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II. The Poverty Reduction Cooperation FundA. Objectives and Scope7. Purpose and Objectives. The goal of the PRF is to assist ADB in reducing poverty in its DMCs. The PRF will thus augment ADB’s efforts for poverty reduction and, as a result, will (i) assist in policy dialogue and strategy formulation on poverty reduction; (ii) develop new programs and projects with increased focus on poverty reduction; (iii) monitor and assess the poverty reduction impact at the project, meso-, and macro-levels; (iv) launch pilot poverty reduction activities to influence future loan design;11 (v) involve broader stakeholder consultations at all stages of design and implementation; (vi) strengthen ADB’s role as the regional development bank for Asia and the Pacific to promote poverty reduction; and (vii) perform other activities as mutually agreed upon between DFID and ADB.12 Appendix 1 summarizes the PRF Framework. 8. Activities and Scope. More specifically, the PRF will support (i) TA for capacity and institution building; (ii) provision of advisory inputs; (iii) thematic and sector work; (iv) monitoring, evaluation, and impact assessment; (v) public conferences, workshops, and other events; (vi) innovative activities such as micro and pilot projects, with clear demonstration effects; (vii) national experts based in RMs working on poverty analysis, and poverty-related gender, stakeholder participation, and governance issues; (viii) outreach and communication; and (ix) administrative costs of fund management. The PRF will not be used for permanent staffing costs (including salaries and training). It will also not support work that is not country-based (albeit cross-border activities can be supported as long they will have a measurable impact on the poverty situation in a country). Projects supported by the PRF will generally be in the range of $0.1 to $1.0 million. 9. Eligibility. PRF project proposals must meet the following eligibility criteria: All activities financed by the Fund should (i) have a strong poverty reduction focus; (ii) support the relevant ADB CSP 13 and the policies of the government; (iii) be designed to support shared poverty objectives in the existing and pipeline activities of other funding agencies, to enhance effectiveness, avoid duplication, and accelerate learning; (iv) not substitute for activities that would otherwise be financed by ADB (conceptual additionality); (v) make maximum use of local expertise and civil society participation; and (vi) support projects solely based on their merit for systemic poverty reduction, with no specific country allocation or country window within the PRF (unless otherwise specified for the PRC 14 ). The implementation arrangements for the PRF and for the PRF-PRC will further refine these criteria to ensure that PRF funds are used only in support of a strong poverty reduction focus, while not being so prescriptive that they unnecessarily restrict ADB’s programming options. 10. Geographical Scope. The PRF will be open to all poor DMCs classified by ADB as A, B1, or B2 countries, excluding India.15 However, it is expected that particular emphasis will be given to countries with a high incidence of poverty, a large number of poor people, and special dimensions of poverty otherwise not being addressed. India will not have access to the PRF because a separate fund has been set up through DFID-ADB cooperation to finance poverty reduction issues in India. 11. PRC Component. The PRF will also comprise a component for financing PRF activities in the PRC. A separate PRC component is needed because DFID is financing such projects from its country allocations for the PRC, whereas funds are provided through a regional cooperation window for all other eligible countries. Because of the direct link to DFID’s PRC portfolio, it is also expected that such PRF projects for the PRC will be closely linked to and integrated into ADB’s CSP, promote civil society participation in poverty reduction, and make maximum use of local expertise and nongovernment organization (NGO) involvement.16 B. Implementation Arrangements12. Approval Process for the PRF. The following approval process will guide the selection of projects for PRF countries excluding the PRC:
The general approval process is summarized in Appendix 2. The special arrangements for the PRC are summarized in Appendix 3. The outline of the concept paper for DFID approval is in Appendix 4. 13. Work Program. Projects will be processed on a regular basis. DFID and ADB will coordinate closely to keep a balance on the country, sector, and thematic allocations. To monitor the implementation, ADB and DFID will have a yearly partnership meeting and additional semiannual stock-taking meetings. A status report on PRF implementation and a work program for PRF financing will be prepared for these meetings. This work program will be arranged according to the PRF input-output matrix as suggested in Appendix 5. 14. ADB Responsibilities. ADB will be responsible for (i) services provided by headquarters and RM staff for designing, preparing, overseeing, coordinating, and managing the projects and activities under the PRF; and (ii) office, secretarial, and equipment support. Within ADB, RSDD will be responsible for managing the PRF and will function as the communication link to DFID on technical matters; it will be responsible for reporting on implementation progress to DFID on the activities financed under the PRF; RSDD will also support the operational departments in project processing. The regional (operational) departments will be responsible for developing, processing, and implementing the individual projects. The Office of Cofinancing Operations will act as the official channel of communications between DFID (and other possible participating donors 18 ) and ADB; it will monitor and report on the financial performance of the PRF. The PRF cooperation will particularly strengthen the role of ADB’s RMs. The PRF will particularly encourage staff from RMs to initiate and implement projects that particularly support innovative action research, and country- or theme-focused poverty analysis, stakeholder coordination, NGO involvement, pilot activities, and monitoring of poverty reduction. It will further strengthen selective RMs by providing additional consultant expertise to ADB’s staff. 15. Central Screening and Coordinating. To have maximum poverty reduction mainstreaming and additionality impact in ADB operations, RSDD will nominate a PRF coordinator who will be responsible for (i) supportingthrough a teamwork approach operational departments and RMs in project processing; (ii) mainstreaming appropriate cross-cutting concerns for poverty reduction; and (iii) overall fund management. 16. Role of DFID. DFID will need to know in advance and agree to the procedures for processing individual proposals. The involvement of DFID will be geared to promote mutual understanding and facilitating partnership, and care will be taken to avoid additional administrative burdens on ADB or DFID staff. A new DFID staff person posted in the British Embassy in Manila will undertake the DFID administration work for PRF. She/he will communicate directly with the PRF coordinator in RSDD. The main vehicle for DFID’s periodic involvement will be an annual review meeting, which will assess the activities under the PRF during the previous year and agree on an indicative allocation of resources for the following year. 17. Procurement. TAs financed under the PRF will be processed and administered under standard ADB procedures. ADB’s Guidelines on the Use of Consultants, will be applied in the selection and engagement of the consultants to be financed under the PRF, and the procurement of goods and other services for TA operations will be in accordance with ADB’s Guidelines for Procurement or any other arrangements as agreed upon between ADB and DFID. Projects will make maximum use of local expertise and civil society involvement. 18. Reporting and Auditing. ADB will maintain all records and accounts, in accordance with its standard procedures, to record contributions, interest, and investment income, as well as expenditures financed by the PRF. ADB will furnish to DFID annual reports on the implementation of the PRF. The annual report will also be made available to the ADB Board of Directors. Upon request, ADB will also make available to DFID all relevant documents and records concerning the PRF and the individual projects. Furthermore, ADB will furnish audit reports from the external auditors as required by DFID. Six months before closing of the PRF, ADB and DFID will jointly initiate an independent external evaluation of its performance and impact. ADB will, in accordance with its usual procedures, inform DFID promptly of any condition that interferes or threatens to interfere with the performance of ADB in the implementation of the PRF. DFID and ADB will consult each other directly on any event determining changes in the implementation of the PRF. 19. Timing. The PRF will commence in July 2002. The final date for approval by ADB of activities financed under the PRF will be 31 March 2006. C. Financing20. Contribution from DFID. The Government of the UK has proposed to make an initial contribution to the Fund in the amount of £39 million, comprising (i) £30 million (approximately $42.8 million) from its regional cooperation window for PRF countries, and (ii) £9 million (approximately $12.7 million) from its window for activities in the PRC. At its discretion, the Government of the UK or any other member country of ADB may provide additional resources to the PRF. Within 2 weeks after signing the Memorandum of Understanding (MOU) on the Establishment of the PRF with ADB,19 DFID will deposit an initial £3.25 million (for all countries covered under the PRF) into a US dollar interest-bearing account to be specified by ADB (the ADB account). Subsequent installments will be made semiannually on receipt of a request from ADB together with a financial statement detailing the use of the previous installment. ADB will manage the financial contribution to the PRF. The Table below provides a summary of the indicative DFID contributions. The amount of each tranche may, however, be varied at the discretion of DFID in light of the actual uptake of the funds made available in previous tranches, provided always that DFID undertakes to ensure that ADB has available to it funds sufficient to meet planned disbursements over the 6 months following the planned date of payment of any tranche.
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