Session Three: Formulation of AfT bankable projects

1. UNITED NATIONSEconomic and Social Commission for Western Asia (ESCWA)Expert Group Meeting on Monitoring and Evaluation Systems for Implementing Aid for Trade Bankable Projects in the Arab RegionHammamet, Tunisia, 12-13 December 2013Ghazi Ben Ahmed Session Three: Formulation of AfT bankable projects

2. Previous workshop – October 2013 • Identification of bankable projects • Design and preparation of bankable projects • Resource mobilization • Execution of bankable projects

3. Purpose and principles of the workshop • To identify priority knowledge gaps, learning needs related to the identification and preparation, appraisal and design, M&E and packaging of bankable Aid for Trade projects and programmes – with a focus on M&E. • To share experiences on common challenges and opportunities, and share best practice. • Encourage open informal and constructive dialoguebetween experts, recipients and funders to support more effective Aid for Trade

4. Purpose of this session • To provide an update on work undertaken so far • Development of the guidelineson formulating bankable Aid for Trade projects and programmes • Allow participants to provide feedback on the proposed guidelines and discuss any challenges in developing the concept notes / proposals

5. Formulating bankable Aid for Trade projects and programmes

6. Broad outline of the guidance document (1) • Introduction - Purpose of the guidelines - Project background - Why these guidelines are needed - Preparing the case for funding • What makes a project or programme Aid for Trade - Background on Aid for Trade - Examples of Aid for Trade projects and programmes • Effective Aid for Trade - Principles - Examples

7. Broad outline of the guidance document (2) • Formulating Aid for Trade projects and programmes - Identifying need and demand from a trade lens - Determining Aid for Trade priorities - Diagnostics and situational analysis, and need assessments - Preparing proposals, concept notes, etc. - Importance of packaging and positioning - Design and appraisal 5. M&E - Theory of change, intervention logic and performance frameworks - Indicators and benchmarking • Checklist Annexes (including templates – e.g. project concept note template)

8. Purpose of the guidance document The purpose of the guidance document is to introduce broad guidelines on how to develop bankable Aid for Trade projects and programmes and successfully position these within the Aid for Trade initiative, taking into account current perspectives and requirements of key Aid for Trade development partners. It aims to enable the systematic analysis of the constraints to trade for a country/region, identification of needs and the formulation of project and programme proposals that are ‘bankable’.

9. Why the guidance document is needed? Many developing countries face substantial difficulties in developing bankable projects and programmes based on their identified needs. According to the results of the 2011 OECD/WTO Aid for Trade questionnaire, 65% of respondents stated difficulties in designing bankable projects as one of the “most important” or “important” challenges in accessing trade-related funding. Numerous development partners and other funding agencies, as well as potential recipients, highlight problems in developing bankable projects and programmes. For instance, the Enhanced Integrated Framework.

10. Why the guidance document is needed? In financial terms, a bankable project would usually refer to a project that lenders are willing to finance since there will be a financial return on the investment. However, in the aid context, a bankable Aid for Trade project is one which development partners are willing to fund since they are guaranteed a positive and sufficient effect on the capacity of the beneficiary. A bankable project could be described as a “good quality project [expected to deliver desired results] addressing relevant needs and falling inside the development partner priorities at the right time”.

11. What makes a project/programme Aid for Trade Aid for Trade is divided into the following broad categories. Some projects and programmes within these categories may not be primarily considered through a trade-lens (i.e. trade objectives and outcomes tangential/indirect): • Trade policy and regulations: trade policy and administrative management; trade facilitation; regional trade agreements; multilateral trade negotiations; and trade education/training. • Economic infrastructure: transport and storage; communications; and energy generation and supply. • Building productive capacity, including trade development: agriculture; fishing; forestry; industry; mineral resources and mining; tourism; business and other services; and, banking and financial services. • Trade-related adjustment

12. Key drivers of effective Aid for Trade • It is targeted at reducing the cost of trading through, for example, investments in infrastructure, transport and trade facilitation • When Aid for Trade investments are integrated into a country’s broader trade policy and strategy framework, building sustainability • Aid for Trade is demand-driven, responding to the needs of recipient countries • It focuses on the most binding constraints to trade • There is political will and Aid for Trade champions • There is good sequencing of reforms and projects and programmes in the design and implementation of Aid for Trade • There is effective coordination and complementarityaround the design, implementation and M&E of projects and programmes

13. Key drivers of effective Aid for Trade • The selection of instruments and modalities for delivering Aid for Trade are able to address trade-related constraints at the regional level and not just targeting individual countries. • A clear, well articulated and realistic results chain and theory of change is developed that links activities, outputs, outcomes and impacts (the achievement of objectives can be traced along a feasible results chain) with SMART indicators and baseline data available. If a proposal for funding can demonstrate that the potential project/programme can deliver on some or all of the above then arguably it has a much better chance of receiving funding.

14. Developing a sound business case (1) • As with any finite resource, there is competition for Aid for Trade resources. Priorities need to be established and choices made. • Securing support requires a carefully considered and well argued ‘business case’ or ‘pitch’ that appeals to the funder. • The case needs to demonstrate that allocating resources to any particular programme, project or activity is an investment rather than merely a cost. • Naturally, the more complex the programme the greater the effort required to prepare the business case.

15. Developing a sound business case (2) Some tips for developing a sound business case (from the WB Border Management Modernisation 2011): • Describing and contextualising problems, issues and consequences • Description of how the proposed solutions will solve the problems identified • Justifying the project through quantitative and qualitative analysis • Demonstrating a capacity to succeed • A careful, realistic identification of risks to success and mitigating strategies • Accurate estimates of required resources • Objective performance measures to allow accurate progress monitoring • Appropriate governance, management and supervision mechanisms

16. Formulating bankable projects and programmes

17. 1. Identification and preparation (1) • During the identification and preparation stage, analysis of the current context (situational analysis, diagnostics, etc.) and a needs assessment should be undertaken to identify key challenges/constraints and priority intervention areas. • Sets the scene: provides the relevant context on why support is needed and indicates the nature of potential support.

18. Diagnostics and toolkits Summary of tools: • Stakeholder consultations • Benchmarking • Diagnostic Trade Integration Studies (DTISs) • World Bank toolkits: • Trade and Transport Facilitation Assessment • Trade Competiveness Diagnostic Toolkit • Trade Corridor Management Toolkit • Border Management Modernisation Toolkit • Freight Transport Toolkit • Port Reform Toolkit • Corridor diagnostics studies (e.g. Corridor Diagnostic Study of N and C Corridors) and border audits • UNDP Aid for Trade needs assessment guide • Value chain analysis • Growth diagnostics

19. Growth diagnostics adjusted for trade

20. 1. Identification and preparation (2) • Each investor has a different approach to project and programme formulation • Some will agree a simple proposal, application or concept note without detailed diagnosis of the problem (that would come later during design once the development partner has agreed to fund the project/programme in principle) • ….whereas others would expect a detailed proposal backed by quantifiable evidence drawing on existing diagnostic studies before pursuing design work • Any requests for support will be much stronger if demonstrated through the use of evidence (qualitative and quantitative)

21. Identification and preparation (3) • It is often difficult to identify which needs to address at different points in time • Needs are numerous, multi-faceted, country-specific and involve a broad range of diverse stakeholders • The list of constraints that hinder trade expansion is typically long • Resources are finite and all needs cannot be addressed immediately and simultaneously, nor should they • In order to guide the effective identification and preparation, and subsequent design and implementation of AfT, the guidance document provides various tools to help prioritise and sequence

22. Identification and preparation (4) • Prioritisation, sequencing and packaging of a range of interventions is critical to ensure they contribute coherently to the overall objectives (e.g. trade expansion) of a project or programme • The prioritisation process may include: • Identifying the most binding constraints to trade • Identifying quick wins • Assessing costs vs. benefits • As well as timeliness (e.g. urgency) • A combination of intervention areas may be appropriate (highest impact; quick wins; time-sensitive; cost effective) • Note that there is typically a trade-off between an optimal package of interventions and feasible (politically, financially, etc.) package of interventions.

23. Design and appraisal • This stage is typically undertaken once a development partner or other investor has expressed an interest in funding the project/programme (once the concept note has been agreed or proposal accepted) • Both the potential funder and the recipient are typically involved at this stage

24. Design and appraisal • Economic appraisal(trade) including, for example, CBA of trade-related costs and benefits • Infrastructure and transport(costs, traffic flows, etc..) appraisals (from a trade lens) • Social appraisalincluding, for example, PSIA/PIA • Political appraisal • Environmental appraisal(e.g. environmental impact of building a road, border posts, port, etc) The findings of any earlier diagnostic toolkits will typically feed in here, or be undertaken at this stage .

25. M&E: Theory of change, intervention logic and performance frameworks The document includes guidance on: • Developing the intervention logic and results chain for a project and programme • Including exploring the causal linkages using Theory of Change analysis • And preparation of performance frameworks (e.g. logframes) and the use of indicators

26. Developing concept notes The Arab Maghreb Union: Technical assistance to the Union for Coordination of Infrastructure and Trade Facilitation Feasibility study of future Single Border Posts Study for the harmonisation of customs procedure Feasibility study on establishing a Corridor Management Committee Feasibility study on establishing an Observatory of Malpractice along the corridor