ANNEX. CRIS number: 2014/37442 Total estimated cost: EUR 5M. DAC-code Sector Public sector policy and administrative management

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1 ANNEX Action Document for 11 th EDF EU-TL Co-operation Support Facility (CSF) 1. IDENTIFICATION Title/Number Total cost 11 th EDF EU-TL Co-operation Support Facility (CSF) CRIS number: 2014/37442 Total estimated cost: EUR 5M Total amount of EDF contribution: EUR 5M Aid method / Management mode and type of financing Standalone project approach Indirect management with Timor-Leste and direct management by Delegation DAC-code Sector Public sector policy and administrative management 2. RATIONALE AND CONTEXT 2.1. Summary of the action and its objectives The Cooperation Support Facility (CSF, EUR 5 M, 4 years) will contribute to the successful preparation, implementation, evaluation and visibility of the development co-operation between the European Union (EU) and Timor-Leste (TL), mainly through strengthening the capacities of the services of the EDF National Authorizing Officer (NAO) and of relevant state and non-state institutions involved in EU-TL cooperation. The overall objective is to contribute to the successful formulation, implementation, evaluation, and visibility of the cooperation partnership between the European Union (EU) and the Democratic Republic of Timor-Leste (TL) in the context of the New Deal to engage with Fragile States Context Country context Economic and social situation and poverty analysis Timor-Leste has made considerable socio-economic and political progress in the decade since independence was restored in Aided by significant oil and gas revenues since 2004 and substantial donor assistance, the country has focused on consolidating security and stability, providing a foundation for nationhood through building state institutions, 1

2 rebuilding/improving its infrastructure and addressing the immediate needs of its people to alleviate poverty. Annual GDP growth averaged 11.3% over the period , with oil GDP contributing up to 80% of total GDP. However, there remains a persistent high level of poverty and low social development indicators especially in rural areas. With a population of 1.1 million (2.4% annual growth), Timor-Leste is one of the least developed economies in south-east Asia (134th out of 187 countries in the 2013 Human Development Report). Timor-Leste has a mixed performance on MDGs and while some progress has been made, it will not meet all targets by Despite belonging to the lower middle-income category of countries (WB, 2013), with a non-oil per capita GDP at current prices of around US$ , Timor-Leste has a high percentage of chronically malnourished children under the age of five (45%) and high poverty rate with 49.9% of the population living below the national poverty line in In addition to this, the fragility assessment that was conducted under the framework of the New Deal to engage with Fragile States and validated by the Government in August 2012, underlines that while some good progress was made on security and with respect to inclusive politics, justice and economic foundations remain the two critical areas that require closer attention in the future National development policy The government s Strategic Development Plan (SDP) aims to transform Timor- Leste into an upper-middle-income country by 2030 based on rapid, inclusive growth enabling it to improve infrastructure, worker skills, education, training and health systems, and combat poverty and malnutrition. The plan was prepared through a participatory and consultative process that included workshops with civil leaders and NGOs and consultations with more than 38,000 men, women, and youth. The plan identifies the strengthening of the institutional framework for governance as a key pillar for the social and economic development of Timor-Leste. The plan emphasises that to achieve the goals of stability, security, enforcement of the rule of law and access to justice for all citizens, requires the development of transparent, accountable and competent institutions. It also states that good governance and a professional, capable and responsive public sector are essential for the delivery of Government services and the implementation of the SDP Sector context: policies and challenges Timor-Leste became a member of the ACP in 2006, and existing staff members still have not yet accumulated sufficient knowledge of EDF regulations and procedures to enable the NAO office to effectively fulfil its role as prescribed in the Cotonou Partnership Agreement. Regular changes in EDF procedures also require continued training. Also recently there has been staff turnover in the NAO office, with one finance officer leaving in March 2014 to return to the Ministry of Finance and a programme officer leaving for further studies in June 2014, both to be replaced. In addition two officers have joined the NAO Office in 2014 (Senior Programme Coordinator and Press and Information Officer). The new staff will 1 Asian Development Bank Fact Sheet 2 ibid Human Development Report, UNDP 2

3 require time and institutional support and training to acquire the knowledge and skills required to function effectively. There is also a shortage of skilled human resources within the line Ministries and the other implementing agencies dealing with EU development projects, and there is a need for technical support and capacity building to ensure timely project identification, preparation, implementation, monitoring and effective visibility of EU-funded projects. It is also necessary to improve coordination with, and to strengthen capacities in line Ministries and other agencies involved in EDF operations. The draft National Indicative Programme also highlights the need for the EU to play a stronger role in donor coordination in Timor- Leste, including within the framework of the New Deal. Until recently there has been limited visibility of the European Union and little knowledge of the European values, principles and standards among the Timorese population, but also to some extent in Government and other Development Partners. Appropriate communication and visibility activities would greatly enhance the positive image of the EU, by raising awareness about its development assistance and its values as well as about the link with EU Member States. Finally, the Government does not always have the flexibility within its own budget to attend relevant training/events or procure relevant highly skilled short-term technical assistance at short notice. The previous Technical Cooperation Facilities financed under the 10 th EDF have proven useful to respond to these kinds of ad hoc and urgent requirements in relation to EU development cooperation objectives Lessons learnt The proposed project builds on two ongoing projects financed under the 10 th EDF. The Institutional Capacity Building Programme for the Government of Timor-Leste II (ICBP II, 3.5M ) provides support and strengthening of the NAO s technical office through two long term technical assistants and training on EDF rules and procedures. The programme also provides funds for short term expertise to mainly identify 11 th EDF projects, funding for training and workshops, and facilitating the participation of Timorese officials / NSAs in international meetings or seminars. A mid term evaluation conducted in November 2012, and a ROM mission conducted in November 2013, concluded that there is still insufficient capacity to design, appraise and monitor programmes and projects, as the NAO staff have still not acquired all the necessary skills and knowledge and staff turnover in the office remains high. The Technical Co-operation Facility II (TCF II) responds to the need of the government for flexible support in the identification and formulation of interventions as well as more ad hoc support in the context of Timor-Leste development policies which correspond to EU development cooperation objectives. The ROM mission also undertaken during November 2013, concluded that the programme was delivering positive results by providing good quality services to a number of different national stakeholders. The main lesson learnt from these two on-going programmes is that the Timorese public sector continues to suffer from a lack of human resources, both in number and in appropriate level of qualifications and expertise. Therefore, there is a continuing need for staff to be trained and for ad hoc technical assistance services to be provided in order to ensure smooth 3

4 planning, preparation and implementation of development projects and programmes. Both projects (ICBP II and TCF II) have proved useful in providing funding for technical assistance, training, events and other activities in a flexible and timely manner. However the implementation of these two programmes has resulted in some duplication and transaction costs (2 annual programme estimates managed in parallel by the NAO for similar activities of training, events and visibility), hence the proposal to merge the 2 programmes in one under the 11 th EDF. Lessons learned from other countries clearly show that technical assistance and financial and operational support to the NAO usually results in enhanced programme performance, at least in terms of financial commitment and disbursement Complementary actions The above-mentioned ICB II which aims at transferring to the NAO office staff the principals of the EDF rules and procedures through the provision of long and short term technical assistance is also financing the cost of office staff and operations. It provides financial resources for training and participation in seminars and conferences by Timorese officials. The long-term TA has been extended until October 2015 (to bridge the gap until a tender is issued to continue these services under the 11 th EDF CSF), but the Programme Estimate which finances staff costs and office operational expenses could only be extended until October As described above, the TCF II provides funding for other technical assistance required by the NAO and line ministries. It also supports further training and workshops, and facilitates Timorese to participate in important international meetings and events. Both the Financing Agreement and the Programme Estimate II will end in March Timor-Leste also benefits from similar TCF projects of the multi-countries PALOP-TL programme and the Pacific Regional Indicative Programme, which provide for training activities and participation of Timorese in meetings and conferences Donor coordination The Ministry of Finance is in charge of external assistance coordination. High level Government - Development Partners Meetings (Timor-Leste Development Partners Meeting), coordinated by the Aid Effectiveness Directorate of the Ministry of Finance, are held once a year to discuss, amongst others, effective ways to enhance coordination and alignment, and to combat poverty. The last meeting was held in June Sector Working Groups were also established by the Government around the SDP priority sectors (economic, social, infrastructure, governance) but it is in its infancy stage. In accordance with the Paris, Accra and Busan aid effectiveness commitments, the EU and member states are promoting stronger coordination, division of labour and aid effectiveness among the donor community. At internal EU level and following the relevant code of conduct, the EU is working towards a common approach and a reinforced frank political dialogue as provided for under article 8 of the Cotonou Agreement. 4

5 3. DETAILED DESCRIPTION 3.1. Objectives The overall objective is to contribute to the successful formulation, implementation, evaluation, and visibility of the cooperation partnership between the European Union (EU) and the Democratic Republic of Timor-Leste (TL) in the context of the New Deal to engage with Fragile States. The purpose of this project is two-fold: i) to support the capacity of the services of the EDF National Authorising Officer (NAO) to manage EU-TL cooperation; and ii) to provide timely and flexible financing for technical assistance, training, seminars, events and visibility activities in line with Government and EU development cooperation priorities and with a view to strengthen the capacity of state institutions in key strategic areas of TL and EU development policies Expected results and main activities This project is essentially a continuation of the EDF10 ICBP II and TCF II, taking into account the above analysis and lessons learnt. It is consistent with the final draft 11 th EDF NIP, which allocates EUR 8 million for an intervention which supports the programming and implementation of the 11 th EDF and provides funding of training, workshops and seminars, and studies in support of programming and implementation. The project is expected to result in: Result 1: Enhanced capacity of NAO office, line Ministries, civil society and non-state actors to efficiently identify, formulate, manage, monitor, and implement projects financed from national and regional indicative programmes and intra ACP resources in accordance with EC rules and procedures, for procurement, contracting, accounting and reporting. This includes close monitoring of project implementation, timely implementation and follow-up of corrective measures, maintaining up-to-date records, proactive actions on audits and timely closure of completed commitments and projects; Result2: Strengthened capacity of state institutions in key strategic areas of Timor-Leste and EU development priorities, includinggreater awareness among key stakeholders on the main issues regarding development cooperation and EU policies and strategies; improved mainstreaming of cross cutting issues; greater involvement of Timor-Leste in regional, intra-acp and multi-countries programmes; and improved development partner coordination. Result3: Increased visibility of the EU-TL cooperation and greater awareness on EU and its Member States' fundamental values, history and culture; The project will principally be composed of the following activities: Result1: 5

6 Capacity building support to NAO Services: long term technical assistance, advisory services and training to strengthen knowledge of operational and contractual and financial procedures, monitoring and reporting, programming, human resource management, and office management systems. Provision of funds as required for the operation of the NAO Services office (communication, transport, supplies, etc.), and local staff. Conferences, training, and seminars related to EU procedures and project management. Result 2: Short-term training and studies and medium term technical assistance related to interventions to support key priorities of line ministries, civil society and non state actors in line with EU development cooperation priorities, as well as cross cutting issues. Conferences and seminars related to the priorities of the ACP-EU Partnership Agreement (structural adjustment, democracy and human rights, sustainable development, environment including climate change, gender equality, trade, etc.), intra-acp, PALOP-TL (if not covered by the regional PALOP-TL allocation), Pacific Island Forum and regional issues (including ASEAN). Result 3: Visibility related activities covering the various EU-funded projects/programmes (press releases, brochures, success stories of EDF funded operations, facilitation visits to sites by media representatives, different types of promotional materials organising/sponsoring relevant culture/youth events, etc) will aim at informing the public at large of the EU's support to the country's socio-economic development. A company will be contracted to support the visibility of all EU-TL cooperation projects on an integrated and long-term basis instead of allocating visibility funds under each cooperation projects Risks and assumptions The main risks which can undermine project effectiveness and efficiency are: Any further institutional changes that will affect the NAO s current location within the GoTL and/or the NAO s technical services location within the Ministry of Foreign Affairs and Co-operation. This risk now appears to be low because the Government has approved recently the Ministry's organic law which firmly embeds the NAO structure in the Ministry. Inability of the Government to allocate adequate office accommodation and qualified staff to the NAO Support Unit. To mitigate this risk, the project will have adequate resources to intervene as necessary providing funds for contracting local professionals and for the smooth functioning of the relevant office operations. Departure and high turn-over of trained staff in both, the NAO's structure and in line Ministries. This risk can be mitigated by involving as many officials as possible in the capacity building programme and by developing durable systems. Local staff and local 6

7 non-state actors will be implicated as closely as possible in activities funded by the CSF in order to ensure ownership and appropriation by national structures. Use of CSF funds for too many incoherent ad hoc requests covering too many different sectors outside of the 11 th EDF focal sectors and EU development cooperation priorities. The NAO and the EU Delegation will continue to jointly review and agree the requests received from different Line Ministries to ensure that only priority requests are positively considered. It is assumed that socio-political stability will be maintained and the cooperation between EU and Timor-Leste will continue to be carried out in the current spirit of partnership and mutual respect. It is assumed that the NAO and the EU Delegation will ensure the effective planning of the projects resource implementation that is aligned to the needs of the EDF implementation. In this respect, the Delegation and the NAO's Office will constantly monitor the use of project funds and hold monthly coordination meetings in this regard Cross-cutting issues The main cross-cutting issues: climate change, environmental sustainability, gender equality, good governance, human rights and HIV/AIDS are not directly integrated into the design of the project. Nevertheless, all cross-cutting issues will be mainstreamed in the actions supported by the project, either in identification and formulation of EDF11 programmes or in providing resources for training, communication and visibility actions dealing with these issues. In addition, it is expected that some funds will be used to support the participation of relevant stakeholders in training related to gender and environment and to support specific activities for the Human Right Day. As regards gender equality, focus will be placed on equal participation of women in the implementation of projects and programmes and in the provision of training opportunities under the project. Terms of References of short and medium term consultants will specifically mention crosscutting issues as important points to be addressed Stakeholders The stakeholders in this project are those concerned by the EU-TL cooperation programmes, especially the Ministry of Foreign Affairs and Co-operation and the NAO Services, the line Ministries involved in EDF implementation, the EU Delegation in TL, EU Member States, other Development Partners (including Australia, Asian Development Bank, World Bank and United Nations' agencies), regional organisations concerned, target groups of the specific EU programmes, and the TL public in general, including civil society, other non-state actors and media. Particular attention will be given to those state entities that need technical assistance and training to build up capacity related to EU development cooperation objectives. 4. IMPLEMENTATION ISSUES 4.1. Financing agreement In order to implement this action, it is foreseen to conclude a financing agreement with the Government of Timor-Leste, referred to in Article 17 of Annex IV to the Cotonou Agreement. 7

8 4.2. Indicative operational implementation period The indicative operational implementation period of this action, during which the activities described in sections 3.2. and 4.3. will be carried out, is 48 months from the date of entry into force of the financing agreement or, where none is concluded, from the adoption of this Action Document, subject to modifications to be agreed by the responsible authorising officer in the relevant agreements. The European Parliament and the relevant Committee shall be informed of the extension of the operational implementation period within one month of that extension being granted Implementation components and modules The programme will be implemented through direct management (short-term technical assistance procured by the EU Delegation, evaluation and audit) and indirect management by the NAO services in Timor-Leste (long-term technical assistance and programmes estimates) Procurement (direct management) Subject Short-term technical assistance in support of EU-TL cooperation and/or to build capacity of State and Non-State Actors in key EU-TL development priorities Type (works, supplies, Indicative number of Indicative trimester of services) contracts launch of the procedure services 10 Throughout the 48 months Indirect management with Timor-Leste A part of this action with the objective of contributing to the successful formulation, implementation, evaluation, and visibility of the cooperation partnership between the European Union (EU) and the Democratic Republic of Timor-Leste may be implemented in indirect management with Timor-Leste in accordance with Article 58(1)(c)(i) of the Regulation (EU, Euratom) No 966/2012 according to the following modalities: The National Authorising Officer of the Democratic Republic of Timor-Leste will act as the contracting authority for the procurement and grant procedures. The Commission will control ex ante all the procurement procedures except in cases where programme estimates are applied, under which the Commission applies ex ante control for procurement contracts above EUR 50,000 and may apply ex post control for procurement contracts up to EUR 50,000. The Commission will control ex ante the contracting procedures for all grant contracts. Payments are executed by the Commission except in cases where programmes estimates are applied, under which payments are executed by the partner country for ordinary operating costs, direct labour and contracts up to the ceilings indicated in the table below. Works Supplies Services Grants < EUR 300,000 < EUR 300,000 < EUR 300,000 EUR 100,000 8

9 The financial contribution covers, for an amount of about EUR 520,000 the ordinary operating costs incurred under the programme estimates. In accordance with Article 262(3) of Delegated Regulation (EU) No 1268/2012, the Democratic Republic of Timor-Leste shall apply procurement rules of Chapter 3 of Title IV of Part Two of Regulation (EU, Euratom) No 966/2012. These rules, as well as rules on grant procedures in accordance with Article 193 of Regulation (EU, Euratom) No 966/2012, will be laid down in the financing agreement concluded with the Democratic Republic of Timor- Leste. The programme will be implemented through programme estimates (managed by the NAO services) and specific commitments for the long-term and short term technical assistances. The service contract for long-term technical assistance will be procured and managed by the NAO under Indirect Management with partner country. Some short-term ad hoc technical assistance will also be procured and managed under the programme estimates Scope of geographical eligibility for procurement and grants The geographical eligibility in terms of place of establishment for participating in procurement and grant award procedures and in terms of origin of supplies purchased as established in the basic act shall apply Indicative budget Component Indirect management with Timor-Leste (Technical Assistance) Long term NAO TA: 40 m/m; Short/Medium term Specialised expertise: about 400 m/d; EU-TL visibility TA: about 1000 m/days over 45 months Indirect management with Timor-Leste (Programme Estimates) Local TA; Local professional staff; Office equipment, furniture and vehicle; Office operations; Training, workshops, seminars; Communications and Visibility Procurement (Direct management by EC) Short/Medium term specialised expertise: about 600 m/d Cost (EUR) 1,600,000 2,150, ,000 Evaluation and Audits 150,000 Contingencies* 400,000 Total budget 5,000,000 * The Use of contingencies requires the prior agreement from the HoD The sub-headings (in italic) are indicative and non-binding 4.6. Performance monitoring Day-to-day technical and financial monitoring will be a continuous process as part of the Beneficiary's responsibilities. To this aim, the Beneficiary in close cooperation with the EU Delegation shall regularly review the performance of the project on the basis of progress reports. In particular, the EUD and NAO will continue to meet regularly on a monthly basis, to monitor and discuss the overall project implementation and performance, as well as more frequently on an ad hoc basis as needs arise. 9

10 The performance indicators are detailed in the logical framework annexed to the TAPs, and will be reported upon on an annual basis. The NAO TA and the PE contracts will be reported upon on a bi-annual basis Evaluation and audit Independent consultants recruited directly by the Commission on specifically established terms of reference through a framework contract, will carry out a mid term and a final evaluation mission. The final evaluation is expected to be launched in late The Beneficiary and the Commission shall analyse the conclusions and recommendations of the final evaluation and jointly decide on the follow-up action to be taken and any adjustments necessary, including, if indicated, the reorientation of the project and/or possible extension with remaining funds under the EDF11 indicative allocation for support measures. The reports of the other monitoring missions will be given to the Beneficiary, in order to take into account any recommendations that may result from such missions. The project expenditure will be subject to an external audit every year. Also, when the total expenditure incurred under the programme estimates amounts to the equivalent of EUR 200,000 or more, verifications of these expenditures by external accounting firms may be done prior to any replenishments and will be done at the submission of the closure request of that program estimate Communication and visibility Communication and visibility of the EU is a legal obligation for all external actions funded by the EU. This action shall contain communication and visibility measures which shall be based on a specific Communication and Visibility Plan of the Action, to be elaborated before the start of implementation and supported with the budget indicated in section 4.5 above. The measures shall be implemented either (a) by the Commission, and/or (b) by the partner country, contractors, grant beneficiaries and entrusted entities. Appropriate contractual obligations shall be included in, respectively, financing agreements, procurement and grant contracts, and delegation agreements. The Communication and Visibility Manual for European Union External Action shall be used to establish the Communication and Visibility Plan of the Action and the appropriate contractual obligations. The large allocation to visibility expenditures (services and expenditures under programme estimates mainly for events and supplies) will be used to ensure the visibility of all EU-TL cooperation projects in an integrated way. In addition to visibility activities financed under the PEs the NAO will procure the services of a communication company through a single contract of about 300,000 EUR (procurement expected to be launched in 2015-Q1). 10