Ethio-Italian Cooperation Framework 2009-2011 I. CONTEXT AND RATIONALE 1. Ethiopia and Italy have long lasted political, economic and cultural relations. During the last 25 years the development cooperation, in addition to contributing to the poverty eradication process and to Ethiopia s development efforts, has played an important role in strengthening these relations and in creating new partnership opportunities for the two countries and their societies. Aware of the reciprocal benefits deriving from the progress of the relations between the two countries, the Italian Government continues to consider Ethiopia as one of the top priority countries within its aid policy for Sub- Saharan Africa. 2. The 1999-2001 Country Programme, signed in Addis Ababa on July 1999, has proven to be a crucial instrument for making the development cooperation between Italy and Ethiopia more systematic and predictable. Considering the importance of having a multi-year strategy and the new developments occurred both at national and global level, and taking into account the initiatives included in the 1999-2001 Country Programme and their subsequent adjustments, the two countries agree on the necessity of defining a new multi-year strategic framework. 3. The Ethiopian and Italian Governments therefore agree on a Cooperation Framework for the period 2009-2011 that: a) will enhance the achievement of the Millennium Development Goals established by the UN General Assembly in 2000; b) will be consistent with the Ethiopian Government s Plan for Accelerated and Sustained Development to End Poverty (PASDEP) and on any future document that may replace the plan; c) will comply with the commitments undertaken within the framework of the European Union 1 and the OECD/DAC 2. 4. A three-year Cooperation Framework (2009-2011) has been chosen to give sufficient perspective to the action of the Italian Cooperation but also to coordinate it as much as possible with the programming adopted by the Ethiopian Government - and consequently by many Donors through the National Plan. 1 Strategy for Africa and Principles on programming and implementing EU cooperation initiatives. Code of Conduct on Labour Division. 2 Meetings of Rome (2003) Paris (2005) and Accra (2008). Paris Declaration (2005), Accra Agenda for Action (2008). 1
II. DEVELOPMENT BACKGROUND 5. Ethiopia is one of the low-income countries who benefitted from development partners assistance and significant debt relief initiatives from the Paris Club members. The economy continues to enjoy a strong expansion. The real GDP has been growing by an annual average of more than 10 percent for the period 2003/04 through 2006/07, and the real per capita income increased during the period at an annual average of 7 percent. The Italian Government has contributed to the Country s efforts through its engagement, among others, in rural development, education, health, and infrastructure sectors. However, there is still a lot to be done in improving the living standard of the population. More than 40% of its population lives with less than a dollar a day, and life expectancy is below 47 years due to a high infant mortality rate and other epidemics. The human development index improved in the last years, yet Ethiopia is only 169 out of 177 countries in UNDP world ranking system 3. 6. The Italian Government recognizes that, despite the progressive improvement of social and economic development indicators in Ethiopia, the Millennium Development Goals could not be reached by the Country without a further increase of external aid, both in qualitative and quantitative terms. Therefore Italy, in collaboration with other donors - amongst which the European Commission, the EU member states, the World Bank and the African Development Bank - is committed to support the initiatives of poverty reduction and development promotion, which are at the core of the PASDEP, and approved by the Ethiopian Parliament during 2006. 7. The Italian Development Cooperation (IDC), together with the other Donors represented in the Development Assistance Group (DAG), supports the Ethiopian Government in the definition and implementation of sectoral and thematic programmes which facilitate harmonization and alignment. Moreover, the Italian Cooperation sustains multi-donors initiatives for capacity building in various sectors and thematic areas. This approach is in line with commitments undertaken by the Italian Government within the EU and the OECD/DAC towards the harmonisation and the effectiveness of the Official Development Aid. It responds to the Ethiopian Government s demand for increased aid predictability and for the adoption of aid instruments aligned to the national administrative procedures. 8. Italy is committed to the division of labour principles internationally agreed. Coherently, IDC is actively involved in the division of labour implementation process in order to contribute to the rationalization and coordination of the aid flow coming from the European Donors. The process is supposed to reduce transaction costs and duplication of efforts among Donors initiatives. 3 Human Development Report 2007, UNDP. 2
III. LESSONS LEARNT 9. The experience of the 1999-2001 Country Programme and its subsequent adjustments encourages to build on the most successful initiatives, but also to optimize the common development cooperation efforts through stronger focus on a limited number of sectors and the improvement of basic social services. It is also acknowledged the importance of making the formulation and disbursement process more time effective in comparison with the past. 10. Significant and innovative initiatives implemented in the framework of the Country Programme 1999-2001 to strengthen access to basic social services 4, along with the active participation in enhanced dialogue between donors and the Ethiopian Government, provide IDC with an opportunity to continue its action towards a greater aid effectiveness. This experience has been proven important also to guarantee quality results and effective monitoring as required for the disbursement of public funds. 11. Therefore IDC future initiatives in Ethiopia will adopt implementation modalities in line with the objectives and consistent with development strategies, programmes and procedures agreed by the Ethiopian government and the Donors Community. In this regard, particular attention will be focused on the harmonization with the European Commission and the other Member States 5. Financial instruments will be chosen as appropriate, in order to achieve the best compromise between effectiveness, quality and transparency of the Italian aid financial flows. To this purpose, it will be adopted a balanced approach able to blend the following instruments: 1) sector or program support through the contribution to sectoral or thematic common funds, 2) protection of basic social services 6, 3) traditional project aid. These instruments will be integrated with specific resources for technical assistance, pilot initiatives, mainstreaming of cross-cutting issues, and human resources to allow a suitable representation of the Italian Cooperation in the financed programmes and coordination fora for the country development dialogue. 12. IDC recognizes the important role played by Non-Governmental Organizations (NGOs) and civil society towards the promotion of development, good governance and democratisation process. In particular, IDC acknowledges the important active role of several Italian and Ethiopian NGOs and charities in the context of the focal sectors identified in the Country Programme. 13. In addition, a constructive dialogue is envisaged to be established with the Italian Local Authorities (Decentralised Cooperation), Universities and Italian scientific institutions operating in Ethiopia since several years. While respecting the reciprocal institutional autonomies, IDC will promote partnerships amongst various institutions of the two countries and will encourage coherence between the initiatives of the different Italian actors and the priorities of the Ethiopian Government. 4 The Italian contributions to the Health Sector Development Programs ( HSDP) and to the Education one (ESDP) 5 Here, reference is made to the structures of the Donors Assistance Group and the EU programming. 6 PBS is a form of direct budget support with resources earmarked to deliver basic services at district level. 3
14. In view of the foregoing, IDC also intends to improve cohesion between multilateral and bilateral aid channels and those of the Italian Cooperation and other Donors. 15. In order to strengthen the financial absorptive capacity of the Country and enable the population access to public services, IDC will support the decentralization process of expenditures at regional and woreda level. IV COOPERATION PRIORITIES 16. Based on past experience and according to the principles of aid effectiveness and division of labour among donors, as well as on the basis of the understanding reached between the two Governments in Rome on 17 November 2004, the Cooperation Framework for 2009-2011 is focused on a reduced number of sectors. With this in mind the following four focal sectors have been chosen due to their relevance for the social and economic development of the Country and the relevant added value which Italy can offer: 1) Health, 2) Education, 3) Rural Development and Food Security, 4) Water and Sanitation. The cooperation activities will give priority to the delivery of social basic services and comply with the intervention framework established by the National Plan. The most effective initiatives recently realized or in progress in the Country will be strengthen. 17. As far as Health and Education are concerned, there is a well-established sectoral programmatic approach 7 adopted by the Government in Ethiopia. The Italian Cooperation already contributes to this approach with two specific on-going initiatives. Starting from the results achieved so far, IDC intends to enhance harmonized forms of support through multi-donor funds, such as the Programme for the Protection of Basic Services (PBS), and to improve technical assistance including multi-donor funds - for the strengthening of institutional capacities. 18. Regarding the Water and Sanitation sector, a similar approach to the previous one has been defined along the way paved by the Country Dialogue established in the framework of the European Union Water Initiative 8, within which Italy has been the leading donor for Ethiopia. For what the support to the Rural Development and Food Security sector is concerned, it will contribute to technical assistance initiatives aimed at strengthening institutional capacities and to pilot initiatives aimed to maintain and streamline the best practices implemented by both the Italian Cooperation and the broader Donors community will be supported as well. 7 ESDP and HSDP programs, both in their 3 rd. multi-year phase. The Italian Cooperation contributes to these programs with direct financing to the related Ministries, together with direct management funds for technical assistance and monitoring. 8 Decided in 2002 within the World Summit for Sustainable Development in Johannesburg as an answer to the general decrease in the aid for water and sanitation. 4
19. By pursuing cooperation initiatives implemented over the last years, IDC will also deal with relevant cross-cutting issues. IDC will work on these issues, by mainstreaming them across focal areas and priority sectors, or using multi-donor pooling funds mechanisms. In case of direct project contributions to cross-cutting issues ad-hoc support tools will be used and IDC financing for these purposes will be additional to those indicated by this Ethio-Italian Cooperation Framework 2009-2011. Furthermore IDC in its all engagements will seek to enhance coherence in its funding and in cooperation with NGOs projects and the Italian Local Authorities (Decentralized Cooperation). 20. Both sides acknowledged the successful progress in the implementation of the Gilgel Gibe II Hydroelectric Project, financed in the framework of the Bilateral Agreement reached in Rome on 17 November 2004 which allocated a soft loan amounting to 220 million Euros to the Project. An independent assessment financed by DGCS in September 2008 revealed a number of environmental concerns, which have been reported to the Ethiopian Electric Power Corporation for appropriate action. Both sides agreed on the importance attached to the hydroelectric energy subsector and its significance to the socio-economic development of the Country. With this in mind the Ethiopian Government asked the Italian Government to make any possible effort to provide additional financial sources, over and above the present allocation, to implement new initiatives in the sub sector. 21. Italy development relationship with partner governments is based upon respecting human rights and strengthening of social, economic and democratic governance. Those principles will be supported throughout the implementation of the Cooperation Framework 2009 2011 and considered as fundamental precondition to strengthen social, economic development and of democratization process going on in the Country. V SECTORAL AND CROSS-CUTTING INTERVENTIONS IN THE PERIOD 2009-2011 22. The Ethiopian and Italian Governments agreed on the necessity to design a Cooperation Framework which covers the period 2009-2011 for the implementation of the objectives, guidelines and priorities indicated above. 23. The design of the Cooperation Framework 2009-2011 has been assigned to the Embassy of Italy in Addis Ababa Development Cooperation Office (UTL), under the supervision and coordination of the Italian Ambassador and the Directorate General for Development Cooperation (DGCS) of the Italian Ministry of Foreign Affairs. The drafting of the Cooperation Framework has been carried out by considering the results and experiences achieved during the previous Country Programme. During the preparatory process of the cooperation framework 2009-2011, the UTL in Addis Ababa has maintained a constant dialogue with the concerned 5
Ethiopian Authorities (Ministry of Finance and Economic Cooperation and relevant line Ministries). 24. Health. This sector is one of the main areas of intervention for the Italian Cooperation in Ethiopia. The activities carried on during the past years under the Italian Contribution to the Health Sector Development Programme (HSDP) have been characterized by a good level of effectiveness, innovation and sustainability, recognised by the National Authorities and the Development Partners. Therefore the proposed Italian Contribution will be based on these positive past experience. Moreover it will be consistent to and enforce the process of harmonization among Development Partners and alignment with the Government procedures. A substantial part of the Italian contribution to the health sector is going to be directed to a pool fund which will be, for the year 2009, the Protection of Basic Services Phase II (PBS II) Sub-Program B. PBS II Sub-Program B is currently the financing channel which best guarantees a degree of financial and managerial accountability in compliance with the Italian Cooperation requirements. In the mean time the appraisal on the MDG Performance Package Fund (MDG PPF) should go on as well as the whole process of its definition and refinement; once this instrument is better framed and regulated, the Italian Cooperation will direct its major contribution to the MDG Fund during the years 2010 and 2011. The major contribution channelled through the common funds will be complemented, during the three year period, by technical assistance at the central and peripheral levels on key health system components like health care financing, information system and others, as requested by the Ministry of Health and building on the proved competence and added value of the Italian Cooperation expertise, with a direct impact on health policies and strategies. Moreover, the continued participation to the Health Pooled Fund and the new contribution to the up-coming HIV-Governance Pooled Fund will be guaranteed over the three years period, as requested by the national counterparts MoH and HAPCO. Resources allocated by IDC to the sector are reported in the table below. 25. Education. Within the framework of the Education System Development Programme (ESDP), the Ministry of Education has developed a General Education Quality Improvement Package (GEQIP), which will be supported, among other donors, by IDC. Acknowledging the paramount importance of quality in the education system, the Ministry of Education designed GEQIP as a package, which tries to address the most important issues which lead to improve quality outcome in education. GEQIP design was initiated by the Ministry of Education and Regional Education Bureaus. Development partners, notably DFID, Italian Cooperation, Netherlands Embassy and the World Bank have been intensively involved in the further development and planning exercises of GEQIP. 6
The development objectives of the First Phase of the Program (2008-2011) are to: (i) improve teaching and learning conditions in primary education and secondary education and (ii) improve planning and budget capacity. The proposed interventions can be grouped in two broad categories: (i) quality improvement for general education through a full curriculum reform for Grades 1-12 in all subjects, followed by a revision of textbooks; new training programs for teacher educators and pre- and in-service teacher training; assessment and examination reform and a school improvement program and (ii) capacity development to effectively plan, manage and monitor service delivery at the national, regional, woreda and school levels, and with respect to education management information systems. At the international level, the program will contribute to the attainment of the education related MDGs. At the national level, the program will support the Government s PASDEP, which recognizes the strategic importance of education within the context of poverty alleviation and economic growth. The proposed project would contribute to the Government s objective to improve access to and quality of basic service delivery through the implementation of the GEQIP. GEQIP will be supported by development partners in a pooled fund arrangement and funding flows will be fully aligned to Ethiopia s Public Finance Management system. Programme resources allocated by IDC are reported in the table below. 26. Water and Sanitation. In 2005 the Government launched the Universal Access Programme (UAP 2005-2012), currently the main programmatic and policy document for the water & sanitation (sub)sector. UAP has far-reaching targets to be met, consistent with MDGs, but within a shorter period (2012 instead than 2015). It aims at achieving 98% access to potable water rural areas and 100% access to sanitation within 2012. UAP targets are endorsed as the national water sector development strategy in PASDEP. Its implementation is estimated to cost 12.5 billion Birr (about 830 million Euro).Given the priority of Water & Sanitation in poverty eradication, Government and main donors have engaged in an intense and sector-wide policy and programme dialogue on Water, Sanitation & Hygiene (WaSH). The country dialogue on WaSH started in 2006 under the auspices of the European Union Water Initiative (EUWI) and is now made permanent and inclusive of all sector stakeholders, including civil society and private sector. In 2006 and 2007 Italian Cooperation has been playing a major role in the WaSH country dialogue by leading EUWI and since early 2008 by representing DAG Water Technical Working Group at the National WaSH Technical Team, the main joint coordination and governance body for the sector. A strong, institutionalized dialogue and a sector-wide approach are indeed necessary and instrumental for the scaling up of sector resources required by UAP. This scaling up is currently pursued by gradually merging the initiatives financed by the main WaSH donors into a National WaSH Programme with aligned objectives and methodology. Resources by WB, AfDB, UNICEF, Finland and DFID, although still on separate dedicated financial mechanisms, are being harmonized into a channel 1b 7
arrangement and will be disbursed according to a single Programme Implementation Manual (PIM), currently under revision. In this context, the new Italian contribution to the National WaSH Programme will be added to the existing external funds by the donors mentioned above, in order to extend the coverage of the programme. Objectives and methodology will be fully aligned to those set up by UAP and agreed by the sector with the new Programme Implementation Manual (PIM), while financial mechanisms will be harmonized using the multi-donor Trust Fund managed by the World Bank 9 or, if possible, supporting directly the Government budget for the sector. Programme resources allocated by IDC are reported in the table below. 27. Rural Development and Food Security. The Rural Development in Oromia, although being a new initiative, it is designed as a follow up of the Arsi Bale Rural Development Programme (ABRDP), an integrated rural development initiative cofunded by Italian and Ethiopian Governments that is phasing out after 12 years of implementation. The new initiative will contribute directly to the budget of the Oromia Region for selected clusters of activities (Channel 1b, at regional level) that have been particularly significant for ABRDP. Therefore, geographical earmarking of funds is to woredas included in the Arsi, Bale and West Arsi zones of Oromia. Thematic earmarking is to two components: (A) Selected Agriculture Productions and their Marketing and (B) Water and Sanitation. Component A is relevant to promising streams of ABRDP experience (activities on durum wheat and wild coffee) that should be given further support in order to be fully fruitful. While noting that ABRDP invested a lot in water supply infrastructure, Component B is to be seen as a step to strengthen what has already been done by ABRDP in this area. It is foreseen that Italian funds for Rural Development in Oromia are transferred to the Oromya BoFED which will then transfer them to the appropriate implementing administrations and bodies as per budgets and timing agreed in the programme document. Although already appraised, the initiative will be split in two separate projects to allow for flexible allocation of resources over the planning period. Resources allocated by IDC are reported in the table below. 28. Cross-Cutting Themes. IDC contribution to good governance and gender/child protection will be delivered through three programmes: 1) Democratic Institutions Programme DIP, 2) Gender Pooled Fund, 3) Other initiatives for Child Protection. The Government of Ethiopia recognizes that democracy and good governance are necessary conditions for poverty reduction. To this end PASDEP seeks to create a more conducive environment to facilitate enhanced degrees of popular participation and at the same time increasing mechanisms of accountability, responsiveness and effectiveness of public institutions. 9 The Trust Fund has been set up recently for channelling DFID s contribution to WaSH. In a deliberate bid towards harmonization, it has been shaped as multi-donor so to allow further donors involved in the sector dialogue to join. The Trust Fund allows for thematic earmarking in order to adapt funds to priorities agreed bilaterally by Government and individual donors 8
The purpose of DIP is to support the development of key organizations that together play a role in strengthening institutional frameworks of democratic governance in Ethiopia. This goal is pursued by promoting human rights and good governance, enhancing the capacity of democratic institutions to be effective, sufficient and responsive in promoting and protecting the rights of the citizens. DIP aims to empower citizens to be active and effective participants in the democratic process as well as develop the respect for the rights of others. The program will be run as a UNDP National Execution (NEX) project. Overall financial management will rest with UNDP. The donor funds contributing to DIP will be managed and coordinated by UNDP. There will be a bilateral co-sharing agreement between each donor and UNDP. Programme resources allocated by IDC are reported in the table below. The overarching purpose of the Gender Pooled Fund is to support the empowerment of women and gender equity in Ethiopia. TOR of GPF which have been agreed with Ministry of Women s Affaires (MoWA) include: 1. Policy and strategy development through research and studies that further enhance the knowledge base on gender/child-related issues in Ethiopia. 2. Capacity development interventions that strengthen organizations and institutions working to promote gender equality, the empowerment of women and child protection in Ethiopia. 3. Interventions supporting improved coordination, partnerships and information-sharing among stakeholders supporting gender equality, the empowerment of women and child protection. GPF resources will be held in trust by UNDP, for use on a request basis by MoWA. DAG members will transfer funds to UNDP dedicated GPF account. Financial management, accounting rules, reporting formats and other necessary regulations will be handled in keeping with UNDP standards. UNDP will be responsible for accounting for use of fund resources and development of DAG Pooled Report. Programme resources allocated by IDC are reported in the table below. VI Resource allocation for Ethio-Italian Cooperation Framework 2009-2011 The Italian Government, on the basis of the State Budget Law for the years 2009 and 2011, will make available for the implementation of the present Ethio-Italian Cooperation Framework 2009-2011 an envelope of 46.37 million Euro. Details regarding the sectors identified, indicative resources allocation (exact amounts will be identified at the end of the on going appraisal exercises), and financial channels to be used are provided in the following table. 9
2009 2010 2011 totals EDUCATION 7,748,710 4,135,085 6,097,625 17,981,420 39% GEQIP to WB Multi Donor Trust Fund 7,691,250 3,845,625 3,845,625 15,382,500 Italian experts 20,000 252,000 252,000 524,000 Local funds 37,460 37,460-74,920 7,748,710 4,135,085 4,097,625 15,981,420 Committed by board in 2008. Disboursment of first instalment in 2009. Additional allocation - - 2,000,000 2,000,000 HEALTH 8,348,400 2,800,000 6,000,000 17,148,400 37% PBS II to WB Multi Donor Trust Fund 7,500,000 - - 7,500,000 Italian experts 360,000 - - 360,000 Local funds 188,400 - - 188,400 8,048,400 - - 8,048,400 Committed by board in 2008. Disboursment in 2009. MDG Fund & Health Info Sys to Ministry of Health pool funds - 2,000,000 3,000,000 5,000,000 Italian technical assistance - 500,000 700,000 1,200,000-2,500,000 3,700,000 6,200,000 Additional allocation - - 2,000,000 2,000,000 Health Pooled Funds to UNICEF for HPN 200,000 200,000 200,000 600,000 to UNFPA for HAPCO 100,000 100,000 100,000 300,000 300,000 300,000 300,000 900,000 RURAL DEVELOPMENT 1,500,000 1,500,000 600,000 3,600,000 8% Rural Development in Oromia to BoFED Oromia 1,200,000 1,300,000 500,000 3,000,000 Italian Technical Assistance 300,000 200,000 100,000 600,000 1,500,000 1,500,000 600,000 3,600,000 Existing proposal to be split in two projects for the two components: AGRICULTURE in 2009/10, WATER in 2010/11 (with minor changes to budgets) WATER 2,200,000 1,200,000 2,750,000 6,150,000 13% National WASH Programme Funds to WRDF (ex art.15) or WB MDTF 2,000,000 1,000,000 2,500,000 5,500,000 Italian technical assistance 200,000 200,000 250,000 650,000 2,200,000 1,200,000 2,750,000 6,150,000 Appraisal within June 2009 CROSS-CUTTING THEMES 500,000 500,000 500,000 1,500,000 3% Democratic Institutions Prog 250,000 250,000 250,000 750,000 Gender/Children 250,000 250,000 250,000 750,000 NEW FRAMEWORK 20,297,110 10,135,085 15,947,625 46,379,820 Agricolture Productivity & Quality Support to MoARD through IAM-B 3,000,000 - - 3,000,000 Additional to the new Framework 10
Done in Addis Ababa on April 21 th 2009. For the Italian Side For the Ethiopian Side Dr Elisabetta Belloni Director General Directorate General for Development Cooperation Italian Ministry of Foreign Affairs Ato Ahmed Shide State Minister Ministry of Finance and Economic Development 11