Perspectives of the Donor Community and International

OrganisationsAid for Trade/Trade Facilitation

Crown Agents Experience of Project Funding Mechanisms

Workshop on Trade Facilitation and Aid for Trade

12-13 March 2009, Addis Ababa

Trevor Simumba - Senior Advisor- Customs & Trade Facilitation

THE CONTEXTUAL CHALLENGE Donors have come to recognise that recipient country

ownership is essential to the effectiveness of aid and development efforts.

This can only be achieved if recipient governments begin to take a more proactive role in determining how aid is allocated and managed.

To date there are relatively few examples of recipient governments taking a lead in their relationships with donors.

This is perhaps not surprising given the asymmetry of resources, power and capabilities which characterises most of the links between donors and recipients.

This presentation highlights the efforts and experience of Crown Agents to help bridge this gap

Donor Funding(in response to EOI’s and RFP’s)

Normally time consuming, laborious and hugely resource intensive

Not unusual to find the project objectives already part-resolved by other projects by the time implementation starts

As a result duplication of efforts from different donors arise and, on occasion, even conflicting objectives through misunderstanding of the needs or changes in circumstance

The requirements for proposal completion are becoming more and more prohibitive

The complexity of the proposal results in a longer evaluation period

Part Donor/Part Self-Funding

A donor may contribute to a project’s funding in the initial stages but assumes some form of financial commitment from the recipient client

The ‘pump-prime’ funding by the donor gets the project up and running

Success of the project (particularly with trade/revenue enhancement projects) may even mean minimal input from the client which may result in lower political commitment

Self-Funded Projects

Self-funding demonstrates real commitment and high level political will

Self-funding projects can be implemented more quickly with the end-receiver client talking directly with the service provider

CA projects in Public Finance Management have demonstrated that financial commitment from the client can reap rewards from enhanced revenue generation

Private Public Partnership

Crown Agents has been exploring the possibility of private public partnerships (PPP), where banks or other financial institutions take the place of donors

In Customs/Tax modernisation projects, as long as there is high level commitment it is possible for bank funding to pump/prime a project and repayment to come from increases in revenue collected

Challenges experienced

Low technical capacity of those requiring funding to draft an appropriate request to donors

Reluctance to take necessary accountable decisions to apply for funding

Lack of understanding about funding options

Inadequate country public finance systems that would allow more direct budgetary support

Poor macro-economic environment

Aid for Trade as a new Aid Funding Mechanism

‘Partnership’ and ‘Mutual Accountability’ should be the foundations of the new aid relationship?

Aid for Trade is a major part of this new aid relationship Required to assist developing countries take advantage of

the liberal global trading environment that is the expected outcome of the Doha Development Agenda.

However, there is also a political economic dimension to it

Although all countries should benefit from a liberalised trading system in the long run, in the short run there will be winners and losers

An Aid for Trade mechanism should assist with the buy-in of the short-term losers

Useful Lessons Learned

Business has a central role in developing trade

“Governments may create trade rules, but it is business that actually creates jobs and

opportunities” (ITC) It is important that AfT initiatives focus more on the

supply side constraints and infrastructure needs for trade There is also need to carefully consider the political

economic dimension in all these AfT initiatives It is unlikely to expect that bilateral donors (wealthy

nations) are willing to provide advice on trade negotiating strategies or export development which conflict with donor nations’ economic interests.

Our Approach to Aid for Trade

“Ownership” means that key players — business, government and non-governmental organizations (NGOs) — need to work together closely

CA has a unique focus on developing trading activity and building confidence between business and government

Our approach to Aid for Trade is based on ‘leadership’ and ‘ownership’ by beneficiary countries

It is a process in which countries actively engage, with CA support, in assessing trade development needs, defining priorities and designing highly targeted projects.

The Focus of Aid for Trade Going ForwardIn Conclusion, we recommend three broad areas on which to apply aid for trade in Africa:

Policy: National and intra-regional policies to support trade development. At the national level, cross-border trade facilitation; export strategies; rule-making in conformity with international standards

Supply side: Trade-related technical assistance that helps countries develop the skills and capacity to export in competitive global markets.

Infrastructure: Trade Corridors, one stop border posts, roads, ports, utilities and other infrastructure necessary for trade