Ministry of Foreign Affairs: Kathmandu /ALO File no.: 104.Nepal.61.KTM External Grant Committee Meeting 11. September 2013 Agenda Item no.: 3 1. Title: UNNATI – Inclusive Growth Programme in Nepal 2. Partners: Local governments in seven districts in Eastern Nepal, Nepal Business Forum, United Nations Capital Development Fund (UNCDF), and a fund manager. 3. Amount: 400.0 million DKK 4. Duration: January 2014 – December 2018 (60 months) 5. Presentation to the programme Committee 2 May 2012 6. Previous Grants: None 7. Strategies and policy priorities: ”The Right to a Better Life” and “Strategic framework for priority area – Growth and Employment 2011- 2015”. 8. Danish National Budget account code: 06.32.02.12.41 “Developing Countries in Asia and Latin America - Nepal” 9. Desk officer: Saroj Nepal/Ingrid Dahl-Madsen 10. Head of Representation Kirsten Geelan 11. Summary: Nepal is one of the poorest countries in the world and is struggling to overcome the legacy of the decade long civil war which ended in 2006. It is a very high priority for the Nepal Government to create sustainable inclusive growth. UNNATI means progress in Nepali, and the key priority in the programme is to strengthen inclusive market based growth to reduce poverty and raise living standards. The programme will target commercialisation of agricultural products and upgrade rural infrastructure in Eastern Nepal. Most poor Nepalese depend on subsistence agriculture, but there is a great scope for improving the value and create better market access for agricultural products. The programme approach is to support: 1) market based activities that are economically viable, 2) public investments in rural infrastructure, and 3) the framework conditions for inclusive growth. The programme is expected to create a net additional income of 640 million DKK compared to the investment of 400 million DKK.
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Ministry of Foreign Affairs: Kathmandu /ALO File no.: 104.Nepal.61.KTM External Grant Committee Meeting 11. September 2013 Agenda Item no.: 3
1. Title: UNNATI – Inclusive Growth Programme in Nepal
2. Partners: Local governments in seven districts in Eastern Nepal, Nepal Business Forum, United Nations Capital Development Fund (UNCDF), and a fund manager.
3. Amount: 400.0 million DKK
4. Duration: January 2014 – December 2018 (60 months)
5. Presentation to the programme Committee
2 May 2012
6. Previous Grants: None
7. Strategies and policy priorities:
”The Right to a Better Life” and “Strategic framework for priority area – Growth and Employment 2011-2015”.
8. Danish National Budget account code:
06.32.02.12.41 “Developing Countries in Asia and Latin America - Nepal”
9. Desk officer: Saroj Nepal/Ingrid Dahl-Madsen
10. Head of Representation Kirsten Geelan
11. Summary: Nepal is one of the poorest countries in the world and is struggling to overcome the legacy of the decade long civil war which ended in 2006. It is a very high priority for the Nepal Government to create sustainable inclusive growth. UNNATI means progress in Nepali, and the key priority in the programme is to strengthen inclusive market based growth to reduce poverty and raise living standards. The programme will target commercialisation of agricultural products and upgrade rural infrastructure in Eastern Nepal. Most poor Nepalese depend on subsistence agriculture, but there is a great scope for improving the value and create better market access for agricultural products. The programme approach is to support: 1) market based activities that are economically viable, 2) public investments in rural infrastructure, and 3) the framework conditions for inclusive growth. The programme is expected to create a net additional income of 640 million DKK
compared to the investment of 400 million DKK.
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Objective and problem formulation: Nepal is struggling to overcome the legacy of the decade long civil war which ended in 2006. Poverty and exclusion of marginalised groups were among the root causes of the conflict. As one of the poorest countries in the world, 25 % of the population live on less than $1.25 per day and 57 % on less than $2, and inequality has risen over the last 10 years. In order to address poverty, Nepal needs inclusive growth, which also has immediate effects on poor men and women in the country. Growth has not been high enough (averaging 4%) to make a sufficient impact on reducing poverty. Nor has it been inclusive enough, much of it being based on remittances rather than on labour-intensive sectors, such as agriculture, where the poor are more actively involved. Unemployment is high, and many young Nepalese opt for working abroad because of lack of opportunities. Against these challenges, the Government of Nepal’s national objective as set out in their Three-Year Plan is to transform Nepal from the group of the least developed countries to the group of developing countries within 2022. To reach this objective, a growth rate of 7 % has to be achieved. The Three Year Plan fully recognises the role of the private sector as the engine of economic growth, employment creation and poverty reduction, and it emphasizes the will to increase the involvement of the private sector as a development partner.
UNNATI will contribute to the Government of Nepal’s long term objective through promotion of sustainable inclusive growth that reduces poverty and raises living standards, as illustrated in the programme results chain table. UNNATI takes its point of departure in 7 districts in the Eastern Region and initially three agricultural commodities, which have potential for delivering inclusive growth. To increase sustainability, focus is on demand driven activities, which are economically viable. One of the most prominent constraints to commercialisation of agriculture in Nepal is the lack of rural infrastructure, and therefore upgrading of roads and maintenance will be a main priority. Also addressing the framework for inclusive growth at political levels will be key to facilitating sustainable, inclusive growth.
Resource efficiency: An estimate of the programme’s attributable impact in terms of inclusive growth in 2020 – two years after the programme has ended – is that the income of 100,000 households and 24,000 farms and small enterprises in Eastern Nepal has increased with a net additional income of 640 million DKK compared to the investment of 400 million DKK. Below is the expected administrative cost per implementing partner. It is not always possible to separate administration from technical assistance:
United Nations Capital Development Fund (UNCDF), who will capacitate financial institutions to increase access to finance in agricultural value chains: 33 % (13 million DKK) of the budget of 40 million DKK is for administration, management and technical assistance.
Management contractor, who will implement the value chain support and provide technical assistance to the rural infrastructure components. As it will be contracted through international tender, the exact amount for administration is not yet known, but assessed to be around 30 % (10,5 million DKK) of the allocated 35 million DKK.
Nepal Business Forum will implement part of the enabling environment component for inclusive growth in cooperation with selected technical consultants: Out of their budget of 15 million DKK, the administration cost is not yet known, but is not expected to exceed 12 % (1,7 million DKK).
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Local Governments: As the management contractor is supporting the local governments with technical assistance for infrastructure, there is no specific administration budget.
Fund manager for a rights and good corporate governance fund: The administration share will depend on the fund manager chosen in a tender process. Tentatively 25 % of the allocated 20 million DKK can defined as administration, which is 5 million DKK.
Based on the above, around 30 million DKK, 8 % of the total programme cost, will be used for management and administration. 18 million DKK, 4,5 % of total programme cost, is allocated for a very thorough monitoring and results measurement system, reviews and research.
Challenges and underlying reflections:
Inclusive growth development is a new sector for Danida in Nepal. New partnerships have to be developed; an understanding of the dynamics of new sectors established; and experience gained working with new challenges and opportunities in a complex and fragile environment. Against this background the programme has been designed with a clear strategic focus on a few important value chains and taking its point of departure in a limited geographical area, namely 7 districts in the Eastern Region. A challenge in the programme is that private sector programmes are still rather new in Nepal and therefore development partners have not yet come together in joint programmes. Working groups are established, and broader and deeper cooperation between development partners will be a priority. The Programme includes a range of public sector and private sector actors as well as organisations located at central, regional and district levels. This is the main justification for the need for a Management Contractor for mainly the district based work related to infrastructure and value chains. The Management Contractor will be contracted by Danida in a competitive process and will provide management support and technical assistance. On the Government side, there is a clear recognition of the need for the private sector to grow if Nepal’s long term goal of becoming a developing country is to be realised, but it is still a challenge to transform this goal into clear ownership at central and local government level. Another challenge has been to ensure an explicit human rights approach in an inclusive growth programme working with private sector and infrastructure. UNNATI will address human right issues by 1) fighting poverty and monitoring programme benefits for marginalised groups, small hold farmers and women e.g. in regard to their social and economic rights, 2) mainstreaming the human rights principles of non-discrimination, transparency, accountability and participation in all activities and 3) promoting that private partners respect human rights and assume responsibility for their impact on human rights, in accordance with the UN Global Compact Principles. Another consideration has been on the conflict sensitiveness of the programme, as Nepal is still on its way towards peace. Programme staff will, therefore, be capacitated in understanding and monitoring potential conflict areas. Efforts will be made to find ways to support the Government directly in developing strategies for inclusive growth that can enable the government to reach its ambitious national goals. However, with the current political situation with a temporary election government, this activity has been postponed to a new democratic government is elected.
Project description:
Government sector priorities: UNNATI’s development objective is to promote sustainable inclusive growth to reduce poverty and raise living standards, and is well aligned with a number of Government priorities. In the new Three Year Plan, main priorities include commercialization of agriculture, expansion of roadways, trade and energy. This is further emphasised in a new 20 year strategic plan for agriculture, which aims to commercialise agriculture by linking it to national and export markets, raising productivity, and realising Nepal’s potential for higher value products. The core component of UNNATI is commercialisation of three agricultural commodities (ginger, tea and dairy), working with a range of relevant stakeholders. The 20 year strategic plan also emphasises the importance of rural connectivity and market infrastructure as part of an overall strategy for commercialisation of agriculture as
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the way forward for economic growth. In consistence with the policies, the Government of Nepal is moving towards greater level of investments in physical infrastructure in an effort to drive economic growth. Where relevant, UNNATI interventions will be aligned with national strategic and policy frameworks to build momentum and Government ownership.
Aid modalities and partners: Growth initiatives are cutting across numerous sectors including agriculture, trade and commerce, industries, infrastructure, energy, labour relations, skills development and environment. The programme aims to reach 24,000 small farms and enterprises and 100,000 households over the 5 year duration. It will be working with a range of public and private stakeholders:
Small and medium scale agricultural service and product suppliers and traders that potentially could have business linkages with primary producers.
Medium and large business engaged in sectors, e.g. importers, manufacturers, distributors, processors or other intermediaries.
Banks and micro-finance institutions.
Key national, regional and district business organisations, including producers’ and commodity associations.
Government ministries, departments and agencies, especially at local level, that are engaged in the administration or delivery of public services of relevance to the sectors.
Trade unions, national non-governmental organisations and research institutions. Management structure:
As the value chain component is the core of the programme, Ministry of Agriculture Development (MoAD) has been designated as Lead Agency of the programme. MoAD will lead the overall coordination with other Government agencies as well as other programmes related to value chain development.
The Ministry of Agriculture Development, Ministry of Finance and the Embassy of Denmark will constitute the Programme Steering Committee (PSC). Below PSC is the Management and Coordination Committee chaired by Ministry of Agriculture Development which will be responsible for coordinating the three components and ensuring that they are mutually reinforcing and contributing to the programme objective in a coherent manner. This committee will, furthermore, be responsible for overseeing the performance of the management contractor. Both public and private stakeholders are represented. The three components are different in nature, and therefore the management, coordination and implementation of activities within each component will be different. Each implementing partner of the sub-components of UNNATI will follow their own management procedures. However, all reports, work plans and budgets will be presented to the Management and Coordination Committee for endorsement, hereby ensuring that all plans and budgets are mutually reinforcing and contributing to the programme objective in a coherent manner.
Collaboration with other development partners: Several development partners are actively engaged in programme activities relating to inclusive growth and value chain development, others have completed programmes and new entrants are expected. The Ministry of Finance is responsible for donor coordination and harmonisation. This being a new area of support for Denmark in Nepal, it is important to learn from other development partners and to establish close collaboration. A recent donor initiative has been the establishment of a forum for private sector development and economic growth coordination. In this connection, it has specifically been agreed that UNNATI will coordinate closely with the EU’s Trade Facilitation and Capacity Building project, UK Department for International Development’s (DFID) Nepal Market Development Programme, and follow up support to an initiative by the UN Food and Agriculture Organisation (FAO) and World Trade Organisation (WTO) in development of the ginger sector in Eastern Nepal. While private sector development still needs further donor harmonisation, rural infrastructure (component 2 of the programme) is more coordinated, where the development partners cover different geographical areas. This component is
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building closely on lessons learnt from rural access programmes by DFID, Swiss Development Cooperation and the World Bank.
Description of the three programme components:
Component 1, sustained improvement in competitiveness of selected value chains (105 million DKK): The rationale for the component is that agriculture is the most significant economic sector in Nepal. Agriculture, however, is largely a subsistence economy with weak market linkages, which contributes to poor access to markets, high transaction costs and low value addition to farm produce. Developing the agricultural sector and its linkages with agribusiness and the market will not only consolidate its important role in the economy, but will further develop it by diversification and expansion.
As an opening portfolio, commercialisation of three value chains – tea, ginger and dairy - will be supported, with a focus on small scale farmers and enterprises. In each of the value chains the programme will identify priority constraints and possibilities and, led by this analysis, develop and implement a series of interventions to address these. The management contractor based in the districts will facilitate the support to the three value chains. The support modalities will comprise of a fund for provision of grants and funds for technical assistance, facilitation and networking, training, capacity development, research and possible other modalities. Beneficiaries will mainly access support on a competitive basis. A gender and social inclusion strategy is an integrated element of the implementation. The component will also integrate climate change and environment concerns by promoting and supporting green production technologies along the value chains. Rural financial services are inadequate, which contribute to low investments in agriculture production and in agro-based micro and small enterprises. Therefore, a financial services programme will be set up to improve access to and use of a range of financial services by households and small enterprises. To promote the availability of appropriate rural financial services, financial institutions will be supported to reach out with financial services to commercial farmers and small enterprises, develop relevant financial products for these groups and support financial institutions with capacity. Implementation of this activity is delegated to UN Capital Development Fund who has vast experience in implementing similar programmes in Nepal, and whose direct partners will be the National Bank of Nepal as well as banks and micro finance institutions.
Component 2, sustained improvement of rural transport infrastructure (190 million DKK): The rationale for the component is that Nepal’s road network is less developed than that of other countries in the region and the general rural infrastructure is inadequate and underdeveloped in terms of market places, storage facilities and productivity enhancement facilities. The unreliability of the transport network affects the timely movement of people, goods and delivery of services. Post-harvest losses are high due to lack of appropriate road network and of marketing and storages facilities.
The programme will in the seven districts improve and upgrade motorable roads, bridges, foot trails, trail bridges and gravity ropeways, enhance local capacity and establish systems to identify, plan, develop and maintain rural transport infrastructure. A small part of the activities will also be to provide better public market-related infrastructure such as collection centres and storage facilities. Most significant infrastructure constraints are found in the mountain and hill districts, and it is in these districts that the main infrastructure activities will be found. A priority will be to ensure that the voices of marginalised groups are also heard during the identification and prioritisation of infrastructure investments. The component is also expected to contribute to better governance through promoting more openness, transparency and accountability in local infrastructure development. Because infrastructure works will be carried out in the mountains and hill areas with a fragile and vulnerable environment, there will be strict adherence to environmental regulations. The activities will be carried out by the local government authorities in the programme districts supported by the Ministry of Federal Affairs and Local Development (MOFALD) and its Department of Local Infrastructure Development and Agricultural Roads (DOLIDAR). Responsibility for implementation will be with
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these partners, but close day-to-day support will be provided by the Management Contractor based in the programme districts. The component will complement activities supported under the Value Chain Component and will adopt the same district-based focus. Funding will be based on annual plans prepared by the respective local government units and will leverage local development funding. The programme will promote labour intensive construction methods and also support local governments in quality assurances and financial control of the works undertaken.
Component 3, sustained improvement in the enabling environment for inclusive growth (35 million DKK): The rationale for this component is that inclusive growth figures prominently on the Government’s agenda, and that private business together with government and the cooperative sector are considered the engine of inclusive growth and employment. However, there are massive challenges pertaining to inclusive growth at all policy levels, including: The need for improvement of the business environment, absence of a comprehensive policy and strategy for development of the private sector, labour relations, and political instability. The component will prioritise challenges and interventions relevant for component 1 and 2.
The Enabling Environment Component comprises two sub-components, where the first is to enhance public private dialogue for improved policy and regulation. Danida will support Nepal Business Forum (NBF), which is the national platform for public-private dialogue. To ensure the linkage between the experiences at district and national level, there will be special support to a Regional Business Forum in the East Region.
The second sub-component is to improve advocacy for rights and good corporate governance. This will be done through a challenge fund with three “windows”, one focusing on advocacy and policy dialogue, one focusing on sustainability of selected private sector organisations, and the third window on awareness creation in relation to responsible business, including the Global Compact principles, corporate governance and inclusive economic development related to human rights issues. A fund manager will be selected through a tender process to administer the challenge fund. Beneficiaries are envisaged to include local government bodies, district chambers of commerce and industries, labour market organisations, non-governmental organisations, and research institutions.
Synergy with other DANIDA programmes: Danida is one of several development partners supporting the Local Governance and Community Development Programme (LGCDP). There will be synergies between UNNATI and this programme in the areas of participatory planning, transparency and accountability at local government levels. UNNATI’s activities have been aligned with the LGCDP, for example, by referring to participatory local planning on infrastructure. The National Rural Renewable Energy Programme, where Denmark is lead donor and which supports renewable energy technologies, could potentially provide power for production plants, cold storage and lighting at markets and collection points. In turn, the infrastructure component of UNNATI could improve access to areas where renewable energy facilities are to be installed. Danida’s assistance in the areas of Human Rights and Good Governance will be assisted by the UNNATI programme through encouraging greater stakeholder participation in local planning at district and village levels and e.g. promoting the participation of women and other disadvantaged groups in both the identification and implementation of infrastructure improvements. At local level UNNATI will give greater voice to the needs of local farmers, agricultural processors and traders of the selected value chain products. LO/FTF Council of Denmark is actively engaged in support to the labour market in Nepal through its regional programme in Asia. LO/FTF has been engaged in the formation of the Joint Trade Union Cooperative Centre, which is expected to serve as an umbrella organisation for trade unions in Nepal. Trade unions may also apply to the UNNATI fund for rights and good corporate governance.
Results measurement and monitoring: An effective and practical monitoring and results measurement system for UNNATI has been developed based on an international standard for Private Sector Development. The system will both facilitate credible reporting of results to stakeholders and foster learning that
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feeds into the improvement of programme strategies and implementation. As seen in annex 3, there is very precise results measurement on the expected attributable impact of UNNATI.
Special considerations and priorities: As set out in the country policy paper for Denmark’s engagement in Nepal, the overall vision is to support the Nepali people in their right to a better life characterised by peace, stability, democracy, social and economic progress and respect for human rights. Based on this, two strategic objectives have been selected for Denmark’s engagement in Nepal:
Contribute to the consolidation of peace through promotion of the implementation of the Comprehensive Peace Agreement, and to strengthening the respect for human rights and democratic governance through promotion of rule of law, access to justice and democratic governance.
Contribute to reducing poverty through support to green and inclusive economic growth with a focus on agriculture, rural infrastructure and renewable energy.
The UNNATI programme is a key element in realising the strategic objective of reducing poverty in Nepal, which is especially related to inclusive economic growth through agriculture and rural infrastructure. The green element of growth is especially linked to the synergy with the Danish supported programme for expanding renewable energy technologies, which also will cover the UNNATI programme districts, where access to energy is a major challenge for growth. The UNNATI programme also follows the principles laid out in the strategy for Denmark’s development cooperation (“The Right to a Better Life”), applying a human rights based approach, building in conflict sensitiveness, targeting inclusion and gender, harmonising with other development partners and having improved financial management by the Government as a condition for moving towards budget funding on infrastructure.
Budget:
The indicative budget for UNNATI is shown in the table below. The management contractor will be recruited through an international tender, and the costs for these services will only be known after the tender process is finalised. It is envisaged that the amount provided under “unallocated funds”, could be used for inclusive growth policy development interventions, if the political environment is adequate for such initiatives at a later stage. Alternatively it could be used for adding a value chain in commercialisation of agriculture. This should be considered during implementation year 2.
UNNATI - Promotion of sustainable inclusive growth to reduce poverty and raise living standards
Improved dialogue and policy (Nepal Business Forum) 3,2 3,4 3,1 3 2,3 15
Rights and Good Corporate Governance 3,3 4,2 4,3 4,2 4 20
Technical assistance and management(contractor) 11 6 6 6 6 35
Reviews, M&E, research 2,8 2,8 4 4 4,7 18,3
Unallocated funds 4,7 4 4 4 16,7
Total 57,8 87,9 91,1 88,9 74,3 400
Financial management arrangements: The flow of funds has taken into consideration that the programme will have a mix of public and private partners. An assessment of the possibilities for providing budget support concluded that it should not be applied during the first phase of the programme due to the
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nature of the programme and the possible fiduciary risks. For improvements of public infrastructure under local governments, Danish funds will initially be transferred directly into a ring-fenced bank account in each programme district, and operated by joint signatories of the Management Contractor and the local governments. The mid-term review will consider if future funding for public sector infrastructure support can be channelled through the Ministry of Finance as sector budget support. For private sector partners and beneficiaries funds and services will be channelled through a number of aid modalities including service providers, matching grants, challenge funds, credit lines, loan guarantee schemes etc., where the management contractor will be the main administrator. At national level funding will be made available to Nepal Business Forum, and to Nepal Rastra Bank through UNCDF.
Significant risks: The major risks for effective implementation and long term impact of UNNATI include the fragile political situation; hesitation on part of the private sector to invest due to unpredictability of private sector policies, strategies and regulations; to a high level of corruption; unavailability of elected local governments at the district and the village level; poor labour relations; and acute shortage of labour force due to foreign and urban migration. The risks are ranked below, and it is elaborated how the programme will manage identified risks.
Risks Probability
Impact Mitigation
1. The political situation continues to be fragile and government structures of an interim nature at both national and local levels
High
High
Strengthen evidence-based dialogue mechanisms at national, regional and district level including capacity building of public and private stakeholders. Maintain a sound balance of private sector and public sector interventions.
2. Political interference High Medium Funding of programme elements will be subject to approval of annual plans and follow transparent and accountable procedures. The programme will be pro-active in ensuring annual plans reflect the needs of the stakeholders. In terms of infrastructure funding programme funds will be kept separate from other district funds and funds will only be transferred for approved projects. The focus on capacity building at DDC (District Development Committee) and VDC (Village Development Committee) levels and the emphasis on improved governance should assist in mitigating this risk at the local level.
3. A continued high level of corruption will discourage private sector investments
High Medium Promotion of corporate social responsibility and good governance throughout the programme. All beneficiaries of programme support will, as relevant, be required to adhere to the UN Global Compact Principles
4. Low private sector investments due to uncertainties and unpredictable private sector policies and regulations
Medium
Medium
Strengthen policy analysis and monitoring especially of policies relating to private sector development. Promotion of a coherent and transparent strategy for private sector development
5. Migration out of rural districts may influence the availability of workforce. Including prevalence of female-headed households and lack of youth in rural areas
Medium
Medium
Focus on creating sustainable and meaningful employment in rural areas and especially for the youth. As relevant introducing new technologies and mechanisation.
6. Insufficient capacity of Nepal Business Forum to support private sector development as part of Component 3.
Medium Medium A number of preconditions must be met prior to channelling funding directly to NBF and support will be given to ensure an organisational strengthening of NBF. Ensuring that relevant technical assistance from e.g. IFC (International Finance Corporation, World Bank Group) is given to NBF will be very important for achieving the expected results of this sub-component.
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Annex 1 - Partners: Local Governments: The overall responsibility for the district level infrastructure rests with the
Ministry of Federal Affairs and Local Development (MOFALD) and its Department of Local
Infrastructure Development and Agricultural Roads (DOLIDAR). Detailed planning and
implementation of local infrastructure, including the Local road Network (LRN), trails and trail bridges,
small-scale irrigation schemes, market places, etc. are carried out at the local government level.
Municipal Councils, District Development Committees (DDC) and Village Development Committees
(VDCs) are the relevant local bodies. District Technical Officers (DTOs) are responsible for all types
of rural infrastructure – but their capacity is often insufficient to ensure proper technical supervision
and due diligence. At project level, the Local Self Governance Act calls for the use of “User
Committees”. The Local Body Financial Administration Regulations call for works of less than NPR 6
million to be carried out through agreements with these user committees.
Nepal Business Forum: Nepal Business Forum (NBF) is the country’s first national platform for public-private dialogue established to deliberate on important investment climate issues and recommend measures to improve it. NBF was established by the Government of Nepal through an executive order in 2010. The Government of Nepal has allocated office space for the Secretariat within the Industrial Enterprise Development Institute building, Kathmandu. A number of issues have been taken up in the NBF including improvement of customs working hours, launching of an informational license e-portal comprising information on 130 licenses, establishment of a business registration system and many other issues. Also a number of working groups have been set up and most of them are well functioning. The Danish support will support the continuation of these efforts as well as an organisational strengthening of NBF, and in addition put emphasis on regional issues related to the Eastern Regional Business Forum (ERBF). As appropriate business environment issues related to improvement of the three UNNATI supported value chains will be taken up in the ERBF and in the concerned working groups. Technical assistance from other development partners like IFC (International Finance Corporation, World Bank Group) will be very important to ensure the organisational structure and capacity of NBF and its Secretariat is sufficiently strengthened.
UNCDF: UNCDF mandate from the UN General Assembly (1966) is to “assist developing countries in the development of their economies by supplementing existing sources of capital assistance by means of grants and loans”. UNCDF’s work to extend financial services to the poor follows an “inclusive finance” approach. This approach seeks to ensure that a range of financial products is available to all segments of society, at a reasonable cost, and on a sustainable basis. UNCDF supports a wide range of providers (e.g. microfinance institutions, banks, cooperatives, money transfer companies) and financial products and services (e.g. savings, credit, insurance, payments, remittances). UNCDF also supports newer delivery channels (e.g. mobile phone networks) that offer tremendous potential for scale. UNCDF regularly conducts independent assessment of its effectiveness; in the recent Smart Aid assessment (2011) UNCDF received the highest score in the “Smart Aid” index, a measure for overall effectiveness. In Nepal, UNCDF has implemented Enhancing Access to Financial Services (EAFS) that reached 281,300 clients by the end of 2012. The purpose of the Danida supported Access to Finance sub-component is to support financial service providers to more effectively serve the agricultural value chain actors with appropriate financial products, thereby enabling smallholder farmers and Micro, Small and Medium Enterprises (MSMEs) to invest into their value chain activities leading to the sustained improvement in competitiveness of selected value chains.
Advocacy Fund Manager: An Advocacy Fund will be established with the objective to support private sector organisations and other organisations interested in private sector development to conduct evidence-based advocacy and lobbyism activities and to support initiatives addressing
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responsible business issues, including the Global Compact principles, corporate governance and inclusive economic development related to human rights issues.
The Management and Coordination Committee (MCC) will have the overall responsibility for the Advocacy Fund. An Advocacy Fund Board will, on behalf of the MCC, oversee the day to day operations of the Advocacy Fund and approve applications. The board will be in charge of overseeing the management of the fund, approve applications and set the criteria for projects and initiatives to be supported. The board will have five members of which one should represent the Embassy.
The Advocacy Fund is a challenge fund, which means that initiatives and activities presented for funding will be evaluated according to a set of criteria to be defined by the Advocacy Board. The challenge fund will have three “windows”, one focusing on advocacy and policy dialogue, one focusing on sustainability of selected private sector organisations, and the third window on awareness creation in relation to responsible business. A fund manager will be selected through a tender process to administer the challenge fund. The fund manager will be responsible for procurement of goods and services under sub-component 3.2 as well as the development of a system for monitoring and results measurement under this sub-component.
Management contractor: To support the implementation of sub-component 1.1 Commercialisation of Selected Value Chains, and the entire Infrastructure Component, it has been decided to contract a consortium of enterprises, NGOs or others who have international and local experience in implementing similar programmes (in the following called the “Management Contractor” (MC)). The contract with the MC will be divided in two phases, namely phase 1 covering 2½ years and a phase 2 covering the remaining part of the programme period. Upon satisfactory performance in the Phase 1 and mid-term review of the programme, the MC can be extended to Phase 2. The objective of the MC’s assignment is to provide the technical assistance to sub-component 1.1 of the Value Chain Component and to the entire Infrastructure Component. This includes ensuring that sub-component 1.1 and component 2 are implemented and managed in the most efficient and effective manner with an optimal impact on the partner organisations and that financial management and controls adhere to the Danish Programme Management Guidelines and to internationally accepted accounting practices. The MC shall assist the management of the Department of Local Infrastructure Development and Agricultural Roads (DOLIDAR) under the Ministry of Federal Affairs and Local Development (MoFALD) and the District Development Committees (DDC) in achieving outputs and manage the technical and financial input provided by Denmark. Capacity building and knowledge transfer, including training of partners and partner institutions staff are key elements of the MC’s assignment. Since the Management and Coordination Committee (MCC) is responsible for the coordination of the three components, the MCC will also be responsible for overseeing the performance of the Management Contractor. The MC will establish a UNNATI programme office in Dhankuta, 2 Cluster offices in Mechi and Kosi corridors and 5 direct offices with necessary transport, office equipment and services for effective implementation (ensure that all 7 districts are covered). In the terms of reference for the management contractor the following positions are included:
Three international specialists: International Team Leader – (Value Chain Development specialist), international Deputy Team Leader – (Senior Infrastructure Advisor) , Financial Management Specialist (Controller)
Twenty-two national specialists: Financial Manager, M&E Specialist, 2 agri-business specialists, and two infrastructure specialists, 2 socio-economic specialists, five agricultural specialists district based, and five infrastructure specialists district based, and two infrastructure specialists in the Department of Local Infrastructure Development and Agricultural Roads (DOLIDAR), 2 district advisors.
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Poverty: Nepal’s Human Development Index ranks 157 among the 187 poorest countries in the world. Approximately 25 pct. of the population lived below the poverty line in 2011 compared to 31 pct. in 2009 and 42 pct. in 1996. The poverty rate is much lower in urban areas (15.5 pct.) than in rural areas (27.4 pct.) Unemployment: Unemployment and underemployment is high, around 45 pct. Agriculture: To third of the population depend on agriculture for employment and livelihood and it contributes to more than a third of GNP. Agriculture plays a critical role in fighting poverty. Economic growth: 3.9 pct. in 2011 Foreign Direct Investment (FDI): Low, average only 0.5 pct. of GDP.
Annex 2 - Background facts:
Political scene: The decade-long civil war in Nepal, which claimed 17.000 lives and displaced thousands of people, came to an end in 2006. The change from authoritarian rule to democracy, the end of armed conflict, and the election of a Constituent Assembly in 2008 portray key achievements. Also the deal reached in 2011 on former Maoist combatants, who have left or will leave their cantonments and enter the civilian or army life, has been a definitive progress towards sustainable peace. Disagreements among the political parties and within the parties have led to several periods of political instability and dead-lock, and a new democratic and inclusive Constitution has not yet been adopted. In particular issues related to a possible federal structure are outstanding. National Elections are expected in November 2013. At local level, there have been no elected representatives in the local governments since 2002 which has considerably weakened accountability mechanisms and increased vulnerability to corruption. Addressing the root causes of the conflict, of which most of them still exist in the form of chronic poverty, widespread exclusion and impunity from human rights violations, is a precondition for sustaining peace and development.
Human rights: The number of human rights violations has decreased after the armed conflict ended, but institutions that should protect human rights and the rule of law continue to lack capacity. Violence and intimidations persist, and human rights defenders and journalists face serious risks and constraints. A culture of impunity is prevalent, and there is a need for stronger state institutions, stronger judicial independence, and increased accountability within the judiciary and judicial bodies, as well as strengthening effective law enforcement. The weak rule of law challenges the stability and further weakens the legitimacy of the state and the opportunities to capture the benefits of peace.
Poverty and economic development: The key socio-economic challenges are linked to high poverty and unemployment, modest growth and low investments despite its geographic location between two of the fastest growing economies of the world – India and China. Over the last seven years the proportion of poor people has halved, and inequality has been reduced, which seems to be linked to the surge in foreign employment and remittance inflows. It is estimated that up to 5 million Nepalese out of a total population of app. 30 million are working abroad. The money Nepalese workers send back is equivalent to nearly 25 pct. of the gross domestic product (second only to agriculture). However, only 2.9 pct. of the total remittance is used for capital formation and thus contribute very little to further economic growth. The political instability is one of the major factors hampering economic development and investments, and there is a need for an effective public sector, a functional banking sector, a favourable regulatory and legal framework as well as adequate infrastructure, stable energy supplies and a well-educated workforce.
7 programme districts - mid hill and mountains - in Eastern Nepal.
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Annex 3 - Indicators:
UNNATI is a new type of programme and is operating in a complex and dynamic political, economic and social context. An effective and practical monitoring and results measurement system for UNNATI has been developed both to facilitate credible reporting of results to stakeholders and to foster learning that feeds into the improvement of programme strategies and implementation. There is no doubt that some programme activities will not lead to expected results. At the same time, some activities may lead to results that exceed expectations. The programme monitoring system must highlight when activities are not leading to expected results and why, as well as when activities are exceeding expectations and why. This information will help the programme management to adjust activities, strategies and portfolios to maximize long-term results from the programme. The UNNATI monitoring and results measurement system will comply with the Donor Committee for Enterprise Development Standard for Measuring Achievements in Private Sector Development. This Standard is based on existing good practice and outlines the minimum components of a credible and useful, internal, monitoring and results measurement system. It provides a framework that will help to ensure that UNNATI’s results measurement system is sufficiently robust both for accountability and for management. The foundation for this standard is the theory of change, presented in the figure, which shows how the programme interventions contribute, through a series of intermediate changes, to sustainable inclusive growth. Logical Frameworks (LFAs) for the overall programme and for each component have been developed. The LFAs summarize the results chains, providing specific objectives and key indicators for the overall programme and for each component and subcomponent. Throughout the programme, more detailed, intervention results chains, based on the programme theory of change, will guide measurement to assess to what extent expected results are happening. Each implementing organisation – the Management Coordinator, UNCDF, Nepal Business Forum and a Fund manager will monitor results throughout the programme. An external Monitoring and Results coordinator will provide support and coordination for this work to ensure that systems across the programme are coherent and sufficiently robust. The Coordinator will also aggregate programme-wide results to be clearly communicated to the Management and Coordination Committee. In order to proactively address inclusion in the results measurement and monitoring, the implementing partners will identify specific ways they can have a positive effect on aspects of inclusion, and develop indications to monitor these effects. In order to help understand the extent to which benefits from the programme are inclusive, data on farmers will be disaggregated by gender, poverty status, disadvantaged groups and location wherever possible. In addition, implementing partners will carry out regular qualitative information gathering to assess the effects of subcomponent activities on these four issues. Monitoring related to environment and climate change will be on two aspects: “do no harm” and positively affecting the environment. Implementing partners will develop a screening checklist to ensure that programme activities do not lead to environmental degradation. In order to positively impact the environment, the implementing partners will identify specific ways that their activities can have a positive effect on aspects of the environment, which will be monitored.
Links to national monitoring systems: The National Planning Commission coordinates monitoring and evaluation across all Ministries. Many of the key indicators chosen for the programme fit with the National Planning Commission guidelines, and will feed into the Government’s monitoring system. The information regularly gathered by government is not sufficiently disaggregated by location or
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frequent enough to provide data that can be used to assess the programme’s results. However, the implementing partners will work together with government agencies or relevant private sector organizations to monitor the programme’s results whenever possible.
Objective
Assumptions Objectively Verifiable Indicators
Target Means of Verification
Methodological Guidance
UNNATI Nepal Inclusive Growth Programme
National Objective: To transform the country from a least developed country to a developing country.
Programme Development Objective
Promotion of sustainable, inclusive growth that reduces poverty and raises living standards
Given the fragile political situation in Nepal, the government continues to see the private sector as the engine of sustainable and inclusive economic growth
Increases in income contribute to improvements in living standards
Improvements value chain competitiveness, infrastructure and the enabling environment contribute to broad-based, inclusive growth
Number of households with additional income (by gender, social group, poverty status and location)
Changes in living standards
1
Number of farms and enterprises financially benefited
Net additional income
Programme benefits/costs
2
Additional full time equivalent (FTE)
3
jobs in Micro, Small and Medium Enterprises (MSMEs).
By 2020 100,000 24,000 DKK 640 million 1.4 230
Surveys and qualitative data collection conducted by the Management Contractor (MC), District Development Committees (DDCs)/District Technical Officers (DTOs)/Department of Local Infrastructure Development and Agricultural Roads (DoLIDAR), UNCDF, NBF and Advocacy Fund Manager.
1 Living standards will include key dimensions covered in the Nepal Living Standards Survey such as health, education and
livelihoods. 2 Calculated as the Net Present Value at the beginning of the programme of programme benefits / programme costs accrued to
2020 which is 2 years after end of the programme. Programme benefits are defined as cumulative net additional income to households, farms and enterprises attributable to the programme. Programme costs are according to the budget. Only Component 1, Subcomponent 2.1 and Subcomponent 3.1 have been considered in benefits and costs. All costs for technical assistance and reviews, M&E and research have been included. For details on the calculation, see Annex 15.
3 Full-time equivalent (FTE) is a unit that indicates the workload of an employed person (or student) in a way that makes workloads
comparable across various contexts. FTE is often used to measure a worker's involvement in a project, or to track cost reductions in
an organization. An FTE of 1.0 means that the person is equivalent to a full-time worker, while an FTE of 0.5 signals that the worker is only half-time.
Sustained Improvement in competiveness of selected value chains
Market conditions remain favourable for tea, ginger, dairy and other selected value chains
Improvements in farms’ and enterprises’ performance lead to increases in their profits
Additional private investment and changes in MSME behaviours will lead to modest increases in jobs in MSMEs even in the short term
Increase in value of products sold in selected value chains
Additional private sector investment in selected value chains
Number of farmers who improve performance
Number of MSMEs who improve performance
DKK 75 million DKK 30 million
Surveys and qualitative data gathering conducted by the Management Contractor and UNCDF in cooperation with value chain players, financial institutions and District Development Committees when appropriate.
Sub-component 1.1 Commercialisation of Value Chains
Commercialisation of selected value chains
Contract farming legislation is enacted
Conditions for investment in agriculture and agri-business improve
Positive changes in farmers and MSMEs’ behaviours will lead to improvements in performance and long term competitiveness of value chains
For each value chain:
Additional volume sold (Metric Tons = MTs)
Additional volume exported (MTs)
Additional value of exports
Additional MSMEs engaged in value chain
Qualitative improvements in competitiveness and inclusiveness of value chain
4
14,000 MT
5
Surveys and qualitative data gathering conducted by the Management Contractor in cooperation with value chain players and District Development Committees when appropriate.
Sub-component 1.2 Access to Finance
Micro, Small and Medium Enterprises (MSMEs)
Profitability of agriculture value chain activities is sustained
Limited or no political interference
Additional clients reached
Number of small holder farmers and MSMEs
250,000 150,000
6
Quarterly Portfolio7
reports prepared by Financial Service Providers (FSPs) and
4 For example, improvements in relationships among farmers and other value chain enterprises. 5 Total across all value chains. 6 Out of the 150,000: at least 55% women; 37,500 from disadvantaged social groups, 55,000 in UNNATI districts and 7,000 from
disadvantaged social groups in UNNATI districts 7 UNCDF verifies data of financial institutions through multiple methods. Triangulation of information, trend analysis, client
interviews, and field visits are some of the methods used.
15
Objective
Assumptions Objectively Verifiable Indicators
Target Means of Verification
Methodological Guidance
Banks and financial institutions show and maintain greater commitments to expand their offerings to agricultural value chains
actively using appropriate and affordable financial products to support their value chain activities
Additional clients enrolled in mobile and branchless banking
Additional clients actively using mobile banking services
100,000 25,000
verified by UNCDF
Qualitative case studies on specific issues of interest
8
Component 2: The Infrastructure Component
Intermediate Objectives
Sustained improvement of rural infrastructure
District Development Committees (DDC), District Technical Officers (DTOs) and DoLIDAR increase emphasis on maintenance of rural infrastructure
Access to improved rural infrastructure encourages farmers to grow more crops for sale
Access to improved rural infrastructure enables and encourages farmers to increase productivity
Increase in per cent of crops grown for sale vs. consumption
Change in annual volume of marketed crops in selected sectors (MTs)
Change in annual value of marketed crops in selected sectors (MTs)
Qualitative changes in agricultural production and marketing
9
Government and donor investment in infrastructure in 7 targeted districts
Avg 10% Baseline & follow-up surveys with farms and enterprises.
FGDs with farmers
Government and donor records on infrastructure expenses.
8 For example, benefits of mobile banking, impact of finance on women bargaining power in HH, workload burden, gender and do
no harm review within FSPs, cost effectiveness of agricultural finance. 9 For example, changes in use of inputs, access to agricultural extension services and farmers’ attitudes towards growing
commercial crops.
16
Objective
Assumptions Objectively Verifiable Indicators
Target Means of Verification
Methodological Guidance
Sub-component 2.1 Rural Transport Infrastructure
Improvement of rural transport infrastructure (RTI)
DDCs, DTOs and DoLIDAR prioritize improvement, repair and maintenance of RTI
Improved RTI leads to increased traffic, reduced travel time and reduced transport costs all year round but particularly during the monsoon
Reduction in travel times for people within 4 hours of improved roads
Reduction in transport costs for people within 4 hours of improved roads
Increase in traffic flow by season
Avg 20% annual; 30% in monsoon season
Baseline and follow up surveys with households, farms and enterprises Before and after traffic surveys
Sub-component 2.2 Public Market-Related Infrastructure
Improvement of public market-related infrastructure
DDCs, DTOs and DoLIDAR prioritize construction and improvement of public market-related infrastructure
Improved public market-related infrastructure leads to reductions in post-harvest losses
Reduced losses in storage & marketing of goods
10% reduction
Baseline and follow up surveys with farms and enterprises
Component 3: The Enabling Environment Component
Intermediate Objective
Sustained improvement in the enabling environment
The government will continue to consider the private sector one of the pillars of sustainable and inclusive economic growth
Improvements in the enabling environment lead to increased profits for enterprises and financial or qualitative benefits for workers
All proposed regulations enacted and processes simplified leading to increased compliance cost savings
Number and type of laws, regulation, amendments, codes, policies, procedures and standards changed
Additional public investment
Additional private investment
Qualitative improvements in national and district enabling environment
10
123 DKK 17 million DKK 228 million
Government records from the Office of the Company Registrar, Department of Industry, Board of Investment and relevant ministries and departments Surveys and qualitative data gathering conducted by the implementing partners in cooperation with relevant providers
Sub-component 3.1 Public Private Dialogue
Enhanced public private dialogue
Political process is not disruptive of the
Additional firms registered
2,500
Records of the Office of the Company Registrar
10 For example, improvements in labour relations, safety regulations or transparency of government decision-making.
17
Objective
Assumptions Objectively Verifiable Indicators
Target Means of Verification
Methodological Guidance
for improved policy and regulations
reform implementation process
Mandate for Nepal Business Forum (NBF) survives with the change in government
NBF score on application of the PPD Charter of Good Practice improved
From 37 to 80 (out of 100)
(OCR)
IFC assessment of NBF capacity, practices and sustainability based on the PPD Charter of Good Practice
Sub-component 3.2 Advocacy for Responsible Business
Improved advocacy for responsible business
The concept of responsible business including economic and social rights and corporate social responsible is well received and understood by private sector stakeholders There are sufficient private sector, labour market and civil society organisations interested to work with the programme
To be finally decided in the inception phase when an Advocacy Fund Manager is recruited Members of supported Private Sector Organisations (PSOs) find that the business environment has improved significantly
Enterprises within the selected value chains show improved compliance with Global Compact principles Qualitative changes in the recognition of and respect for rights Qualitative changes in the processes for influencing the enabling environment
To be agreed with Advocacy Fund Manager
To be agreed with Advocacy Fund Manager
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Annex 4 - Approved response by representation to summary of recommendations in the appraisal reports:
Title of programme support Growth and Employment Promotion in Nepal (GEPIN)
File number: 104.Nepal.61
Appraisal report date: 7 January 2013
Board meeting date:
Summary of possible recommendations not followed:
NA
Overall conclusion of the appraisal
It is the assessment of the Appraisal Team (AT) that the structure and overall approach of the Programme are appropriate. However, the AT finds that the formulation would benefit from further preparation especially as regards: value chains, district profiles, M&E system, gender and environment, and management set-up. Three further studies should be undertaken from February to April 2013 to enable finalisation of the draft GEPIN documents for desk appraisal and approval by mid 2013. Draft terms of reference for these studies are annexed to the Appraisal Report.
Recommendations by the appraisal Follow up by the Representation
1. Adequacy of the preparation process of the partner programme and of the support
N/A
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2. Quality of the partner planning framework and its alignment to national and sector strategies
N/A
3. Consideration of relevant Danida thematic strategies
N/A
4. Proposed programme support design including justification, strategy and partner choices.
Programme level:
4.1 Objectives
The objectives of GEPIN should be adjusted to
include one immediate objective for each of the
three components leading to one development
objective for the entire programme. The
development objective and the immediate
objectives of component 1 and 2 should be
reformulated to reflect sustainable, inclusive
growth.
4.1 Objectives
The final formulation of the programme will adjust the objectives according to the recommendations in the Appraisal Report.
4.2. Component 1: Market Linkages and Value Addition
4.2 C1: Market Linkages and Value Addition
A value chain study should be undertaken in order to i) identify the major binding constraints of the three selected value chains including an assessment of constraints and opportunities for developing the value chains, and ii) an initial mapping of potential BDS providers both related to farmers and MSMEs.
The suggested value chain study will commence from first week of February, and will be followed closely by the Embassy to ensure the outcome.
The eligibility criteria of the Enterprise Innovation Fund should be formulated so that projects supported will strengthen linkages within the three value chains. Not only innovative projects should be eligible for support, also projects using existing and well known technologies should be eligible, for example for expansion of production. The name of the Enterprise Innovation Fund should be changed to “Value Chain Development Fund”.
The Enterprise Innovation Funds will be revised to incorporate the recommendations.
A mechanism in the Fund should be designed to
cater for “supply oriented” initiatives that
directly address binding constraints in the value
chains. It should also be possible to support
research and training initiatives directly without
going through a competition process.
The UNCDF should finalise the proposal for the “Access to Financial Services Sub-component” and the embassy should ensure that the programme documents are revised accordingly.
The Embassy is in close dialogue with UNCDF on the finalisation on their proposal on Access to Finance, and will together with the final formulation consultant to revise the programme document accordingly.
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4.3 Component 2: Infrastructure for Rural Connectivity and Growth
4.3 C2: Infrastructure for Rural Connectivity and Growth
Improvement of road transport infrastructure
should emphasise a combination of spot
improvements and maintenance.
The final formulation of the programme will emphasise spot improvements and maintenance under the road infrastructure intervention.
Roads Board Nepal should be urged to play a
more prominent role in maintaining the Local
Rural Networks – especially as regards funding
– through consultations with relevant ministries
and development partners engaged in the
transport sector.
The Embassy will continue to raise the issue at appropriate forums as well as lobby with other Development Partners.
Small-scale labour-based contracting should be
promoted to the extent feasible, but other
options should not be ruled out.
The final formulation of the programme will follow the recommendation on promotion of small-scale labour based contracting.
Danida should join the Joint Local Transport Steering Committee and the Rural Transport Consultative Group.
The Embassy will join these forums.
Public market infrastructure and irrigation canals that are managed at the community level should be supported subject to the communities accepting operations and maintenance responsibilities.
The programme document and the operation manuals to be prepared as part of implementation will ensure that support to public infrastructure and irrigation is subject to communities taking the operation and maintenance responsibility.
4.4 Component 3: Policy Environment for Inclusive Growth
4.4 C3: Policy Environment for Inclusive Growth
Support for policy development (national inclusive growth strategy/PSD strategy) should await a new elected Government, and any support for this area should be provided jointly with other donors. Support for UNDP in this area should only be given if other donors commit to support the programme and if a joint and positive appraisal can be reached.
The Embassy is continuously observing the national situation and in discussion with other development partners. The recommendation will be followed.
Other donors (including DFID) should be consulted for possible joint support to Central Bureau of Standards for data collection and statistical work.
The Embassy will engage with DFID and other donors for possible joint support to Central Bureau of Standards.
The outcome of the three value chain analyses should be incorporated as part of the assessment of the economic and employment potential and for updating the district perspective plans;
The outcome of analyses will be incorporated in the programme document as well as will be used in updating district plans during course of implementation of GEPIN
Interface and coordination mechanisms with the Local Government and Community Development Programme should be established;
The final formulation of the programme will take into account developments in phase II of Local Government and Community Development Program.
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In addition to the proposed activities the support to IFC/NBF could be expanded to include activities in all seven working groups as well as activities related to reform of the business environment. The total budget could be increased up to DKK 15 million based on a revised proposal from IFC.
The recommendation on the partnership with IFC/NBF will be followed. The Embassy is in close dialogue with IFC on a revised proposal for support to NBF, expanding activities and budget up to DKK 15 mio.
The Joint Donor Facility (JDF), if and when established, could assume responsibility for hosting the Advocacy & Rights Fund subject to agreement between the development partners in the JDF. If this solution does not materialise a public tender for a Management Contractor could be an alternative option.
The recommendation will be followed. The Embassy will take steps to contract a management contractor in the case that a JDF does not materialise.
5. Adherence to the aid effectiveness agenda
N/A
6. Measures to address identified capacity needs in the partner organization
The management structure should be revised so that it is leaner and to a larger extend builds on decision making procedures of the implementing partners and involves the relevant stakeholders in the decision making processes (see suggestion in the appraisal report).
The recommendation will be followed based on the model suggested by the Appraisal Report.
During the first year of implementation the embassy should engage an international consultant to assist in initiating a dialogue with like-minded development partners to establish a Value Chain HUB (similar to the efforts of replacing HUGOU with a joint donor facility).
Monitoring and Evaluation: The DCED Standard for Measuring Achievements in PSD should be applied in GEPIN.
The embassy will raise the issue of establishing a Value Chain HUB with other development partners at relevant donor forums. It will be explored and technical assistance will be provided if need be.
The recommendation will be followed. The Embassy has on the recommendation of the Appraisal Team contracted a consultant to develop the M&E system based on the DCED standard..
8. Budget and financial management
The prospect of adding 20% counterpart funding for maintenance should be explored with MFALD and MoF.
The recommendation will be followed. The Embassy will explore prospects of recommendation with MFALD and MoF. A possible fall-back position would be to phase in counterpart funding during the lifespan of the programme.
22
Procurement problems at the district level should be further investigated through consultations with development partners, e.g. WB and GIZ.
The recommendation will be followed. Embassy will hold consultations with relevant partners regarding procurement challenges and consider relevant measures for the Danish funded programme.
An agreement – which could be part of the Government-to-Government agreement – with MoF/ MFALD on funding procedures should be made prior to finalising the programme documents.
The recommendation will be followed. Embassy will negotiate an agreement on funding procedures before finalisation of programme document.
The option of channelling funds through the formal Government system should be assessed early on during programme implementation in consultations with Government and development partners and draw on the experience from the Multi Donor Trust Fund MDTF.
The recommendation will be followed. The Embassy will analyse funding channels and negotiate appropriate modalities, channels and safeguards as part of programme finalisation.
The programme budget should be revised according to changes proposed in the appraisal report.
The recommendation will be followed. Changes in budget will be incorporated as part of the finalisation of the programme document.
9. Identified risks and risk mitigation
Assumptions, risks, and conditionalities should be revisited according to changes proposed in the appraisal report.
The recommendation will be followed. Revision and possible changes will be made as part of the finalisation of the programme document.
10. Follow-up to the recommendations of the MFA Programme Committee
The AT finds that the MFA Programme Committee’s recommendations are not adequately addressed in the GEPIN documents. The AT has pointed to these at relevant places as part of the detailed appraisal of GEPIN.
The final formulation will ensure all the recommendations are adequately addressed.
11. Other recommendations
N/A
I hereby confirm that the above-mentioned issues have been addressed properly as part of the appraisal and that the appraisal team has provided the recommendations stated above. Signed in Copenhagen on 8 January 2013 ….…Lasse Møller………………….…. Team leader/TAS representative I hereby confirm that the Representation has undertaken the follow-up activities stated above. In cases where recommendations have not been accepted, reasons for this are given either in the table or in the notes enclosed. Signed in Kathmandu on ……………………………..…
Ambassador/Head of Representation
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Title of programme support UNNATI – Inclusive Growth Programme in Nepal
File number: 104.Nepal.61.KTM(UNNATI)
Desk Appraisal report date: 25 June 2013
Overall conclusion of the appraisal
The Desk Appraisal Team (DAT) finds that the changes and modifications to the programme and its components address the main concerns and recommendations of the Appraisal Team (AT) from the field appraisal. As recommended by the appraisal, further preparatory work has been undertaken in the beginning of 2013, including i) a study on the three value chains, ii) a district profile study covering the 7 programme districts in the Eastern Development Region, and iii) a study on the monitoring and evaluation system. There are outstanding issues on UNCDF’s proposal on Access to Finance and ILO’s proposal on Advocacy and Rights Fund, which should be settled before final programme documentation.
Recommendations/Observations by the Desk Appraisal
Follow up by the Representation
The AT pointed to the possibility of strengthening the linkages between the Danida supported National Rural and Renewable Energy Programme (NRREP) within the area of access to renewable energy technologies – biogas, hydropower, and solar energy - for rural households and MSMEs by participation of NRREP in relevant planning forums of UNNATI. This could still be looked into as it does not seem to have been further investigated since the appraisal.
The linkages of UNNATI with NRREP would be explored by the Management Contractor during the inception phase on more specific and concrete project level while preparing the detailed implementation plan of UNNATI.
24
The DAT suggests that it would be worthwhile to mention and include the Guiding Principles in the UNNATI programme since these principles assign responsibilities not only for private sector partners but also for state institutions (within the protect-respect-remedy framework). The UNNATI programme will work with both public and private partners in Nepal and the Guiding Principles may constitute a basis for entering a dialogue on business and human rights with all partners in the programme.
The DAT underline the necessity for the programme to pro-actively integrate environmental concerns and opportunities into design of activities.
With regard to dairy value chain, the AT noted that previous Danish support for this area was phased out some ten years ago mainly based on failure to privatise the Dairy Development Corporation, and to reorganise the National Dairy Development Board to become self-financing and independent of Government. The AT suggested an assessment of the status of progress of these issues and the potential effect on current dairy sector development should be undertaken as part of the further programme preparation. The DAT has not been able to confirm whether this has been looked into during the further value chain studies, as the binding constraints presented do not refer to any constraints at that level. The DAT suggests that this aspect should still be addressed.
The UN Global Compact Principles are mentioned in the Programme Document. The Management Contractor will mainstream the principles into the Implementation Guidelines to be prepared during the inception phase.
The detailed implementation guideline to be prepared in the inception phase will take into account the environmental concerns.
This issue will be further looked into during the implementation of the programme.
The primary target area should be reduced from the proposed 16 to the seven GEPIN programme districts but it should also include enterprises along the value chains beyond the seven districts.
The organisational set up of the UNCDF programme should be leaner including use of local expertise instead of international consultants wherever possible.
The budget should be activity based and the balance between TA/travel cost/ management expenditure and activity based costs - which in the draft proposal is about a ratio of 50:50 - should be revised to 25:75.
The primary target area has been reduced to seven UNNATI programme districts. UNCDF has also specifically mentioned in the proposal about the reach beyond UNNATI programme districts.
The organisational set up has been made leaner. Local staffs and local expertise will be used as much as possible. The international consultants will only be hired on a short term basis and qualified national consultants will be given higher preference.
There is a balance between TA/travel cost/management expenditure and activity based costs with the ratio of 26:74. The M&E component and Knowledge Management components of the proposal have been clarified with an estimated 5% of total funding.
25
There is overlap of many activities between the proposal provided by UNCDF and the TOR suggested for the Management Contractor. This should be rectified before the programme documents are finalised. The principle should be that all activities related to financial services should be implemented by UNCDF and not by the Management Contractor, however, with close coordination.
It is stated that “it (UNCDF) will selectively support those financial institutions with green growth mandates”. This should be further explained. In relation to promoting green growth the project proposal points to the opportunities for linking up with the UNCDF programme “CleanStart”, which supports financial institutions in building their capacity to develop and offer appropriate financing instruments for businesses and households to increase their access to renewable energy products. What indicators will be developed to monitor this?
The overlaps in the activities between the proposal provided by UNCDF and the TOR suggested for the Management Contractor have been rectified. Necessary changes in the programme document have been made.
A detailed explanation on the relationship between UNNATI and UNCDF programme “CleanStart” has been provided which includes supporting, educating and training the financial institutions with overall green growth mandates.
In addition to the proposed activities the support to IFC/NBF could be expanded to include activities in all seven working groups as well as activities related to reform of the business environment. The total budget could be increased up to DKK 15 million based on a revised proposal from IFC. It will be important to ensure that the NBF also reflects the interests of MSMEs and not only large companies organised in the FNCCI. The revised proposal by IFC does not address this concern although it was discussed with IFC during the appraisal.
The JDF, if and when established, should assume responsibility for hosting the ARF subject to agreement between the development partners in the JDF. If this solution does not materialise a public tender for a Management Contractor could be an alternative option.
As part of negotiation with GoN, support will be provided directly to NBF, where IFC will continue to provide technical assistance through its own programme. The issue raised by DAT will be considered as the detailed work-plan of NBF is prepared during the inception phase.
The ILO proposal was not strong and convincible enough to manage ARF. The ARF subcomponent will be tendered to a Fund Manager. A separate subcomponent description has been developed containing the pertinent issues related to establishing an ARF Challenge Fund.
26
There are some inconsistency in the programme document section 7 (Management and Organisation) and the two annexes (4 and 5) presenting TOR of two committees.
The inconsistency in the program document section 7 and two annexes have been addressed. All the tasks of Management and Coordination Committee are reflected in section 7 of the programme document.
The contract with the Management Contractor be divided into two phases, namely phase 1 covering 21/2 years and a phase 2 covering the remaining part of the programme period.
The ToR for the Management Contractor has been revised according to the recommendation.
The prospect of adding 20% counterpart funding for maintenance should be explored with MFALD and MoF
An agreement – which could be part of the Government-to-Government agreement - with MoF/MFLAD on funding procedures should be made prior to finalising the program documents.
The counterpart funding for maintenance will be explored on concrete terms during the inception phase.
GoN has agreed to the funding modality where Danida transfers the funds for infrastructure to the dedicated accounts in the District Development Fund of seven districts.
27
Annex 5 - List of relevant supplementary material:
Programme Documents
1. Programme Document: UNNATI – Inclusive Growth Programme in Nepal, August 2013
2. Component Description: Component 1: The Value Chain Component, August 2013
3. Component Description: Component 2: The Infrastructure Component, August 2013
4. Component Description: Component 3: The Enabling Environment Component, August 2013
5. UNNATI – Inclusive Growth Programme in Nepal, Monitoring and Results Measurement System,
August 2013
Danida
6. The Right to a Better Life, Strategy for Denmark’s Development Cooperation, June 2012
7. Strategic Framework for Priority Area: Growth and Employment 2011-2015, March 2011
8. Denmark-Nepal: Partnership policy 2013-2017, August 2013
9. Rural and Renewable Energy Programme (2012-2017) - Draft Formulation Report, August 2011
10. Agricultural Value Chains in Nepal – Assessment Report; September 2011
11. Nepal: Growth and Employment Programme in Nepal – Appraisal Report, 7 January 2013
12. Nepal: UNNATI – Inclusive Growth Programme in Nepal – Desk Appraisal Report, 25 June 2013
Government of Nepal
13. Three Year Plan Approach Paper 2010/11 – 2012/13, National Planning Commission, August 2010
14. Tenth Plan 2002-2007, National Planning Commission, March 2002
15. White Paper on Public Private Partnership, National Planning Commission, March 2011
16. ADS (2012): Agriculture Value Chains – Assessment and Vision Report
Development Partners
17. Basic Operating Guidelines signed by the major development partners in Nepal including Danida
18. ADB, DFID, ILO: Nepal – Critical Development Constraints, 2009
