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June 09, 1997
FINANCING MEMORANDUM BETWEEN THE COMMISSION OF THE EUROPEAN COMMUNITIES AND THE REPUBLIC OF THE PHILIPPINES
Economic Self-Reliance Programme - Caraballo and Southern Cordillera Agricultural Development ERP - (CASCADE)
FINANCING MEMORANDUM
The Commission of the European Communities, hereinafter referred to as "THE COMMISSION", acting for and on behalf of tlie European Community, hereinafter referred to as "THE COMMUNITY"
of the one part, and
the Government of the Republic of the Philippines, hereinafter referred to as "THE RECIPIENT"
of the other part,
HAVE AGREED AS FOLLOWS :
The project referred to in Article 1 below shall be executed and financed out of the budget resources of THE COMMUNITY in accordance with tlie provisions set out in this memorandum. The technical, legal, and administrative framework within which the project referred to in Article 1 below shall be implemented is set out in tlie General Conditions annexed to tlie Framework Agreement of 8 November 1984 between THE COMMISSION and THE RECIPIENT, as amended or supplemented by tlie terms of tins Memorandum.
ARTICLE 1 - NATURE AND SUBJECT
As part of its 1996 aid programme, THE COMMUNITY shall contribute, by way of grant, towards the financing of tlie following project :
| ALA / 96 / 27 |
| Economic Self-Reliance Programme - Caraballo And Southern Cordillera Agricultural Development ERP -(CASCADE) |
hereinafter referred to as "THE PROJECT".
ARTICLE 2 - COMMITMENT OF THE COMMUNITY
The commitment of THE COMMUNITY is fixed at 13,500,000.00 ECU (Thirteen Million Five Hundred Thousand ECU), hereinafter referred to as "THE EC GRANT".
ARTICLE 3 - ADDRESSES
Correspondence relating to the execution of THE PROJECT, stating THE PROJECT'S number and title, shall be addressed to tlie followmg :
for THE COMMUNITY :
Commission of the European Communities,
Directorate-General 1/B for External Relations,
Rue de la Loi 200,
B-1049 Brussels, Belgium,Telex : 21877 COMEU B
Facsimile : (32 2) 299 0204
for THE RECIPIENT :
National Economic and Development Authority,
NEDA sa Pasig,
Amber Avenue, Pasig,
Metro Manila, Philippines.Telex : 29058 NED PH Facsimile : (63 2) 63137 02
ARTICLE 4 - NUMBER OF COPIES
This memorandum is drawn up in tlie English language in three copies each bemg equally valid.
ARTICLE 5 - ENTRY INTO FORCE
This Memorandum shall enter into force on the date that it has been signed by both parties. The Annex shall be deemed an integral part of this Memorandum.
This Memorandum is subject to an expiry date, after which any balance of funds remaining available under THE EC GRANT shall be automatically cancelled. THE COMMISSION may however, depending on the circumstances, agree to an appropriate extension of tins expiry date, should such an extension be requested and properly justified by the recipient.
For the present project, the expiry date of THE EC GRANT is hereby set at 31.7.2005.
ANNEX
TECHNICAL AND ADMINISTRATIVE PROVISIONS
Recipient :
The Republic of the Philippines
Project Title :
Economic Self-Reliance Programme Caraballo And Southern Cordillera Agricultural Development ERP-(CASCADE)
Executing Agency :
Department of Agriculture (DA)
Project Number :
ALA / 96 / 27
1. PROJECT OBJECTIVES
1.1 Overall Objective
The overall objective is to help the mainly indigenous rural people of this highland area in promoting an agro-based local economy that will allow them a better income and standard of living and will give them the opportunity to remain settled and develop where they are presently living with their
families.
1.2 Specific Objectives
In order to reach the ultimate goal, the operational objective is to trigger off a sustainable development process leading to self-reliance.
These specific objectives will be achieved by:
• improving people's technical capability through the introduction of appropriate upland technologies (technical self-reliance),
• removing the financial bottleneck that blocks people's initiative (financial self-reliance), and
• the development of people's owned and managed financial systems.
In addition, the project will address some issues related to the physical and structural framework within which economic activities can develop: access roads and production-marketing infrastructure, environmental protection. The project through its various activities, will also help the most vulnerable communities to build the necessary capital base that will improve their capacity to face the natural disasters (typhoons, earthquake, etc.) that are frequent in the area. Finally, the project and the LGUs will co-ordinate efforts in order to optimise the use of available human and financial resources and create the maximum synergy for local development.
To support this, assistance shall also be given for the establishment and operation of the Project Management Office (PMO), which will carry out the overall planning and implementation of the project and be responsible for the preparation and implementation of individual project actions, and likewise for the establishment and operation of the necessary District Offices.
Key considerations in the design of these activities will include:
• an emphasis on the full participation of the local communities in the identification, planning, approval, implementation, monitoring and evaluation of project-supported actions;
• an emphasis on flexibility in project planning and management, permitting an adequate response to the priorities expressed by the local communities themselves, and to the different conditions prevailing in different parts of the project area;
• an emphasis on maximising community ownership of development actions supported by the project, in particular through community-based decision-making and through community financing of project-supported actions (including savings as a basis for further credit actions, as well as labour and materials participation in Infrastructure actions);
• and an emphasis on the sustainability of actions supported by the project, at the institutional and organisational level as well as in financial and physical terms;
1.3 Location
Financial and technical assistance will be provided for the implementation of the project in three provinces (Benguet, Nueva Vizcaya, Nueva Ecija) of the Caraballo and Southern Cordillera area in Northern Luzon.
During its 7-year lifetime, the project will extend progressively its coverage according to the resources made available by all partners involved, the existing field dynamics, the level of involvement demonstrated by the target population concerned and the existing potential and constraints for development activities. The project is expected to cover some 170 barangays with 25.000 households in up to 20 municipalities of the Provinces of Benguet, Nueva Vizcaya and Nueva Ecija.
1.4 Costs and Financing
The total direct cost of the project (including capital build-up of rural organisations) over seven years, is estimated at ECU 22.50 million, of which ECU 13.5 million will be covered by the EC grant, ECU 4.0 million by the National Government budget (part of personnel expenditures and a contribution to national road network rehabilitation), ECU 3.5 million by the Local Government Units budgets (field staff, contribution to road network rehabilitation and barangay infrastructures) and ECU 1.5 million by the rural people themselves (contribution in labour for micro-projects and capital build-up of producers groups and savings / credit associations).
The breakdown of funding by input and by source can be seen under 3.4.
2. PROJECT DESCRIPTION
2.1 Project Components
2.1.1 Individual project components will include the following;
- Agricultural production including dissemination of technologies adapted to an upland farming background and covering the different types of crops that are or can be developed in the area mostly rice, corn, root crops, vegetables, fruits, livestock. These should, at the beginning, privilege low cost and simple techniques, that will better match farmers' needs and their technical and financial absorption capacity. They will be progressively upgraded when the individual fanners and their organisations will have consolidated their technical and financial capacities.
- Agricultural marketing will require specific market studies (especially for vegetables and fruit markets), promotion of agro-processing facilities, assisting in the development of market information systems and strengthening of rural organisations better able to handle this function in relation to other existing market structures. Quantitative and qualitative requirements, value added and proper processing of products will be major concerns.
- Micro-enterprise development will be developed as another important source of income at household or group level. Simple technology transfer and careful economic-financial follow-up are essential.
- Social Development component will mainly focus on water and sanitation facilities, information and awareness and support to barangay health workers under responsibility of the municipal health service.
- Environmental resource management will aim at maintaining the productive potential of natural resources through appropriate agricultural practices. The concept of rational and sustainable use of natural resources will lead to the elaboration of all technical manuals as well as the planning process for activities at barangay level.
- Technical support services and training will be provided to the farmers' groups or communities for ail activities mentioned above. Training will also be provided to LGU staff. The methods for input delivery are crucial to a progressive responsabilisation of the beneficiaries and a final take over by their organisations once they will have been consolidated under the project.
- The financing of small productive activities (PHP 2.000 - 5.000 a priori) i.e. most of the production and marketing as well as off-farm activities, will be transferred to the existing or to be established savings and credit organisations. The project will therefore concentrate a large share of its energy in rural financial group building or strengthening as an additional and essential strategic thrust. The rural financial organisations will receive technical support (organisation and management) and financial support when necessary (seed capital to complement their own capital build-up).
- The productive activities or investment that would generate excessive risks for the developing rural financial organisations or which would exceed their lending capacity or prudential ratios, can be financed by the project either under a "pump-priming" process (the project provides seed capital to an initial group savings effort in a pre-defined proportion for instance 2 to 1) or under a direct seed capital mode where the group will have to save for further capital buiid up when the activity wilt generate profit. This modality particularly fits larger investments such as post-harvest facilities or irrigation.
- The other activities which are not directly productive like barangay infrastructure (roads, footpaths, foottrails, bridges, drinking water facilities, etc.) or environmental actions will be financed through a grant where the community will bring labour as its counterpart. This procedure can also be applied for selective productive micro-projects in specific barangays when it is considered justified (extreme poverty, remoteness, absolute lack of savings capacity, occurrence of disaster, etc.).
2.1.2 Gender equity is addressed by taking the rural household as the key target group where, traditionally, women are important decision makers for both technical and financial matters. The project therefore will assist in improving traditional farming techniques in order to make the tasks of women easier. It will in addition, give them a major role in group or association building especially when savings and credit groups are concerned. Women in general, are more sensitive than men on such issues as family security and protection
against risks which leads immediately to the necessity and propensity for saving and capital base build-up. Indicative of this hypothesis, many managers of existing rural financial associations are women. Finally, as in Phase 1, a large proportion of field team members of the project will be women, thus facilitating a profound mutual understanding about women's issues and priorities.
2.1.3 Environmental considerations, with particular reference to sustainable resource management, will be fully integrated into project activities, in particular, the project will ensure that sustainable resource management issues are fully taken into account in the design, implementation and evaluation of all project actions; promote a wide awareness of sustainable resource management issues among the local communities, including the preparation of appropriate land-use plans at the barangay level, and more general education and training activities as necessary; implement specific environmental rehabilitation and protection measures in specific barangays where these are most necessary and carry out specific environmental studies as necessary.
2.2 Project Inputs
Project inputs will include the following:
- The facilities of Phase 1 will be entirely taken over by Phase 2. Provision is made for additional facilities which might be necessary;
- Transport facilities, including 4WD vehicles, utility vehicles, and motorcycles, and other equipment as necessary, including office equipment and furniture, communications equipment, microcomputers, survey equipment, workshop equipment and tools, and agricultural equipment as appropriate; all assets and commitments of the Phase 1 project (including facilities, equipment and materials as well as ongoing commitments and contracts) will be immediately taken over in their entirety by the Phase 2 Project;
- Personnel and recurrent costs, including fuel and materials, spare parts, staff allowances and salaries, and operating costs for the project as a whole;
- Local Technical Assistance as may be required;
- European Technical Assistance to be recruited under terms and conditions described in 5.5;
- Funds for savings and loans guarantees and development and support to capital build-up of groups and associations; revolving credit fund for direct interventions of the project.
2.3 Project Outputs
It is expected that by the end of the project, the following will have been achieved:
• Up to 30 savings and credit associations and some 150 savings and credit informal groups gathering some 10 to 13,000 persons will provide their members on a continuous basis with small loans ranging e.g. from PHP 1,000 to 5,000 (ECU 30 to 150).
page 6
• Some 300 production or marketing groups or co-operatives (+/- 12,000 households involved) will have been strengthened through technical support and eventually financial support for specific productive activities or investment which cannot be served by the developing savings and credit associations.
• Some 800 micro-projects will benefit some 14,000 households either through barangay infrastructure improvement (footpaths, foottrails, drinking water facilities, etc.) or through collective production investment (post-harvest facilities, solar dryers, irrigation, etc.) where the project thinks it justified according to criteria of poverty, remoteness and active participation of the beneficiaries. Rehabilitation of critical sections of access roads (+/- 150 km) will allow improved access and cash crop development (vegetables and fruits mostly) for some 15,000 households, all over the project area.
• A marketing information system is established as well as market linkages.
• The environmental awareness and resource management techniques will have been included in the development activities of all barangays covered.
• Synergy will have been developed with the Local Government Units and all other possible partners (Line Agencies, NGOs, etc.) through common planning and implementation of field actions.
2.4 Time Schedule
The project will be implemented over a 7 year period calculated from the date of arrival of the Technical Assistance team leader. The first year will be largely occupied with the consolidation of Phase 1 activities and with the necessary preparatory actions for the new strategies introduced in Phase 2. Years 2 through 5 (1998 to 2001) will see the full implementation of the project, and it is expected that by the end of that period, the major quantitative targets will have been achieved and the rural peoples' organisations will have reached an appropriate financial autonomy and management capability.
The phase out process should start in year 5. Years 6 and 7 (2002 to (2003) will concentrate on ensuring a full consolidation of the process. The phase-out process will be carefully studied in due time with all partners involved, taking into consideration that the rural people's organisations will be in fact, the principal stakeholders in the take-over process.
3. FINANCIAL AND OTHER CONTRIBUTIONS
3.1 The EC grant will cover the entire cost of technical assistance and equipment, as well as operational and recurrent costs. It will also cover the costs of the other main project components and the Project Office. It will not cover staffing costs.
3.2. The GOP budget will cover the personnel expenditures (including any increase in salary as well as additional government benefits over time) of the project. The Government through the competent authorities will also participate in the rehabilitation / improvement of the national road network. The
LGU budgets (at provincial or municipal level) will cover personnel costs for field staff (including any increase in salary as well as additional government benefits over time) under the modality of assignment of existing staff to the Programme activities. They will also contribute to road network rehabilitation (especially at cost of the provincial government) and barangay infrastructures (especially at cost of the municipalities). The ERP inputs will be integrated with LGU inputs through the elaboration and joint implementation of the Local Action Plans.
Local Government Units will contribute directly from their budget and staff to the activities foreseen in the Local Action Plan agreed with the Project. In addition, the Government will make an in-kind contribution to cover any costs for [and or rights-of-way required for works financed by the project. The financial commitments by the DA and Local Governments shall be a part of their regular budget process. The precise amounts and timing of the local government contributions will be established in a Memorandum of Understanding to be entered into between the National Government and the respective local authorities during the first two years of project implementation.
3.3 The beneficiaries / rural people themselves will bring a significant contribution either in labour (micro-projects) or in cash through savings and capital build-up in their own organisations (savings and credit associations and co-operatives or production / marketing groups).
3.4. Cost Estimates
The total cost of the project over 7 years, is estimated at ECU 22.5 million shown by the following indicative breakdown of funding by input and source (in ECU thousands).
1. 1.1 1.2 1.3 2. 2.1 2.2 3. 4. 5. 5.1. 5.2. 6. 7. 8. 3.5 Use of Contingencies
Eventual reallocations of the fund provisions for individual components within the project activities budget which might become necessary to take account of the relative progress and achievements of the different components, shall be proposed for the agreement of the Executive Steering Committee (ESC) and the Commission in the annual revisions of the project workplan.
4. PROJECT IMPLEMENTATION
4.1 General
The Department of Agriculture (DA) shall be the executing agency on behalf of the Government of the Philippines. Project/field activities will be carried out under the supervision of the Project Management Office (PMO). This office will be responsible for overall project planning and implementation, coordination, and monitoring. District Offices will be established, each of which will be the base for a number of Area Teams. Under the supervision of the PMO these District Offices shall be responsible for the planning and implementation of project activities in their respective areas.
individual project activities will be implemented either by the PMO directly or through the District Offices or by local communities, NGOs, LGUs, DA field units or other appropriate government agencies, under the supervision of the respective District Office.
The national staff will be partly recruited directly by the Programme (coming mostly from the Phase 1 project) and will partly come from the LGU departments concerned at municipal and provincial level.
4.2 Project Management Office and Project Co-Directors
The Project Management Office (PMO) shall be headed jointly by a National Co-Director and a European Co-Director. The two Co-Directors shall be jointly responsible to DA for the implementation of the project and for the management and disbursement of project funds, within the framework of the project workplan as agreed by the ESC and the Commission.
For administrative purposes, the PMO with its subordinate units shall be established as an administrative unit within the Office of the Secretary of DA. However, the PMO shall from the beginning operate in an autonomous fashion, in accordance with article 6.1 below, within the framework of the agreed workplan.
DA shalf appoint the National Co-Director, at an appropriate senior level, to be jointly responsible with the European Co-Director for the implementation of the project. This appointment shall be subject to the concurrence of the Commission on the basis of the candidate's technicaf skills and experience.
The Team Leader of the European Technical Assistance Team, recruited following procedures described in 5.5, will be appointed European Co-Director and wiil be jointly responsible with the National Co-Director for the implementation of the project. This appointment shall be subject to the concurrence of DA on the basis of the candidate's technical skills and experience.
The National Co-Director and the European Co-Director shall carry out their duties jointly, and shall be jointly responsible to DA for the preparation of the annual workplan and for the implementation of the project in accordance with the agreed workplan. To this end, the two Co-Directors shad work in the closest collaboration at all times.
4.3 Workplan
The two Co-Directors shall be jointly responsible for the:
• preparation of the Project Workplan (set-up in a participatory process that involves the communities, LGUs at municipal and provincial level, other Agencies and organisations), including both a Global Workplan (covering strategic thrusts and milestones over the entire life of the project, both operational and financial), and a detailed Annual Workplan (covering specific objectives and activities for the current year, together with cost estimates, procurement procedures and schedules, cash flows and staffing patterns), for the approval of the ESC and the Commission.
• the implementation of the project in line with the agreed workplan;
• the preparation of tender documents, obtaining tenders and quotations, and placing orders after tender evaluation;
• certifying the acceptance of works, supplies and services and certifying payment orders;
• the approval of the District Workplans submitted annually by the District Offices;
• the timely annual revision of the Project Workplan, for the approval of ESC and the Commission;
• the preparation of quarterly reports on project progress and annual reports on project achievements.
4.4. Reporting
The following reports will be prepared by the PMO:
• an Initial Plan of Activities (IPA)
• a Global Workplan (GWP),
• Annual Workplan and Budgets,
• quarterly progress reports - the fourth quarterly report will be an annuel report,
• a final report on termination of EC support,
• supplementary (special) reports on specific aspects of the project as advised.
The Initial Plan of Activitiesoperates during the first six months of the project. This report will contain a brief and summarised fashion of the main activities envisaged in the start-up phase of the project and the funds estimated necessary to ensure a smooth inception period.
The GWP is prepared in an indicative manner for the entire duration of the project and should correspond as closely as possible to the requirements laid down in the Financing Agreement.
In addition to the reports provided to the executing agency, ESC and the Commission, the PMO shall also establish, not later than three months after each year of project implementation, an annual public report describing the activities and achievements of the project. This report will be given a broad circulation, as well as being available on request to all interested parties. Similar public reports, dealing more specifically with project activities and achievements within each province, shall be issued annually by each District Office.
4.5 Project Committees
The government shall establish an Executive Steering Committee (ESC), chaired by the Secretary of DA, which shall be responsible on behalf of the Government for approving the project's annual workplan and for reviewing project progress, and for providing policy guidance as necessary. Membership of the ESC shall include representatives of DA and other concerned national government agencies, of concerned provincial governments, of major national NGOs, and such other public or private sector bodies as may be appropriate. Arrangements shall be made to include also representatives of municipal governments agencies and of farmers1 organisations concerned with the project. The National Co-Director shall act as Secretary of the ESC.
Technical consultation and co-ordination with the regional offices and national bureau of the various concerned line agencies will be handled through a Technical Consultative Committee (TCC) comprising representatives of the various agencies concerned along with such other public or private sector representatives as may be appropriate. This Committee shall be chaired by the Undersecretary of DA responsible for the Special Concerns Office.
General consultation and co-ordination with governmental agencies and local community bodies within the areas served by the project will be handled through individual Provincial Consultative Committees (PCCs), comprising representatives of provincial line agencies, local government bodies, local development councils, and other local community or nongovernmental bodies as appropriate. These Committees shall be chaired by the National Co-Director.
Finafly, the Review Committee , chaired by the National Co-Director, shall be responsible for the review and approval of all individual project actions (micro-projects) funded under the project.
4.6 Inception Activities
The first year of implementation is considered an inception phase enabling the Co-Directors to set up project office, logistics, launch baseline surveys, prepare for the agreement of DA and the Commission detailed recommendations for the procedures and processes to be followed regarding consultations, information and partnerships with LGUs, local NGOs, People's organisations (POs), management information systems including monitoring and evaluation and finance and administration procedures. The two Co-Directors shall also prepare for the agreement of DA and the Commission detailed recommendations for the manner in which the credit scheme is planned and institutional strengthening activities at the provincial, municipal and barangay level shall be implemented, and for the manner in which farmers' organisations participate in the monitoring and assessment of project impact.
4.7 Linkages between the project and the partner institutions
The project aims at creating synergy of action in the field from all possible partners: Line Agencies, Local Government Units (Province and Municipalities), NGO's and other public or private institutions involved in rural development activities and represented in the Local and Regional Development Councils. Co-ordination with said partners for implementation purposes, will be made through local action plans that will be established on the basis of an exact analysis of needs and priorities conducted together with the communities and rural people concerned. The action plans will state the objectives, responsibilities for implementation and resources allocations of each partner according to their technical or geographical field of competency. Once agreed between the project and the partners, the local action plans will be integrated in the local development plans of the concerned LGUs and be aligned with the Social Reform Agenda (S.R.A.) as well as the Medium Term Agricultural Development Plan of DA as possible.
The objective of such co-ordination is to reach an optimal complementarity of the human, technical and financial resources available so that the development issues be addressed in a comprehensive and coherent manner.
4.8 Transitional and Terminal Arrangements
All assets and commitments of the ERP project phase 1 (including facilities, equipment, vehicles and materials as well as ongoing commitments and contracts) will be immediately taken over in their entirety by the project.
On completion of the project, it is foreseen that any balance of funds allocated to credit activities or to financial support to rural organisations, shall following an agreement between the Commission and the Government, be transferred permanently to appropriate local community organisations in such a manner as to best continue the objectives and achievements of the project.
Arrangements shall be made between D.A. and the EC regarding the transfer, disposal of vehicles, equipment and facilities after project termination.
5. FINANCIAL PROCEDURES
5.1 For those expenditures funded under the EC grant and involving direct payments in currencies other than Pesos, payment shall be made directly by the Commission using its own procedures.
5.2 For those expenditures funded under the EC grant and involving local expenditures in Pesos, payment shall be made as follows:
• the project shall establish appropriate bank accounts in the Philippines (one in ECU and one in Pesos) for this sole purpose. These accounts shall be operated with the joint signatures of the two Co-Directors. Subordinate Peso accounts may only be opened with the express agreement of the Commission;
• the Commission shall make an initial advance of 200.000 ECU following notification of the opening of the accounts;
• the Commission shall, on the basis of the agreed workplan and estimates make a further advance of up to 100% of the estimated expenditure during the first year of implementation, decreased by the amounts already transferred;
• disbursement from the project accounts shall be made jointly by the two Co-Directors, in line with project requirements of the project and the agreed workplan and estimates.
• transfers from the ECU account to the Peso account shall be made in line with the monthly requirements of the project. The balance in the Peso account shall not normally exceed two months' estimated expenditure, nor fall below one month's estimated expenditure. The exchange rate applied to transfers from the ECU account to the Peso account shall be regular market exchange rate applicable on the day on which the transfer is made;
• monthly statements of expenditure from the project accounts shall be prepared by the two Co-Directors and submitted for inspection to a qualified firm of auditors to be hired by the project for this purpose. The selection of auditors shall be subject to the prior concurrence of both DA and the Commission. Once certified by the auditors as being in conformity with project progress and the agreed workplan and estimates, these monthly returns shall be the basis of requests by the two Co-Directors to the Commission for the transfer of additional funds; such requests shall normally be made quarterly;
• in case of urgency, duly justified by the two Co-Directors, the Commission may be requested to make a temporary partial reimbursement on the basis of an unaudited request. Any such temporary reimbursement will be recovered from subsequent audited requests;
• copies of all requests for transfer of funds made by the two Co-Directors to the Commission shall be provided simultaneously to the Office of the DA;
• for the second and subsequent years of project implementation, the outstanding advance of the preceding year shall be adjusted to reflect the agreed estimates of expenditure for the current year. This adjustment will be effected by providing a supplementary advance, or by decreasing subsequent payment instalments made in respect of reimbursement requests during that current year;
• all funds in the project accounts, including any interest generated thereon, shall remain the property of the Commission. Any unused balances remaining available on the termination of the project shall revert to the Commission.
For those expenditures funded by the Government of the Philippines from its own budgetary resources, expenditures and the accounting for expenditures shall be made by the National Co-Director in accordance with normal government procedures. A summary of such expenditures, annual and cumulative, shall however be included in the project's annual reports.
For recording purposes, the Project Office shall inform the Department of Budget and Management (DBM), on a quarterly basis, of the value of all goods and services received by the project in reflection of expenditures funded under the EC grant. These statements shall be the basis for DBM to issue the necessary Advice of Allotment (AA) and Non-Cash Availment Authority (NCAA) required for recording disbursements under a grant-in-kind procedure.
5.3 Exchange Rate
Concerning the transfer of funds to cover local costs, the exchange rate is the one applied by the bank at the date of transaction.
Concerning reimbursements, the conversion to ECU will be based on the exchange rate published in the Official Journal of the European Communities as it stands on the tenth day of the month in which the expenses were incurred.
For the non-published currencies in the Official Journal, the conversions will be made following the exchange rate published in the "Financial Times" on the first Tuesday of the month in question.
5.4 Accounting
All Monthly statements of expenditure from the project shall be prepared by the Project Co-Directors. The accounts of the project shall be the subject of a quarterly audit by a qualified firm of auditors to be hired by the project for his purpose. The selection of auditors shall be subject to prior agreement of both the Project Co-Directors and the Commission. Once certified by the auditors as being in conformity with project progress and the agreed workplan and estimates, these quarterly returns shall be the basis of requests by the project to the Commission of the transfer of additional funds and such requests shall normally be made quarterly.
The accounts of the project should use the double entry system, and the registration of each receipt and of each effected expense should be entered therein.
The accounting entries of the ledger, including the interest account, should appear in the project's genera! ledger.
The accounting practices of the country notwithstanding, the Commission may require accounting information in other forms to be specified, depending on the requirements of the project.
5.5 Procurement Procedures
Procurement of works, supplies and local services under the EC grant shall be carried out through international or local tendering, international or local calls for quotation, or mutual agreement The tendering will be done according to the attached tendering rules and regulations as they may be amended from time to time in accordance with the Communities regulations applicable.
Technical assistance services shall be procured by the Commission under its own procedures; the Consultant who will provide these services wilt be selected by the Commission, foliowing the terms of reference to be agreed between the Commission and DA, and will be appointed by the Commission, after the concurrence of DA on the selected Consultant has been obtained.
The General Conditions of Contract prepared by the Commission shall be used for internationally procured services, works or supplies financed by the EC grant.
6. SPECIAL CONDITIONS
6.1 Project Autonomy
The Commission and the Government recognise that a proper autonomy of the Project Office, within the framework of the agreed project workplan, is an essential condition for the successful operation of the project. Given this, the Government will take all necessary steps, immediately on commencement of project implementation, to ensure that the two Co-Directors have all the necessary functional autonomy (financial, technical and administrative) required to effectively implement the agreed workplan. In particular, the Government shall ensure that the National Co-Director is given the necessary administrative authority to operate the project accounts jointly with the European Co-Director.
6.2 Establishment of Project Office and Project Committees
Within three months from signature of the present Financing Memorandum, the Government shall take all necessary legal and administrative steps to establish the Project Office as an administrative unit attached directly to the Office of the secretary of DA, to appoint the National Co-Director and other senior staff, to provide the National Co-Director with the necessary authority as called for in article 6.1 above, to establish the various project committees, and to issue the necessary Joint Circular and Memorandum of Agreement required for the proper implementation of the project in full conformity with the provisions of the present Financing Memorandum.
6.3 Respect of the Rights of Indigenous People
The project shall ensure that the rights of indigenous people are properly respected in all project activities. In particular, the project shall not operate in areas considered as ancestral domain except with the full consent of the indigenous inhabitants, properly expressed after a substantive consultation process. The project will however make a particular effort to associate indigenous people in project activities, should that be their desire.
6.4 Modalities of Co-operation with LGUs
The project aims at creating and developing an effective synergy of action in the field from all possible partners among which are the Government agencies and the Local Government Units. Other public or private institutions involved in the development and the financial sectors (DTI, Landbank, NGOs, Universities, other rural development Programmes such as CHARM or CE-CAP, etc.) could help either directly (through field action of financing the activities) or indirectly through exchange of experience, methods and techniques. Finally, the Programme will have to draw heavily on the experience of existing successful co-operatives and savings and loans associations and from institutions like NORLU or CAVALCO.
As a general rule, participation and co-operation should be considered as a natural and practical way of implementing activities in the field. Synergy of action can significantly accelerate and amplify the local development process.
Co-operation between partners can be practised at different levels, e.g.:
• Co-ordination of strategies and policies in order that in one specific area, no conflict arises between the project and another institution in the way they offer assistance to the communities (especially important in the savings/credit development matters);
• Geographical co-ordination of activities in order to avoid duplication of efforts or competition between two institutions serving the same community;
• Sharing activities in the same area (municipality for instance) along a common action plan where each partner takes in charge a specific part of the activities with its own staff and resources;
• Co-management of activities in the same area (municipality for instance) according to a common action plan where each partner brings its staff and resources to carry on jointly a common activity.
6.5 Gender Issues
The Government, through the project, will pay a particular attention to ensuring that gender issues are properly addressed in project planning and implementation. In particular, the project will ensure that women and men participate in and benefit from project activities on equal conditions, and that project activities are structured in such way as to assist and encourage women to play their full part in the development process.
6.6 Operation and Maintenance
Infrastructure works foreseen for funding under the project (including for example irrigation facilities, farm-to-market roads, water supplies, post-harvest facilities, etc.) will only be considered for funding where satisfactory assurances (by the respective responsible national or local governments) are established regarding arrangements for future operation and maintenance.
6.7 Sustainability
The project strategy tends to reinforce the ownership feeling of the beneficiaries through their increased participation in project planning and implementation (participation in labour and part of the costs) and also in the financing of their productive activities through their own financial resources. Capital build up and savings collection are indeed essential to a responsible and sustainable system of credit and the same is valid for co-operative development. The project therefore wilf help promote this approach in both categories of organisations: the savings and credit associations as well as the production or marketing groups and co-operatives. Membership commitment, ownership feeling and mutual responsibility are the foundation of any sustainable farmers' institution and in such poor areas where highland type subsistence farming prevails, of any sustainable process of development.
These institutions owned, managed and controlled by the people themselves will progressively become the real catalysts and motors of development in the area, some have already successfully developed that way in several piaces. They will be assisted by the project and its partners in setting up secondary level organisations strengthening the vertical integration and absorbing part of the operations and maintenance activities which continue after the project ends. Local governments will increasingly have a role in social service provision, regulation, spatial planning and creating an environment which is conducive to development.
With regard to the sustainability of the overall process applied by the project for the overall benefit of the communities, the early involvement of Local Government Units is seen to be of the utmost importance. The Local Government Units (LGUs) will benefit from training and institutional strengthening support. Partnership with LGUs, NGOs and other agencies will be formalised through Memoranda of Understanding to be prepared by the project as necessary.
Additionally, the project strategy is in line with both the Government policy of "people empowerment" and decentralisation and with the rural people's willingness to engage in a responsible process of development as shown in the project area by a significant number of successful and soundly managed groups or co-operatives in the productive, commercial and financial sectors. These examples also demonstrate that a 7-year duration is adequate in the prevailing socio-cultural and socio-economic context, for the assisted organisations to attain the objectives of financial autonomy, sound management and technical capacity.
6.8 Monitoring and Evaluation
The existing monitoring and evaluation arrangements under Phase 1 shall be continued and strengthened under Phase 2. Particular attention shall be given to strengthening the monitoring of savings and credit activities, and of rural enterprise and co-operative activities. The project shall also build on the base-line survey work carried out under Phase 1, as well as carrying out specific surveys and practical studies of the integrated development potential and constraints in each project area.
A first external review shall be carried out at the end of Year 2 (joint GOP/EC mission) and again during Year 5 with a pre-completion review during Year 7.
6.9 Disputes
Disputes arising during the performance of a contract between the Government and a contractor, consultant or supplier who is not a Philippine national shall be settled definitely in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce.
6.10 Expatriate Experts1 Status
Expatriate experts will be given the same status as granted by the Philippine Government to international agencies (e.g. the UN Technical Assistance personnel) and enjoy the same privileges, especially the right of free circulation in, out and into the Republic of the Philippines, as required for the proper execution of the project.
Summary Table 2 - Annexes IV to VI
SERVICE CONTRACTS CONCLUDED EXTERNALLY FOR A NON-MEMBER COUNTRY
Eligibillity Community, recipient country Community, recipient country Community, recipient country Procedure Direct Agreement Principle: negotiated procedure
Variant: framework contract if duration less than 6 monthsPrinciple: restricted invitation to tender publication in local press
Variant: framework contract if duration less than 6 monthsNumber of firms consulted or invited to tender 1 or more Principle: minimum 3
Variant: framework contactPrinciple: shortlist minimum of 5 firms.
Variant: framework contract if duration less than 6 monthsApproval of invitation to tender file Contracting authority Contracting authority with agreement of delegation Principle: IB-E/2 Assessment of tenders Contracting authority Contract award committee with participation of delegation Contract award committee with participation of delegation Award decision Contracting authority Contracting authority with agreement of delegation Delegation if contract to go to lowest bidder.
Otherwise: IB-E/2Contract Contarct signed by contacting authority Contract signed by contracting authority
Variant: contract signed by IB-E/2
Principle: contract signed by contracting authority
Variant: contract signed by IB-E/2Summary Table 4 - Annexes XII to XV
SUPPLY CONTRACTS CONCLUDED LOCALLY FOR A NON-MEMBER COUNTRY
Origin No rules on origin Community, recipient country, eligible countries Community, recipient country, eligible countries Community, recipient country, eligible countries Procedure
Direct contract
Direct contractPrinciple: open invitation to tender -publication in local press. Variant (with prior agreement of headquarters): restricted invitation to tender International invitation to tender - publication in OJ and local press Number of firms consulted or invited to tender 1 or more at least 3 Principle: open Variant: minimum of 5 firms, at least 2 from Community Open Dispatch of invitation to tender / / File sent to delegation File sent to delegation Approval of invitation to tender file
// Delegation
Commission approval required (headquarters)Assessment of tenders Contracting authority Contracting authority Assessment committee on which delegation is entitled to sit Assessment committee with participation of delegation Award decision Contracting authority Contracting authority
Delegation: if proposed contractor is lowest bidder and amount is not in excess of budget limits. Otherwise: headquartersHeadquarters Contract Order signed by contracting authority Copy and supporting documents fiied Contract signed by contracting authority Copy and supporting documents filed Contract signed by contracting authority, then by contractor.
Contract signed by contracting authority endorsed by Commission (headquarters), then by contractor. Summary Table 5 - Annexes XII to XV
WORKS CONTRACTS CONCLUDED LOCALLY FOR A NON-MEMBER COUNTRY
Direct contract
Restricted invitation to tenderInvitation to tender - publication in local press
International invitation to tender -publication in OJ and local press
Number of firms consulted or invited to tender
at least 3 at least 5 Open Open / / File sent to delegation File sent to delegation / / Commission approval required (delegation). Commission approval required (headquarters)
Contracting authorityAssessment committee on which delegation is entitled to sit
Assessment committee on which delegation is entitled to sitAssessment committee with delegation participation Contracting authority Contracting authority Delegation: if proposed contractor is lowest bidder and amount is not in excess of budget limits. Otherwise: headquarters
HeadquartersOrder signed by contracting authority Copy and supporting documents filed.
Contract signed by contracting authority Copy and supporting documents filed.Contract signed by contracting authority, then by contractor
Contract signed by contracting authority, endorsed by Commission (headquarters), then by contractor.
- Delegations, project management units or recipients.
- ECU 137 000 or more: contract concluded by headquarters (see Annex III).
- Eligible countries: MEDA Regulation, Article 8 (1): Mediterranean partners.
- ALA Regulation, Article 13: developing countries, case by case. Exceptionally, others.