PERIODIC FINANCING REQUEST. RE: Higher Education in the Pacific Investment Program: Periodic Financing Request #1

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1 PERIODIC FINANCING REQUEST Date: April 2012 To: Asian Development Bank 6 ADB Avenue Mandaluyong City, Metro Manila ATTENTION: Director General, Pacific Department Fax No Sir: RE: Higher Education in the Pacific Investment Program: Periodic Financing Request #1 Please refer to the Framework Financing Agreement (FFA) for Higher Education in the Pacific Investment Program dated April 2012 between Asian Development Bank (ADB) and The University of the South Pacific (USP). Expressions defined in the FFA shall have the same meanings herein. Pursuant to the provisions of the FFA, USP requests ADB to process this PFR for a tranche, in the form of a loan from its Special Funds resources. The proposed financing amounts, terms, conditions, and financing plan are specified in Attachment A hereto. Descriptions of the project and components for which financing is hereby requested are set out in Attachment A including Annexes 1 to 4. The Government of Kiribati (GoK) hereby confirms that a guarantee in form and substance acceptable to ADB will be executed and issued, and confirmed as the valid and binding obligation of GoK, as a condition precedent to the requested tranche becoming effective. By: Rajesh Chandra Vice-Chancellor and the President The University of the South Pacific By: H.E. Reteta Rimon High Commissioner Kiribati High Commission in Suva, Fiji

2 Attachment A Project Description The project outputs proposed for financing under the requested PFR are: (i) Strengthened Regional Campuses. The University of the South Pacific (USP) Kiribati campus in Tarawa will be expanded in order to sustain the rapidly increasing numbers of students, including construction of additional classrooms, an information and communication technology (ICT) studio, a student cafeteria, and other administration facilities. (ii) Enhanced ICT-Based Education. For the upgraded campus, new ICT equipment will be provided and operationalized to improve connectivity to other USP campuses and facilitate the provision by USP of expanded, faster and more reliable ICT-based learning courses, especially distance and flexible learning (DFL) courses. (iii) Strengthened USP governance and management. The education management information system (EMIS) will be enhanced by improving and making more comprehensive the collection, analysis, and dissemination of statistical information about USP s activities and human resources to support USP management and operations. All appropriate data will be disaggregated by sex. (iv) Strengthened project management capacity. Project management capacity will be supported by establishing a project implementation unit (PIU) within USP, which will manage all project activities (e.g., procurement, accounting, monitoring). The Design and Monitoring Framework for this tranche is in Annex 1. Cost Estimates and Financing Plan The total cost of the project is estimated at $3.975 million equivalent, inclusive of taxes and duties ($300,000), contingencies, and interest charges during the implementation period. The detailed cost estimates and financing plan are in Annex 2. Summary Financing Plan (US$ million) Source Amount Share of Total (%) Tranche 1 Asian Development Bank (ADF) % The University of the South Pacific % Government of Kiribati % Total % ADF = Asian Development Fund. Source: Asian Development Bank and The University of the South Pacific estimates.

3 Loan Amount and Terms Period of Loan Utilization Advance Contracting Retroactive Financing Implementation Arrangements Procurement and Consulting Services Readiness of the Project for Implementation The request is for a loan of SDR1,692,000 from the Special Funds resources of the Asian Development Bank (ADB), with an interest charge at the rate of 1.0% per annum during the grace period and 1.5% per annum thereafter; for a term of 32 years, including a grace period of 8 years and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board. The project activities are expected to be completed by 31 December No disbursements from the loan account will be requested or made later than 30 June Advance contracting will be undertaken to recruit a consulting firm who will prepare civil works design and tendering documents, and supervise civil works. USP has requested that ADB assist with the preparation of tender documents in recruiting these consulting services. Retroactive financing is requested for eligible expenditures not exceeding an amount up to 5% of the loan, incurred up to 12 months prior to the signing of the legal agreement. The executing agency will be USP. Implementation arrangements shall be as set out in detail in the FAM. The project steering committee (PSC) will provide overall guidance for project implementation and facilitate cross-agency dialogue. The PSC will be chaired by the USP vicechancellor and will include representatives from the USP member countries. The PSC will oversee the financial plan and implementation of project activities on the Kiribati campus. A project implementation unit (PIU) will be created within USP s Development, Marketing, and Communications Division (DMCD) with responsibility for day-to-day implementation of all project activities, including procurement, civil works, finance, and contract management. The director of DMCD will act as project supervisor, and the PIU team leader will be recruited by USP. The procurement plan is attached as Annex 3. Terms of reference for the engagement of consultants under this tranche are attached as Annex 4. For the expansion of the USP campus in Kiribati, preliminary concept designs for civil works have been prepared by USP. Based on the concept design, more detailed designs for construction and facilities will be carried out under Tranche 1.

4 Safeguards The project is classified as category B for environment in accordance with ADB s Safeguard Policy Statement. An initial environmental examination (IEE) was prepared to guide the assessment and review the process for project investment. The project is classified as category C for both involuntary resettlement and indigenous peoples in accordance with ADB s Safeguard Policy Statement. The project does not involve land acquisition or involuntary resettlement impacts. All civil works will be undertaken on land currently being used by USP or on land provided by the government free of any other claims or encumbrances. The project is not expected to impact any distinct and vulnerable group of indigenous peoples as defined under the Safeguard Policy Statement (2009).

5 Design Summary Impact USP graduates contribute to economic competitiveness and diversifications of Kiribati and other USP member countries DESIGN AND MONITORING FRAMEWORK FOR TRANCHE 1 Performance Targets and Indicators % of job placement in public and private sectors among USP graduates from Kiribati improves from 42% in 2008 to 55% in 2020 Number of USP Kiribati campus graduates who continue to postgraduate study reaches at least 20 by 2020 (baseline 1 in 2010) Data Sources and Reporting Mechanisms USP annual graduate destination surveys USP official statistics s and Risks Annex 1 Labor market growth is expected to expand. USP will continue to serve as a leading higher education institution in Kiribati. Risks Change of emigration regulations in neighboring industrialized countries can accelerate brain drain from Kiribati. Outcome USP provides expanded and equitable access to quality higher education in Kiribati Outputs 1. Strengthened regional campus in Kiribati 2. Enhanced ICTbased education in Kiribati 3. Strengthened USP governance and management Enrollment in USP Kiribati campus increases from 770 in 2010 to at least 1000 by 2020 At least 30% of all females are enrolled in degree programs by 2018 (12% in 2011) At least 5 new classrooms operate with adequate ICT equipment for mixed modes of teaching including DFL by 2016 % of courses that utilize Moodle as a learning management system increases from 45% in 2010 to 80% by 2016 At least 30% of Kiribati students use ICT-based mode for DFL by 2018 (baseline 7% in 2010), with at least 50% of ICT-based DFL users being female Full EMIS is in place with sexdisaggregated data on students, faculty, and alumni by 2016 and reports are produced annually USP official statistics USP official statistics Project progress reports USP official statistics USP official statistics USP management reports USP Council and senior management continue to be committed to USP reform efforts specified in the Road Map. Kiribati is politically stable and youths continue to be motivated to participate in higher education. Risk Weak coordination and reporting across USP regional campuses on civil works delay planned construction work. ICT-based education continues to be supported and complemented by other development projects supported by AusAID and JICA. USP s Strategic Plan objectives and key targets continue to drive planned improvements.

6 4. Strengthened project management capacity Activities with Milestones 80% of internal audit report recommendations are complied with by 2016 (baseline 50% in 2008) Females will hold 40% of management-level positions by 2016 (32% in 2007) Project outputs are delivered on time and within budget Output 1: Strengthened regional campus in Kiribati 1.1 Complete procurement of a construction design and supervision firm (Q4 2012) 1.2 Complete site clearances (Q2 2013) 1.3 Construct/upgrade USP facilities at the existing site in Kiribati (Q Q3 2014) 1.4 Finalize outfitting and prepare for certificate of compliance prior to handover (Q3-Q4 2014) 1.5 Commence the campus at full operation in new buildings (Q1/2015) Internal audit reports Project progress reports Inputs Tranche 1 USP to recruit additional staff to manage the project ADB: $2.60 million USP: $0.375 million Government of Kiribati: $1.00 million Output 2: Enhanced ICT-based education 1.1 Review the academic portfolio in terms of quality and relevance (Q Q3 2013) 1.2 Provide DFL training to USP faculties, selected administrative staff, and students (Q Q4 2014) 1.3 Procure equipment and services for ICT-based education in Kiribati campus (Q2-Q4 2014) Output 3: Strengthened USP governance and management 1.1 Assess the current educational management information system (EMIS) (Q1-Q2 2013) 1.2 Collect, manage, and compile all USP student and academic staff profiles (sex-disaggregated data) in EMIS (Q Q4 2014) 1.3 Improve the effective use of data on student performance (Q Q4 2014) Output 4: Strengthened Project Management Capacity 4.1 Tender, award, and manage contracts (Q Q4 2014) 4.2 Monitor project implementation (Q Q4 2014) 4.3 Implement and monitor the gender action plan (Q Q4 2014) 4.4 Provide timely progress reports (Q Q4 2014) 4.5 Carry out regular accounting and annual audit (Q Q4 2014) ADB = Asian Development Bank, AusAID =Australian Agency for International Development, DFL = distance and flexible learning, EMIS = education management information system, ICT = information and communication technology, JICA = Japan International Cooperation Agency, USP = The University of the South Pacific. Source: Asian Development Bank

7 COST ESTIMATE AND FINANCING PLAN FOR TRANCHE 1 (US $000s) a Annex 2 ADB USP Government of Kiribati Item Total Amount % of Cost Category Amount % of Cost Category Amount % of Cost Category A. Investment Costs 1. Civil Works 1,900 1, % 0 0% 0 0% 2. Equipment % 0 0% 0 0% 3. Consulting Services % 0 0% 0 0% 4. Capacity Development % % 0 0% 5. Project Operation and Maintenance % % 0 0% 6. Project Administration (Travel Costs) % 0 0% 0 0% 7. Taxes and Duties % 0 0% % 8. Land Contribution b % 0 0% % Subtotal (A) 3,625 2,250 62% % % B. Contingencies c 1. Physical % 0 0% 0 0% 2. Price % 0 0% 0 0% Subtotal (B) % 0 0% 0 0% C. Financing Charges During Implementation d % 0 0% 0 0% Subtotal (C) % 0 0% 0 0% Total Project Cost (A+B+C) 3,975 2,600 65% % % ADB = Asian Development Bank, USP = University of the South Pacific a In mid-2011 prices b This amount represents an in-kind contribution by the Governments of Kiribati. c Physical contingencies are computed at 5% for civil works, equipment and services. Price contingencies are computed at 1% foreign exchange costs and average regional cost escalation factors for local currencies d Interest charges on the ADB loan will be capitalized at 1% per annum during implementation period. Figures may not sum precisely due to rounding. Source: Asian Development Bank and The University of the South Pacific estimates.

8 Annex 3 Project Name: Loan Amount: Executing Agency: PROCUREMENT PLAN Original Procurement Plan: April 2011 Current Procurement Plan: 20 April Project Procurement Thresholds Basic Data Higher Education in the Pacific Investment Program Periodic Financing Request 1 $2.6 million The University of the South Pacific Unless otherwise agreed to ADB, the following process thresholds will apply to the procurement of goods and works: Method Procurement of Goods and Works Threshold International competitive bidding (ICB) for works At or above $1,000,000 International competitive bidding (ICB) for goods At or above $1, National competitive bidding (NCB) for works and goods Below $1,000,000 and at or above $100,000 Shopping procedures Below $100, ADB Prior or Post Review Unless otherwise agreed to ADB, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the project. Procurement Method Prior or Post Comments Procurement of Goods and Works International competitive bidding for works Prior and goods contracts Direct contracting (single source) Prior Shopping Post Recruitment of Consulting Firms Quality-and-cost-based selection (QCBS) method Prior Quality cost ratio 90:10 3. Goods and Works Contracts Estimated to Cost More Than $1 Million The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. General Description Contract Value $ Procurement Method Prequalification of Bidders (y/n) Advertisement Date (quarter/year) Civil works for 1,900,000 ICB N Q4/2012 Kiribati campus upgrade ICB = international competitive bidding, N = no, Q = quarter. Comments

9 4. Consulting Services Contracts Estimated to Cost More Than $100,000 The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months: General Description Detailed design for civil works and construction supervision in Kiribati Contract Value $ Recruitment Method Advertisement Date (quarter/year) International or National Assignment Comments 200,000 QCBS(90:10) Q3/2012 International EA will negotiate the contract for prior approval by ADB ADB = Asian Development Bank, EA= executing agency, Q = quarterly, QCBS = quality- and cost-based selection. 5. Indicative List of Packages Required Under the Tranche The following table provides an indicative list of procurement (goods, works, and consulting services) under tranche 1. General Description Civil works for Kiribati campus upgrade Detailed design for civil works for Kiribati campus Goods of all ICT equipment Estimated Value (cumulative) Estimated Number of Contracts Procurement Method Domestic Preference Applicable $1,900,000 1 ICB No $200,000 1 QCBS No $100, Shopping No Comments ADB = Asian Development Bank, ICB = international competitive bidding, ICT= information and communication technology, QCBS = quality-and-cost-based selection.

10 Annex 4 SUMMARY TERMS OF REFERENCES Consulting Services for Detailed Design and Preparation of Bid Documentation for Civil Works 1. The objective of the services is to complete the design and construction documentation of campus buildings in Kiribati, for which the preliminary designs have been provided by USP, to (i) prepare the detailed design for all the buildings according to specifications, and (ii) produce ICB documents for each site to recruit suitable contractors. 2. The main activities include but are not limited to the following: (i) Carry out all investigations, surveys, consultations, estimates, detailed design, construction drawings, specifications and preparation of tender documents, tendering, selection of contractors, construction supervision reports, and production of as-built drawings to meet the specific output requirements for all separable parts of the project. (ii) The design of all works will at all times conform to the standards of international standards and all other relevant ordinances, regulations, by-laws, etc. as may be applicable. (iii) (iv) Particular consideration should be given in the detailed design: provision for disabled persons, access to facilities (e.g., ramps for disabled children); covered walkways; access to schools and other facilities; provision of sanitary facilities; provision for water storage/water tanks; provision for site drainage; provision for general recreation; and location and details for septic tank positions and quality of design. Generally, each campus will be provided with the following facilities: general classrooms; administration and library facilities; specialist laboratory facilities; and toilets. 3. The following professionals may be required for some input as required for the project: (i) (ii) (iii) (iv) Structural engineer. The structural engineer, under the control of the architect, will undertake all required structural design and documentation preparation. Civil engineer. The civil engineer, under the control of the architect, will prepare all required civil designs and documentations including design of all required earthworks, retaining walls, drainage and any other required structures. Electrical engineer. The electrical engineer, under the control of the architect, will design and prepare the documentation of all electrical services and works. Mechanical engineer. The mechanical engineer, under the control of the architect, will design and prepare the documentation of all mechanical services and works.

11 (v) (vi) Hydraulic and fire services engineer. The hydraulic and fire services engineer, under the control of the architect, will design and prepare the documentation of all hydraulic and fire services and works. Environmental specialist. The environmental specialist will have a degree in a relevant subject and at least five years experience in preparing reports or environmental monitoring. 4. International expert services for environment will be provided through the design and supervision contract to support the PIU to prepare an environmental impact assessment in accordance with the requirements of the Ministry of Environment, Lands and Agricultural Development in Kiribati. The consultant will support the PIU in its application for an environmental license for the tranche 1 project. The approved environmental monitoring plan will be included in the civil works bidding documents and incorporated into the construction contracts. 5. During the construction phase, national expert services will be provided through the supervision contract for monitoring the implementation of the environmental management plan by the civil works contractor. Monthly compliance reports will be prepared and submitted to the PIU and will be incorporated into the quarterly progress reports to ADB. The civil works contract will contain appropriately scaled remedies for noncompliance. 6. In addition, expertise in (i) geotechnical engineering, (ii) land surveying, and (iii) quantity surveying may be required.