ESTABLISHMENT AND OPERATION OF THE PEMSEA PARTNERSHIP FUND

Transcription

1 22 June st EAS Partnership Council Meeting Agenda Item: Technical Session ESTABLISHMENT AND OPERATION OF THE PEMSEA PARTNERSHIP FUND Introduction 1. The Regional Programme Office has completed a comprehensive review of various operating arrangements and experiences in the region concerning the transition of donor-supported projects into self-sustaining corporate entities. In particular, the review was conducted with due consideration to the establishment of a mechanism that could serve as the recipient of fees, revenues, grants and donations for deposit into, and use by, the PEMSEA Partnership Fund. The analysis included literature reviews and interviews with representatives of a number of organizations and institutions that have established such funds, or have created mechanisms that transformed donor-supported initiatives into selfsustaining entities. Among the organizations interviewed and contributing input to the review were: 1) UNDP; 2) UNOPS; 3) ASEAN Center for Biodiversity (ACB); 4) Asian Development Bank (ADB); 5) International Rice Research Institute (IRRI); 6) the World Fish Center and 7) Development Network (DEVNET). This paper summarizes the outcome of the review and seeks a decision from Council on the way forward. Background 2. The PEMSEA Partnership Fund (Fund) is a component of the regional mechanism for the implementation of the SDS-SEA, as established in the Haikou Partnership Agreement, which was signed in Haikou, P.R. China in The Fund is envisioned as a vehicle for reducing and removing disparities in technical, scientific and management capacity at the national and sub-national levels, through capacity development and knowledge transfer initiatives and events. 4. The EAS Partnership Council will oversee the management of the Fund. The Executive Committee will be tasked with directing the Fund intersessionally, while the day-to-day management and implementation of Fund-sponsored projects will be the responsibility of the PEMSEA Resource Facility. Funding Sources 5. The proposed sources of revenue for the Fund include: a) donations from PEMSEA State and non-state partners; b) grants from international agencies and organizations; c) sale of PEMSEA publications; d) registration fees for PEMSEA-organized events, including the EAS Congress; e) provision of technical services on a cost recovery basis, including training and technical Page 1 of 6 pages

2 assistance, as appropriate; and f) development and implementation of new projects. 6. Initial capital for the Fund will come from the proceeds of the existing Trust Account of the Regional Programme amounting to USD 495,000.00, representing registration fees from the EAS Congresses 2003 and 2006, and income from the sale of publications, training workshops, and technical assistance projects completed by the RPO. Use of the Fund 7. The Fund will be used to finance capacity development initiatives in support of SDS-SEA implementation. The PRF, in collaboration with national and subnational stakeholders, will assess capacity development needs and priorities and prepare a list of eligible project activities and budget estimates for review and approval by the Executive Committee. Project proposals will then be solicited, prepared, reviewed and submitted to the Executive Committee for final endorsement, prior to project implementation. 8. In addition, Funds may be earmarked by donors/capital providers for specific projects. Such projects shall contribute to the realization of the SDS-SEA objectives and work program adopted by the EAS Partnership Council. Fund Structure 9. The Fund will operate initially in a sinking fund mode. The sinking fund is not reinvested, except by way of deposits in interest-bearing accounts. Any income derived by way of interest on deposits will be deemed a creditable contribution to the Fund by the grantor or donor to the Fund. 10. In the future, consideration may be given to other operating modes, such as an endowment fund or revolving fund. An endowment fund represents the donations or grants that are general in purpose and not earmarked for specific project activities. The funds are placed in interest-bearing accounts or invested wisely in marketable securities, for example, as a Fund Manager may deem fit. Only the interests on the funds are used to finance project activities and administrative costs. 11. A revolving fund is expected to be expended and replenished from time to time. What is crucial in setting up a revolving fund is the identification of a regular stream of funds from which to replenish the revolving fund, for example the operation of PRF Services on a full cost-recovery basis. Legal Requirements 12. Management and administration of the Fund must be within a recognized legal framework. At present, the PEMSEA Resource Facility does not have its own legal personality, but operates within the legal frameworks of UNDP (PRF Secretariat Services), IMO (Regional Programme Office), and, with the start-up of the new GEF project, UNOPS (PRF Technical Services). Page 2 of 6 pages

3 13. IMO will be exiting as Executing Agency of the PEMSEA Regional Programme in September Thus, the existing Regional Programme Office Trust Account will be closed. 14. The UNDP has not been able to get approval to establish a separate Trust Account for the PEMSEA Partnership Fund. Thus, operating a Fund within the UNDP legal framework would entail similar procedures and administrative obligations as the current Cost-Sharing Agreement (CSA) modality being utilized by China, Japan and RO Korea to finance the PRF Secretariat Services. While this modality has been helpful in facilitating government financial support to the PRF operation, it is limited in its capacity with respect to handling and managing other sources of income (e.g., income from new projects; sale of publications; cost-recovery activities of the PRF). In addition, there is an administrative/management fee of 8% plus direct expenses associated with the UNDP account. 15. The UNOPS has provided verbal confirmation that a Trust Account could be set up within their legal framework. The Trust Account would be managed and administered by the UNOPS for a fee of no less than 7% plus direct expenses. The Trust Account would receive government and donor funds through contractual agreements with, or approved by, UNOPS. Similarly, income from technical assistance and training activities could be deposited into the Account. Use of the Account funds (i.e., the Partnership Fund) would be managed by UNOPS, upon the recommendations of the EAS Partnership Council/Executive Committee. 16. The UNOPS option provides the Council with a short-term solution to closing and transferring funds from the IMO/Regional Programme Office Trust Account. However, it does not contribute to the longer-term goal of transforming PEMSEA from the existing project-based arrangement within the UN framework, to a selfsustained and effective regional mechanism with the mandate to pursue SDS- SEA implementation, as confirmed in the Haikou Partnership Agreement. 17. A third option would be to set up a recognized legal entity for the management and administration of the PEMSEA Partnership Fund, such as a PEMSEA Resource Facility, Inc. (PRFI). The PRFI would be the legal mechanism for receiving fees and revenues generated by the PRF, as well as grants, donations and other potential funding, for deposit into the PEMSEA Partnership Fund. The PRFI would also have the legal personality to sign contracts with Partners and collaborators for projects and activities related to SDS-SEA implementation. 18. The executing arm of the PRFI would be the PRF. In other words, the PRF would be tasked with managing and implementing all projects and activities funded via the PEMSEA Partnership Fund. 19. The establishment of the PRFI parallels an arrangement previously set up by the UNDP and the UN Fund for Science and Technology Development (UNFSTD). The arrangement involved the implementation of the UN Technological and Trade Information Promotion System (TIPS), which began as a UN-sponsored project, and evolved into a global technology support program for exchange of information on trade and investment opportunities between companies in Page 3 of 6 pages

4 developing countries. In 1986, the two UN agencies helped to organize DEVNET, a non-governmental organization based in Rome, whose role was and continues to be the management and development of TIPS. DEVNET receives financial support from government and non-government sources, and executes countryspecific services in 31 countries. A major contributor to TIPS Asia is the European Union, with DEVNET offices now located in China, Indonesia and Philippines. UNDP no longer has any significant role in the financing or direction of TIPS. 20. In a similar fashion, the PRFI would be registered as a non-stock and not-forprofit organization operating under the laws of the Philippines for the purpose of building regional capacities in integrated coastal and ecosystem-based management. The choice of the Philippines as the home country of the PRFI is most logical as the Philippines has been hosting the Regional Programme for the past decade, and has committed to continue hosting the PRF. The PRFI would be housed at the PRF Office and would receive administrative and technical support from the PRF. 21. The process of obtaining the Certificate of Registration from the Philippine Securities and Exchange Commission (SEC) will take from one to two months. Upon registration with the Philippine SEC, the PRFI would acquire juridical personality with legal capacity. It would have a corporate life or existence of 50 years commencing from the time the Certificate of Incorporation is issued in its favor. 22. As a Philippine-registered NGO, the PRFI is exempt from income tax on donations, grants, and gifts, provided its net income will not inure to the benefit of any individual. Profits generated from business activities would be taxed, regardless of the disposition of the income. Thus, tax exempt entities would be subject to the 34% corporate income tax on unrelated and recurring business income. PRFI Linkages 23. The PRFI would form part of the PEMSEA regional mechanism. Operating outside the UN framework, the PRFI would receive fees, revenues, grants, donations and other potential funding for deposit into the PEMSEA Partnership Fund. The PRFI would have the legal personality to sign contracts with Partners and collaborators for projects and activities related to SDS-SEA implementation. 24. The executing arm of the PRFI would be the PRF, which would be tasked with managing and implementing all capacity development projects and activities funded via the PEMSEA Partnership Fund. 25. The corporate powers of the PRFI would be exercised by a Board of Trustees consisting of a minimum of seven (7) members, including the three EAS Partnership Council Chairs and the PRF Executive Director as ex officio members. The three remaining members of the Board of Trustees would include representatives of State and non-state Partners of the EAS Partnership Council with residency status in the Philippines (e.g., the Secretary of DENR Philippines). This arrangement would result in a Board of Trustees with direct linkage to the Page 4 of 6 pages

5 EAS Partnership Council, and comprised of a majority of Philippine residents as required by law. 26. The work program of the PRFI would be developed and implemented in accordance with the decisions of the EAS Partnership Council. For the management of the PRFI and the Fund, the Board of Trustees would consult and work closely with the PRF, as well as seek policy guidance from the EAS Partnership Council. 27. The PRFI and PRF would be complements of each other. For the implementation of specific projects, the PRFI would request the provision of technical, scientific, legal, administrative and management support services from the PRF on a cost-recovery basis. 28. The following diagram illustrates the organizational arrangement involving the EAS Partnership Council, PRF, PRFI and the PEMSEA Partnership Fund. Actions for the Consideration of the 1 st EAS Partnership Council Meeting: 29. The Meeting is invited to consider: a) the concept of the PEMSEA Partnership Fund, including the objective, potential funding sources, use of Fund resources, and Fund structure; b) the legal requirements for the establishment, operation and management of a PEMSEA Partnership Fund; and c) the management, administrative and financial implications of the different options that meet the legal requirements for establishing the Fund, with due Page 5 of 6 pages

6 consideration to the short- and long-term objectives of PEMSEA, including the goal of transforming PEMSEA into a self-sustaining regional mechanism. 30. The Meeting is invited to decide on the establishment of the PEMSEA Partnership Fund within the legal framework that it considers most appropriate. 31. Based on the decision, the Meeting is invited to consider the following actions: a) Request the Executive Committee to oversee the planning, development and establishment of the PEMSEA Partnership Fund, within the legal framework as decided by the Meeting, and to report the progress to the next EAS Partnership Council; b) Request the PRF Secretariat Services to prepare and facilitate the necessary organizational arrangements, documentation and approvals for the establishing, managing, administering and implementing the PEMSEA Partnership Fund, and report the progress to the next Meeting; c) Request the PRF Secretariat Services to prepare a manual of operations and a work program of the PEMSEA Partnership Fund, including a list of potential projects and activities to be financed by the Fund, for review during the next Meeting. *** Page 6 of 6 pages