MDF Economic Development Financing Facility

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MDF Economic Development Financing Facility
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Background Information I

• Damage from the tsunami to the productive sector
  was US1.2 billion. 80,000 small and medium
  enterprises, providing employment to 140,000
  people, were destroyed
• Oil and gas account for 23 of GDP, manufacturing
  related to cheap gas a further 20 of GDP. Gas
  accounts for over 90 of Acehs exports.
• Over the last 20 years, Aceh has grown at lower
  rates than Indonesia. As a result, approximately
  30 of the population live below the poverty line
  (2004 data)

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Background Information II

• Acehs economy contracted by 13 in 2005, a
  result of the tsunami and declining oil revenues.
  Agriculture, livelihood provider for the majority
  of the population declined by 9.
• A result of the reconstruction has been higher
  inflation rates (as high as 26 by end of 2006)
  and higher wages than in the rest of Indonesia.
• gt A coordinated approach is necessary to address
  the destruction of the tsunami to the productive
  sector and structural deficiencies of Acehs
  economy.

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Population is worried about the economy I

• IFES Survey, Jan-Feb 2007, n1023
• Evaluation of Specific Conditions in Aceh (in )

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Population is worried about the economy II

• IFES Survey, Jan-Feb 2007, n1023
• Important Issues for new Gov. in first 100 days
  in office

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What is the EDFF

• The Economic Development Financing Facility will
  finance a set of programs and projects to foster
  sustainable economic recovery and growth in Aceh.
• It will help to build Aceh back better through
  (i) technical assistance, (ii) institution and
  capacity building, (iii) addressing market
  failures and (iv) provide funds for key public
  economic infrastructure.

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EDFF Rationale

• Avoid an economic slowdown and rising
  unemployment as the tsunami reconstruction
  program slows down
• Need for a coordinated approach and a pooling of
  resources to foster economic growth and close
  identified gaps in the reconstruction effort
• EDFF can provide international best practice in
  designing projects and policies, a model that the
  Government of Aceh can continue beyond BRR and
  MDF.

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EDFF Key Principles

• Consistent with Government of Aceh economic
  development plans
• Capacity building of regional governments through
  implementation of sub-projects
• Sustainability addressed by (i) using existing
  government channels and (ii) design of an exit
  strategy Aceh Development Fund
• Seizing the opportunity to modernize government
  institutions, the productive sector and to
  increase the role of the private sector in Acehs
  economy.

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EDFF will have 4 components

• Pro-Poor GrowthRecovery of those sectors that
  provide livelihoods for most poor agriculture
  and non-farm rural employment, fisheries, micro
  and small enterprises.
• Sustained InvestmentDevelopment of strategies
  and investment packages to attract investment
  (domestic and foreign). Removal of administrative
  barriers for investment. Improvement of business
  environment.
• Export-Led GrowthPreparing Acehs products and
  services to meet international product quality
  standards. Linking Acehs producers with foreign
  markets. Trade Facilitation.
• Management (Program Implementation Unit)Planning
  and Monitoring-Evaluation, Procurement, Financial
  Management, Communication and overall
  Administration

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EDFF Timeline

• EDFF project will be implemented over a period of
  3 years (2007-2010).

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EDFF Project Evaluation Criteria

• Economic Impactjobs, export earnings and
  incidence on poverty
• Capacity to Implementlocal government and
  community support, appropriate management
  structure
• Builds on Acehs Competitive Advantagesimproves
  business and investment environment, addresses
  key problems constraining supply response
• Value Addedtechnology and/or knowledge transfer
  for Aceh producers, service providers and
  business management/marketing capacities
• Sustainabilitydownstream funding identified,
  resources managed for the long term

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EDFF Project Evaluation Criteria

• Environmental Impact no significant impact
  and/or includes plans to address environmental
  issues
• Equityaddresses gender/socio-economic imbalances
• Consistency with Current Plans Political
  Agendaconsistent with stated economic
  development objectives and strategies of the
  Government of Aceh
• Market Oriented Solutionsproject addresses
  market failures where interventions are necessary
  using market oriented solutions

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EDFF Administration-Preliminary
APPROVAL OF EDFF
MDF
PROJECT SUPERVISION
World Bank
Approval Committee (Governors Office, BRR,
BAPPEDA)
APPROVAL OF SUB-PROJECTS

• Sources of sub-projects
• Pipeline of projects during preparation-
  Proposals by implementing agencies- Proposals
  by Aceh Development Fund

Project Implementation Unit in the Governors
Office
PROJECT MANAGEMENT AND SUB-PROJECT PROPOSAL
PROJECT IMPLEMENTATION
Partner agencies, NGOs
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Next Steps 1 Month

• Prepare Concept Note
• Further analysis of projects to define a pipeline
  for Year 1 during project preparation
• Discussions with Lead Organizations (Governors
  Office, BAPPEDA)

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• EXAMPLES OF PROJECTS UNDER CONSIDERATION FOR A
  PROJECT PIPELINE FOR YEAR 1

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Improvement of Agriculture Services Provision
(Component 1 Pro-Poor Growth)

• This 3 year project targets improved quality of
  inputs and extension for developing agricultural
  skills in the food crops and horticulture, estate
  crops as well as livestock sectors.
• The project would be implemented through the
  livelihoods networks established through BRR and
  ETESP in local Dinases at province and district
  level.
• The project would have three components (i)
  agriculture services for food crops and
  horticulture (63), (ii) agriculture services for
  estate crops (11), and (iii) agriculture
  services for livestock (26).
• Estimated costs for this project would be US8.9
  million.
• Experienced Partners ADB-ETESP, BRR and Dinases.

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Fisheries Livelihood Recovery (Component 1
Pro-Poor Growth)

• This 2 year project will assist fishers and
  aquaculture farmers in Aceh and Nias to develop
  improved production systems and market chains.
• The project would be implemented through the
  livelihoods networks established through BRR and
  ETESP in local Dinases at province and district
  level.
• The project would have three components (i)
  Capture fisheries along Aceh west coast (34),
  (ii) Mariculture in Simeulue and Nias (32), and
  (iii) Aquaculture along Aceh north-east coast
  (34).
• Estimated costs for this project would be US10
  million.
• Experienced Partners ADB-ETESP, BRR and Dinases.

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Development of Aquaculture Cluster (Component 1
Pro-Poor Growth)

• Tsunami had a devastating impact on tambaks
  15-16,000 ha damaged, water supply and drainage
  systems destroyed, over 300 aquaculture villages
  affected
• Activities Rehabilitation of tambaks, improved
  management, initial provision of inputs, support
  infrastructure and government services.
• Costs for a 2 year project, rehabilitating 7,500
  ha of tambak (non-operational or poorly
  rehabilitated) is approximately U 12 million.
• Experienced Partners Network of Aquaculture
  Centres in Asia-Pacific (NACA), UNDP, ADB-ETESP

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Expansion of One-Stop-Shop to 4 Kab.(Component
2 Sustained Investment)

• OSS merge licensing authority from different
  departments into one office, streamlining
  licensing processes with significant time and
  cost savings and increasing incentives for
  formalization of businesses.
• The project provides TA for structural and legal
  reforms, licensing process improvements, staff
  training and IT development.
• Together with the management of the project,
  costs would be approximately US 500,000 for a
  2-3 year project and 4 kabupaten.
• Experienced partner The Asia Foundation, who has
  piloted the OSS in Banda Aceh and Aceh Utara and
  around 50 other kabupaten throughout Indonesia.

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Support of the Investment Outreach Office
(Component 2 Sustained Investment)

• Support to the IOO and improvement of the
  investment climate in general
• Development Business Directory
• Image Building (Professional PR firm, promotional
  videos, TV and radio programs)
• Supporting BKPMD in proactive investment
  promotion
• Analysis and dissemination legislation related to
  investment
• Matching funds program for feasibility studies
• Support to SEZ/KAPET in Sabang
• Total costs for a multi year program would be
  approx. US5.1 million.
• Experienced partner BKPMD, IFC

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Support to Export Commodities Clusters (Component
3 Export Promotion)

• This 3 year project would support clusters of
  economic activities related to export
  commodities.
• Export commodities will be determined through
  public consultation and analysis available. Some
  possibilities are cacao, rubber, nutmeg, cloves.
• The project will have three outputs (i)
  formation of public-private partnerships (PPP)
  around clusters, (ii) implementation of
  initiatives and projects developed by PPP and
  (iii) adoption of new governmental procedures and
  models to support local economic development
  greater private sector participation.
• Total estimated costs for this multi-year project
  is US17.5 million.
• Experienced Partners UNDP, BAPPEDA