Project Action Fiche for TRTA/PSD III
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1 Project Action Fiche for TRTA/PSD III 1. IDENTIFICATION Title/Number Trade Related Technical Assistance Programme, Private Sector Development Phase Three (TRTA/PSD III) CRIS No. ASIE/2010/ Total cost EU contribution: Grant beneficiary's Contribution: total Aid method / Method of implementation Project Approach/direct centralised management DAC-code Sector Trade policy and regulation, management, private sector development 2. RATIONALE 2.1. Sector context Pakistan's economy is still in a developing stage and is faced with many challenges on internal and external fronts. A review of Pakistan s economy shows that its economic growth has slowed down to 2% in as compared to high growth rates at 6% during The share of exports as percentage of GDP has decreased proportionally even stronger, leading to the conclusion that Pakistan's export sector does not sufficiently penetrate global markets. (Economic survey of Pakistan ) Unemployment is high. With an estimated per capita income of US $1046 in 2009 and Human Development Index (HDI) rank of 139 out of 179, Pakistan is ranked low on major social, economic and business indicators. Its competitiveness rankings are declining and it thus ranked 101 on world competitiveness index in 2009 compared to place 92 in (Pakistan Competitiveness Report 2009) Pakistan's export base remains narrow, products are not well diversified and of low quality, branding and marketing is insufficient, access to finance for SMEs is inadequate, transport system (logistics) are weak, infrastructure (especially energy provision) is facing constant constraints (load shedding) and bureaucratic impediments are high. In addition to the internal factors as listed above, there is increasing competition from countries such as China, India, Sri-Lanka, Egypt, and Bangladesh. In its latest Strategic Trade Policy Framework (STPF ) the Government of Pakistan (GoP) presents a strategic approach towards foreign trade policy of the country in view of fostering growth and reducing poverty. The non agricultural small and medium sized enterprises (SME) sector makes 30% contribution to the GDP, and accounts for almost 25% EN 1 EN
2 of Pakistan s exports. It is the biggest employer of skilled and unskilled, but mostly seasonal, labour after the agriculture sector Lessons learnt The first phase of the EU trade related technical assistance (TRTA I of 6.5 million, ) focused on public sector-capacity building related to the World Trade Organisation (WTO) and its rules. TRTA II (10 million EUR, launched in 2009) is also concentrating on the public sector with the objective to further enhance its capacity in trade policy as well as strengthening the quality of infrastructure for export and to enhance compliance with intellectual property rights (IPR). TRTA PSD III is to provide the missing link: a direct intervention aimed at the private sector to enhance its export oriented trade capacities through the provision of appropriate services and activities by Pakistani Business Intermediary Organisations (BIOs) Complementary actions The dimension of TRTA II on vocational training should be kept in mind throughout the TRTA III implementation. In addition, the following complementary activities of other main donors, in relation to the trade sector and especially in the leather and gems and jewellery sectors, have been identified: USAID Donor Project/ activities - supported the establishment of Pakistan Gems and Jewellery Development Company in 2006; - provides Rs 50 million for establishing FATA Center of Excellence for Gems and Jewellery; - providing support to TADP for staff training; DFID ADB - providing support to overall economic growth manly in the financial sector; - providing support to the national trade corridor programme focusing on building infrastructure jointly with World Bank; - ADB is finalizing its study on Economic growth and transformation in collaboration with Planning Commission of Pakistan; SDC Norway - providing support of 7.97 million Swiss francs focusing on economic activities and improving access to markets in selected marginalized districts of Khyber Pakhtoonkhwavia its livelihoods programme; - supported a specific project Cleaner production in the tanneries in Sialkot in collaboration with TDAP, Norwegian Agency for Cooperation & Development (Government of Norway) under the EN 2 EN
3 management of Pakistan Gloves Manufacturers & Exporters Association; World Bank - providing support to the National Trade Corridor programme 2.4. Donor coordination - The Pakistan Tax Administration Reform Project supports improvements in customs administration -provided support to the latest report on Pakistan Growth and Export Competitiveness Report; Donor co-ordination in the field of trade in Pakistan is not fully satisfactory. However, the EU Delegation will play an increasingly active role in donor co-ordination, especially with the EU Member States as well as with other donor countries and international organisations, principally the ones identified above. 3. DESCRIPTION 3.1. Objectives The overall objective of the programme is to support the GoP's trade strategy, in particular to foster sustainable economic development and poverty reduction via trade competitiveness by private sector's export diversification and export promotion and via job creation. The overarching specific objective is to strengthen the capacity of Pakistan's BIOs at the federal, provincial and local level. This objective shall be achieved via capacity building on the ground via service portfolio development of grant beneficiaries as well as of other relevant (smaller) BIOs active in the following two chosen sectors: (i) gems & jewellery (G&J) and (ii) leather products (LP). Such portfolio shall be aimed mainly at the needs of export oriented private firms and especially SMEs in either of the two sectors to improve their export competitiveness and job creation capacity. It shall be part of activities specified under the CfP. Among others such services portfolios shall include information provision as well as training capacity at product, firm and market (access) levels. Outcomes and conclusions of the planned TA component on the "Value Chain Analysis (VCA)" shall feed into further specification of such portfolios. The sub-objectives may include the following specific areas: a) improve quality of production through provision of business development services (BDS), taking into account environmentally friendly production; b) enhance product development and improved design as to moving products up the value chain through state of the art production techniques; c) marketing and branding; EN 3 EN
4 d) provide access to knowledge: upgrading skills of employees (through technical training relevant for each of the focal sectors) with focus on gender balance; and training in management and organisational skills of middle management; e) improved access to regional and international markets as a result of the above and through provision of necessary information provided by the BIOs specifically on product compliance for export (as for example compliance with the EU Reach Directive for leather production/tanning) and export & customs documentation. Weighted priority as to the above listed specific objectives and subsequently the expected results and activities (see 3.2.) will be reviewed when the results of the planned TA on value chain are available. The geographical focus is not restricted to certain regions in Pakistan. Preference, however, will be given to regions & clusters with production activities in the two chosen sectors. Choosing the sectors: G&J and LP have been identified as sectors for intervention of TRTA PSD III for the following reasons: -being two of the eight GoP STPF identified sectors with export growth potential; -TRTA III formulation mission recommendation and outcomes of stakeholders' consultations; -taking into account the activities of other donors (complementarity); -taking into account the capacity and growth potential at the level of BIOs in the country; -best potential to maximise improvement of trade competitiveness; -potential to access international markets without major investments in physical infrastructure; value addition through design and branding; -serving as pilots for possible further interventions covering other sectors in future programmes Expected results and main activities RESULTS Result 1: Strengthening of operational, management and institutional capacities of BIOs, acting as relevant service providers for private firms in view of increased trade competitiveness. Help them to develop appropriate, demand driven services portfolios. Among others such services shall include information provision as well as training capacity at product, firm and market (access) levels. The focus on local BIOs will ensure country's ownership as well as increased sustainability (for the indicative list of BIOs, which may benefit from this result, see 3.5). Result 2: Improved performance and strengthening of competitiveness of firms through product development and diversification, including modernising product design, better production techniques (including leaner and cleaner production), organisation and management of business, branding of products, marketing and distribution (including market survey and development). EN 4 EN
5 Result 3: Upgrading skills of the workforce as well as mid-managers in the focal two sectors, which are labour intensive, through specialised technical trainings, improved access to design services via supporting local design related institutes and access to knowledge on production floor organisation for managers. Result 4: Improved international market access to improve export compliance and enhance the capacity of firms to deal with production and product related compliance for export as well as with other customs related and required documentation (also by using already existing capacities of TDAP, Export Cells etc). Result 5: Functioning multilateral platform(s) for networking, knowledge management and information sharing between involved implementing partners, as well as between other existing BIOs (i.e. smaller enterprise groupings and associations) with the objective to enhance the final outcomes as a whole; ACTIVITIES 1-TA on VCA -looking into all phases of the value chain: Input-Production-Branding+Marketing- Logistic+Distribution in G&J and LP, on the one hand identifying all gaps and bottlenecks as well as provide clear mapping of the poor in the value chain and potential benefits. - provide feedback to the local/provincial/federal authorities on suitable changes in the regulatory and administrative framework 2-Indicative activities implemented by grant beneficiaries (selected in restricted CfP) (the list is identical to the list in in the Draft Guidelines for the CfP): Indicative activities for Result 1 a-bios chosen as implementing partners shall strengthen their capacities and increase their provision of relevant BDS for firms; an external Capacity Building Needs Assessment will be done in the inception phase. b-information dissemination of relevant services provided by BIO to SMEs in G&J and LP (strengthening the local market for advisory services, if feasible possibly also provision of registries of local BSD providers with annual evaluation of their performance). Indicative activities for Result 2 c-training on improvement of design and finishing of products by establishing linkages between designers and the focal sectors; d-provision of expertise and technical advice on more efficient and cleaner production, including production floor organisation and management; e-provision of expertise and advice on organisation and management of production; f-provision of expertise and advice on branding and marketing for mid-management or owners of SMEs, including provision of market survey for existing or new products. EN 5 EN
6 Indicative activities for Result 3 g-setting up & provision of necessary technical training and skills development for employees in both sectors; h-specific training for mid-management on inclusion of women in their labour force including equal pay for equal work; i-create training opportunities especially designed for women, where their involvement into active work life will be complemented by necessary infrastructure (as for example provision of transport). Indicative activities for Result 4 (cross-sectoral) j-specific training on product compliance and other regulation (domestic, EU, international) for export (as for example on EU Reach directive); k- training on necessary customs related export documentation (also through already existing export cells). Indicative activities for Result 5 l-establishing and/or participating in a multilateral networking mechanism for knowledge management among all the implementing partners and with other BIOs online as well as in terms of meetings, conferences and workshops; 3.3. Risks and assumptions The common risks and assumptions applicable to the programme are as follows: Risks common to the programme/ all components Beyond project control Political instability and security risks Level of likelihood that risk occurs High EU Measures to mitigate the risk or accept the risk Accept risk and foresee some contingency plans in the programme. Macro stability economic High Accept risk and foresee some contingency plans in the programme In project control Local partners identified for capacity building may not have internal capacity to absorb the intervention Medium Call for proposal approach spreads the risk to up to four implementation partners. Carful capacity assessment carried out during the selection process High cost of doing Medium Qualitative reforms in trade and other national EN 6 EN
7 business discourages new private sector investments in exportable products. Suitable skilled and trained personnel are not available. Business community shows interest and commitment to the programme. Medium Medium polices will be facilitated in the margins of TRTA II to encourage private sector initiatives in exportable products. Technical and vocational, skill enhancement trainings will be supported. Maximum and effective involvement of business community in various activities under all components of the programme ensured through effective visibility campaign Crosscutting Issues Gender: both sectors chosen will create opportunities for women, since they represent a significant part of the workforce in both sectors not only for design, but even already at the moment polishing of stones and some of the leather production involves women workforce. Special components in provision of skills can be devoted to women. Moreover, managers need to be trained on how to include women's workforce and how to improve equality in pay. Governance issues: ensured on the one hand by governance arrangements and co-operation within the PSC, which will include the Pakistani authorities, and on the other through promotion of transparent implementation of the projects, regular monitoring and accountability towards the PSC especially as to results achieved Not sure whether this is meant or rather the impact of the project to work against e.g. corruption. Environment: when looking at the production methods in both sectors, the projects will promote cleaner (especially in cutting and polishing for G&J and chemical preparation of materials for LP) and leaner (energy efficient) production Stakeholders Stakeholders have been extensively consulted during the formulation mission. For the purpose of implementation of this programme, the following stakeholders have been identified to be called upon participation in the programme (also for the CfP): a) BIOs: Private Sector Stakeholders (i.e. Potential Grant Beneficiaries) General (Non-Sectoral) BIOs Technology Upgradation and Skill Development Company (TUSDEC) (linked to Ministry of Industry); Small And Medium Enterprises Development Authority (SMEDA) (linked to Ministry of Industry) Women Business Incubation Centre (WBIC) (part of SMEDA) EN 7 EN
8 Trade Development Authority of Pakistan (TDAP) (linked to the Ministry of Commerce) Federation of Pakistan Chambers of Commerce and Industry; Chamber of Commerce Karachi; Women Chamber of Commerce Karachi Chamber of Commerce and Industries Sialkot; Chamber of Commerce Lahore; Women Chamber of Commerce Lahore SME Business Support Fund (BSF) (linked to TDAP) Sindh Small Industries Corporation Gems and Jewelry Pakistan Gems and Jewellery Development Company; Pakistan Stone Development Company (PASDEC) All Pakistan Commercial Exporters Association of Rough and Unpolished Precious and Semi Precious Stones (APCEA), Peshawar; Leather Leather Production Development Institute (LPDI), Sialkot Glove Manufacturers Association, Sialkot Leather Garments Manufacturing Association, Sialkot Pakistan Tanners Association, Pakistan Footwear Association, Design Pakistan School of Fashion Design (link to Ministry of Industry). b) GoP:MoC/PITAD, Ministry of Industry, Ministry of Finance (Economic Reform Unit), Ministry of Science and Technology, Planning Commission and local (provincial) departments of commerce and industry. EN 8 EN
9 c) Donors and IOs (see 2.3. and 2.4.) 4. IMPLEMENTATION ISSUES 4.1. Method of implementation The project will be implemented by direct centralized management after signature of a Financing Agreement between the EU and the Government of Pakistan. Implementation will thus be carried out through the following methods: 1-TA: technical assistance through the signature of service contracts following call for tenders or framework contracts: a) TA on VCA, for each chosen sector to calibrate the weight of possible activities in terms of their impact, with focus on poverty reduction; VCA shall be a practical study, identifying concrete bottlenecks in VC for the two sectors, including any possible obstacles arising from the existing legal and administrative framework, export and other compliance rules, especially linked to customs and other issues as derived from the government policies or activities of other public sector agencies; and b) TA on Visibility to ensure among others outreach in the business community concerned. 2-Restricted Call for Proposal: when the results of TA on value chain are available, a restricted Call for Proposal for grants shall be launched to be followed by signature of two to four grant contracts of minimum value of 1 million per grant award and maximum value of 2 million per grant award up to maximum 90% of the project costs. This implementation method has been chosen to ensure genuine competition for innovative approaches for a TRA programme, added value in terms of creativity in the formulation of proposals to be submitted under the CfP, risk dispersion by implementing through more than one organisation/project, enhanced local ownership and strengthening of local actors (including BIOs), which shall all ensure better sustainability of the outcomes. 3-Monitoring, evaluation and audits: will be implemented in centralised management, through the signature of service contracts following calls for tenders or within current framework contracts. 4-Governance: A Project Steering Committee (PSC) will be established, chaired by the EU Delegation and the GoP (Ministry of Commerce and Ministry of Industry). Ministry of Finance (Economic Reform Unit), Ministry of Science and Technology and the Planning Commission for Economic and Social Development will be invited as Members of the PSC. Implementing partners (grant beneficiaries) and donors will be Members with observer status. In case of identification of any further stakeholders with potential PSC membership or observer status, the governance structure may be revised accordingly. It is however envisaged that other BIOs (apart from grant beneficiaries) do not participate in PSC, since they are all targeted by the CfP. The PSC will meet on semi-annual basis. Its main task will be to: - monitor the implementation of projects as designed through the CfP; - provide guidance and advice on questions which may arise during implementation; EN 9 EN
10 - ensure overall coherence and co-ordination of the programme Procurement and grant award procedures 1) Contracts All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by the DCI Regulation, provided that eligibility criteria are fulfilled. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in articles 31(7) and (8) DCI. 2) Specific rules of grants The essential selection and award criteria for the award of grants are laid down in the Practical Guide to contract procedures for EU external actions. They are established in accordance with the principles set out in Title VI 'Grants' of the Financial Regulation applicable to the general budget. When derogations to these principles are applied, they shall be justified, in particular in the following cases: - Financing in full (derogation to the principle of co-financing): the maximum possible rate of co-financing for grants is 90%. The CfP shall foresee for a grant not to be less than 50 % or more than 90 % of the total eligible costs of the action. The upper limit of 90% is justified by considering high amount of the grants as well as targeting local BIOs, which are not financially strong Full financing may only be applied in the cases provided for in Article 253 of the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation applicable to the general budget of the European Union. - derogation to the principle of non-retroactivity: a grant may be awarded for an action which has already begun only if the applicant can demonstrate the need to start the action before the grant is awarded, in accordance with Article 112 of the Financial Regulation applicable to the general budget. Eligible beneficiaries under the CfP are local non-governmental sector organisations in the two sectors identified, so as to ensure the achievement of one of the specific objectives of the intervention, i.e. sustainable capacity building of Pakistani BIOs and genuine ownership of the programme. Other parties, including international NGOs will only be eligible to participate in the CfP as partner of such local organisation Budget and calendar The total cost of the project is , of which is covered by the general budget of the European Union, and are Grantee Contributions. Category breakdown EU Contribution Contribution of Grantees Total (EUR) Contracting/ Paying EN 10 EN
11 (EUR) (EUR) Authority European Commission 1 Services / Monitoring / Evaluation Audits / TA on VCA / TA on Visibility / Grants Call for Proposals Contingency / TOTAL European Commission European Commission European Commission Full Duration as from the signature of the Financing Agreement Procedure Indicative timeframe Financing agreement with GoP Q Launching TA on VCA Q Launching TA on Visibility Q Restricted Call for Proposal Q Signature of Grant Agreement with the selected implementing partners Q Tendering for mid-term evaluation Q Tendering for pre-completion programme evaluation Q Programme audits Q The operational duration of the project is 36 months as from the signature of the Financing Agreement Performance monitoring Preliminary indicators of progress have been outlined in the Log Frame (i.e. increase in the level of exports in the two identified sectors; increased diversification of products in the two identified sectors; increase in technical skills of the workers and employment levels in the two identified sectors etc). The overall regular monitoring is part of the EU Delegation's responsibilities and will be one of the main tasks of the Project Steering Committee (PSC), co-chaired by the EU Delegation and GoP. EN 11 EN
12 External impact monitoring will also be carried out by independent consultants recruited directly by the EU Delegation. These monitoring activities will be funded by the project.. The Implementing Partners shall regularly update the EU on the progress of the project through meetings and written reports that will include the following: -Quarterly Progress Report; -Annual Report; -Special Reports, as needed; -Audit Reports as appropriate; and -Project Completion Report Evaluation and audit Mid-term and pre-completion programme evaluation and audits will be funded by the project and will be carried out by independent consultants recruited directly by the Commission Communication and visibility Visibility is essential element of the programme. Proper compliance with EU visibility guidelines is required. For this purpose, we suggest a special allocation for visibility (i.e. communication and information campaign), where professional communication companies will assist the EU Delegation to launch the CfP and will thereafter assist chosen grant beneficiaries to implement the visibility dimension from the very beginning of the project. In addition to working with the chosen professional communication company, the chosen grant beneficiaries may consider using specific media depending on need (e.g. TV, radio, websites, newspapers and magazines, brochures and posters etc.). Visibility will be the responsibility of the grant beneficiaries and will be subject to review by the PSC. EN 12 EN
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