Project Document PREP-ICCTF

30th December 2009

United Nations Development Programme

Country: Indonesia

Project Document

Agreed by (Government)

Agreed by (UNDP):

I.Situation Analysis

1.1 Climate Change

Climate change is today considered the biggest challenge facing mankind. According to the Intergovernmental Panel on Climate Change (IPCC) contemporary temperature rises, precipitation changes, sea level rise and extreme weather events such as storms, floods and droughts which are already impacting countries around the world may be ascribed man made climate change. Indonesia is among the countries which will be severely affected by these negative consequences of climate change.

Attempts have been made to mitigate climate change through the setting of binding greenhouse gas emission targets for developed countries (Kyoto Protocol, 1997). Additionally, national, sub-national, private and voluntary mechanisms are being developed in order to attempt to reduce or avoid Green House Gas (GHG) emissions. To minimize the negative impacts of climate change and to adapt accordingly, assessments of the vulnerability of countries to climate change and adaptation plans and programs have been made. However, much greater efforts and more ambitious targets have to be formulated in order to prevent catastrophic climate change. Furthermore, coordination of the existing efforts to mitigate and adapt to climate change is crucial in order to ensure effective development assistance on this area. The Indonesian Climate Change Trust Fund (ICCTF) is created as a response to this need.

1.2 The Jakarta Commitment, A4DE and Paris Declaration

The Jakarta Commitment, signed on 12 January 2009 by the Government of Indonesia (GOI) and its development partners, followed by the establishment of the Aid for Development Effectiveness Program (A4DE) aiming at implementing the Commitment’s objectives, signaled both a national will to implement the principles contained in the Paris Declaration on Aid Effectiveness to Indonesia’s specific country context. According to the Jakarta Commitment (2008:1) ‘Indonesia’s overarching concern is to maximise the effectiveness of all its resources committed to development, including external assistance’.

The ICCTF can be seen as a materialization of the main message of the Jakarta Commitment:

‘The Jakarta Commitment is to be based on the spirit of mutual respect, support and accountability. It represents the shared commitment on the part of Government and Indonesia’s development partners to enhance the effectiveness of external financing (2008:5).

Hence, the ICCTF aims at aligning itself with international principles and standards, such as the Paris Declaration on Aid Effectiveness, as well as the specific guidelines from the Jakarta Commitment and A4DE. Following this, UNDP and other partners are now aiming to make new knowledge and international best practices accessible in the grounding of the ICCTF, to enhance the implementation of the nationally owned multi-donor fund according to principles of transparency and accountability.

1.3 ICCTF launched

On 3 September 2009 a decree of the State Ministry of National Development Planning (BAPPENAS) was enacted on the establishment of ICCTF. The blueprint for ICCTF was launched 14 September 2009. This edition of the blueprint specifies that the ICCTF is a funding mechanism managed by the Government of Indonesia. It also states that a national Trustee for the ICCTF will subsequently be procured according to ICCTF’s financial and procedural requirements and standards. As the blueprint remains a work in progress as far as the structural design and procedural and policy framework of the ICCTF, the specifications for procuring a national Trustee is to be yet to be decided. However, the blueprint notes that the ICCTF is an alternative financing for climate change mitigation and adaptation to be managed by government in a transparent and accountable manner. Principles of good governance are therefore to be imbued into ICCTF’s institutional arrangements and features.

1.4 ICCTF now needs to be operationalized

Generally, GOI has enjoyed favorable experiences with multi-donor trust funds. However, trust fund modalities have been managed by multilateral organizations. As a result, Government institutions have limited practical experience in the management of these trust funds, such as trustee arrangements and the necessary administrative and fiduciary oversight capacity to attract international funding. In order to successfully implement ICCTF, capacity needs to be developed within GOIto ensure an efficient, transparent and accountable nationally managed implementation. In this regard, GOI has invited development partners to contribute to the further development of ICCTF so that it can in the near future function as a nationally managed, multi-donor funding mechanism for mitigating climate changes.

Currently, ICCTF needs to be further operationalized through institutional, legal and organizational arrangements. This implies matters such as clear climate mitigation targets, work plans, Standard Operating Procedures (SOPs),results framework,monitoring and evaluation mechanisms, an initial project pipeline of activities to be financed by the ICCTF and preparation of its formal launch. Overall, the fund’s strategy, structuring, features and procedures need to be refined and finalized.

A number of development partners have readily responded to GOI’s request for contributing to further develop the ICCTF. GTZ has provided assistance to Bappenas in the form of an advisor to support the technical development of the ICCTF Blueprint and to operationalize the fund. The Government of the United Kingdom, through DFID, has offered grant financing to support the full establishment of the ICCTF. In turn, Bappenas requested UNDP to provide technical and managerial assistance as described in this Project Document. With the objective to fully operationalize the ICCTF, Bappenas and UNDP have agreed to initiate the project “Preparatory Arrangements For the Indonesia Climate Change Trust Fund” (hereafter referred to as PREP-ICCTF).

II.Strategy

2.1 Goal

The goal of the Support to Operationalizing the Indonesia Climate Change Trust Fund project isto enable the Government of Indonesia and its development partners to enhance theeffectiveness of their response to climate change.

2.2 Objectives

The goal of the PREP-ICCTF project shall be accomplished throughthree objectives:

Objective 1:Support initiatives on climate change as prioritized by the GOI, for an interim period while the ICCTF is being set up.

Objective 2: Provide support and development for establishment of the ICCTF.

Objective 3: Support capacity development needs of the Government of Indonesia for the efficient and effective implementation of the ICCTF.

2.3Scope of PREP-ICCTF project and Management Arrangements

The PREP-ICCTF project was jointly established by the Government of Indonesia and the UNDP, under the terms established in the Letter of Agreement between the Government of Indonesia and the UNDP regarding Implementation of the PREP-ICCTF project:[1]

At the request of Government, the PREP-ICCTF project is designed as a UNDP managed project. It shall be implemented under the Project Management Implementation Guidelines (PMIG),jointly developed between Bappenas and the UNDP, and using the National Implementation Modality (NIM). The guidelines outline the agreed minimum requirements and processes that will be applied to all UNDP-funding activities in Indonesia.

UNDP shall work under the leadership of the Government and respond to the expectations of Development Partners. It is the intention of Government and UNDP that the ICCTF will be fully established by the end of the interim period, with all ICCTF entities and procedures operational and sufficient capacity and expertise established within Government to manage the fund. PREP-ICCTF project implementation will be based on clearly defined milestones that facilitate the gradual transition of responsibility to the ICCTF as it develops.

Regarding financial arrangements, UNDP and Bappenas have agreed that:

• The Harmonized Approach to Cash Transfers (HACT) modality will be applied for Objective 2 and Objective 3. Bappenas will open a Project Bank Account subject to the results and recommendations of the HACT Assessment. Budget for Objective 2 and 3 flowing through the Project Bank Account will be managed by the National Project Director with the support of the ICCTF Secretariat;
• UNDP will administer Objective 1using a Letters of Agreementwith implementing agencies and disbursing PREP-ICCTF project funds from the UNDP Bank Account in Jakarta to project proponents. Funds will be disbursed after a funding decision of the ICCTF Steering Committee;
• The use of any interest deriving from project funds will be decided by the ICCTF Steering Committee.

2.4 Workplan, Objective, Output and Activities

All Objectives, Outputs and activitiesprepared under the PREP-ICCTF project (as shown in the table below) will be further reviewed by ICCTF Technical Committee and submitted to the ICCTF Steering Committee for review and approval for their quality.

Objective 1:Support priority climate change initiatives as prioritized by the Government, for an interim period, while the ICCTF is being established. UNDP will assume the role of interim fund Administrator under the PREP-ICCTF project and disperse funds to approved projects prepared and reviewed by the ICCTF Technical Committee and approved by the ICCTF Steering Committee. UNDP will also provide support to the ICCTF Secretariat in assisting the line Ministries to identify and develop project proposals to be submitted to ICCTF technical and Steering Committee for further process and approval. There is also the need to develop the capacity of selected Government institutions that will implement approved PREP-ICCTF projects, enabling them to: (i) develop high-quality PREP-ICCTF project submissions, and; (ii) effectively manage project implementation under PREP-ICCTF project arrangements, including the financial arrangements and monitoring and evaluation systems.

Objective 2:Provide support and development for establishment of the ICCTF.Outputs for Objective 2 focus on providing Bappenas with technical assistance to: (i) finalize the ICCTF’s governance, management and administrative structures, (ii) conduct policy dialogues and public relations activities

Objective 3:Support capacity development needs of the Government of Indonesia for the efficient and effective implementation of the ICCTF. Outputs from Objective 3 will ensure that Government has the institutional capacity and knowledge to manage the ICCTF efficiently and in a sustainable manner.

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III.Workplan, Objective, Output and Activities

The following work plan has been developed following the principles stipulated in the LoA between Bappenas and UNDP (Annex 1).

Indicative timeline for activities under Objective 1 in 2010:

January – February: Support line Ministries to develop project proposals

March: Support ICCTF Secretariat and Technical Committee to check and evaluate proposals

March: Support ICCTF Steering Committee to convene meetings and approve projects

March:Develop, finalize and sign LOAs between recipient line Ministries and UNDP

April- :Start implementation of projects

Project Support Costs:

To support the execution and monitoring and evaluation of the Project, the following are required within the overall context of supporting and strengthening the ICCTF Secretariat:

General Management Services (7 % of the total disbursement)USD 1,053,271

(GMS is based on the real expenditure)

TOTAL BUDGETUSD 16,100,000

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IV.Management Arrangements

The implementation arrangements for the PREP-ICCTF project take into account:

• The Government of Indonesia’s decree of 09 September 2009 to establish the Indonesia Climate Change Trust Fund;
• The Blueprint for the Indonesia Climate Change Trust Fund document, draft issued on 11 September 2009-11-12;
• The Letter of Agreement (LOA) regarding the implementation of the Indonesia Climate Change Trust Fund, signed between the Government of Indonesia and UNDP on 14 September 2009; and
• The Project Management Implementation Guideline (PMIG), jointly developed between Bappenas and UNDP, and operational since September 2009.

Of these, the Letter of Agreement serves as the legal instrument creating the PREP-ICCTF project, including defining the scope of collaboration between the Government and the UNDP, outlining roles and responsibilities and establishing the principles for the participation of other stakeholders. According to the LOA, the PREP-ICCTF project is jointly established by the Government of Indonesia and UNDP, to be implemented as a UNDP project under Government leadership. The management arrangements will be based on the:

• Project Management Implementation Guidelines, which serve as the agreed minimum requirements and processes that will be applied to all UNDP-funding activities in Indonesia; and
• The National Implementation Modality (NIM, formerly NEX), under the leadership of Government and in consultation with the development partners; and

Within this framework:

• Bappenas will be the Lead Implementing Partner from within Government;
• The project and its activities will be implemented under the leadership of the assigned National Project Director (NPD) by Bappenas which will function to manage and supervise the overall implementation of the PREP-ICCTF project;
• The ICCTF Secretariat will assist the National Project Director, and will be supported by an appropriate mix of professional staff which will be recruited under UNDP contracts.The selection of these personnel will be a joint GoI/UNDP process, with the NPD or assigned representative also present in the selection panel. The Secretariat shall serve to support and consolidate the ICCTF structure established under Government decree (Objectives 2 and 3), and ensure initial priority projects are developed (Objective 1). This will also include the transition strategy will ensure that ICCTF structures and procedures are developed during the PREP-ICCTF project interim period, and that responsibilities are gradually handed over as capacity allows. The Secretariat will also function as a project management unit as defined within the PMIG.

ICCTF Steering Committee

The ICCTF Steering Committee provides strategic direction, overall decision-making and oversight to the PREP-ICCTF project, functioning as a Project Executive Board if necessary, as defined in the PMIG. As such, the PREP-ICCTF project will follow the guidance and direction as decided by the ICCTF Steering Committee. It is envisaged that members of the ICCTF Steering Committee will include donors beside line ministries and other important stakeholders. The ICCTF Steering Committee roles are further defined within Bappenas Decree Number KEP.44/M.PPN/HK/09/2009 on “ESTABLISHMENT OF INDONESIA CLIMATE CHANGE TRUST FUND (ICCTF)”.

National Project Director

Bappenas will assign a senior government official from the Government as the National Programme Director (NPD). The NPD will supervise the project implementation and will carry overall accountability on behalf of the Government for the PREP-ICCTF project. S/he will report to the ICCTF Steering Committee on progress, challenges, and next steps in the project. The NPD will also ensure coordination with other relevant departments and government agencies. She/he will strengthen and supervise the ICCTF Secretariat which serves as the programme management unit in implementing the projectin developing the relevant SOPs, procedures and mechanisms, Annual Work Plans, progress reports, Monitoring and Evaluation framework, and other activities as relevant. The NPD will endorse work plans, requests for cash advances to UNDP (if applicable), Annual Reports, and needs to approve all payments to be made to vendors, in accordance with applicable rules and regulations from GoI and/or UNDP. S/he will also be responsible for financial reporting to the Ministry of Finance in accordance with existing regulations, and will need to sign the Combined Delivery Report together with UNDP. The NPD will also, ensure that the PREP-ICCTF project, under the leadership of Government, shall execute the following tasks: (i) develop the workplan and ensure delivery of Outputs from Objective 1, Objective 2 and Objective 3, (ii) oversee the disbursing of funds to implementing agencies of government on direction from the Steering Committee, as well as the interim fund manager’s financial and monitoring and evaluation reporting to the ICCTF Secretariat.