1995 es Corden, W. Max Corden, W. Max Una zona de libre comercio en el Hemisferio Occidental: posibles implicancias para América Latina En: La liberalización del comercio en el Hemisferio Occidental - Washington, DC : BID/CEPAL, 1995 - p. 13-40 2014-01-02T14:51:16Z hdl:11362/37043 Formulating bankable aid for trade projects Guidance document Project Document Formulating bankable aid for trade projects Guidance document Economic Commission for Latin America and the Caribbean (ECLAC) This document has been prepared by the Economic Commission for Africa, as part of the activities of the United Nations Development Account: “Facilitating the Effective Integration of Developing Countries in the Global Economy through Aid for Trade Schemes”, ROA 139-7. The views expressed in this document, which has been reproduced without formal editing, are those of the author and do not necessarily reflect the views of the Organization. LC/W.615 Copyright © United Nations, August 2014. All rights reserved Printed at United Nations, Santiago, Chile ECLAC – Project Documents Collection Formulating bankable aid for trade projects Contents I. Introduction .............................................................................................................................. 5 A. Purpose of the guidelines................................................................................................. 5 B. Project background .......................................................................................................... 5 C. Why these guidelines are needed? .................................................................................. 6 D. Preparing the case for funding ......................................................................................... 6 II. What makes a project an aid for trade project ......................................................................... 9 III. Effective aid for trade ............................................................................................................. 11 IV. Formulating aid for trade projects and programmes .............................................................. 13 A. Identifying need and demand from a trade lens and determining aid for trade priorities ........................................................................................................... 14 1. Introduction ............................................................................................................. 14 2. Diagnostics and situational analysis, and need assessments ............................... 16 3. Contents of a proposal and concept note............................................................... 23 B. Appraisal and design ...................................................................................................... 25 C. ME ................................................................................................................................ 26 1. Intervention logic and Theory of Change ............................................................... 26 2. Indicators and benchmarking ................................................................................. 27 V. Cross-cutting issues............................................................................................................... 29 VI. Building aid for trade into design ........................................................................................... 31 Bibliography ................................................................................................................................... 33 Annexes ......................................................................................................................................... 35 Annex 1 Aid for Trade Project Concept Note......................................................................... 36 Annex 2 Example of a results chain-intervention logic .......................................................... 41 Annex 3 Existing datasets and indicators .............................................................................. 42 Annex 4 Integrating gender into aid for trade projects and programmes .............................. 45 3 ECLAC – Project Documents Collection Formulating bankable aid for trade projects Tables Table 1 Examples of aid for trade indicators ....................................................................... 28 Diagrams Diagram 1 Diagram 2 Diagram 3 Diagram 4 Diagram 5 Diagram 6 Elements for the formulation of bankable projects and programmes ..................... 13 Prioritisation matrices ............................................................................................. 15 Stages for the Trade Competitiveness Diagnostic ................................................. 19 Corridor project cycle.............................................................................................. 20 Growth diagnostics adjusted for trade .................................................................... 22 Intervention logic or results chain including theory of change................................ 27 Boxes Box 1 Box 2 Box 3 Box 4 Box 5 Box 6 Box 7 Box 8 Box 9 Developing a sound business case .......................................................................... 7 Elements of the best project proposals .................................................................... 7 Aid for Trade categories ......................................................................................... 10 Trade-related infrastructure, transport and trade facilitation .................................. 10 Transport observatories.......................................................................................... 18 Collecting data and why? ....................................................................................... 19 A practical guide to data and policy analysis ......................................................... 21 Asking the right questions ...................................................................................... 23 Road project appraisal............................................................................................ 26 4 ECLAC – Project Documents Collection Formulating bankable aid for trade projects I. Introduction A. Purpose of the guidelines The purpose of this document is to introduce broad guidelines on how to develop bankable Aid for Trade (AfT) projects and programmes and successfully position these within the AfT initiative, taking into account current perspectives and requirements of key AfT development partners. The guide is not meant to be a blueprint, nor is it meant to be exhaustive. It aims to enable the systematic analysis of the constraints to trade for a country/region, the identification of needs, and the formulation of project and programme proposals that are ‘bankable’ and ready to be presented to development partners for funding under the broad umbrella of AfT. The audience is wide, ranging from those preparing project proposals and concept notes (whether potential beneficiaries, development partners, consultants, etc.) to those reviewing and approving project proposals (the funder). B. Project background The guideline document is a key output of an assignment to provide technical support towards enhancing the formulation of bankable AfT projects in Africa. The assignment is part of a larger project to provide technical support to the successful implementation of the UN Development Account project on “Facilitating the Effective Integration of Developing Countries in the Global Economy through Aid for Trade Schemes” led by the UN Economic Commission for Africa (UNECA).1 1 The four other UN Regional Commissions (Economic and Social Commission for Asia and the Pacific (ESCAP), Economic and Social Commission for Western Asia (ESCWA), Economic Commission for Europe (ECE), Economic Commission for Latin America and the Caribbean (ECLAC)) are also involved in this project; with specific activities undertaken at the regional level and others at the inter-regional level. 5 ECLAC – Project Documents Collection Formulating bankable aid for trade projects C. Why these guidelines are needed? There are very large disparities in AfT per capita in Africa and a low level of correlation between potential demand and supply.2 Karingi and Fabbroni (2009) find that countries most in need are those showing the worst values across a selection of trade-related performance indicators.3 However, this does not translate into higher levels of AfT supply. In fact, there is an extremely weak relationship between need/demand and supply of AfT in per capita terms. Many developing countries face substantial difficulties in developing bankable projects and programmes based on their identified needs.4 According to the results of the 2011 OECD/WTO AfT questionnaire,5 65% of respondents stated difficulties in designing bankable projects as one of the “most important” or “important” challenges in accessing trade-related funding. Recent survey results confirm this remains the case and show that both African countries and RECs face difficulties in developing bankable project proposals and clearly identifying needs and associated priorities. These challenges are ranked as “the most critical in hampering an adequate resource mobilisation through AfT”.6 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 AfT project is one which development partners are willing to fund since they are confident of a positive and sufficient effect on the capacity of the beneficiary (e.g. greater regional integration, increased trade capacity, growth, poverty reduction, etc.). A bankable project could be described as a “good quality project [expected to deliver the desired results] addressing relevant needs and falling inside the development partner priorities at the right time”.7 D. Preparing the case for funding As with any finite resource, there is competition for AfT 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 (see the box 1 and 2). As discussed by the World Bank (2011), the case needs to demonstrate that allocating resources to any particular programme, project or activity is an investment rather than merely a cost, not just to the funder but also the wider constituency. Naturally, the more complex the programme the greater the effort required to prepare the business case. Economic analysis is useful in setting the context and calculating costs and benefits of new investments. It is important to contextualise the evidence and demonstrate relevance to a particular country or region.8 Box 2 outlines the key elements of the best project proposals. In summary, the best proposals are comprehensive yet concise, tailored to a specific funder (in terms of priorities, formats and approach), evidence-based, demonstrate credibility and track record, and are realistic in terms of what can be achieved. 2 3 4 5 6 7 8 Karingi, S. and Fabberoni, M., 2009. The following countries are in the worst performing quintile: Burundi, Central African Republic, Chad, Comoros, Eritrea, Guinea-Bissau, Niger, Rwanda, Somalia, Sierra Leone and Zimbabwe. UNECA, 2011, Basnett, Y., Engel, J., Kennan, J., Kingombe, C., Massa, I. and te Velde, D.W., 2012. OECD-WTO, 2011. In preparation for the Fourth Global Review of AfT, the WTO, in collaboration with the AUC and UNECA designed an online questionnaire aimed at assessing how AfT can best support the AU objective of Boosting IntraAfrican Trade. The questionnaire was circulated to African countries and RECs as well as development partners and Southern partners. UNECA, 2013. www.unescap.org/tid/projects/bankaft-s5-teemu.pdf. World Bank, 2011. 6 ECLAC – Project Documents Collection Formulating bankable aid for trade projects BOX 1 DEVELOPING A SOUND BUSINESS CASE According to Li, Y., McLinden, G. and Wilson, J. (2011)a, a sound business case will usually include: •Description and contextualisation of the problems, issues and consequences: - A clear, concise summary of key issues and any key decisions required. - A clear account of the problems to be solved and the long term vision (i.e. the situation expected to be reached if a project goes ahead). - Explanation of the link between issues and problems, and effects and causes. •Description of how the proposed solutions will solve the problems identified: - A clear link between the issues and problems identified and any activities to be agreed on and financed under a project, demonstrating that prioritisation is based on sensible criteria, including a discussion of possible alternatives and the reasons for their rejection. - How lessons learned from previous efforts have been incorporated (what worked, what did not and why?). •Justification of the project through quantitative and qualitative analysis: - A strong justification for the likely expense, weighing costs against benefits through cost-benefit analysis, as well as difficulty of implementation etc. (see the diagram 2). - Costs are much easier to quantify than benefits. A traditional cost benefit analysis, if robustly undertaken, can greatly strengthen the business case. Alone, however, it is usually not sufficient to make the business case – qualitative benefits should also be included. •Demonstration of the capacity to succeed: - Clear evidence of the proposer’s technical capacity to carry out the project and achieve its objectives. •A careful, realistic identification of risks to the success of a project and appropriate mitigating strategies. •Accurate estimates of required resources. •Objective performance measures to allow accurate progress monitoring. •Appropriate governance, management and supervision mechanisms. Source: Authors’ elaboration. Note: a World Bank, 2011. BOX 2 ELEMENTS OF THE BEST PROJECT PROPOSALS There are a number of key elements that could potentially transform a good document into a winning proposal: Comprehensive yet concise: Proposals must answer all the questions the funder wants to know —e.g. resource requirements, beneficiaries, timeline, goals and objectives. While the proposal needs to be as comprehensive as possible, it must also be well-written, reader-friendly and straight to the point. Long descriptions and lengthy explanations will lose a reviewer’s interest. Ideally a proposal should be approximately 10 pages. Detailed breakdowns (budgets, work plans, etc.) can be annexed. Tailored to a specific funder: Proposals should be tailored to be in line with a funder’s priorities. It helps to closely review the mission and vision, goals and objectives of a funder and ensure that the proposal is in line with these insofar as it is possible. Also, the applicant should review the projects the funder has previously funded to see how much it usually provides as financing, what areas it tends to support and the type of funding provided. If available, it would be a good idea to review earlier proposals that have been successful in order to get a better idea of expectations. The proposal should be drafted in a way that fits the funding agency’s needs and requirements (e.g. size of budget and areas of expertise). Follows the funders preferred format: Use the funder’s language/terms in the proposal and minimise jargon and acronyms. Simpler or more common words often provide the same or greater impact. It is important to understand and use terms appropriately to show the funder that the proposal fits well with the funders goals and objectives. The proposal should follow any preferred formats (with set headings, fields, etc.) of the funders. Some may not have any particular format hence it is up to the applicant to decide which types of information the funder may find most useful (in line with the request for proposal if available) – see the annex 1 for an example of a ‘best practice’ concept note/ proposal format. Know each funders approach: There are many different approaches to developing and receiving proposals. Sometimes the development partner may request a proposal from a particular recipient, or through an open competition with numerous applicants, etc. In others, the development partner may assist the organisation develop the proposal/application. Or the funder themselves may actually prepare the proposal or business case for funding for approval in consultation with the ‘recipient’. Also, an organisation may approach a funder (unsolicited – i.e. not in response to a request) with a proposal that they consider worth funding. At the proposal stage, some may require 7 ECLAC – Project Documents Collection Formulating bankable aid for trade projects Box 2(conclusion) a brief one page summary first to help determine whether they need a more detailed proposal later on, whilst others may expect an in-depth proposal upfront. Factual, specific and error-free: Use facts to make the case. Making statements based on generalities and no evidence will weaken the argument. Where possible, detailed rationale and itemised budget breakdowns should be provided. Proof-read the proposal several times – the proposal should not contain any errors including contradictory information. Highlights track record and credibility: The proposal should make the case for why an organisation has the capacity to manage/implement the project, and provide the necessary background details on the organisation. The proposal should begin with a short overview of the organisation (mission, vision, goals and objectives, areas work in, etc.), as well as its experience, track record and strengths, including any similar projects managed/implemented and examples of successful delivery. Set realistic goals, timelines and budgets: It is important not to promise more than can be delivered (in terms of timing, outcomes, budget, etc.). Local factors and bureaucratic procedures should be fully taken into consideration when planning to ensure goals and activities can be met and done within the time period. The proposal should list specific, realistic goals that can be measured and achieved within a set timeframe. Budgets need to be realistic, not over- or under-estimated. For instance, low funding requests suggest to a funder that the applicant does not have a realistic assessment of what it takes to implement the project on time and on budget. A detailed budget should be provided in the annex and any other supporting documentation to justify the estimated costs. Activities to be funded should be directly related to the outputs and outcomes to be achieved. Follows guidelines and instructions: If guidelines are provided by funders, these should be carefully followed and queries raised with the funder if anything is unclear. Include all of the funders requirements in the proposal (e.g. some funders may ask that the planned activities address gender issues). Offers a sustainability plan: Funders are more likely to finance a project when they know there is a plan to ensure activities and interventions will carry on after funding ends. Source: Ocampo, A, 2013. 8 ECLAC – Project Documents Collection Formulating bankable aid for trade projects II. What makes a project an aid for trade project The AfT initiative gained prominence during the WTO Ministerial Meeting held in Hong Kong in December 2005. The final Ministerial Declaration stressed the importance of AfT in assisting developing countries, especially least developed countries (LDCs) “to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly expand their trade”.9 AfT aims to support countries to take advantage of trading opportunities and ultimately help countries grow and contribute to reducing poverty. The WTO AfT Task Force that came about as a result of the Ministerial, provided recommendations on how to operationalise the initiative. It also defined the rationale of AfT as “assisting developing countries to increase exports of goods and services, to integrate into the multilateral trading system, and to benefit from liberalized trade and increased market access. Effective AfT will enhance growth prospects and reduce poverty in developing countries, as well as complement multilateral trade reforms and distribute the global benefits more equitably across and within developing countries”.10 A vast empirical literature suggests that by achieving the most common aims of AfT (e.g. increasing trade, diversifying exports, etc.) this will, on average, boost growth and reduce poverty.11 The Task Force recommended that “the scope of Aid for Trade should be defined in a way that is both broad enough to reflect the diverse trade needs identified by countries, and clear enough to establish a border between Aid for Trade and other development assistance of which it is a part”.12 The six main categories identified by the Task Force as Aid for Trade are included in box 3. According to the 2013 OECD/WTO AfT At a Glance report, trade facilitation, competitiveness and value chains are emerging as key priorities for partner countries.13 The OECD categorise AfT data according to the following broad headings and sub-categories: • 9 10 11 12 13 Trade policy and regulations: trade policy and administrative management; trade facilitation; regional trade agreements; multilateral trade negotiations; and trade education/training. WTO, 2005. WTO, 2006. OECD, 2011. WTO, 2006. OECD/WTO, 2013. 9 ECLAC – Project Documents Collection Formulating bankable aid for trade projects • 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.14 • Trade-related adjustment. Some projects and programmes within these categories may not be primarily considered through a trade-lens: i.e. trade objectives may be tangential and trade outcomes either not included or only indirectly. One of the objectives of these guidelines is to consider some of these types of projects and programmes and tease out the relevance for trade with the view to integrate trade more prominently. For instance box 4 shows a range of infrastructure, transport and trade facilitation activities, some more obviously trade-related than others. It should be noted that the relative emphasis on trade often depends on who is involved in designing a project/programme (i.e. from which lens/angle) —for instance an engineer may be more concerned with traffic flows and vehicle operating costs whereas a trade economist is more likely to want to know how a reduction in vehicle operating costs will impact on trade flows. BOX 3 AID FOR TRADE CATEGORIES Trade policy and regulations, including: training of trade officials, analysis of proposals and positions and their impact, support for national stakeholders to articulate commercial interest and identify trade-offs, dispute issues, institutional and technical support to facilitate implementation of trade agreements and to adapt to and comply with rules and standards. Trade development, including: investment promotion, analysis and institutional support for trade in services, business support services and institutions, public-private sector networking, e-commerce, trade finance, trade promotion, market analysis and development. Trade-related infrastructure, including: physical infrastructure. Building productive capacity. Trade-related adjustment, including: supporting developing countries to put in place accompanying measures that assist them to benefit from liberalised trade. Other trade-related needs. Categories c), d), e) and f) should be reported as AfT when these activities have been explicitly identified as trade-related priorities in the recipient countrys national development strategies. Source: WTO, 2006. BOX 4 TRADE-RELATED INFRASTRUCTURE, TRANSPORT AND TRADE FACILITATION Transport corridors (e.g. Abidjan-Lagos Corridor) Roads (e.g. national level road projects) Rail (e.g. Southern Africa Hub Port and Rail Programme) Air and sea ports (e.g. Central Africa Hub Port and Rail Programme) Cold storage and fruit terminals (e.g. Community Agricultural Infrastructure Improvement programme) Border post development (e.g. One-stop border posts in Southern Africa) Customs modernisation (e.g. WCO/AfDB Customs Modernization Action Plan for Africa (CMAPA)) Standards and quality infrastructure (e.g. Uganda QUISP programme) Energy and regional power pools (e.g. West Africa Power Transmission Corridor) ICT networks (e.g. ICT Enabling Environment programme) Source: Authors’ elaboration. 14 Development activities are identified through the trade development policy marker, since 2007. 10 ECLAC – Project Documents Collection Formulating bankable aid for trade projects III. Effective aid for trade Before we consider how to develop proposals and design/formulate AfT projects and programmes, we explore some of the factors that determine the effectiveness of AfT. AfT works best when:15 • • It focuses on the most binding constraints to trade. AfT is integrated into a country’s broader trade policy and strategy framework, building sustainability. • AfT is demand-driven, responding to the needs of recipient countries. • AfT projects and programmes are aligned with local/country systems. • There is effective coordination around the design, implementation and ME of projects and programmes,16 to avoid duplication and improve complementarity, and when all partners participate fully. • There is political will and AfT champions. • There is appropriate sequencing of reforms and projects and programmes in the design and implementation of AfT. • The selection of instruments and modalities for delivering AfT are able to address traderelated 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 (Specific, Measurable, Attainable, Relevant and Time-bound) indicators and baseline data available. • Development partners and partners are accountable for results and results are measured (and are measurable). 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. 15 16 Based on Basnett, Y., Engel, J., Kennan, J., Kingombe, C., Massa, I. and te Velde, D.W., 2012, Hallaert, J.J. and Munro, L., 2009. This list is by no means exhaustive and factors determining the effectiveness of aid depend on a multitude of factors, not least the local context. Between development partners and recipients, amongst development partners, between recipient country government ministries; etc. 11 ECLAC – Project Documents Collection Formulating bankable aid for trade projects IV. Formulating aid for trade projects and programmes There are a number of elements in project and programming formulation applicable to all types of aid. Here we group these under the following headings: • Identification and preparation • Appraisal and detailed design • ME We explore these using relevant examples for AfT. These elements are not necessarily distinct sequential steps. For instance, ME should not be considered as an ‘add-on’ at the end of project design — rather it is integral across the formulation process as well as implementation (with lessons from implementation feeding into re-design and new design). Throughout, development partners and recipients need to consider key aspects to improve the likelihood that AfT will achieve its desired outcomes.17 DIAGRAM 1 ELEMENTS FOR THE FORMULATION OF BANKABLE PROJECTS AND PROGRAMMES Source: Authors’ elaboration. 17 Basnett, Y., Engel, J., Kennan, J., Kingombe, C., Massa, I. and te Velde, D.W., 2012. 13 ECLAC – Project Documents Collection Formulating bankable aid for trade projects A. Identifying need and demand from a trade lens and determining aid for trade priorities 1. Introduction In this section we highlight various tools that are employed to determine AfT priorities (e.g. Diagnostic Trade Integration Studies (DTIS). As noted above, AfT should be demand-driven, responding to the needs of recipient countries. Analysis of the current context (situational analysis, SWOT analysis, diagnostics, etc.) and a needs assessment should be undertaken in order to identify the key challenges and constraints that need to be overcome and the priority intervention areas. This sets the scene and provides the relevant context on why support is needed and indicates the nature of potential support required. It is arguably the most important stage in formulating a bankable project or programme since it makes the case for funding and, if successful, will lead to a development partner agreeing to go forward with the proposal and undertake detailed design and appraisal work typically with assistance from the development partner. It should be emphasised that each investor and development partner has a different approach to project and programme formulation. Many will agree a simple proposal, application or concept note without detailed diagnosis of the problem (that would come later 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. Thorough analysis and data collection are crucial to facilitate the identification and prioritisation of appropriate and effective interventions/activities. It should be emphasised that any requests for support will be much stronger if demonstrated through the use of evidence (qualitative and quantitative).18 As noted by Basnett et al (2012), “this process and its translation into AfT programming is a central determinant of the effectiveness of AfT”. Typically during the identification and preparation stage, needs are identified, as well as priority areas for support, with detailed programming carried out at the design and appraisal stage. It provides the information required to ‘pitch’ potential support to funders through either a proposal or concept note or similar (depending on the funder’s requirements). When embarking on developing a proposal for support it is important to first highlight the key challenges and constraints to trade as well as possible opportunities and strengths. An analysis of strengths, weaknesses, opportunities and challenges provides better understanding of the current situation and context and helps inform the formulation of initiative(s). It is often difficult to identify which needs to address at different points in time because these are not only numerous but multi-faceted, country-specific and involve a broad range of diverse stakeholders. Indeed, the most binding constraints to trade will differ across countries: for example, the most pressing needs of landlocked economies may be different to those of small and vulnerable island economies. 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 prioritisation process often involves the following: • 18 Most binding constraints to trade: Ranking the most binding constraints to trade, identifying those that have potentially the greatest impact on trade expansion. For example, in many countries/regions trucking services are often the largest share of DFID, 2011. 14 ECLAC – Project Documents Collection Formulating bankable aid for trade projects logistics costs largely due to high profit margins as a result of regulation and restricted competition.19 However, we also need to consider the level of effort and feasibility of tackling the ‘big impact’ interventions (e.g. in general, activities to promote reform of the trucking industry are likely to require significantly more effort to deliver systemic change in the market in the long-term). • Identify quick-wins: Some of the most binding constraints may be difficult to tackle (e.g. high level of effort, less likely to deliver, etc.) and the benefits slow to transpire. There may be pressure (internal and external) to deliver some quick wins where the benefits materialise in the short term but do not necessarily have the highest impact. Quick-wins also help develop and retain buy-in, commitment and interest in the project or programme. • Urgency: There may be challenges that need to be addressed urgently (time-sensitive) even if they may not have the largest impact on trade. • Cost vs. benefits: Some interventions may deliver benefits but are very costly. Depending on the relative benefits, some interventions will need to be avoided if the benefits do not outweigh the costs by a reasonable margin. It is recommended that a combination of intervention areas (high impact, quick wins, timesensitive, cost effective) are presented to the funder at this stage. Diagram 2 shows a simplistic tool that can be used to assist in the prioritisation process. In addition, sequencing and packaging of a range of interventions is critical to ensure that these contribute coherently to the overall objectives (e.g. trade expansion) of a project or programme. However, it should be noted that there is typically a trade-off between an optimal package of interventions and a politically and financially feasible package of interventions.20 a) Impact/effort matrix 19 20 DIAGRAM 2 PRIORITISATION MATRICES b) Urgent/important matrix The high price of transport is more to do with high profit margins rather than high costs. The costs for Africa’s trucking operators are not much higher than costs in other parts of the world however profit margins are exceptionally high especially in Central and West Africa Ranging from 60 to 160% due to limited competition combined with a highly regulated market, Foster, V. and Briceño-Garmendia, C., 2010. OECD, 2012. 15 ECLAC – Project Documents Collection Formulating bankable aid for trade projects Diagram 2 (conclusion) c) Cost/benefit matrix Source: World Bank, 2012. 2. Diagnostics and situational analysis, and need assessments There are a number of diagnostic tools available that can be used to identify the challenges and constraints to trade and provide an analysis of the current situation (i.e. establish the current or baseline position / benchmarking). Some of the diagnostic tools attempt to prioritise the constraints to trade, rather than provide a shopping list of challenges and needs. Diagnostics either feed into needs assessments or are part of a needs assessment. Needs assessments show the gap between the current state-of-play (baseline) and what we want to achieve. Such assessments provide recommendations including measures and actions to help overcome the challenges and constraints and take advantage of potential opportunities, informing the design of projects and programmes.21 There are a range of tools employed in the AfT arena, many of which are outlined below. Some are used in isolation although often the best method is to combine a number of tools. The methodology employed will vary depending on the specific needs, circumstances and local context, as well as the requirements of different development partners. Stakeholder consultations: In determining the most important constraints to improving trade performance and the needs on the ground, it is essential to first identify the relevant stakeholders (amongst government, private sector, civil society, academia and/or other non-state actors) and undertake consultations to understand the local context and tap into their knowledge, experience and relationships. Consultations build ownership and buy-in for the programme or project and are standard good practice across the project cycle (from needs identification to implementation to assessing progress and evaluation). By building ownership, this improves the chances of successful implementation of a programme or project. Consultations can be conducted through, for example, interviews (one-to-one, focus groups, etc.; structured, semi-structured, etc.) as well as through electronic questionnaires. The process should be context-specific with the techniques, methods, approaches, etc. tailored for the local situation and the types of stakeholders being consulted. Those most likely to be directly affected or involved in the project should be targeted and consulted in the early stages and throughout as required during the life of the project. The consultation process should 21 UNDP, 2008. 16 ECLAC – Project Documents Collection Formulating bankable aid for trade projects be two-way so that both sides have the opportunity to exchange views and information. The findings of the consultation process should be reported back in a timely way to those consulted, with clarification of next steps. It is important to note the potential bias inherent in stakeholder consultations. Even the views of an organisation representing a particular stakeholder group (e.g. private sector) can be subjective and not representative of all stakeholders such organisations represent (for instance, captured by vested interest). Given its limitations, stakeholder consultations should be complemented by other tools (Hallaert, J.J. and Munro, L., 2009). Benchmarking: Benchmarking can help identify the binding constraints through the use of existing indicators. Desk-based compilations of quantitative indicators (e.g. World Bank Doing Business (DB) and Logistics Performance Index (LPI); World Economic Forum Enabling Trade Index (ETI)) can be used to assess and compare performance across countries as well as establishing baselines. The data can also be used to assess determinants of trade performance (e.g. Gamberoni and Newfarmer (2009) measure developing countries capacity constraints as measured by benchmark indicators and find that these have a strong effect on export performance).22 Benchmarking is probably more useful as a confirmation tool for constraints identified by other methods and/or when used in conjunction with other identification approaches.23 Diagnostic Trade Integration Studies (DTISs): DTISs are prepared under the EIF for individual LDCs to identify challenges and constraints to trade, competitiveness and export growth. DTISs typically focus on: achieving trade expansion and increasing export competitiveness; exploring trade policies, trading opportunities and supply-side constraints (e.g. bottlenecks related to transport and trade facilitation); and analysing the export potential of particular sectors and sub-sectors. DTISs recommend areas for policy intervention and development partner assistance through the development of action/implementation matrices. DTISs cover a wide-range of areas given the multifaceted nature of trade-related constraints and associated needs. Most DTISs identify a range of key sectors/subsectors/products believed to have significant export potential. However, they often include a long-list of needs that are not prioritised in terms of the most binding constraints to trade and potential impacts. Therefore DTISs are often considered a useful first step that can provide the building blocks for prioritising the binding constraints to trade. Trade and transport toolkits: The World Bank’s Trade and Transport Facilitation Assessment (TTFA) is a toolkit for identifying trade facilitation and logistics inefficiencies in global supply chains. It aims to provide an in-depth assessment of the trade supply chain to help identify measures to facilitate trade.24 It provides a multi-dimensional assessment of the services and processes associated with the movement of products across borders. It includes two phases: 1) providing an understanding of the bottlenecks in infrastructure, regulations, transport and logistics services, and border processes that affect the trade competitiveness of the country or region being assessed; and 2) examines the relative importance of the challenges identified in the first phase, as well as the constraints and needs of specific international supply chains. The assessment provides recommendations on policies, measures and actions. It provides information on where opportunities exist to improve performance along the supply chain and helps inform the design of initiatives to improve logistics performance related to infrastructure, services, and procedures and processes. It develops implementable actions beyond just diagnostics. It is conducted through a range of structured interviews with public agencies (customs and other border management agencies, port authorities and transport regulators) and private service providers (freight forwarders, transport operators and financial intermediaries). 22 23 24 Gamberoni, E. and Newfarmer, R., 2009. World Bank, 2013 and Hallaert, J.J. and Munro, L., 2009. World Bank, 2010. 17 ECLAC – Project Documents Collection Formulating bankable aid for trade projects The World Bank’s Trade Competitiveness Diagnostic (TCD) Toolkit provides a framework, guidelines, and tools to conduct an analysis of trade competitiveness including identifying the main constraints to improved trade competitiveness and the policy measures to overcome these constraints. It can assess the competitiveness of a country’s exports including specific trade sectors. It includes guidance on tools and indicators that can be employed to analyse trade performance (e.g. export growth, trade orientation, export diversification, as well as market and supply-side factors that determine competitiveness). The output of TCD exercises can be used as standalone products or as inputs into, for instance, the formulation of DTISs. The toolkit is intended for policy-makers and practitioners. It provides a step-by-step guide to conducting diagnostics of trade competitiveness including detailed practical information and tools. It has 3 modules: Trade Outcomes Analysis (indicators and tools); Competitiveness Diagnostics (analytical frameworks, indicators, and interview guides); and, Policy Options for Competitiveness and Case Studies. It also presents a scaled down version of the TTFA called the ‘Trade Facilitation and Logistics Assessment’ with the aim of conducting a high-level assessment —if the analyst requires a more in-depth assessment the TTFA toolkit can be employed.25 There are a number of other toolkits and guides that can be used to guide diagnostics and help inform needs assessments.26 The World Bank’s Trade Corridor Management Toolkit aims to assist policymakers and development professionals in improving trade and transport corridor performance and to guide them in identifying constraints and improvement measures. Trade and transport corridors are complex and multi-faceted and each corridor is unique: “a bundle of transport and logistics infrastructure and services coordinated by a national or regional institution to facilitate trade and transport flows between centres of economic activity and international trade gateways”.27 The corridor approach attempts to prioritise investments and maximise returns to scale. The toolkit includes 13 modules and a range of instruments to diagnose, measure and design interventions to improve corridor performance and assess impact. It provides guidelines to assist in: i) corridor monitoring: defining core indicators (e.g. on cost, time, reliability, flexibility, safety and security)28 of performance of trade corridors; ii) corridor performance: identifying measures that can be taken to improve corridor performance; and iii) corridor context: describing the trade facilitation agreement and institutional issues that impact corridors. Its intention is to be a comprehensive, holistic and ‘live’ toolkit that allows for easy updating based on existing and new knowledge on how to design, implement and assess trade and transport corridor projects and programmes. BOX 5 TRANSPORT OBSERVATORIES Transport observatories: In order for transport and transit policies, programmes and projects to have a positive impact on costs and delays, there are a number of important assumptions: a) the problems are correctly identified and 2) progress can be measured. SSATP has developed, and continues to develop, a series of tools as part of a comprehensive toolbox of diagnosis and monitoring instruments under its transport observatory work. The SSATP transport observatory activities have the dual objective of enhancing and strengthening the content of the toolbox while also providing technical assistance for its actual implementation and use in policy dialogue in African corridors. Source: Hallaert, J.J. and Munro, L., 2009, World Bank, 2013. 25 26 27 28 World Bank, 2012. World Bank, 2013. World Bank, 2012. Time (time taken to go through each component and the length of the corridor); cost (cost to go through each component and the whole corridor); reliability (variation in time and cost); flexibility (different combinations of cost and time available); security (security of goods and safety of the system) 18 ECLAC – Project Documents Collection Formulating bankable aid for trade projects DIAGRAM 3 STAGES FOR THE TRADE COMPETITIVENESS DIAGNOSTIC Stage 1: • Time: 2-4 weeks. Trade outcomes assessment • Activities: desk-based trade data analysis. • Output: trade outcomes note, including hypotheses on key issues to address in the diagnostic. • Time: 2-3 weeks • Activities: desk-based compilation of quantitative indicators (benchmarking) and review of key policy and strategy documents • Output: pre-mission note outlining key issues for research, data requirements, interview targets Stage 2a: Initial diagnostic analysis and fieldwork preparation • Time: 4-6 weeks Stage 2b: • Activities: in-country interviews and data collection Fieldwork • Output: aide memoire summarizing main findings and next step • Time: 4-6 weeks • Activities: analysis of diagnostic findings and preparation of report outlining potential responses • Output: final TCD report Stage 3: Analysis and preparation of final diagnostic Source: World Bank, 2012. BOX 6 COLLECTING DATA AND WHY? TOOL PURPOSE Logistics benchmarking Trade modelling Freight flow analysis Survey of private sector Sector diagnostic Supply chain analysis Point surveys and travelogues To compare relative performance To estimate the potential benefits of integration To map existing movements To consider firm priorities To benchmark sector performance To identify cost and time bottlenecks To validate check points/stoppages Source: LOI, Going Business and WEF. 19 ECLAC – Project Documents Collection Formulating bankable aid for trade projects DIAGRAM 4 CORRIDOR PROJECT CYCLE Source: World Bank, 2012. The World Bank’s Border Management Modernisation Toolkit provides practical advice on how to develop a strong business case for reform and how to design and implement comprehensive border modernisation programmes in developing countries.29 More specialised diagnostic tools include the WCO’s Columbus Programme on customs (Aid for SAFE Trade). The aim of the Columbus Programme is the full implementation of the SAFE Framework of Standards, and other WCO conventions and instruments, as well as best practices in the area of customs administration. The first phase of the programme includes a comprehensive diagnostic needs assessment of the customs administration based on the WCO’s Diagnostic Framework tool, producing a diagnostic report including situational analysis, gap analysis and recommended way forward to feed into the planning stage. During the planning stage, action plans and project proposals are developed and the business case is made and submitted to stakeholders and potential development partners. The World Bank has also developed a Freight Transport Toolkit, and others such as the Port Reform Toolkit. Corridor diagnostic studies and border audits: Identify and analyse corridor transit and transport costs and delays, including physical impediments, process constraints and non-tariff barriers such as institutional and regulatory constraints.30 They assess current and forecasted trade and traffic volumes and recommend and prioritise potential options for removing barriers. Examples include the Corridor Diagnostic Study (CDS) of the Northern and Central Corridors of East Africa and the Northern Corridor Baseline Border Assessment. The CDS of the Northern and Central Corridors of East Africa is an extensive in-depth study that provides detailed corridor diagnostics (covering infrastructure, trade and transport facilitation, etc.) and measures corridor performance.31 It identifies 29 30 31 World Bank, 2011. Turner, L. and Higgins, K. with Engel, J., 2010. Nathans, 2011. 20 ECLAC – Project Documents Collection Formulating bankable aid for trade projects key bottlenecks, measures cost and time of different transport modalities, and includes impact assessments and trade and traffic forecasts. The study recommends strategies and projects for improving corridor performance. The CDS also attempts to prioritise projects using the following criteria: estimated impact on corridor performance (price, time and reliability); estimated economic impact (internal rate of return); readiness for implementation in the short-term. The CDS diagnostic audit employed the software and audit methodology FastPath (a transport logistics diagnostic tool) to measure performance (time, cost, reliability, etc.) and identify bottlenecks and potential solutions.32 UNDP Aid for Trade needs assessment guide: The guide is designed to assist those conducting needs assessments to ultimately “identify a set of policy recommendations and technical assistance needs aimed at improving the contribution of trade to human development and poverty reduction”.33 The main elements of the analysis are as follows: 1) review current investment and trade policies and their linkages with economic growth and human development; 2) assess the country’s business environment and investment climate; 3) analyse selected existing (ex-post) trade policies and agreements and those under negotiation (ex ante) for economic growth, employment, equity and poverty, policy space and public sector capacity implications; 4) review economic and export performance as well as any specific constraints that the country’s exports face in international markets; 5) analyse key economic sectors for expansion of output, productivity, exports, employment and sustainability; 6) consider the impact of the above on poverty, inequality, social exclusion and regional disparities, as well as on policies to address these and related development challenges; 7) provide specific policy recommendations and institutional reforms demonstrating ways in which trade might contribute more to economic growth, human development and poverty reduction.34 The guidance notes that each country needs assessment will differ depending on specific circumstances. Box 7 sets out a useful checklist for analysis. BOX 7 A PRACTICAL GUIDE TO DATA AND POLICY ANALYSIS 1. Define the problem: Describe the problem (not a diagnosis of the causes) 2. Assemble the evidence: Gather information and present the evidence 3. Construct the alternatives: Address the problem starting with measuring the benchmark/counterfactual and consider the alternative solutions to the problems 4. Select the criteria: identify criteria to assess the best outcomes 5. Project the outcomes: determine as far as possible the benefits and costs of the alternatives/options including identifying unanticipated consequences 6. Confront the trade-offs: measure trade-offs across possible outcomes and compare benchmarks with alternatives/options 7. Decide: Select the best option given the analysis 8. Tell your story: tell the story to the target group(s) Source: UNDP, 2008. Value chain analysis: Value chain analysis can help identify the binding constraints to trade and how best to allocate AfT. It typically provides quantitative and qualitative analysis of competitiveness from the perspective of an investor, identifying constraints to competitiveness at the sector, sub-sector or product level looking at all activities from sourcing, production, packaging and 32 33 34 “FastPath is a proprietary diagnostic tool developed in a partnership between USAID and Nathan Associates to analyze transport infrastructure and operational inefficiencies in the transport/logistics chains serving import and export traffic. FastPath provides a quantitative basis for monitoring corridor performance. The audit methodology consists of surveys and questionnaires to identify bottlenecks and appropriate improvements to freight corridors.” (Nathans, 2011). UNDP, 2008. UNDP, 2008. 21 ECLAC – Project Documents Collection Formulating bankable aid for trade projects delivery.35 It can be conducted for selected companies and through a representative sample of companies. The analysis maps the value chain across the life of a product recording time and costs to identify the areas where the firm, sector, sub-sector or product is falling behind the competition. It can identify where time and costs need to be decreased to improve competitiveness. It identifies the bottlenecks that apply to sections of the value chain in the areas of, for instance, physical infrastructure, transport, trade facilitation and logistics, etc. The method combines benchmarking and stakeholder consultation. Growth diagnostics adjusted for trade: The growth diagnostics framework was developed by Hausmann, Rodrik and Velasco (2005) to diagnose the binding constraints to growth and to assist in sequencing reform priorities. This framework can be adjusted for trade and can help identify the key constraints to achieving trade expansion. The advantage of the approach is that it attempts to identify the most binding constraints to trade and assists in guiding the sequencing of reforms and AfT interventions —by addressing the most binding constraints the impact on trade will be as large as possible. The framework combines various diagnostic tools and uses a relatively simple decision tree approach (see figure 5) to guide a series of questions (see box 8 for examples) to identify the biggest impediments to trade. The first step is to identify the 3 constraints that are the main impediments to trade followed by a second step to identify specific distortions (i.e. causes) underlying these constraints. The decision tree moves from the problem —e.g. low trade performance— to isolating some of the key constraints (e.g. access and cost of trade finance) that can be the target of specific interventions. Answering these questions points to the areas where reform etc has the biggest impact. Once the most binding constraint has been addressed, the identification process can restart to identify the next most binding constraint. It is a dynamic but relatively simple approach that recognises that not all needs and constraints can be addressed at the same time and reforms need to be sequenced. As a result, it helps sequence and prioritise and direct AfT flows. Stakeholder consultation, benchmarks, and value chain analysis can be used at each ‘node’ of the decision tree. By combining diagnostic tools this limits potential bias and provides the opportunity to combine the best elements of each tool. DIAGRAM 5 GROWTH DIAGNOSTICS ADJUSTED FOR TRADE Source: Hallaert, J.J. and Munro, L., 2009. 35 UNIDO, 2011 and World Bank, 2012. 22 ECLAC – Project Documents Collection Formulating bankable aid for trade projects BOX 8 ASKING THE RIGHT QUESTIONS Hallaert and Munro (2009) suggest a number of example questions which might be asked in identifying the binding constraints to trade: • If a country (or region) wants to increase its international trade or diversify its exports, what would be the most efficient reform taking into account the trade-related institutions and the need to ultimately increase incentives to trade? • Is the trade performance low because the cost of trading across borders is high (making exports uncompetitive and imports too expensive) or is it because of the cost of producing is too high (affecting exports competitiveness), or is it because of uncertainties (economical, institutional, or political) that discourage firms from engaging in external trade? • If the main problem is the cost of trading across borders, what is the main reason for this high cost? Is it because of issues related to trade finance, an unfavourable trade or customs regime, or inadequate infrastructures? If the main problem is related to infrastructure, is this due to cost, availability or quality? The answers to these questions will point to the most binding constraints and the areas where reforms and AfT would have the biggest impact on trade performance. Source: Hallaert, J.J. and Munro, L., 2009. It should be noted that a trade supply chain is “only as strong as its weakest link”. Determining where the weakest links are and addressing these through targeted development interventions is central to improving trade.36 3. Contents of a proposal and concept note As discussed, the overall justification for the envisaged support is provided and presented in a proposal or concept note (developed by the recipient or sometimes developed by both the recipient and potential development partner) or similar. It should set the foundations for the design of the project/programme. Utilising the diagnostics, situational analysis and/or needs assessments, the following will be analysed, formulated and presented, typically in consultation with partners and funders (refer to annex 1 for detailed explanation of each of these components and information to be provided): 1. Project context and need: for instance: • Analysis of the overall context and importance of trade and regional integration and the relevant policy and strategy framework. • Situational analysis describing the problems/challenges faced which hinder trade (e.g. the binding constraints to trade which increase the time and costs of trading). • Overview of existing relevant initiatives and support. 2. Project overview and justification: For instance: • • Purpose and main objectives (overall and specific) of the project. • Gap analysis: summary of why the project is needed (from a ‘trade-lens’) – i.e. the justification for the interventions/activities being proposed. • 36 Brief description of the proposed project for funding. How the proposed project represents unmet need. World Bank, 2010. 23 ECLAC – Project Documents Collection Formulating bankable aid for trade projects • How the proposed project helps address the problems/challenges identified above. • How were the needs (and activities to be supported requested below) identified. 3. Strategic context and relevance: • How the project fits with the AfT initiative aims and objectives. • How the project fits with the organisation’s priorities, policy and strategy framework. • Whether the proposed interventions/activities are explicitly identified in any trade and/or regional economic integration strategy, policy, programme or similar. • How does the project contribute to trade and/or regional economic integration objectives. • Recipient and beneficiaries: who will be assisted directly by the project (recipients) and who is expected to benefit (beneficiaries). 4. Expected results and detailed activities: • Expected results: the outputs and outcomes the project activities will deliver and how the project contributes to trade and regional economic integration outcomes. • Detailed activities: type of support (e.g. technical assistance; training; other capacity building activities; etc.); main activities and estimated level of inputs (e.g. no. of experts and no. of days); how the activities will deliver the expected results (outputs and outcomes) and how the support contributes to the overall purpose and objectives of the project. 5. Coordination and complementarity with other support: • How will the project work with and complement existing interventions including development partner funded projects. • How will the project ensure that it does not duplicate existing support. 6. Measuring results: Description of ME of the potential results (outputs, outcomes, etc.). 7. Efficiency and Value for Money considerations: Outline of why the project/activities proposed are considered the best and most efficient option to deliver the expected results. 8. Risk management: Summary of key risks to the project (e.g. political instability; insufficient political commitment and weak coordination; etc.) and how these risks will be mitigated. 9. Sustainability: How will the benefits accrued from the project outputs will be sustained after the project 10. Location and duration 11. Management and reporting: project implementation and quality control arrangements 12. Budget and work plan 13. References 24 ECLAC – Project Documents Collection Formulating bankable aid for trade projects B. Appraisal and design In most cases, the design and appraisal phase allows for in-depth formulation of the potential project/programme once an agreement in principle (during the identification phase) has been made by one or more investors. It is not a separate or distinct phase. It builds on the identification and preparation stage. 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. Typically during this stage detailed project design is undertaken. Work completed during the identification and preparation phase is reviewed. Expected outcomes, activities, intended beneficiaries, etc. are confirmed and fleshed out. According to the World Bank, “agreement is reached on the viability of all aspects of the project at this time” and the funder usually ensures that all aspects are consistent with their own procedures and rules, etc. and that the government has the necessary institutional arrangements in place to implement the project.37 During this stage, detailed appraisals are often undertaken. These provide a stronger more robust evidence-base to justify the project/programme and guide the design of the activities, linking activities with expected results (see the next section). For AfT projects and programmes these may include the following appraisals (depending on the funder and the nature and scale of the project/programme): • • Institutional and political appraisals explore institutional issues but go beyond just looking at formal structures to reveal the underlying interests, incentives and institutions that enable or frustrate change. Such analysis is important in project/programme design as it helps shape realistic expectations of what can be achieved and the risks involved, and improves the likelihood of politically feasible and effective interventions and activities. It can contribute to better results by identifying where the main opportunities and barriers exist and how programming and influencing tools can be used to promote positive change.39 • 39 Poverty and social appraisals typically explore the poverty and social aspects of a project and programme.38 There are a number of tools available that can be adapted according to the intervention or project/programme. Poverty and social analysis provides disaggregated insights into the trade-related opportunities, barriers and risks facing different groups of people and can be used to inform and strengthen AfT projects and programmes in ways that contribute to inclusive growth and poverty reduction as well as trade expansion. • 38 Technical appraisals explore the detailed technical issues. For instance, for an infrastructure and transport project, a technical appraisal may identify and analyse data on traffic flows, the costs of transport and the relationship with trade. • 37 Economic appraisals assess the costs and benefits of a project and activities, both quantitative and qualitative, and often include a cost-benefit analysis (CBA). Environmental appraisals are common when undertaking capital works. For instance, when investing in roads, bridges, ports or border posts, it is important to assess the direct http://go.worldbank.org/GI967K75D0. Turner, L. and Higgins, K. with Engel, J., 2010. DFID, 2009. 25 ECLAC – Project Documents Collection Formulating bankable aid for trade projects physical impact of any construction on the environment but also the potential impact of changes in traffic flows on the environment. At this stage some of the earlier diagnostic toolkits may be used (again or for the first time depending on the requirements of the funder). It should be noted that some guidance on appraisals (e.g. for infrastructure) may not give sufficient attention to trade and may need to be adapted. For instance, technical appraisals for a road project may consider costs, traffic flows and vehicle operating costs but not take into account the link with trade (see box 9). BOX 9 ROAD PROJECT APPRAISAL Pre-AfT initiative road project explores: • Costs • Vehicle traffic • Reduction in Vehicle Operating Costs Post-AfT initiative road project: • As above, plus: • Add global market drivers into traffic appraisal • Part of multi-modal corridor or feeder road • Identified in national/regional AfT strategy • Connecting land-locked production areas to ports • Reduction in time/cost/risk to export/import • Expected increase in exports Source: Authors’ elaboration C. ME As highlighted earlier, ME should not be considered as an ‘add on’ to project conceptualisation and design but should be embedded throughout the project cycle. ME approaches and tools help us to think through the logic of a project/programme and whether it is likely to deliver the intended results, as well as provide an accountability tool for reporting on results. Here we present key elements of ME design including the importance of developing an intervention logic supported by a strong Theory of Change as well as some example indicators to measure progress. 1. Intervention logic and Theory of Change In project design, it is good practice to start by developing a ToC. A ToC is a means of explaining implementation theory for the purpose of programme planning and improvement. It explains the process through which it is expected that inputs/activities will be converted to expected outputs, outcomes and impacts. A strong ToC strengthens attribution by ensuring a rigorous causal chain from activities to impact. Using a ToC helps us to improve project design and implementation: it is a structured technique for understanding how a project/programme is likely to contribute to long-term outcomes and impacts (the “how” and “why”). A ToC needs to include an explanation of how the programme’s activities contribute to the results —not simply a list of activities followed by results with no explanation of how these are linked. It needs to articulate the theories and assumptions which underpin the anticipated change process, along with supporting evidence. It is crucial to have sufficient evidence (e.g. from the appraisals) to provide solid justification for the project and programme activities. Ideally this evidence should be quantifiable. A ToC allows for creative and dynamic thinking about how to achieve impact/goals. It generates a shared understanding of what is most important and achievable (i.e. the critical path). 26 ECLAC – Project Documents Collection Formulating bankable aid for trade projects DIAGRAM 6 INTERVENTION LOGIC OR RESULTS CHAIN INCLUDING THEORY OF CHANGE Following the example in figure 6, in making the case and designing a border post project a ToC can be useful in understanding the linkages from investment to impact. For example, a border post investment is expected to contribute to increased trade, however it is crucial to understand how and why. A ToC helps us to think through the linkages and what is necessary to ensure that these deliver the anticipated changes. While it may appear logical that improving infrastructure (both soft and hard) may contribute to increased trade, this is dependent on improved border posts leading to the reduction in costs of trading. The assumption is that time savings translate into transport costs savings, and that the latter are passed on to traders leading to reduced trade costs. However, it is important to interrogate the evidence to determine whether this a sensible assumption since the savings may be captured by transporters. At this stage it would be important to explore examples from other initiatives to investigate whether evidence exists to suggest this would occur. Annex 2 provides an example of a complex results chain/intervention logic for a regional integration programme in East Africa (TradeMark East Africa). For each of the links, an assessment was made by the programme into the assumptions that would need to hold and the existing evidence to provide the rationale that the suggested interventions would deliver the expected results along the causal chain. 2. Indicators and benchmarking In addition to developing a ToC, a results framework should be developed in order to measure and monitor performance. This is usually presented in the form of a log frame. A log frame presents a range of indicators to measure progress based on the intervention logic and ToC. Indicators are quantitative or qualitative factors/variables that provide a simple and reliable means to measure achievement, to reflect the changes connected to an intervention. Indicators need to be simple yet SMART (Specific, Measurable, Attainable, Relevant and Time-bound). A range of indicators are available to measure macro performance (see annex 3). Specific SMART indicators should be developed and tailored to the output, outcome and impact levels to measure progress along the chain. 27 ECLAC – Project Documents Collection Formulating bankable aid for trade projects TABLE 1 EXAMPLES OF AID FOR TRADE INDICATORS Outputs (project deliverables) • • • • • • • • Kilometres of roads built and maintained Increases in sea/airport capacity Increases in access to landlines, cell phones, internet Access to credit Reductions in power outages Access to cold storage, especially in rural areas Increased compliance with SPS and other international standards Rationalisation, harmonisation of regulations related to trade, transit in regional trade agreements, especially involving landlocked countries Medium-term outcomes (measures of trade and investment flows) Short –term otucomes (measures of trade costs and competitiveness) • • • • • • • • • • Reduction in number of forms required to import/export Reduction in days for goods to clear customs Reduction in trade taxes, especially on key technologies, other inputs Reduction in internal transit time to market, port or end user Reduction in total time to get goods to destination Reduction in the share of output not reaching market due to delivery delays Competition measured by market shares of top five or ten firms providing logistics, transportation services Reduction in transportation costs (changes in CIF/FOB) Size of inventories held Effects of aid on exchange rate Source: OECD, 2013. 28 • • • • • • Increased capacity in sectors producing tradable goods and/or services Increased value-added in tradable goods and/or services sectors Increased firm-level productivity Change in global export shared (total and in key sectors) Diversification of exports (share of top five products in total exports) Increased private investment (foreign or domestic) in and around infrastructure projects and in productive sectors receiving assistance Impacts/goals • • • • • • Higher employment levels in tradable goods and/or services sector Increased number of subsistence farmers engaging in market activities (local or export) Lower shares in economic activity/employment for informal sector Higher and sustained growth following increases in trade Higher overall employment if growth stimulated Reductions in poverty rates ECLAC – Project Documents Collection Formulating bankable aid for trade projects V. Cross-cutting issues There are a number of cross-cutting issues (gender, environment, HIV) that should be considered and taken into account in project identification, design, implementation and ME. Across development partners, the importance given to cross-cutting issues depends on their policy priorities. For example, the World Bank, Canada and UK have given significant attention to gender issues in programme guidance.40 Development partners such as Finland and Denmark often integrate environmental considerations in their projects and programmes. It should be noted that many AfT projects and programmes may not include activities directly targeting or impacting on cross-cutting issues. However, it is important to take into account the potential (often indirect) impact on cross-cutting issues when designing AfT. For instance, investments in border posts should consider the role of women in trade (formal and informal) and how they use border posts and any gender-specific challenges they face (e.g. harassment). With respect to environmental issues, building a border post or any other hard infrastructure will have an impact on the environment which needs to be assessed during the design phase. 40 Higgins, K., 2012, Turner, L. and Higgins, K. with Engel, J., 2010 and CIDA, 2003. 29 ECLAC – Project Documents Collection Formulating bankable aid for trade projects VI. Building aid for trade into design To conclude, many projects and programmes do not explicitly include trade-related objectives despite having the potential to impact on trade. Given the levels of AfT funding and interest by development partners in supporting activities that contribute to economic growth and development, a case can be made for improving the integration of trade in relevant projects and programmes through integrating trade objectives and components into, for instance, infrastructure projects and programmes. 31 ECLAC – Project Documents Collection Formulating bankable aid for trade projects Bibliography Basnett, Y., Engel, J., Kennan, J., Kingombe, C., Massa, I. and te Velde, D.W. (2012). Increasing the effectiveness of Aid for Trade: the circumstances under which it works best. London: Overseas Development Institute. CIDA (2003), Gender and Trade-related Capacity Building: A Resource Guide for Practitioners. Gatineau: CIDA. DFID (2009), Political Economy Analysis – How To Note. DFID (2011), Writing a Business Case. London: DFID. Foster, V. and Briceño-Garmendia, C. (2010). Africas Infrastructure: A Time for Transformation. Washington: World Bank. Gamberoni, E. and Newfarmer, R. (2009). Aid for Trade: Matching Potential Demand and Supply. Washington DC: World Bank. Hallaert, J.J. and Munro, L. (2009). Binding Constraints to Trade Expansion: Aid for Trade Objectives and Diagnostics Tools. Paris: OECD. Hausmann, R., Rodrik, D. and Velasco, A. (2005). Growth Diagnostics. Higgins, K. (2012). Gender Dimensions of Trade Facilitation and Logistics: A Guidance Note. Washington: World Bank. Karingi, S. and Fabbroni, M. (2009). The Reality of Aid for Trade in Africa: Does Supply Meet Demand? Addis Ababa: UNECA. Ministry of Foreign Affairs. (2011). Guidelines for Programme Management. Copenhagen: Ministry of Foreign Affairs. Nathans. (2011). Corridor Diagnostic Study of the Northern and Central Corridors of East Africa. Ocampo, A. (2013). Elements of the best project proposals. Washington: Devex. OECD (2011), Trade for Growth and Poverty Reduction: How Aid for Trade Can Help. Paris: OECD. OECD (2012), Succeeding with Trade Reforms: the Role of Aid for Trade. Paris: OECD. OECD (2013), Aid for Trade and Development Results. Paris: OECD. OECD/WTO (2013), Aid for Trade at a Glance 2013: Connecting to Value Chains. Paris/Geneva: OECD/WTO. OECD-WTO (2011), Partner Country Questionnaire on Aid for Trade. Paris: OECD. Turner, L. and Higgins, K. with Engel, J. (2010). Integrating Poverty and Social Analysis into Aid for Trade Programmes: Trade Facilitation and Trade-related Infrastructure. London: Overseas Development Institute. Turner, L. and Higgins, K. with Engel, J. (2010). Integrating Poverty and Social Analysis into Aid for Trade Programmes: Trade Policy and Regulation. London: Overseas Development Institute. UNDP (2008), Aid for Trade and Human Development: A Guide to Conducting Aid for Trade Needs Assessment Exercises. UNDP. UNECA (2011), On Evaluating Aid for Trade in Africa. Addis Ababa: UNECA. 33 ECLAC – Project Documents Collection Formulating bankable aid for trade projects UNECA (2013), Building Trade Capacities for Africa’s Transformation: A critical review of Aid for Trade. UNIDO (2011), Industrial Value Chain Diagnostics: An Integrated Tool. Vienna: UNIDO. World Bank (2010), Trade and Transport Facilitation Assessment: A Practical Toolkit for Country Implementation. Washington, D.C.: World Bank. World Bank (2011), Border Management Modernisation. Washington DC: World Bank. World Bank (2012), Trade and Transport Corridor Management: A Toolkit for Performance Improvement. Washington DC: World Bank. World Bank (2012), Trade Competitiveness Diagnostic Toolkit. Washington DC: World Bank. World Bank (2013), Improving Trade and Transport for Landlocked Developing Countries: World Bank contributions to implementing the Almaty Programme of Action - A report preparing the ten-year comprehensive review. WTO (2005), Doha Work Programme: Ministerial Declaration. Geneva: WTO. WTO (2006), Recommendation of the Task Force on Aid for Trade. Geneva: WTO. 34 ECLAC – Project Documents Collection Formulating bankable aid for trade projects Annexes 35 ECLAC – Project Documents Collection Formulating bankable aid for trade projects Annex 1 Aid for Trade Project Concept Note Summary page Title of proposed project Brief description of main results (outcomes) and activities (e.g. increased intra-regional trade) Category of assistance (e.g. technical assistance, training, other capacity building, or other) Indicative funding requirements (estimated budget) Other sources of funding (including counterpart funding if applicable) Potential funding sources (e.g. AfDB, Word Bank, etc.) Recipient organisation(s) Implementing organisation(s) Project duration (expected start and end date) Countries and regional economic communities (RECs) covered by the project Name of the applicant/organisation Main contact person (full name, position, office address, office email and telephone number) Date/month/year 1. Project context and need 1.1 Regional integration, trade and Aid for Trade - Overall context and importance of trade and regional integration - Overview of relevant RECs and policy and strategy framework [1 page approx] 1.2 Corridor and agency Overview of the transport corridor and background on corridor agency [1 page approx] 1.3 - Situational analysis Describe the problems/challenges faced along the transport corridors which hinder trade (e.g. the binding constraints to trade which increase the time and costs of trading) 36 ECLAC – Project Documents Collection - Formulating bankable aid for trade projects When elaborating, consider these problems/challenges in the context of the activities being proposed in this concept note [2-3 pages] 1.4 Existing development partner funding Overview of existing relevant support [1-2 pages] 2. Project overview and justification Brief description of the proposed project for funding [500 words approx] 2.1 Purpose and objectives Outline the purpose and main objectives (overall and specific) of the project [300 words approx] 2.2. Gap analysis - Summary of why this project is needed (the need should be identified from a ‘trade-lens’) – i.e. the justification for the interventions/activities being proposed? - How does the proposed project represent unmet need? - How will the proposed project help address the problems/challenges identified above? - How were the needs (and activities to be supported requested below) identified? For example, was a problem analysis, needs assessment, diagnostic study, appraisal and/or feasibility study (elaborate on these) undertaken? [1-2 pages] 2.3. Strategic context and relevance - How well does the project fit with the AfT initiative aims and objectives? - How well does the project fit with the organisation’s/REC’s priorities, policy and strategy framework? - How well does the project fit with the priorities identified in the PIDA Priority Action Plan (PAP) and/or other similar initiatives (e.g. NEPAD, AU Infrastructure Master Plan, etc.)? - Are the proposed project interventions/activities explicitly identified in any trade and/or regional economic integration strategy/policy/programme or similar? - How does the project contribute to trade and/or regional economic integration objectives? [1-2 pages] 37 ECLAC – Project Documents Collection 2.4. Formulating bankable aid for trade projects Recipient and beneficiaries Summarise who will be assisted directly by the project (recipients) and who is expected to benefit (beneficiaries) [200 words approx] 3. 3.1. Expected results and detailed activities Expected results - What outputs will the project activities deliver? Outputs are specific, direct deliverables of the project that are attributable to the activities/inputs – e.g. border posts built, training undertaken, reports produced, etc. - What outcomes will the outputs generate? Outcomes are the changes that occur as a result of the output (i.e. the changes that the project delivers) - Does the project contribute to trade and regional economic integration outcomes (increased intra-regional trade)? [1 page approx For example: - Improved access to infrastructure (output)  Increased share of intra-regional trade (outcome) - Skills and capacity of RECs built (output)  Improved implementation of regional integration commitments (outcome)] 3.2. Detailed activities Describe in as much detail as possible: - Type of support (e.g. technical assistance; training; other capacity building activities; etc.) - The main activities and estimated level of inputs that are required if known (e.g. no. of experts and no. of days) - How the activities will deliver the expected results (outputs and outcomes) and how the support contributes to the overall purpose and objectives of the project? [2-3 pages approx] 4. Coordination and complementarity with other support - How will the project work with and complement existing interventions including development partner funded projects? - How will the project ensure that it does not duplicate existing support? [300 words approx] 38 ECLAC – Project Documents Collection Formulating bankable aid for trade projects 5. Measuring results Describe how the potential results (outputs, outcomes, etc.) will be monitored and evaluated. [300 words approx] 6. Efficiency and value for money considerations Outline whether the project/activities being proposed are considered the best and most efficient option to deliver the expected results (i.e. were other options considered and dismissed because sub-optimal)? [300 words approx] 7. Risk management Summarise the key risks to the project [e.g. political instability; insufficient political commitment and weak coordination; etc.]. In other words, what factors or events might delay or undermine the project in delivering its activities and expected results (outputs and outcomes)? How will these risks be mitigated? [300 words approx] 8. Sustainability How will the benefits accrued from the project outputs be sustained after the project? What mechanisms will be used to ensure sustainability? [300 words approx] 9. Location and duration Add information on the location of the assignment; duration (start and end date); total days required (if known). [300 words approx] 10. Management and reporting - Describe project implementation arrangements. - Describe how the applicant will take ownership of the project and assure the project is supervised to ensure delivery of high quality outputs which are on time and on budget? [300 words approx] 11. Budget Provide indicative budget if available. [Insert table] 39 ECLAC – Project Documents Collection Formulating bankable aid for trade projects 12. Work plan Provide indicative work plan (i.e. activities against a timeline) if available. [Insert table] 13. References List the key documents or other sources of information which should be referred to by those developing and delivering the project. [Insert references] 40 Example of a theory of change – TradeMark East Africa Overall impact Objectives ECLAC – Project Documents Collection ) Annex 2 Example of a results chain-intervention logic Strategic impacts 41 Strategic outcomes Formulating bankable aid for trade projects ECLAC – Project Documents Collection Formulating bankable aid for trade projects Annex 3 Existing datasets and indicators Datasets and indicators: The World Bank’s World Trade Indicators (WTI) database contains approximately 450 traderelated policy and outcome indicators for 211 countries organised around five pillars: (a) trade policy; (b) external environment; (c) institutional environment; (d) trade facilitation; and, (e) trade outcome. It is a tool that enables countries to benchmark their trade policy and performance and compare across countries and country groupings (e.g. by region, income group, regional trade agreements). ITC’s Trade Performance Index (TPI) assesses sectoral trade performance and provides a general profile and ranking for a country’s key export sectors as well as a series of static and dynamic indicators to assess each sector’s international competitiveness. The TPI calculates the level of competitiveness and diversification of a particular export sector and compares results across countries. Currently the TPI covers 184 countries and 14 different export sectors. Its composite ranking is based on five criteria, which are value of net exports, per capita exports, world market share, and diversification of products and of markets. Altogether, the TPI consists of 22 quantitative indicators of trade performance. The World Bank’s Doing Business database offers a range of quantitative indicators that reflect the business regulatory environment in 181 countries. The indicators cover complexity and cost of regulatory processes (e.g. starting a business; dealing with construction permits; getting electricity; registering property; paying taxes; trading across borders) and strength of legal institutions (e.g. getting credit; protecting investors; enforcing contracts; resolving insolvency; and, employing workers). The Trading Across Borders indicators represent a country’s trade facilitation capabilities and consists of objective measures of the trade facilitation environment: number of documents for import and export; time (in days) for import and export; and cost (USD per container) to import and export. It estimates the monetary costs associated with shipping goods from the factory gate to ports, and from ports to retail outlets for a standard container. The World Bank’s Logistics Performance Index (LPI) is a benchmarking tool focused on measuring the trade and transport facilitation ‘friendliness’ of countries. It reflects the overall perception of a country’s logistics environment and compares the trade logistics profiles of 155 countries. The LPI measures: i) efficiency of customs and border management clearance; ii) quality of trade and transport infrastructure; iii) ease of arranging competitively priced shipments; iv) competence and quality of logistics services; v) ability to track and trace consignments; and, vi) frequency with which shipments reach consignees within scheduled or expected delivery times. The World Bank’s World Integrated Trade Solution (WITS) database and analytical tool includes data on trade, as well as tariffs and non-tariff measures. Developed in close collaboration with UNCTAD, ITC, UNSD and WTO. The World Bank’s Services Trade Restrictiveness Index (STRI) provides information on barriers to services trade that can be compared across countries. Data for 103 countries covering five sectors (telecommunications, finance, transportation, retail and professional services) and the key modes of service supply. The World Economic Forum’s Enabling Trade Index (ETI) captures the attributes that affect a country’s ability to benefit from trade. It measures the extent to which economies have developed institutions, policies and services that facilitate trade. It is divided into four sub-indexes: a) market access – measures the extent to which the policy framework of the country welcomes foreign goods into the economy and enables access to foreign markets for its exporters; b) border administration —assesses the extent to which the administration at the border facilitates the entry and exit of goods; c) transport and communications infrastructure— takes into account whether the country has in place 42 ECLAC – Project Documents Collection Formulating bankable aid for trade projects the transport and communications infrastructure necessary to facilitate the movement of goods within the country and across the border; and, d) business environment -looks at the quality of governance as well as at the overarching regulatory and security environment impacting the business of importers and exporters active in the country. The World Economic Forum’s Global Competitiveness Index measures the microeconomic and macroeconomic foundations of national competitiveness and is composed of 12 pillars (institutions; infrastructure; macroeconomic environment; health and primary education; higher education and training; goods market efficiency; labour market efficiency; financial market development; technological readiness; market size; business sophistication; and, innovation). Competitiveness is defined as the set of institutions, policies, and factors that determine the level of productivity of a country taking into account its level of development. ITU’s ICT database provides time-series data across countries on telecommunications and ICT. UNCTAD’s FDI database includes time-series data on FDI flows by country and broad sectors. The WTO’s Trade Policy Review website includes access to all of the Trade Policy Reviews undertaken which includes qualitative and quantitative information assessing countries’ trade and investment policy environments. The World Bank’s World Development Indicators provide a broad range of country-level statistics. The World Bank’s Investing Across Borders (IAB) initiative compares regulation of FDI globally and presents quantitative indicators on economies’ laws, regulations, and practices affecting how foreign companies invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes. The AfDB’s Africa Infrastructure Knowledge Programme (AIKP) manages the infrastructure database that was previously under the Africa Infrastructure Country Diagnostic (AICD). The database includes a range of indicators (containing a total of 893 variables) to measure performance in nine major infrastructure sectors (air transport, ICT, irrigation, ports, power, railways, roads, water and sanitation) across 24 African countries. Quantitative indicators include infrastructure performance measures of access, efficiency, quality and financial performance, with a focus on infrastructure service providers such as utilities. Qualitative indicators measure the institutional, legal and regulatory frameworks of each sector. 43 ECLAC – Project Documents Collection Formulating bankable aid for trade projects Selection of aid for trade related indicators Dimension Indicator Source Dimension Indicator Source Trade performance Real growth of exports of goods and services World Bank, World Trade Indicator Change in export market share of goods and services World Bank, World Trade Indicator Competitiveness effect (change in market share) ITC, Trade Performance Indicator Demand effect (change in market share) ITC, Trade Performance Indicator Index of export concentration (Herfindhal) World Bank, World Trade Indicator Trade restrictiveness index (tariffs only) World Bank, World Trade Indicator Share of tariff lines with domestic peaks World Bank, World Trade Indicator Share of tariff lines with MFN-0 (%) World Bank, World Trade Indicator Share of tariff lines bound (%) World Bank, World Trade Indicator Tariff overhang World Bank, World Trade Indicator Applied tariff escalation World Bank, World Trade Indicator GATS commitment index World Bank, World Trade Indicator Quality of transport and IT World Bank, Logistics Performance Index Number of internet users, mobile phone and fixed phone subscribers for 1000 inhabitants World Bank, World Development Indicators Percentage of paved road, total km of rail lines, air transport freight costs to US World Bank, World Development Indicators Quality of port and water infrastructure Institutions World Bank, World Trade Indicator Number of products exported/imported Infrastructure World Bank, World Trade Indicator Real growth in total trade (%) Incentives World Bank, World Trade Indicator FDI inflows (% of GDP) IMD, Global Competitiveness Report Trading Across Borders (rank) World Bank, Doing Business Time to export/import World Bank, Doing Business Efficiency of customs World Bank, Logistics Performance Index Ease and affordability of arranging international shipments World Bank, Logistics Performance Index Domestic logistics costs World Bank, Logistics Performance Index Timeliness of shipments in reaching destination World Bank, Logistics Performance Index 44 Practical guidance for integrating the gender dimension into trade and transport infrastructure projects Evidence suggests that women are disproportionately disadvantaged when it comes to infrastructure. Women tend to have less control over transport resources in the household than men. As a result, women rely more heavily on walking and public transport to get their goods to market. Women also tend to spend a higher proportion of their income on transportation than their male counterparts, and experience higher levels of insecurity when using transport. Diagnostics: questions to consider in project design • • • 45 • • Stakeholders: people to engage What types of trade and transport infrastructure is used by women? Does this differ from men? How much time, and how much money, do women spend on these different types of trade and transport infrastructure? Does this differ from men? What challenges or constraints do women face in accessing and utilising trade and transport infrastructure? Do women experience these more acutely than men? Do particular services exist to support women with trade and transport infrastructure? How could women’s use of trade and transport infrastructure be enhanced? • Women’s business and/or trading associations Individual female and male traders Civil society organisations that represent women’s interests Government officials involved with trade and transport infrastructure Private sector representatives involved with trade and transport infrastructure Chambers of commerce Formulating bankable aid for trade projects Source: Adapted from (Higgins, K., 2012) • • • • • ECLAC – Project Documents Collection ) Annex 4 Integrating gender into aid for trade projects and programmes 45 Gender-intensified constraint Potential responses ME indicators Input 46 Inadequate access to storage facilities for perishable goods at border posts, which women typically trade more than men Increase the regularity and reach of public transport, and support affordability Resources to support the expansion of public transport (e.g. buses) Buses transporting goods and people to markets which are affordable, regular and stop at an accessible distance to most female traders More women using transport infrastructure – in the form of public or private transport – to transport goods to markets Support the development of feeder roads, which connect remoter areas with larger roads, and enable female traders to connect to larger markets Resources to support the expansion of feeder roads Expanded feeder road system making it easier for female traders to access markets Improve safety on public transport Resources to support the expansion of public transport (e.g. buses) to reduce overcrowding More buses transporting goods and people to market Improve security at transport hubs Better lighting and ‘women only’ spaces at transport hubs More secure areas for women to wait at transport hubs More effective police presence at transport hubs Resources to support the implementation of low-cost, reliable storage for perishable goods Increased number of lowcost, reliable storage facilities for perishable goods Support the implementation of low-cost, reliable storage facilities for perishable goods at border crossings 46 Safer and more secure transportation services for women traders Less wastage as a result of waiting times, leading to better profits for female traders Formulating bankable aid for trade projects Lower levels of safety and higher levels of insecurity experienced by women when using transport infrastructure. Outcome More reliable police presence at transport hubs Greater difficulty for women in accessing transport infrastructure because of distance and cost, limiting access to markets and points of networking where market information can be exchanged Output ECLAC – Project Documents Collection ) Action: addressing gender-intensified constraints Formulating bankable aid for trade projects Guidance document