Proposed Establishment of the ASEAN Australia Smart Cities Trust Fund under the Urban Financing Partnership Facility

Transcription

1 April 2019 Proposed Establishment of the ASEAN Australia Smart Cities Trust Fund under the Urban Financing Partnership Facility Distribution of this document is restricted until it has been approved by Management. Following such approval, ADB will disclose the document to the public in accordance with ADB s Public Communications Policy 2011.

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3 CURRENCY EQUIVALENTS (as of 13 February 2019) Currency unit - Australian Dollar (AUS$) AUS$1.00 = $ $1.00 = AUS$ Vice-President Director General Facility Manager Director Team leaders Team members Bambang Susantono, Knowledge Management and Sustainable Development WooChong Um, Sustainable Development and Climate Change Department (SDCC) Robert Guild, Sector Advisory Services Cluster, SDCC Vijay Padmanabhan, Director, Southeast Asia Regional Department (SERD) Manoj Sharma, Chief of Urban Sector Group, SDCC Joris van Etten, Senior Urban Development Specialist,(SERD) Ilaria Caetani, Principal Financing Partnerships Specialist, Office of Cofinancing Operations (OCO) Shinsuke Kawazu Senior Counsel, Office of General Counsel Michael John Lacambacal, Operations Assistant, SERD Don Nishimoto, Senior Financial Control Specialist, Controller Department Lara Arjan, Urban Development Specialist, SDCC Aldrin Plaza, Urban Development Officer, SDCC Antonio Ressano-Garcia, Principal Urban Development Specialist, SERD Trina Mari R. Samia, Associate Financing Partnerships Officer, OCO Mary-Ann Vargas, Operations Officer, SERD

4 CONTENTS Page I. THE PROPOSAL 1 II. BACKGROUND AND RATIONALE 1 III. OBJECTIVES 1 IV. SCOPE 2 V. CONTRIBUTION AMOUNTS AND FUND TRANSFER ARRANGEMENTS 3 VI. ADMINISTRATION ARRANGEMENTS 4 VII. RISK ASSESSMENT 7 VIII. THE PRESIDENT S RECOMMENDATION 7 APPENDIX: INSTRUMENT OF CONTRIBUTION 8

5 I. THE PROPOSAL 1. This requests for approval of the proposal to establish ASEAN Australia Smart Cities Trust Fund {AASCTF} (the Fund) under the Urban Financing Partnership Facility (UFPF) The Fund is a single-partner trust fund with an indicative contribution from the Government of Australia, through its Department of Foreign Affairs and Trade (DFAT) for AUS$ 20 million. II. BACKGROUND AND RATIONALE 3. More than half of Association of Southeast Asian Nations (ASEAN) Member States population reside in urban areas and an additional 70 million are forecast to live in ASEAN cities by Rapid urbanization in ASEAN countries has the potential to generate significant economic gains and through the benefits of economies of scale and network effects of agglomeration, this urbanization can enhance access to employment, productivity and incomes. 4. While rapid and unplanned urbanization can also undermine quality of life, exacerbate inequality, and cause environment stress, ASEAN s cities and utilities have an opportunity to mitigate the associated risks by capitalizing on the exponential growth of technology. The mass deployment of broadband infrastructure, mobile telecom penetration, and wireless connectivity across ASEAN countries provides an excellent opportunity for cities and utilities to plan, govern and finance urban basic services. 5. The emergence of digital technologies to transform cities is significant across the Southeast Asia (SEA) region. According to the McKinsey Global Institute (MGI), disruptive technologies (particularly mobile Internet, big data, cloud technology, the Internet of Things (IoT), and the automation of knowledge work), have the potential to generate between US$220 to US$625 billion in annual economic impact in the SEA region by Cities are typically at the frontier of new technology adoption given that their economies of scale allow providers to pilot new technology cost effectively (e.g., rolling out of fiber wire broadband or mobile data networks is more cost effective in dense population centers due to high fixed infrastructure costs) Advantages that technology provides in identifying smart solutions to tackle urban challenges include: operating systems using real time data from sensors and IOT, analyzing habitation patterns through socioeconomic profiles, understanding citizens needs, analyzing service usage patterns, analyzing climate change events, and forecasting future events. 7. With this understanding, urban planners and technology experts are promoting the concept of smart cities. A commonly used working definition of a smart city is a city that makes efficient and effective use of data, technologies and available resources to improve core functions of city planning, management and efficient service delivery, to engage more effectively with citizens and the private sector, and to strengthen inclusion and accountability. III. OBJECTIVES 8. The envisioned impact of the Fund is aligned with ADB s Strategy 2030 which includes an 1 Asian Development Bank, 2009, Urban Financing Partnership Facility: Establishment of the Urban Environmental Infrastructure Fund and Urban Trust Fund, Manila. 2 ASEAN Secretariat, 2018, ASEAN Sustainable Urbanization Strategy, Jakarta.

6 2 operational focus on building livable cities that are green, competitive, inclusive, and resilient, 3 and ASEAN s Sustainable Urbanization Strategy which aims to promote high quality of life, competitive economies, and sustainable environments. 4 The expected outcome of the Fund will be that through the adaptation and adoption of digital solutions, systems and governance in participating ASEAN cities are improved. IV. SCOPE 9. Output areas. The Fund will be the mechanism for facilitating and channeling the resources for eligible projects as well as any other activities that may be decided between DFAT and ADB for project preparation and implementation, financing and associated capacity development in the following output areas: a. Planning systems in participating ASEAN cities improved. The Fund supports cities to enhance their planning process for collecting, storing, analyzing and utilizing data on a geospatial platform. Activities may include, among others, (i) data interpretation using satellite imagery for analyzing spatial and temporal land use patterns vis-à-vis urban sprawl, building climate change resilience, water flow patterns, etc.; (ii) use of wireless communication, connected sensors, and IoT as tools for location intelligence; and (iii) crowd sourcing of data using a variety of applications and techniques. b. Service delivery in participating ASEAN cities improved. The Fund aids the promotion and use of integrated and smart network management systems to strengthen operational systems and to improve quality and efficiency of service delivery. Activities may include, among others, the use of information and communication technologies for real time operational management of assets, the use of algorithm-based and cloud-based hydraulic models, leak detection methods for better water resources management, wireless meter reading and the reduction of nonrevenue water through the installation of sensors and pressure gauges that transmit real-time information. c. Financial management in participating ASEAN cities improved. The Fund recognizes the need for an integrated financial management information system to improve institutional credit worthiness and fiscal standing. This system provides a seamless integration of the entire budget cycle from planning, budgeting, implementation, and reporting to ensure limited financing is utilized in the most efficient manner and promotes better transparency and accountability. In addition, ways to enhance revenue collection using digital technologies and property mapping and use of blockchain technology for the introduction of more responsive tax policies will be considered. Demonstrating good governance practices by local governments and operators, will help generate interest from the private sector to participate in infrastructure development and service provision and create revenue surpluses for asset creation and expanded and better service delivery. 3 Asian Development Bank Strategy 2030, Achieving a Prosperous, Inclusive, Resilient and Sustainable Asia and the Pacific. Manila. 4 ASEAN Secretariat ASEAN Sustainable Urbanization Strategy. Jakarta.

7 3 10. Cross-cutting themes. In each of the output areas, the Fund will prioritize digital solutions which enhance gender equality and women s empowerment, social inclusiveness and address climate change. 11. The Fund resources will be used to finance activities including investment grants (IG), technical assistance (TA) and direct charges 5. Details on the use of the Fund proceeds will be set out in the implementation guidelines (AASCTF-IG), jointly determined by ADB and DFAT. 12. The Fund will provide IGs, TA and direct charges related to interventions as listed in the output areas, 6 including but not limited to: a. Procurement of goods, equipment, civil works, and installation; b. Consulting services to support project design, monitoring and implementation, project preparation and detailed engineering design, and related costs such as remuneration, per diem, surveys, equipment, travel, and office space; c. Studies, knowledge partnerships, twinning arrangements, and capacity building activities required for the TAs; d. Participation of government officials from the following ASEAN countries: Cambodia, Lao PDR, Indonesia, Malaysia, Myanmar, the Philippines, Thailand, and Viet Nam, and other stakeholders in events; e. Participation by ADB staff and consultants as resource speakers or moderators; f. Dedicated staff resources hired over a specific period of time to support Fund activities; and g. Fees for external audit, financial charges, and administration and management of the Fund. V. CONTRIBUTION AMOUNTS AND FUND TRANSFER ARRANGEMENTS 13. ADB will accept, on an untied basis, contributions to the Fund. Contributions will be held and administered by ADB separately from ADB s other resources. 14. To ensure cost-effective processing and reporting, the minimum contribution to the Fund will be AUS$2 million. 15. Collaboration between ADB and DFAT for establishing the Fund will be consistent with the terms of the instrument of contribution at Attachment 1, whereby DFAT will contribute to the Fund in accordance with the terms of this paper. 16. Contributions to the Fund will be made in the form of cash in a freely convertible currency. Contributions will be deposited into a United States dollar (US$) account (the Account) to be specified by ADB as appropriate. For contributions received in currencies other than USD, ADB will, upon receipt of the funds, convert them into US$ and transfer them to the Account. 5 Resources from the Fund can be used as additional resources through direct charges for project-related and operational-related expenses provided these are direct and identifiable up to $225,000. Expenses are considered direct and identifiable if they are related (i) to the activity of a project which is financed by the Fund, or (ii) to an activity which is related directly to the operation of the Fund when the same is the only source of financing for such activity. 6 It is anticipated that the Fund will provide approximately 5% of the total contribution towards service fees. Indicative allocation of the Fund towards technical assistance is up to 60%, 30% towards investment grants, and 5% towards direct charges. Currently, direct charges is up to a maximum of $225,000 per application. The allocations will be reviewed jointly by DFAT and ADB during the annual meetings.

8 4 17. Commitments by DFAT will not be subject to any conditions, except as provided in this paper and the AASCTF-IGs and provisions of ADB's "Urban Financing Partnership Facility: Establishment of the Urban Environmental Infrastructure Fund and Urban Trust Fund" Board paper (footnote 2). By depositing an instrument of contribution DFAT will be deemed to have accepted the objectives as outlined in this paper, and the terms set forth in this paper and the AASCTF-IGs. 18. Contributions will be held, administered, and invested at the discretion of ADB in accordance with ADB s policies and procedures. Pending disbursements, ADB may invest and reinvest contributions. Any income earned in respect of such investment and reinvestment, as well as interest accrued in respect of the Account will be credited to the Account and used for the purposes of the Fund, including related administration expenses ADB will make disbursement from the Account as necessary to meet the expenditures of projects and activities supported by the Fund. Disbursement will follow ADB s Loan Disbursement Handbook (2017, as amended from time to time). If other currencies are required for payment to meet eligible expenditures, ADB may purchase the required currencies with the available funds. Any fees and charges relating to such purchase will be paid out of the Account. 20. With respect to funds provided by DFAT, ADB will exercise the same degree of care in the discharge of its functions as the trustee as it does with respect to its administration of other external financing resources. ADB will take appropriate measures against (a) anticorruption, (b) financing of terrorism, and (c) child labor, all in accordance with the detailed arrangements as set forth in the AASCTF-IG. VI. ADMINISTRATION ARRANGEMENTS 21. Governance Structure. The Fund will be established as a single donor urban trust fund under the UFPF, managed by ADB on behalf of DFAT. The Fund will be implemented in accordance with the UFPF eligibility criteria and other terms set out in the paper establishing the Urban Financing Partnership Facility (footnote 2). 22. Upon approval of this proposal, ADB s Sector Advisory Service Cluster (SDSC) of the Sustainable Development and Climate Change Department (SDCC) manages the UFPF. The Chief Sector Officer of SDSC is the Facility Manager for the UFPF. The Director, Southeast Asia Urban Development and Water Division (SEUW), Southeast Asia Regional Department (SERD), will oversee the day-to-day operations, monitoring and evaluation, and reporting of the Fund in her/his position of AASCTF Manager (Fund Manager). 23. Administration of the Fund is governed by AASCTF-IG to be prepared by the Fund Manager and approved by DFAT on or before the first fund allocation to be made. 24. The AASCTF-IG may be amended from time to time, jointly by ADB and DFAT, provided that such amendments are consistent with the provisions of ADB s Urban Financing Partnership Facility: Establishment of the Urban Environmental Infrastructure Fund and Urban Trust Fund Board paper. 25. ADB may, from time to time, adopt additional rules for managing and administering the Fund that are substantially based upon, and consistent with, the terms of this paper. 7 Administration costs include ADB s service fees, cost of external audits, and finance charges that may be incurred in connection with purchasing required currencies and remitting funds.

9 5 26. ADB will promptly inform DFAT of any condition which interferes, or threatens to interfere, with ADB s management and administration of the Fund. 27. Applications. Applications for Fund allocations will be submitted by SERD to the SDSC and will need to comply with eligibility criteria for the Fund and AASCTF-IG. 28. Activities to be supported by the Fund will be identified, designed, processed, approved, and implemented in accordance with applicable ADB policies, procedures, and guidelines, including consulting services and procurement, disbursements, safeguard policy statement, 8 public disclosure, anticorruption and governance, financial management, and reporting. 29. Reporting Requirements. The UFPF Facility Manager will provide DFAT with semiannual and annual UFPF reports on the progress of activities being supported by the UFPF including proposed activities for the succeeding year. A section dedicated to activities covered under the Fund is included as part of the UFPF semi-annual and annual progress reports. 30. In addition, an Annual Work Plan and Progress Report for the Fund will be prepared by the Fund Manager in consultation with SDCC and submitted to DFAT every first quarter of the calendar year for DFAT approval. Semi-annual progress reports will be submitted by the Fund Manager in the third quarter of every calendar year. The Progress Report will, among others, cover monitoring against agreed indicators, gender equality and cross cutting issues, case studies, and financial commitments and disbursements. Format for the Annual Work Plan and Progress Report will be developed in consultation with DFAT. 31. ADB will maintain the records and accounts, in accordance with its standard procedures, that identify the contributions made, the commitments to be financed out of the available funds, eligible activities and administration expenses. ADB will provide DFAT with semi-annual unaudited financial statements on these records and accounts. Financial statements will be reported under US Dollars and include no breakdown of expenditures nor comparison to budget. Periodic financial statements are provided within two months. The terminal financial statement will be provided within six months of Fund closing. 32. External financial audit will be undertaken annually by ADB s external auditor with the cost of the audits to be borne by the Fund, or paid with additional funds to be transferred to ADB by DFAT. 9 For the purposes of the audited financial statements the end of the fiscal year is 31 December, and will be made available at the end of June of each year. Copies of the audited financial statements will be submitted to DFAT. 33. The Fund Manager will also provide DFAT, if required, additional reports and information concerning the progress of projects and activities financed under the Fund. The contents of such additional reports and information will be jointly determined between DFAT and Fund Manager in advance. 34. Annual Consultation Meeting. The financing partners to the trust funds established under UFPF (UFPF Financing Partners) and ADB jointly steer the implementation of activities undertaken under the UFPF. UFPF Financing Partners and ADB accomplish this by meeting annually in a donors consultation meeting to review the UFPF Annual Report and Annual Work Program. 8 ADB Safeguard Policy Statement. Manila. 9 DFAT may opt not to have the financial statement audit.

10 6 35. In addition to the UFPF Financing Partners consultation meeting, ADB and DFAT, will have at least one annual meeting to discuss Fund specific matters to (i) provide strategic direction to the Fund; (ii) approve the Annual Work Plan and Progress Report for the Fund; (iii) endorse the AASCTF-IG and its subsequent revision from time to time; (iv) review progress and the Fund s portfolio of supported activities; and (v) discuss any other pertinent issues. In addition, DFAT can request for additional meetings beyond the annual UFPF meetings, should the need arises. 36. Review and Evaluation. DFAT and ADB will discuss a possible review of the Fund at a mutually convenient time. 37. Visibility Requirement. ADB will acknowledge DFAT s contribution to the Fund in public information about the Fund and its activities (e.g., through related signage, documentation, including the use of the DFAT s logo). ADB will invite DFAT representatives to participate in key events related to the implementation of the Fund. DFAT will be responsible for its own costs with respect to any participation in such events. 38. Service Fees. Except for direct charges, ADB will charge administrative fees for activities financed under the Fund in accordance with its fee policy, as revised from time to time. 10 IGs TAs Table 1: Fees 5% up to US$5 million; 2% over US$5 million with a minimum of US$250,000, whichever is greater 5% for disbursed amounts 39. Fund Closing Date. Unless otherwise decided by DFAT and ADB, the Fund will be closed on or before 30 June Office of Co-Financing (OCO) and the Fund Manager will consult with DFAT on how to return or transfer the unused funds and will take necessary actions, as required. 11 Winding up of the Fund may commence upon financial closure of all projects and activities financed under the Fund. The Fund Manager will advise OCO of the Fund closing. 40. Early exit from the Fund. An early exit may be initiated through a written notice, indicating desire to refund the remaining uncommitted funds, sent to ADB and becomes effective on the last calendar day of the third month from the time ADB acknowledges the receipt of exit notice (hereafter referred to as the effective exit date ). 12 The refund amount will be paid within three months after the effective exit date. 13 DFAT will continue to receive reports and/or documents on 10 ADB Review of the Asian Development Bank s Service Charges for Administration of Grant Cofinancing from External Sources. Manila. 11 Refunds will be returned within six months of financial completion, or completion of the audited financial statements if requested. Any refunds will be returned net of all fees and charges and losses and contracts already committed through the Fund. If balance is less than US$100, ADB no return will be provided. 12 ADB to confirm receipt within 5 working days of receipt of the exit notice 13 Refund shall be computed at the time of the effective exit date based on the unaudited monthly financial statement prepared by ADB s Controllers Department, as follow: Refund amount (US$) = financing partners pro-rata share (%) based on the actual contribution received in US$ as of effective exit date x uncommitted fund balance.

11 7 the Fund or UFPF until all DFAT funds are expended. After that time, DFAT will no longer receive any reports and/or documents on the Fund or UFPF other than the facility report and audit report for the calendar year of the exit. VII. RISK ASSESSMENT 41. As the Fund is established under the UFPF which has substantial experience of implementing similar trust funds, the Fund s implementation risk is categorized as low. For each IG to be financed through the Fund, separate risks assessments will take place in line with ADB s provisions for grant processing. VIII. THE PRESIDENT S RECOMMENDATION 42. The President, acting under the authority delegated by the Board of Directors, has approved: (i) the establishment of the proposed ASEAN Australia Smart Cities Trust Fund under the Urban Financing Partnership Facility; and (ii) the acceptance of contributions from the Australian Government through DFAT; in accordance with the provisions set forth in this paper and hereby reports these actions to the Board of Directors. where, uncommitted fund balance = actual contribution received in US$ + investment/interest income +/- gain or loss on foreign exchange + other income - project disbursements - outstanding project commitments - approved projects but not yet effective - projects pending approval (commitments to Climate Change Steering Committee authorized projects undergoing ADB approval process) - approved direct charges - administration fees (expensed based on project disbursements & reserved based on outstanding project commitments, approved projects but not yet effective and projects pending approval) - estimated external audit fees - financial expense (bank charges) - other expenses.

12 Appendix 8 INSTRUMENT OF CONTRIBUTION [date] Asian Development Bank 6 ADB Avenue, Mandaluyong City, Metro Manila 1550 Philippines The Government of Australia, through its Department of Foreign Affairs and Trade (DFAT), hereinafter referred to as the "Contributor", hereby undertakes to contribute to the ASEAN Australia Smart Cities Trust Fund {AASCTF} (the Fund ) under the Urban Financing Partnership Facility in an amount of AUS$20 million in accordance with the provisions of the ADB approved paper entitled Proposed Establishment of the ASEAN Australia Smart Cities Trust Fund (the Paper ) and subject to the terms set forth in the Paper and its Implementation Guidelines. The contribution will be paid to the Asian Development Bank in the form of immediately available Funds on or prior to the following indicative schedule: Q2 2019, up to AUS$5 million Q4 2019, up to AUS$5 million Q4 2020, up to AUS$5 million Q4 2021, up to AUS$5 million Q4 2022, remaining balance The contribution will be converted to United States Dollar upon receipt and paid into the ADB bank account with the following details: Name of Bank: Citibank N.A. 111 Wall Street New York, NY USA Account Name: ASEAN Australia Smart Cities Account Number: Type/Currency: USD SWIFT/BIC: CITIUS33 Fedwire No.: ABA The Australian contribution to the Fund will be utilized by 30 June 2024 unless otherwise mutually decided in writing. Dated this day of, 20. For and on behalf of: DEPARTMENT OF FOREIGN AFFAIRS AND TRADE David Dutton Assistant Secretary, Regional Engagement Branch Southeast Asia Division