EUR 14,100,000 for budget support. EUR 700,000 for complementary support Budget support Sector Reform Contract. Budget Support

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1 ANNEX 1 of the Commission Decision on the Annual Action Programme 2013 in favour of Cooperative Republic of Guyana Action Fiche for Sea and River Defence Budget Suppport 1. IDENTIFICATION Title/Number Total cost Sea and River Defence Sector Budget Support Programme CRIS number: 2008/21401 Total amount of EDF contribution EUR 14,800,000 of which Aid method / Method of implementation Type of aid code EUR 14,100,000 for budget support EUR 700,000 for complementary support Budget support Sector Reform Contract A02 Sector Budget Support Markers BSAS DAC-code Sector Flood prevention from the Sea Aid method / Method of implementation Complementary support Partially decentralised management with the Co-operative Republic of Guyana DAC-code Sector Flood prevention from the Sea 2. RATIONALE AND COUNTRY CONTEXT 2.1. Summary of the action and its objectives The overall objective of the Sea Defence Policy is to reduce the risk of flooding and the loss of land in the coastal zone. The purpose of the EDF sector budget support (SBS) is to provide additional funding to support the sea defence investment and maintenance programme of Guyana through the implementation of the rolling five year plan and to improve implementation capacity. Sea defence breaches will always remain a risk, due to severe weather events, but improvements in overall condition of sea defences, particularly in vulnerable areas, together with improved response capacity will reduce the need for emergency interventions. 1

2 2.2. Country context Main challenges towards poverty reduction/inclusive and sustainable growth Guyana has an income per capita of USD 3,148 1 in 2012, and is classified as a low middle income country. Up-to-date figures regarding poverty are not available. The latest figures were presented by the government in 2007 and were based on a Household Income and Expenditure Survey. Moderate and extreme poverty rates declined from 43% and 29% in 1992 to 36% and 18.6% in 2006, respectively 2. Most recent figures on unemployment date back to 2006 when a Household Budget Survey showed an unemployment rate of 10.7%, an underestimated figure. Guyana moved up one place in the 2013 Human Development Index ranking (118 out of 187 countries with an HDI average of 0.636), and is considered to be a medium human development country. The Government's 2011 report for Guyana on the status of the Millennium Development Goals (MDG) objectives, states that the country made reasonable progress towards attaining most of the goals, but the pace of progress may be insufficient to meet some of the targets set for The most significant progress has been made in reducing hunger, promoting primary education, providing basic amenities to low income households, and empowering women. In spite of a 7%increase in revenue, the overall fiscal deficit continued to widen in 2012 to 4.5% of GDP (4.4 in 2011 and 3.6 in 2010) falling short again of the budget target on the account of a 17.1% increase on non-interest current expenditure. The economy of Guyana continues to expand, although at the slower pace of 4.8% in 2012 vs. 5.4 in 2011, reversing the trend observed in the first half of the year which was 2.8%. Gold has become Guyana's biggest foreign exchange earner with a 20.8% increase in production in Exports are concentrated on a few primary products: gold (35%), rice and bauxite (13% each) and sugar (12%). The IMF asks the Government of Guyana in its 2012 Article IV Report to continue to pay attention to improving the business environment for private enterprises. According to the 2013 World Bank IFC Doing Business indicators, Guyana is ranked 114 th of 185 countries, with no reforms to make it easier projected. The balance of payments reflected a surplus in 2012 (USD 12.4 million), compared to a deficit in 2011 (USD 15 million), mainly as a result of improvement in the capital account due to higher foreign direct investment, which increased by 19% to USD 294 million in Fundamental values Guyana is a consolidating democracy with a multi-ethnic, multi-religious population and a unique, inclusive governance model. This inclusive governance model has been enshrined in Guyana s revised 2003 constitution and supported by parliamentary and legislative reforms. In the PRSP, the Government recognized that 1 Budget speech, ibidem. 2 Country Assistance Strategy for Guyana for the period FY , The World Bank, April 15,

3 in order to generate sustained growth, priority needed to be placed on removing bureaucratic bottlenecks and improving Public sector Management. Considerable progress has been made in building domestic capability in the governance infrastructure and several sectors of the economy. To fully realize Guyana s development potential there needs to be continued investment in a second generation set of governance reforms and infrastructural development to build more trust and confidence in the system and higher-value investment. These reforms and investments include modernizing the public sector, improving citizen s security, improving the justice administration system, and deepening inclusivity in political governance. Important problems remain in areas such as violence against women and children, intolerance of LGBT, human trafficking. Crime seems to be on the rise in general. Furthermore, progress has been made in legislation (e.g. family law), and Guyana is on track to achieving many of the Millennium Development Goals (such as primary education). Local elections have not been held since 1994, but key legislation to enable it has recently been adopted by Guyana s Parliament. The bills are yet to be signed by the president and no date has been fixed so far. The EU and the Government of Guyana will continue their political dialogue enshrined in the Cotonou Agreement mainly in its Articles 8 and 9 considering the "Respect for all human right and fundamental freedoms, including respect for fundamental social rights, democracy bases on the rule of law and transparent and accountable governance are an integral part of sustainable development" Eligibility for budget support Public policy a) The Government of Guyana has complementary strategy documents. The poverty reduction agenda for is rooted in the Government's vision of the medium-term that focuses on (i) high value employment creation; (ii) improved standards of living; (iii) dramatic reduction in poverty; (iv) the rule of law and public safety; (v) protection of individual constitutional rights; and (vi) investment in human resource development. The path to attaining this vision is dealt with in several interlocking strategies that include the Poverty Reduction Strategy Paper , the National Competitiveness Strategy; Education Sector Strategy, Health Sector Strategy, Low Carbon Development Strategy and the National Development Strategy. b) Policy relevance: A Sea and River Defence policy draft was prepared with EDF assistance in 2008 and was approved by Cabinet in June The objective is to reduce the risk of flooding and the loss of land in the coastal zones therefore minimizing the likelihood of damage to social and economic infrastructure...through rehabilitation, maintenance and management. The policy considers the sea defences to be made up of three pillars: man-made and 3

4 natural defences, drainage and irrigation and conservancy dams (for storage of flood and irrigation water) and included in its recommendations a revised role of the Sea Defence Board (SDB) as an oversight body, continued strengthening of the Works Service Group (WSG) and National Drainage and Irrigation Authority (NDIA), and improved focus on maintenance. The coming years' planned budget projections for sea defences do clearly show a stronger focus on maintenance. c) Policy credibility: Until 2009 the Sea and River Defence Division (SRDD) submitted a yearly budget proposal to the Ministry of Finance with a detailed breakdown into projects. These budget proposals were designed to match the expected resources, but this was not always the case. However, since 2010, the budget proposal has been restructured to specifically identify maintenance, rehabilitation, reconstruction and included allocations for mangrove R&D and public awareness. The Sea and River Defence Sector Implementation Plan outlines the budget projection for the period 2013 to 2017 with a detailed breakdown of the specific planned allocations for undertaking various activities under the sector, equivalent to an annual allocation double of what was allocated annually over the past 6 years. The budget projections for include a classification of the work to be carried out with reference to the current condition of each section. This is heavily focussed on "critical" and "poor" sections, where "critical" indicates remaining life of 2 years or less. Thus, the bulk of the investment is for the improvement of sections where breaches may be imminent and funding is limited for sustainable, maintenancebased programme in the medium-term. However considerable lengths of rehabilitation and maintenance are also catered for. In view of the above, the Delegation considers that there is a credible and relevant sector development strategy that supports the objectives of poverty reduction, sustainable and inclusive growth, and democratic governance Macroeconomic policy a) The IMF asks the Government of Guyana in its 2012 Article IV Report to continue to pay attention to improving the business environment for private enterprises. According to the 2013 World Bank IFC Doing Business indicators, Guyana is ranked 114 th of 185 countries, with no reforms to make it easier projected. The Private Sector Commission (PSC) is concerned about this low ranking. The Transparency Institute of Guyana and PSC have agreed to join efforts aimed at eradicating corruption in Guyana through, among others, ensuring that Government appoints and funds the Public Procurement Commission and the Integrity Commission as well as the services of the Ombudsman. The banking sector remains, according to the draft IMF Article IV report, liquid, despite continuous private sector credit expansion, at 20% in 2012, helped by a reduction in the lending rate. b) The Bank of Guyana promotes price stability and external balance through prudent and timely policy action aiming at liquidity absorption to mitigate inflationary pressures. The classification of Guyana's risk of debt distress is kept at moderate, despite a recent deterioration in the fiscal outlook. Regarding 4

5 medium term fiscal consolidation efforts, there is no indication that the Government of Guyana will deviate from the path it has followed over the last years. At the same time, a formal MTEF, a methodology that guides reprioritisation of spending and allocation of fiscal space to new spending initiatives, is not yet in place, though some elements are evolving through the annual budget preparation process. A system of forward spending estimates (or baseline projections) is not yet fully in place, taking into account factors such as cost drivers and the recurrent cost implied by investments already committed. On the income side similar observations can be made with regard to medium term frameworks, although the government's overall aim is to improve tax collection and to strengthen administrative capacities. The 2012 budget deficit is slightly higher in 2012 at 4.5% of GDP compared to the 4.4% of For 2013, the overall fiscal deficit is targeted to decrease at 4.6% of GDP from 4.7% in c) The policy framework to improve fiscal sustainability is discussed in detail at part A of the latest IMF Article IV report, concluding: "In staff s view, continued fiscal consolidation is required to reduce the risk of procyclical policy and to rebuild buffers within the context of a strengthened medium-term policy framework. The overall fiscal effort needs to be stronger to underpin a consolidation strategy, focused on debt reduction. In particular, to contain the NFPS deficit, the authorities would need to improve public enterprise performance, with financial assistance conditional on achieving specific performance targets, and acceleration of plans to bolster operational and administrative capacity. The authorities should also intensify monitoring of public sector investment projects, with a view to ensuring value for money, especially in high profile projects. Meanwhile, staff welcomed the authorities initiative to pay down Petrocaribe debt through rice exports d) In spite of the global financial and economic crisis, the economy of Guyana continued to grow compared to a few years ago and compared to many countries in the region. The important driver for growth in 2012 remained mining and quarrying (14.8% in 2012 vs. 19.2% in 2011). Agriculture records a limited growth at 3.6%, on account of an 8%decline in sugar, compensated by well performing rice and fishing sectors (respectively 5 and 15.5%). For 2013 the Government of Guyana expects a growth of 5.3%. The Government recognizes the need for improvement of Guyana's infrastructure to facilitate continuation of robust economic growth. The development of the Amaila Falls Hydropower Plant is one of the most important projects in that respect. Although the plant would potentially reduce costs of energy, facilitating business operation in Guyana, the projects also come with risks, linked to institutional capacity and debt sustainability. In general, and in line with the IMF, the macroeconomic outlook for 2012 and the medium term remain generally positive. The authorities policies have supported macroeconomic resilience, fiscal prudence and sustained growth. Therefore, the Government is putting in place credible and relevant macroeconomic policies aiming at macroeconomic stability. 5

6 Public financial management a) Progress had been made at the time of the 2007 IFA in response to the strengthening of the underlying legislative and regulatory framework in the early 2000s (enabled by amendments to the Constitution). The strengthened framework enabled the introduction of IT-based PFM systems (IFMAS, payroll control and revenue administration) in 2004 that resulted in significant strengthening of budget execution and accounting and reporting systems. Complementing the strengthening of PFM systems in the executive branch of government has been a strengthened external scrutiny function. The external audit function has improved its effectiveness, helped by the Audit Act of 2004 and extensive technical assistance, first from Canadian International Development Agency (CIDA) and then from Inter-American Development Bank (IDB). The legislative oversight function has also improved in terms of scrutiny of audit reports, the Public Accounts Committee being able to increase its effectiveness in holding the executive branch of government to account. Progress in PFM reform continued to be made following the 2007 IFA through the bedding down of strengthening processes that had already started and partly in response to measures taken by the Government under the Action Plan agreed with development partners to address challenges identified through the IFA. b) The recent 2012 IFA/PEFA report recognizes four main areas where substantial challenges remain. Internal control systems lack strength in some areas and/or are not sufficiently complied with, resulting in the potential for inefficient and wasteful expenditure and leakage of funds at the expense of public service delivery. The annual reports prepared by the Audit Office of Guyana (AOG) highlight several compliance issues. (PEFA PIs 18-21, MAPS). The comprehensiveness and transparency of the budget could be furthered enhanced in the interests of greater accountability to stakeholders for the use of public funds. Accounting and reporting could be strengthened further. The external audit function and legislative oversight functions in terms of audit reports continue to improve. c) Assessment of the relevance and credibility of the PFM reform strategy(ies). The Government of Guyana has demonstrated commitment to reforms in the area of public finance management. The 1997 reforms in programme budgeting, key constitutional reforms in 2001 and legislative reforms in 2003 in the areas of fiscal management, procurement and audit have contributed to improve the PFM situation. Building on the utility of an action plan as a measuring tool, a PEFA 2013 Action Plan has been developed following the 2012 PEFA assessment which was undertaken as part of the comprehensive 2012 Integrated Fiduciary Assessment (IFA) (see above). The Government s PFM 2013 Action Plan has defined over 100 activities to be concluded over the period and reflects an ambitious set of actions to be taken by the Government in the area of PFM reform. The main focus of the actions is on the second generation types of reforms in light of the fact that the requisite legislative reforms have already been undertaken and the next five year period will focus on the need to create, strengthen and embed systems and processes 6

7 needed for effective articulation of and compliance with the legislative reforms. Strong emphasis has been placed on compliance and capacity building which are considered the priority means to validate and test the effectiveness of the reforms. Several fundamental drivers have led to the identification of the activities in the Action Plan, foremost amongst which is the Government s will to ensure greater accountability. The activities in the Action Plan are based mainly in PEFA indicators and in specific instances, where agreed, actions were identified by the Government of Guyana to further improve and strengthen the systems and capacity in areas of internal and external audit, procurement, multiyear perspective in budget planning, predictability and control and internal controls. The rationale the Governement has applied for the selection of indicators is as follows: Budget management: Work on the information contained in the Government of Guyana s Estimates of Expenditure and Revenue have improved over the years while medium term planning and budgeting has been recognised as an area in need of further strengthening in order to make the discussions at the sectoral level more meaningful. In this regard, the activities highlighted for budget management, reflect where further improvement is needed while being consistent in achieving improved scores in specific areas including the provision of additional information within the published budget documents. Predictability and Control of Budget Execution: Since 2004 the Govenrment has introduced computerised systems for the management of expenditute and revenue, IFMAS and TRIPS respectively. The areas of accounting administration and revenue management in this 2013 Action Plan focus on capacity building and training to ensure that systems are improved and documented to secure greater compliance and efficiency in the systems and greater value for money. Procurement: Legislative reforms undertaken in Guyana have placed the country in an advanced position in the region concerning single procurement legislation. Having concluded the major reforms, the activities now build on the achievements over the last five years and aim at institutionalising capacity building and training. Further strengthening on data collection and analysis is foreseen, also embedding the reforms to ensure that there is improved public awareness on how to access information, that the procurement system is utilised effectively, including the protest mechanism and that more information is available on awards on the national procurement website. Internal audit: The Government has declined that the strengthening of internal audit will use a model of a strong unit housed at the Ministry of Finance that oversees the internal audit function for the entire central government. The activities identified focus on the operationalization of this new Unit and the building of capacity within it and across central government with a strong emphasis on deriving greater accountability and compliance with internal 7

8 control systems. Further, the building of a culture or reporting, feedback and follow up to ensure greater compliance with procedures is planned to be established. External Audit: Having achieved improved capacity over the last five years, the focus is now on expanding work on performance audit, compliance with audit recommendations and further strengthening of staff in control-based audit methodology. The five-year 2013 Action Plan for PFM reform is considered as part of the Government's engagement with PFM reform. It can be considered as credible and relevant, and constitutes the basis for the assessment of the EU eligibility criteria and achievement of agreed reform efforts Budget transparency and oversight of the budget The comprehensiveness and transparency of the budget could be further enhanced in the interest of greater accountability to stakeholders for the use of public funds. The fiscal risk posed by public enterprises is potentially high, particularly in the case of GUYSUCO and GPL. Transparency could be strengthened through the annual preparation of a consolidated fiscal risk report, as a stand-alone report accompanying the Budget estimates. The lack of transparency in year adjustments can be significant. In addition, the budget classification structure is reasonably clear, though complex, for current expenditure is reasonably clear, but it is not for capital expenditure. Greater clarity would be achieved through putting the coding structure on the same basis as for current expenditure. However, the quality of fiscal information available to the public has improved in some respects in recent years, mainly through the availability to the public of audit reports and half-year budget performance reports. The latter, starting in 2007, have been included in the Mid-Year Reports (MYR) presented by the Minister of Finance to the National Assembly. The information provided, however, is only at a highly aggregated level. Very little information on procurement contracts is provided to the public. The Government publishes a brochure Budget at a Glance which attempts to explain the annual budget to the layman in terms that are easier to understand than the detailed budget estimates. This is commendable, but the readability of the brochure could be significantly enhanced through the use of pictures, charts and tables. Currently, the brochure is all text. A system for reporting on financial and physical resources received by primary service delivery units (e.g. primary schools and health care units) has not yet been developed, and represents an important limitation in budget management and the monitoring of requirements versus resources provided to meet them. The Government publishes the Executive's Budget Proposal on the day it is submitted to parliament (in 2013, March 25). The Budget Speech as well as the different volumes supporting the proposal are available on the website of the Ministry of Finance: 8

9 2.4. Lessons learnt The EU has a long association with the sea and river defences in Guyana. It became evident that poor capacity and high staff turnover at the Sea and River Defence Division (SRDD) compromised project impact (8 th EDF Sea Defence project evaluation). An institutional assessment was launched and major changes were instigated in the run-up to the 10 th EDF, including integration of the SRDD into the WSG. Sea defence investments have in the past been reactive, often dealing with emergencies or critical structures rather than planned and maintenance-based. However with the changed approach under the 9th EDF programme actual rehabilitation and preventive maintenance has become an integral part of the planning for five year rolling periods. The Strategic Environmental Assessment carried out to study the effects of the new sea defence policy made many recommendations, including investigating alternative sea defence solutions such as mangroves, improving links between the relevant agencies or reviewing roles in some cases, improved data collection and analysis. Coordination across the sea defence "sector" as a whole (sea defences, drainage, mangroves etc) has been difficult, with overlapping responsibilities of various agencies. The sector policy strives to increase the mandate of the Sea Defence Board and with the five year plan for implementation there is a solid basis on which to plan and monitor development within the sector Complementary actions The EUR 17,000,000 9 th EDF sea defence works included a project for the rehabilitation and maintenance of 19.5 km of sea defences, which was substantially completed in August, The project provided considerable capacity building under a large Technical Assistance simultaneously with the implementation of the works. Guyana is also benefitting from a EUR 4,667,000 sector budget support program funded under the EU Thematic Strategy for Environment and Sustainable Management of Natural Resources (ENRTP) targeted at rehabilitation and management of mangroves areas. This on-going program will contribute both to forest protection and management (combating climate change) and to sea defence. The EU is currently the only donor for sea defence infrastructure, but the IDB, WB and DFID support the other "pillars" that define the sea defence sector; IDB contributes mainly to irrigation (and drainage) and WB and DFID to the conservancy dam (retaining surface water in the swamplands southeast of Georgetown) Risk management framework The macro-economic situation in the country remains positive despite the external shocks due to the global economic downturn. Budget support in Guyana has had mixed success, with some delay or review of modalities due to the EU s view that Guyana did not maintain eligibility or meet indicator targets. The eligibility situation was reassessed in April 2013 on the basis of a new PFM Action Plan based on the weaknesses identified by a new IFA/PEFA assessment carried out in The PFM Action Plan includes tangible deliverables that have to be met in order to demonstrate eligibility. The key areas that need to be addressed in the area of PFM reform are 9

10 related to compliance, and internal as well as external control. Special attention is being paid to procurement issues and the linkage between procurement and sector plans as well as the establishment of a complaints mechanism. Sea defence sector performance and delivery on indicators will depend on efficiency of the implementation of the five year implementation program. This is highly dependent on transparency in public procurement, unexpected failures (emergencies) and adequacy of financial allocations for sea defence to meet budgeted works. To address remuneration and quick staff turnover, Cabinet approved in 2012 a revised organisational structure for the WSG and the supplementary provision to cover costs filling positions and the reorganisation. Corruption remains important in Guyana, in 2012 the country was rated on place 133 (out of 174) by transparency international on the latter s corruption index, only Haiti having a lower ranking in the Caribbean. On the World Bank s Corruption Perception Index, Guyana ranks 39 out of 174, which is 24.3% worse than the average for all Corruption by Country. The corruption risk will be mitigated by the package of measures (100 actions) contained in the PFM Action Plan, PFM Policy Dialogue, support for watchdog function of civil society and parliament. 3. DETAILED DESCRIPTION OF THE BUDGET SUPPORT CONTRACT 3.1. Objectives General Objectives: to reduce the risk of flooding and the loss of land in the coastal zone. Specific objectives: to support the sea defence investment and maintenance programme of Guyana through the implementation of the rolling five year plan and to improve implementation capacity Expected results (1) Sea defence multi-annual maintenance and investment plan implemented (2) Sea defence condition monitoring, data collection and data management system fully operational (3) Improved capacity at Work Service Group (4) Sea Defence Board oversight function to include six monthly sector review (5) Improved understanding of mangrove survival and sustainability (included in SD policy, SD investment plan and Mangrove Action Plan, also supported by EC through GCCA) (6) Increased public involvement in flood prevention 10

11 Technical assistance is foreseen in order to assess performance Rationale for the amounts allocated for budget support The total amount allocated to the Sea defences/coastal management under the NIP is EUR 14,800,000 of which 100% is to be delivered under the present budget support programme. This amount is based on: Financing needs of the partner country; Commitment of the partner country to allocate national budget resources (including EU budget support) in line with development strategy and objectives and to follow standard national budget procedures; Result orientation in the partner country's development strategy including a monitoring system; A detailed implementation plan for the sector policy developed by the Government of Guyana in August, 2012, which outlines a comprehensive programme for progressively fulfilling various aspects of the policy over the period 2013 to 2017, with a planned budget level ensuring a continued allocation at levels in line with past allocations inclusive of donor funding. The 2013 budget includes a capital and recurrent expenditure allocation for the sector in line with the five year implementation plan (GYD 1.71 billion). The fixed tranche 2013 represents 41% of this amount Main activities The main activities to implement the budget support package are policy dialogue, financial transfer, performance assessment, reporting and capacity development Budget Support Monitoring of the shore zone including sea defence structures will be carried out by the Sea and River Defence Division of the Works Services Group (Ministry of Public Works and Communications), using a large team of monitoring officers (Rangers) who will carry out site and condition inspections on 160km of man-made sea defences. This will provide input for the annual update of the maintenance and investment programme submitted to the Ministry of Finance for input to the national budget Complementary support Funds are allocated to recruit Technical Assistance throughout the main part of the program, to assist the WSG in monitoring performance, assess compliance with the agreed specific indicators for the variable tranche, provide capacity building on the job and develop visibility activities. Funds allocated under the TA programme will also be utilised to support research and capacity building initiatives to the SRDD on the technical and engineering 11

12 aspects of mangrove protection and natural regeneration. Of particular importance will be the acquisition of data and creation of a database to capture information on movement of the mud banks. Data from the National Mangrove Management Programme where the use of geo-tube (detached breakwater), low-cost groynes and low-crest structures were piloted in selected areas will be analysed and the results will be closely monitored to determine the most effective means for creating the appropriate environment to enhance the protection and natural regeneration or mangrove forests Donor coordination Overall donor coordination in Guyana is carried out through the Ministry of Finance Project Cycle Programme Management Unit (PCMU). The European Union (EU) through the European Development Fund (EDF) has had a long history of involvement in the reconstruction of critical lengths of the sea wall and has been contributing substantially to the development of this important sector. Since the commencement of the 7th European Development Fund (EDF) Programme in Guyana the EU has invested in excess of EUR 40,000,000; committing EUR 12,000,000 in the 7 th EDF, EUR 20,000,000 in the 8 th EDF and more than EUR 17,000,000 in the 9 th EDF. After a period of considerable donor involvement in the sector from the mid-nineties when the conditions of the sea defences were critical, the EU is at present the only remaining donor supporting the sector. The Ministry of Finance through the PCMU meets with the EU Delegation regularly at bi-lateral level. Updates and review of the EU programmes are usually done at the Portfolio Review meetings chaired by the Deputy National Authorising Officer who is also the Head, PCMU at the Ministry of Finance. In addition to the monitoring and reporting requirements on the implementation of the EDF programmes, the Ministry of Finance is responsible for submitting the necessary information required to confirm Guyana s eligibility for sector budget support under the EDF Stakeholders The Works Support Group, the implementing agency is the primary stakeholder. Other main stakeholders are the Guyana Lands and Surveys Commission, which administers land use, National Drainage and Irrigation Authority, responsible for drainage canals and kokers (sluices), the Sea Defence Board, which is concerned both with sea defence coordination and land-use permits in the sea defence zone, the Mangrove Action Committee and the Environmental Protection Agency (EPA) Guyana which is concerned with the monitoring social and environmental issues. These stakeholders are represented on the Sea Defence Board and have as such through the board been involved and informed on the process of development of the programme Conclusion on the balance between risks (2.6.) and expected benefits/results (3.2.) The risks identified related to Public Finance Management should be mitigated by close monitoring of the new PFM Action Plan and a reinforced policy dialogue between the delegation and the national authorities. The stakeholder sector review 12

13 that is being introduced with this programme, together with the assessment of variable tranche indicators and the five year implementation plan, shall provide for close monitoring of the sector s performance. The intervention of the EU will reduce sector policy risks and ensure that sufficient resources are directed towards the sector. Thus, it is envisaged that Guyana will have improved the sea defence management and lower risk-exposure to flooding. 4. IMPLEMENTATION ISSUES 4.1. Financing agreement In order to implement this action, it is foreseen to conclude a financing agreement with the partner country, referred to in Article 184(2)(b) of the Financial Regulation or in Article 17 of Annex IV to the Cotonou Agreement Indicative operational implementation period The indicative operational implementation period of this action, during which the activities described in sections 3.4. and 4.4. will be carried out, is 60 months, subject to modifications to be agreed by the responsible authorising officer in the relevant agreements Criteria and indicative schedule of disbursement of budget support a) The general conditions for disbursement of all tranches are as follows: Satisfactory progress in the implementation of the Sea and River Defence policy and continued credibility and relevance thereof; implementation of a credible stability-oriented macroeconomic policy; satisfactory progress in the implementation of the PFM Action Plan; satisfactory progress with regard to the public availability of timely, comprehensive and sound budgetary information; b) The specific conditions that may be used for the variable tranches will be related to (i) the production of a detailed annual implementation plan showing capital and maintenance works; (ii) documentation of continued implementation of the annual WSG capacity building plan; (iii) the continuous performance of the annual sea defence condition survey of all manmade sea defences; (iv) the implementation of the Annual Infrastructure Programme as outlined in the Sea and River Defence Sector Policy Implementation Plan and (v) sufficient budgetary allocation outlined for the corresponding years in the budget presented by the Ministry of Finance to the Parliament. The indicative schedule of disbursements is summarised in the table below (all figures in EUR million) based on fiscal year of the partner country. 13

14 Tranches ( Million / Years) Total Fixed Tranche (Eligibility criteria) Variable Tranche Variable Tranche Variable Tranche TA/evaluation/visibility Total Details on complementary support Partially decentralised management with the partner country/joint management A part of this action with the objective to assist the WSG in monitoring performance, assess compliance with the agreed specific indicators for the variable tranche and provide capacity building on the job, will be implemented in partially decentralised management with the Cooperative Republic of Guyana in accordance with Article with Articles 21 to 23 of the 10 th EDF Financial Regulation 215/2008 according to the following modalities: The partner country 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 > EUR 50,000 and may apply ex post for procurement contracts 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 operating costs 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 The financial contribution does not cover the ordinary operating costs deriving from the programme estimates. The public finance management component will be implemented in joint management with UNDP through the signature of a contribution agreement in accordance with Article 29 of the Regulation (EC) No 215/2008 on the financial regulation applicable to the 10 th European Development Fund. The international organisation complies with the criteria provided for in the applicable Financial Regulation and is covered by a framework agreement concluded with the Commission (FAFA). The contractual model that will be used is a Standard Contribution Agreement. 14

15 The change of method of implementation constitutes a substantial change except where the Commission "re-centralises" or reduces the level of budgetimplementation tasks previously entrusted to the beneficiary partner country. In accordance with Article 262(3) of the Rules of Application, the partner third country shall apply for procurement rules of Chapter 3 of Title IV of Part Two of the Financial Regulation. These rules as well as rules on grant procedures in accordance with Article 193 of the Financial Regulation will be laid down in the financing agreement concluded with the partner country Scope of geographical eligibility for procurement The geographical eligibility in terms of place of establishment for participating in procurement procedures and in terms of origin of supplies and materials purchased as established in the basic act shall apply Indicative budget Module Amount in EUR thousands Third party contribution 3.3. Budget support Sector Reform Contract N.A Decentralised management with the Cooperative Republic of Guyana (incl visibility) 600 NIL 4.8. Evaluation & Audits 100 NIL Totals NIL 4.7. Performance monitoring Monitoring of the shore zone including sea defence structures will be carried out by the Sea and River Defence Division of the Works Services Group (Ministry of Public Works and Communications), using a large team of monitoring officers (Rangers) to carry out site and condition inspections on 160km of man-made sea defences. This will provide input for the GIS Based Shore Zone Management System and for the annual update of the maintenance and investment programme submitted to the Ministry of Finance for input to the national budget. The condition surveys for 2012 are nearing completion and have been used to establish the indicative infrastructure programme for the 2013 to All relevant stakeholders including the Works Services Group, Drainage and Irrigation Authority, Mangrove Action Committee and the Ministry of Finance will provide the required information to indicate compliance with the general and specific indicators. The EU Delegation will continue to monitor progress in the sea defence sector on a monthly basis. The Works Services group and NAO Task Force will provide all requested information regarding the agreed indicators which will facilitate close 15

16 monitoring. The EU Delegation also participates in the bi-monthly Sea Defence Steering Committee Meetings and will be provided with the minutes of pertinent discussions of the Sea Defence Board in connection with the development of the sector. This will provide a further basis for monitoring and promote discussions on the evolution on the implementation of the sector policy. The General Conditions relate to eligibility and must remain satisfied for each disbursement: 1. Stability oriented macro-economic policies are being implemented. 2. Satisfactory progress in the implementation of a credible and pertinent reform plan to improve public finance. 3. Sea and River Defence Sector Policy in place and under implementation in line with the five year implementation plan. The performance indicators for the calculation of variable tranche payments will be: 1. Production of a detailed annual implementation plan showing capital and maintenance works. 2. Annual WSG capacity building plan and continued implementation of the three year WSG restructuring plan. 3. Performance of the annual sea defence condition survey of all 160 km manmade sea defences. 4. Implementation of Annual Infrastructure Programme as outlined in the Sea and River Defence Sector Policy Implementation Plan or Expenditure of indicative budgetary allocation outlined for the corresponding year. A sector stakeholder review will be conducted twice a year, in order to assess the performance and the needs of the sector policy. This will feed both into the budgetary process and the performance assessment of the sector policy and more specifically the variable tranche indicators Evaluation and audit An ex-post evaluation of performance will be conducted after the operational period of the assistance. This will cover, among other points, validation of the data underlying the indicators and technical assistance, are planned. The Commission may decide to carry out an audit of all or parts of the programme Communication and visibility A budget for visibility actions will be integrated within the visibility and community action programme of the WSG. 16