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Table of Contents
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I. Introduction
II.Objectives and Scope
III.Implementation Arrangements
IV. JFPR Implementation Arrangements
V. Conclusion
VI. Recommendation
Appendixes
APPENDIX I: Examples of Potential Activities
>> APPENDIX II:Draft Agreement
Cooperation with Japan: Japan Fund for Poverty Reduction (2000) : Appendixes

Appendix II: Draft Agreement

___________________2000

Mr. Tadao Chino
President
Asian Development Bank

Dear Mr. President:

I have the honor to refer to the discussions between the Government of Japan (the Government) and the Asian Development Bank (ADB) with regard to cooperation between them in the process of promoting poverty reduction in developing member countries (DMCs) of ADB.

Majority of the world's poor live in Asia, and the negative impact of the recent financial crisis that initially hit the poor in East and Southeast Asia, and then spread to other parts of the Asian and Pacific Region, caused a worsening of poverty in the Region. In 1999, as part of a plan to assist the crisis-affected countries in Asia, the Government supported the Asian Currency Crisis Support Facility (ACCSF), which is administered by ADB. Economic recovery has begun in some crisis-affected countries. But it will take quite some time before the fruits of economic recovery reach those people who are most severely hit by the financial crisis and socially vulnerable, and still increasing number of poor people in the Region need urgent assistance.

In this connection, I have the honor to inform you that the Government intends to make available to ADB funds in the amount of ten billion yen (¥10 billion) on a grant basis during the Government's fiscal year 2000, for the financing of activities that specifically target the poor in Asia. Concerning the provision of the Japan Fund for Poverty Reduction (the Fund), I have the honor to propose the following arrangements:

1. The Government will appoint ADB as Administrator of the Fund. The appointment will come into effect upon the entry into force of these proposed arrangements. The Government will provide, in accordance with the budget and relevant laws and regulations of Japan, the above-mentioned grant funds to ADB in its capacity as Administrator.

2. The Fund will be made available under the following terms and conditions:

  1. The objective of the Fund is to support innovative poverty reduction and social development activities that can add substantive value to ADB-financed projects. DMCs of ADB that have been adversely affected, directly or indirectly, by the recent financial crisis will be eligible for the Fund. Accordingly, the Fund will be utilized for the following purposes:
    1. support well-targeted poverty reduction and social development activities that have a direct impact on the poor and on socially or economically excluded or vulnerable groups;
    2. stimulate self-help capacity of the poor and broad stakeholder participation at community level; and
    3. provide a systematic impact on operations and approaches of the DMCs towards sustainable poverty reduction.
  2. Within the general objective, the Fund will finance activities, which (a) are aimed directly at poverty reduction; (b) provide innovative and demonstrable impacts on poverty reduction; and (c) have strong relation to and enhance the effectiveness of ADB financed projects. Typical types of activities to be covered will be as follows:
    1. provision of basic economic and social services to the poor, including pilot-testing type of activities, such as community level water supply and sanitation, small clinics, local product market facilities, and skills training centers;
    2. supporting social development funds that channel funding to small-scale programs such as child nutrition, reproductive health, skill training, and microfinance, which are targeted to benefit the poor and communities that are otherwise excluded from access to jobs and essential services;
    3. supporting non-government organization (NGO) activities for poverty reduction and social development, through assisting NGOs in processing projects in a participatory manner, facilitating community involvement in project implementation, capacity building at the grassroots level, and monitoring project progress; and
    4. capacity building for local government, community-based organizations, and local NGOs for the purpose of designing, implementing, monitoring and evaluating projects and testing of pilot activities in conjunction with ADB financed projects.
  3. In the implementation of the Fund, ADB will monitor the outcomes of each activity covered by the Fund so that the results are fed back to DMCs' poverty reduction operations. Monitoring and evaluation of each activity's impact on poverty reduction will be suitably designed by ADB.
  4. Recipients of the Fund will in principle be central and local governments, as well as public sector institutions of DMCs. Expenditures arising from activities financed under the Fund will be paid in accordance with ADB's standard procedures for disbursements. Activities financed by the Fund are expected to be managed and maintained by communities, and active participation of communities in design, implementation, monitoring, and evaluation is essential.
  5. As ADB identifies specific activities for financing under the Fund, ADB will, at such intervals as agreed with the Government, provide to the Government for approval a list of such activities, their outlines, the amounts of the proposed assistance, and the proposed items of expenditure to be financed.
  6. As poverty reduction activities financed by the Fund will be spread all over the Region and over various sectors, input from civil society is needed for effective implementation. ADB will make efforts to obtain input and feedback from civil society for activity design, implementation, and evaluation.
  7. As the World Bank will operate a similar fund, financed by the Government, there will be close coordination between ADB and the World Bank with respect to each such fund.
  8. The Fund will be used to finance foreign exchange or local currency expenditures for goods, services and consultants which will be procured or supplied from ADB member countries, in accordance with procedures and practices consistent with the applicable ADB guidelines. ADB will ensure that the procurement of goods and services provided under the activities to be financed under the Fund are carried out in accordance with ADB's Guidelines for Procurement, as amended from time to time. ADB will ensure that the consulting services to be financed under the Fund are engaged in accordance with ADB's Guidelines on the Use of Consultants, as amended from time to time. The Government shall use reasonable endeavors to make available to ADB information concerning expertise available in Japan, and will assist ADB in the identification of suitable Japanese individuals, firms and institutions to help implement activities financed by the Fund.
  9. ADB will, as Administrator, enter into an agreement or agreements, as appropriate, with the recipient government and/or the concerned executing agency in connection with the provision of individual financial assistance out of the Fund.
  10. ADB will (a) be responsible for the administration of each agreement referred to in paragraph 2(9) above; (b) carry out such administration in accordance with its normal practices and standards and with the same degree of care as it uses in the administration of its own funds and have no further responsibility to the Government in respect thereof; and (c) may enter into such agreements, and do any and all such acts and things, as may be necessary or appropriate to accomplish fully the foregoing.
  11. ADB will be responsible for the appraisal and negotiation with the recipients of the scope and content of the activities referred to in paragraphs 2(1) and 2(2) above.
  12. Supervision and evaluation of the activities to be financed under the Fund will be the responsibility of, and will be carried out by, ADB. ADB will make available to the Government at six-month intervals, beginning six months after the entry into force of these proposed arrangements, a summary of progress on all activities financed by the Fund. ADB will also make available to the Government an annual report on the evaluation of activities financed by the Fund. ADB will invite the Government to participate, at its option, and with the prior consent of the recipient concerned, in the supervision and evaluation missions carried out by ADB.
  13. The Government will make payment of the Fund into an account (the Account) in the name of ADB at the Bank of Japan. An amount of ten billion yen (¥10 billion), for the Government's fiscal year 2000, will be paid promptly after the entry into force of these proposed arrangements.
  14. ADB may invest and reinvest the funds in the Account pending their disbursement to the relevant recipients. ADB will exercise the same care in investing these funds as it does for its own account. Interest earned will be used for the purpose of the Fund.
  15. ADB may use part of the Fund (together with any interest earned thereon) to cover the direct and identifiable costs incurred in the administration of the Fund including monitoring and evaluation.
  16. ADB will (a) maintain separate records and accounts in respect of the funds deposited in and withdrawn from the Account; (b) cause such accounts and records to be audited and certified by external auditors for each fiscal year of ADB that funds remain in the Account; and (c) furnish a copy of the report of such audit to the Government.

3. These arrangements shall remain in force until terminated by either the Government or ADB upon three months prior written notice to the other party. If these arrangements are terminated:

  1. such termination will not affect any commitment under existing activities and ADB may continue to make withdrawals from the Account in respect of such activities (including withdrawals for related costs of ADB) as if these arrangements had not been so terminated; and
  2. the use of any residual funds, including investment income of the Fund, will be determined in consultation between the Government and ADB.

4. From time to time, at the request of either party, the Government and ADB will consult with each other on matters arising out of the present arrangements. Moreover, ADB will promptly inform the Government of major changes or developments affecting the activities financed out of the Fund, including, inter alia, amendments to agreements; reallocation of funds; suspension, termination or cancellation of disbursements; and of any event which interferes, or threatens to interfere, with the successful implementation of such activities.

I have further the honor to propose that the present note and your confirmation of the foregoing arrangements shall be regarded as constituting an agreement between the Government and ADB, which will enter into force on the date of your confirmation.

Sincerely yours,
Naoyuki Shinohara
Executive Director for Japan


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APPENDIX I: Examples of Potential Activities		Cooperation with Japan: Japan Fund for Poverty Reduction (2000)>>