/CFT requirements.
Following the feasibility study and system design, defining all major facets of the solution including
ARPS's business and operating model, the implementation program of the system is currently underway
targeting a pilot go-live in 2020. This process encompasses establishing a sound legal basis that addresses
all legal requirements necessary for the system's operation while, at the same time, focusing on standing
up the organizational capabilities in a fast-paced manner which would enable the organization to start
delivering payment services at the earliest opportunity.
Moreover, the AMF realizes that the only way to ensure a successful implementation is through constant
engagement with all stakeholders, including commercial banks and other relevant private and public sector
institutions, to align on needs and expectations and address them through the development and enhancement
of the system's services. Further, the AMF aspires to work more closely with international organizations to
ensure alignment with best practices whilst simultaneously building partnerships with other cross-border
systems with the ultimate goal of further connecting and integrating the Arab region to the global economy.
Above all, we hope that the Arab Regional Payment System (ARPS) will facilitate and increase intra-Arab
financial and economic transactions, which we estimate to amounted up to USD 830 billion per annum,
USD 245 billion of which is attributed to intra-Arab trade in 2018. ARPS will also foster the economic,
trade, and investment relations with the region's main trade partners across the globe, considering that trade
between the Arab region and the global economy amounted to roughly USD 1960 billion in 2018.
Ultimately, ARPS is expected to create significant macroeconomic impact for the region as well as globally
by establishing a foundation for regional integration.
3