PREPARING IPA II SECTOR PLANNING DOCUMENTS (SPDs)

PREPARING IPA II SECTOR PLANNING DOCUMENTS (SPDs) RuggeroTabossi George Chabrzyk All presentations are available on the PPF5 website: www.ppf5.rs

Training Objectives To explain: The IPA II legal basis and regulatory framework The hierarchy of EC and Serbian strategic planning documents for programming IPA II assistance The ‘Sector Approach’ in the context of EU enlargement and IPA II EC criteria for assessing sector maturity and readiness for adopting a Sector Approach How sector assessments are undertaken in Serbia Types of IPA II Programmes /Actions IPA II and Sector Budget Support Standard templates for Sector Planning Documents (SPDs)/ Action Documents (ADs) SPD Intervention Logic SPD Sequencing and Budgeting SPD Indicators and Targets

IPA II REGULATORY FRAMEWORK

Legal Framework

Hierarchy of Strategic Documents Enlargement Package (EU Enlargement Strategy, EC Progress Report /SAA/ European Partnership) IPA II Regulation / Rules of Application Country /Multi-Country Strategy Paper National Sector Programme or (IPA-specific) Sector Planning Document -SPD) Action Documents (ADs) Annexed: SPDs (Draft) Action Programme (AP) Financing Proposal Annexed: ADs Commission Implementing Decision Annexed: AP Financing Agreement

Programme Types

Programming Terms used in IPA II Action Programme: A group of Actions which address CSP targets and which are the subject of a Commission Implementing Decision Action: A coherent set of coordinated activities carried out to meet a defined objective, which have an estimated total cost plus implementation schedule and performance parameters. Activity: A component of an Action which can be clearly identified by its costs and type of financing (procurement, grant etc.) Measure: A set of operations contributing to one or more common objectives Operations: Projects and /or contracts

There might also be cases where an individual Action Programme is made up of one single Action, particularly where an Action (and therefore the entire Action Programme) focuses on a defined sector (e.g. through Budget Support). There might also be cases where an individual Action Programme is made up of one single Action, particularly where an Action (and therefore the entire Action Programme) focuses on a defined sector (e.g. through Budget Support).

Proposed Sector Planning Document (SPD) Template

Sector Planning Document

Sector Planning Document 1. Sector Description 1.1National Sector Policy & Strategy 1.2 Sector Institutional Framework, Coordination, Capacity 1.3 Performance Assessment Framework 2. Sector Programme Rationale 2.1 Sector Status and Problem Analysis 2.2 SWOT Analysis 2.3 Links with National Documents, Sector Strategies and Country Strategy Paper 2.4 Cross-Cutting Issues 2.5 Links with other sectors 3. Sector Programme Description 3.1 Overall & Specific Objectives 3.2 Impact Indicators 3.3 Results 3.4 Measures & Operations 3.5 Past and on-going experience, lessons learned 3.6 Sustainability 3.7 Assumptions & Pre-conditions 3.8 Institutional Arrangements for Implementation 4. Budget 4.1 Summary of Indicative Budget 4.2 Budget breakdown per year INTERVENTION LOGIC SPD 2.1 SPD 2.2 SPD 3.1 SPD 3.3. SEQUENCING SPD 3.3 SPD 3.4 SPD 4.1 SPD 4.2

AD Intervention Logic Intervention logicshows how planned results and specific objectives will be achieved by sector action operations.

SPD: Sequencing Specific Objective 1 Specific Objective 2 Results R1 R2 R3 R4 R5 R6 R7 R8

The Sector (Wide) Approach

What is the Sector Approach? The Sector Approach is a way of working together between: Government and Donors and other Key Stakeholders (NGOs, CSOs etc) It is a process aiming at broadening government and national ownership over public sector policy and resource allocation decisions within a sector by increasing the coherence between policy, spending and results, and reducing transaction costs It involves a shift from stand-alone projects to programmes where donor assistance contributes to the development and implementation of a coherent, nationally owned programme across a whole sector (i.e. ‘Sector-Wide’)

Paris Declaration: Aid Effectiveness Paris Declaration (02/03/2005) principles are: 1) Ownership; 2) Alignment; 3) Harmonization; 4) Managing for results; 5) Mutual accountability Indicators Countries put in place national development strategies with clear strategic priorities (OWNERSHIP). Donors align their aid with national priorities and provide the information needed for it to be included in national budgets (ALIGNMENT) Co-ordinated programmes aligned with national development strategies provide support for capacity development (ALINGNMENT) As their first option, donors use fiduciary systems that already exist in recipient countries (ALINGNMENT). As their first option, donors use procurement systems that already exist in recipient countries (ALINGNMENT). Aid is released according to agreed schedules (ALINGNMENT).

What is a Sector? There is no single definition of the policy area that can be considered a sector, nor is there an exhaustive list of possible sectors. A sector is a defined policy area under the responsibility of a line minister (following DG ELARG guidelines).

Criteria for Sector Definition Sector should be have relevance for EU accession and/or national socio-economic development. Sector should be wide enough to be significant for national accession /development objectives, but narrow enough for institutional coherence Sector should have a clearly established institutional framework, institutional leadership & responsibilities, ideally there should be one lead institution; Sector should have a clear linkage to the national budgetary process

Indicative Sectors 1Taken from ‘A Quick Guide to IPA Programming’. DG ELARG December 2013.

Rule of Law

Implementing Actions: PRAG Contracts and/or Budget Support

Types of Contract and Associated Documents IPA Action Document Terms of Reference SERVICES Procurement SUPPLIES Technical Specifications Bills of Quantity WORKS Guidelines for Applicants GRANTS

Contracting & Disbursement Deadlines

What is Budget Support (BS)? BS is a method of delivering financial assistance which normally has 4 steps: (Sector) Policy Dialogue Financial Transfers (in ‘tranches’) to National Treasury Account Performance Assessment Capacity Development BS is delivered by means of ‘Sector Reform Contracts’.

Political and Economic Focus of IPA-BS Compliance with the political criteria should be the primary focus of IPA2 BS. In particular, assistance should support preparations for acquis chapters 23 and 24 (The ‘Rule of Law’) For the economic criteria, the main focus of IPA2 BS should be on supporting the establishment of a functioning market economy (Copenhagen Criteria: i.e. ‘The ability to withstand the pressures of the internal market’)

Assessment of Eligibility Assessment takes place at 2 stages in the programme cycle. During programme preparation: assessment of relevance (are key constraints /weaknesses addressed?) and credibility (realism, institutional capacity, track record, political commitment) During programme implementation: assessment of progress made in policy implementation (benchmarked against reform commitments)

Risk Management Framework Risk management is an internal assessment of risk levels based on the analysis of replies to questionnaires in 5 categories, namely: Political Macroeconomic Developmental Public Financial Management Corruption /Fraud There are 4 risk levels: Low Moderate Substantial High Beneficiaries are expected to define their risk response by means of ‘Mitigation Measures’ (these are monitored)

Whether to Provide BS? The EC decision on providing BS is based on 3 assessments: Assessment of political commitment to a reform agenda (in line with EU accession) Assessment of eligibility Assessment of risks and mitigation measures

Variable Tranches: Performance Reserves ‘A Performance Monitoring System and related disbursement criteria is at the heart of any budget support operation’ (EC) BS disbursements are of 2 sorts: Base (or fixed) tranches: these are linked to eligibility criteria Variable tranches: these are intended to create an incentive for improved performance and are based on performance indicators. The EC limit (cap) the use of variable tranches to avoid unpredictability /volatility of disbursements. Typically, Sector Reform Contracts cover commitments for 3 years with an upper limit of 40% variable tranches

Variable Tranche (Performance) Indicators The following principles should be applied: Targets and indicators should be Coherent with sector problem analysis and programme objectives Whilst combined indicators may be used, the emphasis should be on Results Number of indicators should be limited to a maximum of 8 per Tranche (to avoid loss of policy focus) Indicators, targets and assessment methodology should be defined during programme preparation

Sector Assessment

EC Assessment Criteria for Sector Approach Key Criteria National sector policies/ strategies Institutional setting, leadership & capacity Sector & donor coordination Mid-term budgetary perspective Monitoring & performance assessment Sector Reform Contracts 6. Public finance management 7. Macro-economic framework

National Sector Policy/ Strategy There are 3 groups of criteria for assessing the quality of national sector policies /strategies: Nature of policy process & ownership Quality of policy objectives Implementation arrangements

National Sector Strategic Frameworks : Example

Sector Policy /Strategy: Key Questions Is the sector policy authored by domestic actors? Is there enough political support & stakeholder involvement to ensure ownership & future sustainability? Are policy objectives coherent with national development objectives? Are the objectives sufficiently SMART? Is there an ‘Action Plan’ showing the timing & sequencing of planned operations & showing institutional responsibilities for these?

Institutional Setting There should be a Lead Ministry which: Plays a leading role on donor coordination within the sector & works closely with the NIPAC Is responsible for coordinating the planning /drafting of Sector Support Programmes Coordinates with other relevant stakeholders Coordinates the implementation of IPA funded sector support. Coordinates the collection and analysis of monitoring data (indicators) for IPA sector support.

Institutional Mapping: e.g. Justice

EC-HQ / EUD National Authorising Officer /National Fund Audit Authority Operating Structure NIPAC/ NIPAC-TS Sector Monitoring Committee Sector Working Group IPA Monitoring Committee Sector Lead Institution Body Responsible for Measure 1 Body Responsible for Measure 2 Body Responsible for Measure N Contracting Authority End Beneficiaries Contractors /Service Providers

Institutional Capacity The Lead Ministry and other institutions within the Operating Structure must have the capacity to absorb existing and planned IPA financial support Recent workload analyses of the Serbian administration (carried out in support of DIS /DMS accreditation) have show that, at present staffing levels, certain Lead Ministries will experience difficulties in absorbing IPA funds over the 2014-16 period.

Absorption Capacity (I): Ministry of Justice Inherited Workload IPA 2012 (2 service+1 supply+1 works+1 direct grant) IPA 2013 (3 service+1 supply+ 3 twinnings+1 works) The Procurement Plan

Absorption Capacity (II): Ministry of Justice Workload Analysis (WLA) for staffing needs to implement IPA 2012-13 shows the following minimum staffing levels needed to meet the Procurement Plan, these are as follows: Existing and Planned Staffing Levels are as follows: Available staff (incl. Heads of Division)=6; Systematised staff (i.e. Planned)=9 Conclusion. Unless missing staff are recruited, the MoJ will not be able to implement IPA 2012-13 according to the Procurement Plan. The peak demand will be in 2014-15 which coincides with additional demands for contracting IPA2 Sector Programmes. The capacity of the MoJ to absorb IPA II funding will be low.

Institutional Setting &Capacity: Key Questions Has the sector been defined with institutional coherence in mind? Is there a lead Ministry in the Sector? Are there inter-institutional agreements showing responsibilities for achieving sector targets? Have workload analyses of the institutions in the Implementing Structure been carried out? Is capacity building envisaged? How & when will a needs assessment be carried out?

Sector Coordination Covers 2 components: (1) Coordination of government institutions & key non-government stakeholders; (2) Coordination of donors. Lead Ministry /Institution responsible for establishing & coordinating an ‘Operating Structure’ composed of the main government institutions involved in sector policy /strategy making and implementation. Functional, government-led Sector Working Groups. Government manages database(s) of external assistance per sector. Government publishes regular monitoring/ progress reports for each sector.

Sector Budget There needs to be a clear link between sector policy & budgeting. Sector plans should be properly priced & prioritized within a realistic estimate of the resources available from the national budget & external donors. IPA II Sector Support Programmes are planned to be multi-annual & should be co-financed by predictable, multi-annual national funding. It is necessary to provide a brief description of the sector budget on an annual, & if possible, on a medium-term perspective (3-5 years). Ideally there should be a Medium Term Expenditure Framework (MTEF) for the sector. However, development of MTEFs will be gradual, at first assessments should focus on the existence of credible annual sector budgets. At minimum, it is crucial to verify whether the sector budget can be identified in the state budget.

Monitoring Performance Stand-alone project-based assistance emphasises the monitoring of resource usage (inputs) & immediate deliverables (outputs) and relatively little on achieving objectives. By contrast the sector approach will introduce much stronger results orientation to monitoring assistance & will focus national monitoring systems on measuring the achievement of policy objectives. There should be agreement on a Performance Assessment Framework (PAF).

Public Finance Management (PFM): Key Questions Is there a PFM reform programme in place? What are the PFM mechanisms in place for the sector? Based on information available what are the possible areas where support could be considered? How do the remaining weaknesses affect the sector policy & what recommendations can be made to improve the situation?

Macro-Economic Framework The purpose of the macro-economic assessment is to assess the stability of the macroeconomic situation & consequent potential for future public funding It is not expected that a separate macroeconomic analysis be carried out, but that a judgement on stability-oriented macroeconomic policies be made on the basis of existing documentation.

Overall Assessment The purpose of assessments is to establish sector-level policy dialogues with beneficiary country authorities. Negative assessments of the key criteria do not necessarily prevent the adoption of a sector approach. Few beneficiary countries will have functioning MTEFs & PAFs in place in 2014 but this is not a barrier to the introduction of sector approaches. Sector assessment provides a basis for targeting necessary TA & capacity building activities. However, 3 criteria are considered essential & must be in place before adopting a sector approach: The existence of a national sector policy /strategy & a sector budget or a government commitment to develop these. A lead institution/ ministry responsible for the sector/subsector The existence of a functional sector coordination framework or a government commitment to develop one.

Overall Assessment: Key Questions Are the priority sectors for IPA II assessed as being satisfactory on the 3 key criteria for a sector approach? Can the problems revealed by negative assessments be addressed with domestic /IPA /other donor resources as part of programme preparation for 2014? Can the problems revealed by negative assessments be mitigated by the time of the mid-term review?

Thank you for your attention All presentations are available on the PPF5 website: www.ppf5.rs

PREPARING IPA II SECTOR PLANNING DOCUMENTS (SPDs)