39190 Global Environment Facility Evaluation Office ________________________________________________________________________ SWOT ANALYSIS: ENHANCING THE PARTICIPATION OF THE EXECUTING AGENCIES IN THE GEF ________________________________________________________________________ Technical Paper 3 Part of the Evaluation of the Experience of the Executing Agencies under Expanded Opportunities in the GEF, conducted by the GEF Evaluation Office. Not edited November 2006 By: Oscar Gonzalez-Hernandez Task Manager: Siv Tokle Team Leader: Oscar Gonzalez-Hernandez 1 1. Introduction The evaluation on the Experience of Executing Agencies under Expanded Opportunities in the GEF addresses the following key questions: a. How has the participation of the Executing Agencies in the GEF and the related legal framework for Expanded Opportunities of the Executing Agencies evolved to date? b. What are the main strengths in the Executing Agencies' experience with the GEF? c. What are the main weaknesses in the Executing Agencies' experience with regard to (i) participation and cooperation in GEF policy and operational issues; and (ii) project development and implementation? d. Based on the above, what are the main threats to Executing Agencies' participation, and what are the main opportunities in the future? This paper addresses the SWOT analysis envisaged in Questions (b) through (d). It draws on, in part, Evaluation Technical Paper 2: Executing Agencies GEF Portfolio Overview; and Technical Paper 1: The Evolution of Expanded Opportunities to Executing Agencies and the Legal Framework, which covers Question (a). The Executing Agencies are: · Asian Development Bank (ADB) · African Development Bank (AfDB) · European Bank for Reconstruction and Development (EBRD) · Inter A merican Development Bank (IADB) · Food and Agriculture Organization (FAO) · International Fund for Agriculture and Development (IFAD) · United Nations Industrial Development Organization (UNIDO) The SWOT analysis is also based on the interviews conducted with representatives of all Executing and Implementing Agencies (GEF coordinators or focal points and operational staff) particularly regarding their experience in working with GEF through direct and indirect access, and their mandate, interest and capability to work in the GEF focal areas; with selected Council members and staff members of the GEF Secretariat; and on the collection and analysis of data obtained for the Joint Evaluation of the GEF Activity Cycle and Modalities and for the preparation of Technical Paper 2. The interviews and the data analysis were useful to contrast the mandate and experience of the Executing and Implementing Agencies to work with GEF both at policy and operational levels. This exercise identifies the Strengths, Weaknesses, Opportunities and Threats of the current involvement of the Executing Agencies in the GEF and its prospective enhancement. It yields insights to help pinpoint the barriers to overcome, simplified or removed, to allow the Executing Agencies to realize their full potential as members of the GEF partnership, and was used in the formulation of the findings and recommendations of the evaluation. The SWOT analysis is summarized in the worksheet in Annex A and described in sections 2-5. in accordance with the Evaluation Terms of Reference, it is based on the main objective of Enhancing the Participation of Executing Agencies in GEF Operations. The following standard definitions for the SWOT analysis were used: · Strengths: Internal attributes of the ExA cooperation with the GEF that are helpful to achieving the objective · Weaknesses: Internal attributes of the ExAs cooperation with the GEF that are harmful to achieving the objective · Opportunities: Conditions external to the ExAs that are helpful in achieving the objective · Threats:Conditions external to the ExAs that are harmful to achieving the objective. 2 2. Analysis of Strengths The strengths and weaknesses concern both characteristics of the Executing Agencies themselves, and of the cooperation between the GEF and these Agencies. This is also considered in relation to the experience of the Implementing Agencies and the GEF. The section mainly reflects strengths and weaknesses of the GEF-ExA cooperation up to now; emerging issues are covered under opportunities or threats. 2.1. Mandates and Policies of the Executing Agencies All the seven Executing Agencies have stated mandates and policies to work on environmental matters. Within their regional and/or technical outreach, they constitute a good match to work with GEF in the respective areas of competence. These areas of competence are stated in the Agency summaries included in the Annex to Technical Paper 1on the Evolution of the Expanded Opportunities. The Regional Development Banks have environmental policies whose core objectives are included in their lending operations and aim at improving the quality of life of the people by helping to preserve and enhance the ecological capital and life-support systems. For example, in addition to its 2002Environment Policy, ADB also has formulated sector-specific policies, covering, for example, Forestry (1995), Fisheries (1997), Energy (2000), Water (2001). The core objectives of the AfDB 2004 Environmental Policy are to improve quality of life of the people of Africa by helping to preserve and enhance the ecological capital and life-support systems across the African continent. The EBRD updated its Environment Policy in 2003; and the IADB Board of Directors approved the Environment and Safeguards Compliance Policy in January 2006, with three objectives focussed on environmental sustainability. IFAD's activities are guided by the Strategic Framework for IFAD 2002-2006: Enabling the rural poor to overcome poverty, with one of the three objectives to improve equitable access to productive natural resources and technologies. The Agencies more oriented to Technical Cooperation systematically take into consideration environmental concerns in their interventions. The FAO Strategic Framework (2000-2015) highlights the twin objectives of sustainable production and natural resource conservation. The UNIDO Strategic Long- Term Vision" (GC.11/8, IDB.30/23, December 2005) with a mandate of Sustainable Industrial Development, concentrates on Energy and Environment as one of three thematic areas. 2.2. Institutional Capacity and Experience in GEF Project Development and Implementation The seven Executing Agencies have institutional capacity to identify, develop, appraise, implement, monitor and evaluate projects in their respective niches and in line with GEF criteria. They have participated through their GEF focal points, operational staff and evaluation units in recent GEF evaluations, namely the Joint Evaluation of the GEF Activity Cycle and Modalities and the present evaluation. Most have adequate representation in the field (national and/or regional) either by own staff or counterpart national organizations. Some have such representation integrated in the UN Resident Coordinator Office. Technical Paper 2 on the ExA Portfolio analyzes the quality at entry and the level of co-financing of projects prepared and executed by the Executing Agencies both under direct and indirect access and concludes that such projects, on average, follow the same pattern as for the Implementing Agencies. Obviously, the projects of Regional Development Banks and IFAD show higher levels of co-financing 3 than those of the Technical Cooperation Agencies. For example, the IADB Medium-size Project (MSP) Clean Tech Fund in Latina America has co-finance ratio of over 60. After an intial learning process of gef procedures, the Executing Agencies now exhibit the same strenghts and weaknesses as Ias in managing the activity cycle. After the World Bank, IFAD next shortest time from GEF Pipeline Entry to Work Program inclusion for FSPs approved in gef-3, as per the Joint Evaluation of the GEF Activity Cycle and Modalities. In terms of average timeframes for the appraisal phase, ADB reported a lower duration of 2 to 4 months. Contrasting the two strengths above with those of the Implementing Agencies, it can be stated that they are on par. 2.3. Sustained Interest in Working with the GEF Despite the barriers and mixed success of working with the GEF, all seven ExAs expressed a sustained interest to continue working with the GEF. Their attendance, statements and documentation prepared for the policy making organs of the GEF confirm this commitment. At the last GEF Assembly, ExA participation was assured in one case by the Director General of the organization, in another by a Vice President, and in all cases by the respective GEF Focal points. Most Agencies had prepared for the occasion publications related to their commitment to work in the environment and with the GEF specifically, and provided information to the Assembly participants through their information booths. Furthermore, the Executign Agencies' committment to the GEF is evidenced by their constructive cooperation with non-project activities such as their involvement in several GEF task forces, contributiions to GEF indicator work; support ot the operationalization of RAF, notwithstanding the fact that the financing of the ExA participation in such areas had to come from their own resources. All seven Executing Agencies also contributed financially and substantively to the Joint Evaluation of the GEF Activity Cycle and Modalities (GEF/ME/C.30/6). The Joint Evaluation was initially proposed by ADB; two of the eight components were led by ADB and UNIDO and all ExAs particiapted through workshops and contribution of inputs. The main reason for the ExAs continued interest is that the GEF provides an opportunity to reinforce their contributions to the global environmental agenda by providing additional resources to support their existing efforts. Furthermore, their GEF participation enables them to more efficiently respond to country demands. 2.4. Increased Collaboration between Agencies An important and positive effect of working with the GEF is that an increased collaboration and exchange of information has taken place between the GEF partners on environmental matters. In particular, the Executing Agencies themselves have established communication and coordination mechanisms, by which they prepare joint positions and statements as seen at the June 2006 Council meeting (GEF/C.28/CRP.5); represent each other at GEF meetings, and circulate information among the GEF coordinators. Such exchanges of experience generates efficiencies in the management of the GEF partnership. There are also some examples of increased collaboration between Executing and Implementing Agencies. UNEP has provided FAO with a staff member on secondment to help support development of its GEF portfolio; and UNDP and UNIDO are conducting a joint project evaluation. Cooperation on a technical level has long taken place, for example through the FAO Investment Centre assisting in the preparation, appraisal and supervision of some 60 GEF projects implemented by other partners. 4 3. Analysis of Weaknesses 3.1. Insufficient Involvement of the Executing Agencies in Policy, Decision-Making and Resource Allocation matters The upstream involvement of the Executing Agencies in GEF is largely affected by a historical precedent. The restructured GEF was established in 1994 with the three Implementing Agencies charged with the operationaliztion of the operational policies, strategies and decisions of the Council. As a consequence, there is insufficient involvement of the Executing Agencies on matters related to policy, decision-making and resource allocations by the GEF Secretariat. This important constraint adds to the unpredictability and uncertainty Executing Agencies have to contend with. The Executing Agencies are not expected nor are they invited to meetings where important policy decisions are taken. As stated in the latest Corporate Budget (GEF/C.28/8, for FY07, paragraph 11), "Focal area task forces, composed of relevant technical staff of the Secretariat and the Implementing Agencies, develop and review GEF operational policies and programs, focal area strategic objectives, adherence to the project cycle, standard portfolio and project performance reviews, and proposals for the business plan. Working groups are established to address specific issues that may arise or that cut across the interests of any one task force. Meetings among the Secretariat's management and the Implementing Agencies' executive coordinators are held weekly in order to promote interagency collaboration and communication and to review operational policy issues." Executing Agency involvement is not addressed. This particularly affects these Agencies when decisions are made to include certain type of projects in the periodic Work Programs. The agendas for these meetings are not routinely circulated to the Executing Agencies. The same applies to the meeting minutes, especially for those meetings that have a direct impact on the Executing Agencies. The situation seems to have improved recently since the minutes of the Executive Coordinators meeting of September 21 2006 were distributed to all partnership Agencies. The last years have seen an increased participation of ExAs in several focal area Task Forces, but consultations and/or participation at the policy, programming and decision making stages remain at unsatisfactory levels. This reinforces the notion that the dichotomy between Implementing and Executing Agencies continues. Executing Agencies regularly participate in the GEF Council meetings and Assemblies. However they can only address these bodies when so requested or through GEF Secretariat interventions. Consequently this participation has been of a relatively passive nature. Participation of the Executing Agencies in STAP has been marginal. Regional Development Banks are represented in the STAP Implementing Committee. Some of the Executing Agencies have supplied names for reconstituting the roster of experts managed by STAP. However, during interviews with the Executing Agencies, the importance of their participation in this panel was minimized. The ExAs were consulted on the modalities of the revision of the fee system carried out in 2002-2004 and have participated sporadically in other ad hoc technical groups such as for the GEF indicator work on land degradation (by IFAD). The GEF M&E Policy (2006) was also subject to consultation with all Agencies for harmonization with with inter-agency standards and international good practices. In sum, the Executing Agencies face a lack of transparency and unpredictability in strategic and operational processes. A fully transparent and participatory decision-making mechanism involving all participating Agencies on an equal basis is needed. 5 3.2. Lack of an Incentive Structure for Enhanced Participation The Corporate Budget of the GEF finances on an annual basis the governance structure of the GEF, as defined in the Instrument. The governance structure, which consists of the Assembly, the Council, the Conventions, the Scientific and Technical Advisory Panel, the Trustee, the Secretariat, the Evaluation Office, and the three Implementing Agencies. The functions financed by the Corporate Budget can be broadly grouped under four headings; (a) governance (support of the Assembly and Council); (b) program management (formulation and overseeing of business plans, operational procedures, focal area strategies and work programs); (c) relations with constituents (Conventions and other bodies); and (d) management of the Trust Fund. As per the latest Corporate Budget (GEF/C.28/8), its purpose is to "...finance the activities required to manage a partnership organization". The allocation under the Corporate Budget for FY07 is around US$ 3 million per Implementing Agency. The GEF has evolved since with the inclusion of the additional partners who all bear significant cross- cutting responsibilities in their respective regions and areas of expertise, but the original consultation and decision making structures determined by the Instrument and annual appropriations for the Corporate Budget remain largely unchanged. The FY 2007 Corporate Budget further states that "Strong integration of the constituents in the organization is critical to the performance of the partnership. To effectively manage the GEF, it has been necessary to establish good communications channels, coordinate activities between partners, share knowledge, align values and incentives, build trust and overcome institutional differences". It is not clear how the corporate budget has helped support such strong integration of the ExA constituents. This systemic constraint results in a sub-optimal and at times strained relationship between the GEF Secretariat and the Executing Agencies. The lack of budget allocations to the Executing Agencies for upstream work hinders their involvement. Furthermore, the Executing Agencies have had no access to a PDF-A imprest account. They are obliged to fund such participation mostly from their regular budgets. In document GEF/C.28/8, Corporate Budget FY07, under program management, the role of Executing Agencies is mentioned in the preparation of the work programs, review of concepts for entry in pipelines, the Portfolio Performance Review Process; developing a results-management framework for the GEF; the National Dialogue Initiative, and in the establishment of a project cycle management system. 3.3. Counterproductive Competition for GEF Resources The evaluation perceives that an atmosphere of distrust and unhealthy competition exists within the GEF partnership, particularly between Implementing Agencies and Executing Agencies. Most Executing Agencies interviewed had examples to show in this regard. The Joint Evaluation of the GEF Activity Cycle and Modalities also found evidence of the trend towards a more competitive nature of the GEF, without commensurate benefits, exacerbated under resource limitations. This was in particular noted during the project appraisal phase, with notable elapsed time, where more comments seem to be received when another Agency does not want the project, and also review comments that are not limited to mandate of the reviewing Agency. One stakeholder noted "When constructive, comments [from other agencies] are useful, when antagonistic, they are not helpful. This used to work better; the situation is worsening". The historical tradition of bilateral discussions between the GEF Secretariat and the IAs and the absence of the ExAs representatives in the GEF Operations Committee appear to have placed additional barriers for the ExAs, given the perception that non-technical considerations come into play during these deliberations because of the competition for GEF funds. 6 A certain degree of competition is understandable, even desirable because it may stimulate the development of innovative and quality projects and complementarity between Agencies' participation. However, this positive side of competition is only likely to be effective with a level playing field for all participating Agencies. 3. 4. GEF Processes are not Conducive to Private Sector Participation The nature and the length of the GEF activity cycle, its modalities and related management structures and decisions-making processes, do not create the necessary conducive environment to enhance private sector involvement in GEF operations. Consequently, the GEF is not able to take full advantage of existing linkages with the private sector provided by some Executing Agencies, nor of the comparative advantages of such Agencies. This is the particular case of one Regional Development Bank, the EBRD, which operates essentially with the private sector. One project prepared by this Bank as a follow up of a similar project co-financed by the GEF sought and obtained grant funding from another source in view of the estimated duration of project development using the GEF. The lack of responsiveness in working with private sector can limit the opportunities to mainstream GEF into Agency operations though blended projects with the GEF. 3.5 Complexity and lack of Planning in Establishing a Legal Framework for Participation The process of establishing the necessary policy and legal framework for the participation of the Executing Agencies has, in itself, been a barrier to their effective involvement. The ExAs were granted access to GEF financing in a phased process, with different levels of access at different times. Consequently, the policies on ExAs' direct access took considerable time to operationalize. Although the first discussions on the role of Regional Development Banks were initiated in June 1992, up to the present Executing Agencies have not been fully incorporated into the GEF system. As of June 2006, the Memorandum of Understanding and the Financial Procedures Agreement for direct access to GEF full project resources are still being negotiated for EBRD. Challenges were encountered both at the legal side of the GEF (as negotiated by the World Bank legal department) and the ExAs. As a consequence, the evaluation finds that it was difficult for project proponents to know what Agency had access to what resources at what point, which also hampered the timely realization of the expanded opportunities. The lengthy process to finalize the signing of the agreements for direct access has delayed the enhancement of the involvement of the Executing Agencies; a sign of a lack of under-estimation and pro-active planning to address the full set of policies and procedures needed. Business practices, both at the institutional and project level, remained largely the same after the incorporation of ExAs, reflecting policies formulated with only the three IAs in mind. The transition from indirect to direct access was also difficult to manage. Two IFAD projects in Brazil and Mali, were initially developed under indirect access procedure through two IAs. The implementation process was only negotiated with IAs after confirmation of the IFAD revised agreement giving access to all grants, signed in May 2005, and project status was then changed to IFAD as Executing Agency. The evaluation finds that any "opening up" of the GEF to additional agencies would have to be handled in a different and less bureaucratic manner than has been done for the seven Executing Agencies, given the complexities, workload and fiduciary issues involved. 7 4. Analysis of Opportunities Opportunities to enhance the participation of Executing Agencies in GEF operations can be found in external trends, events, and changes in policy or institutional developments. Opportunities can also emerge from building on strengths or eliminating weaknesses. 4.1. Primacy Role of Implementing Agencies Blurred with Time The primacy role provided in 1994 to the Implementing Agencies, based at the time on their specific advantages, has become, at best, less distinct. The GEF Instrument (paragraphs 22 and 23, and Annex D) envisaged roles for Implementing Agencies and the Executing Agencies in implementation and cooperation, which were maintained in the Business Plan for FY 2003-05. The dichotomy between these two groups has became artificial over time in terms of project and policy functions. The present comparative advantages of the two groups in terms of geographical scope, mandates and capacities to work in environmental matters and country level presence, do not justify the dichotomy. This issue presently constitutes an opportunity to enhance the participation of Executing Agencies on the basis of an equal footing with the Implementing Agencies. This opportunity has a chance to materialize in the short term with the announcement of the GEF CEO in October 2006 of proposals to the December 2006 Council. 4.2. High Transaction Costs in Indirect Access The use of Direct Access to GEF resources for ExAs can potentially reduce costs and delays, as well as assuring a distribution of project fees that is more equitable in relation to the value added. The Joint Evaluation of the GEF Activity Cycle and Modalities indicates high transaction costs involved in the indirect access modality. Indirect access has to follow the cycles of at least three organization (GEF, IA and ExA) in addition to national procedures. The consultations, negotiations and duplicative nature of cycle processes represent transaction costs to the GEF partnership. The Council approved direct access for IFAD, EBRD, AfDB, UNIDO, and FAO acting within their agreed scope for GEF operations in November 2003. Countries, such as Ecuador, did not indicate strong demand for joint projects; it is not certain that projects succeed in bringing out the comparative advatantages of each partner (Source: Joint Evaluation). The costs associated with implementing a GEF project are covered by a flat project fee of 9%. Project fees allow Agencies to provide project cycle management services related to the GEF projects they manage. The fee is simultaneously approved with the respective project itself. These costs are mainly related to the cost of project coordination, administration and supervision. In Direct Access projects, this fixed fee system is straightforward as there is only one Agency to contend with. With projects undertaken jointly with other Agencies, extensive negotiations regarding the distribution of the fee have been common, which increases the time for project development and have an unnecessary cost. There are no GEF guidelines to guide the process of fee negotiation, which depends on the specific Agencies and staff involved. Depending on the level of understanding that exists between the concerned partner Agencies, and on whether the project preparation was done in a joint fashion, these negotiations can result in mutually agreeable arrangements and agreements. When agreement is difficult to reach, the process often results in additional delays. Furthermore, the current systems do not allow the Trustee to easily record and track division of funds for joint projects, which has at times caused delays in project budget disbursements to the Executing Agencies. 8 4.3. Different, Complementary and Innovative Approaches Pursuing the expansion of access of Executing Agencies represents an opportunity to utilize different complementary and innovative approaches used by such Agencies to global environmental considerations by drawing on the full potential of technical know-how of these Agencies. This was referred to the Evaluation as an opportunity, by the GEF Secretariat, in connection with projects entertained by at least two Executing Agencies, which did not materialize for lack of support of the respective Implementing Agency. The portfolio of the Executing Agencies, albeit limited as yet, contains projects with innovative components; participatory and consultative approaches and multi-focal area projects. Innovation is seen as particularly interesting for the newer focal area of land degradation. Two multifocalprojects proposed for the June 2006 Work Program include the "Participatory Coastal Zone Restoration in the Eastern Province of Post-Tsunami Sri Lanka" (IFAD) and "Sustainable Environmental Management for Sixaola River Basin" (IADB). Partnership apporaches are pursued the Land Degradation "Central Asian Countries Initiative for Land Management" (ADB) and "China/GEF Partnership on Land Degradation in Dryland Ecosystems: Project I: Capacity Building to Combat Land Degradation" (both ADB). FAO is supporting the large partnership of the "Africa Stockpiles Program". Furthermore, the Executing Agencies can provide the GEF with a broader range of lessons in operational and managerial issues. Several GEF partner agencies have developed integrated monitoring tools1 in this regard that might influence the development of the new GEF Management Information System (MIS) for which funds were approved at the November 2005 Council. Several Agencies have been activie in harmonization, simplification, development of IT-systems and Results based management (RBM). This includes the RDB Common Performance Assessment System, COMPAS); the IFAD Result Based Country Strategy Opportunity Paper (RBCOSOP) and RIMS system, the FAO FPMIS system, the IADB PAIS; the UNIDO organization-wide RBM system launched in 2004/2005; the ADB performance based allocation system, etc. Of the new GEF RBM system under development, the Joint Evaluation stated that "The potential implications for the cycle efficiency and effectiveness would depend on the use of existing processes and of bringing the Agencies' systems together...". 4.4. GEF Green Label Working with GEF provides a recognized green label to the Executing Agency operations, and enhances awareness of and exposure to global environmental concerns within the Agencies and their immediate partners. This is particularly important for the Regional Development Banks since it can be challenging to incorporate global environmental concerns as elements of a loan. Such an opportunity was referred to the evaluation by practically all Executing Agencies. Involvement in the GEF Partnership also strengthens the Executing Agencies' environmental profile, enhances their image by working on current global issues, and transcends the boundary limitations and country specificity usually found in traditional Agency projects. On the other hand, the partnership with the Executing Agencies provides the GEF with access to a broader range of stakeholders and partners, which in turn supports increased awareness of global environmental issues in areas where the GEF has not traditionally been active. For example, it presents the opportunity of outreach and mianstreaming within sustainable agriculture and rural development (FAO), land degradation (IFAD), industry and private sector (UNIDO and EBRD), as well as cooperation with regional institutional networks in GEF focal areas through the RDBs. 9 4.5 Possibility to Soften Loans For the Regional Development Banks and IFAD, grant GEF funds softens their loans and provide an incentive to integrate in lending operations, particularly with the private sector, elements of environmental protection. However, this opportunity is relative since GEF is not the only source of grant funds for the Banks. This can be an important element in countries with a lending portfolio and environmental priorities, such as for ADB operations in China. 4.6. Incremental Cost Analysis Executing Agencies do not seem to have been involved in decisions regarding incremental cost analysis nor in the Evaluation of Incremental Cost Assessment (GEF/ME/C.30/2). According to the Incremental Cost evaluation most project documents register low compliance against GEF requirements for incremental cost assessment and requirements, but no differentiation is provided between projects prepared by Implementing and Executing Agencies. In general, there remains weak understanding and much confusion about incremental cost concepts and procedures and the assessment and reporting does not add any value to the quality of projects. The Joint Evaluation on the GEF Activity Cycle found that the difficulties in incremental cost analysis "have been exacerbated for specific focal areas or regions such as Land Degradation in Africa and for the new Executing Agencies". Consequently, the overarching recommendation in the Evaluation of Incremental Cost Assessment is to rethink and reformulate current incremental cost requirements, processes and methodologies used, to more effectively incorporate incremental reasoning into the substance and design of the projects. It would be advisable to ensure active participation of all GEF partnership Agencies, in this exercise to create a sound foundation and critical mass of support for the new incremental cost guidelines to be developed. 5. Analysis of Threats Threats mainly refer to external factors adn trends that may create barriers to enhanced cooperation or exacerbate current trends. 5. 1. Lack of Transparency and Predictability in Strategic and Operational Processes of GEF A number of evaluations and reviews have pointed to weaknesses in the GEF regarding information management. The Joint Evaluation found that disclosure of information and transparency in the GEF has been uneven both to management and to stakeholders. The main areas where transparency is lacking include key GEF policies, strategies and criteria of programming, and management tracking of project progress and status. Also, lack of transparency on operational policies, especially on GEF eligibility and procedures, is particularly challenging for new entrants to the GEF system. The Executing Agencies face presently an atmosphere of lack of transparency and unpredictability in strategic and operational processes. A fully transparent and leveled participatory decision making mechanism is needed. The weakness of insufficient involvement of the Executing Agencies in policy and decision-making may turn into a threat unless the situation regarding transparency and predictability is dramatically changed. 5. 2. Unclear Interpretation of Comparative Advantages, and Limited Direct Access of some Executing Agencies 10 The originally assigned comparative advantages to the IAs (1995) are now less distinct. The Third Overall Performance Study of the GEF (OPS3) found that the roles and responsibilities for Implementing Agencies and Executing Agencies are not always clear, and noted a number of projects that crossed over into the comparative advantage of other Agencies. The blurring of pre-assigned roles to the Agencies has increased as more projects feature integrated approaches and competition for limited resources increases. Based originally on a concern regarding an IA, the Council asked for a policy paper to clarify the roles and comparative advantages of the IAs and ExAs for the December 2006 Council meeting (Comparative Advantages and Complementary Roles of the Implementing Agencies and Executing Agencies of the GEF, 9 May 2006, GEF/C.28/15). This causes unnecessary friction between Agencies and it may further causes operations in the Agencies spreading too thin over a too wide range of focal areas and functions, without possessing the necessary critical mass to sustain such a wide involvement. In this context, the existing capabilities of ExAs have not been fully utilized due to the limitations on direct access to resources. The indirect access mechanism continues to restrain GEF use of comparative advantages and existing expertise of some Agencies in other focal areas. There have been no clear and consistent procedures to determine whether the participating Agencies have the stated competences. In the paper for the December 2006 Council, (GEF/C.30/9, Roles And Comparative Advantages Of The GEF Agencies), it is recommended that GEF Agencies will focus their involvement in GEF project activities within their respective comparative advantages and assigned primary roles; and that the seven Executing Agencies operating under expanded opportunities will be granted direct access to GEF funding based on their comparative advantages. This would, if approved, provide an opportunity for more transparent and healthy competiton and potentially pave the way to ensure the countries' access to the most appropriate Agency that will help them address their priority issues within the RAF. The GEF mechanisms for developing strategies and operationalizing Council policies have not caught up with the changed context in which the GEF operates. 5. 3. Challenges posed by the RAF The newly introduced Resource Allocation Framework has transferred increased responsibility and consequently GEF portfolio ownership to the country level. It further provides for more predictability in resource allocations within the focal areas of climate change and biodiversity. While these advantages have been welcomed by partnership Agencies, a certain degree of skepticism remains in the ExAs on the impact on their enhanced participation. The involvement of Executing Agencies in the RAF system has been irregular. From the interviews with the Executing Agencies, it transpired that some Agencies were asked for comments on this system, others were not. Some Agencies have participated in the sub-regional consultation meetings on the RAF. However and not considering the pilot program on Country Dialogue Workshops, Executing Agencies have not been adequately involved in the National Dialogue Initiative which also provided assistance and training of National Focal Points to guide the process of identification their national priority areas as it relates to GEF and the likely Agencies to be involved in the subsequent project development and implementation. As a consequence it is not clear whether the potential role and comparative advantages of the Executing Agencies has been sufficiently made known to the National Focal Points. With the GEF Results Allocation Framework (RAF) in effect for GEF-4, countries were requested to endorse their project proposals by September 2006. At the time of writing this Paper (October 2006), 55 endorsement letters had been received by the GEF Secretariat. A preliminary analysis of these endorsement letters reveals an imbalance in the proposed project distribution among the ten Implementing and Executing Agencies. The initial round of proposals for the climate change and biodiversity focal areas included only five Executing Agency projects out of 241 (2%), accounting for 3% of the total country- 11 endorsed allocations. An additional 4% of allocations for joint projects may also include Executing Agencies, but not under direct access. These figures show no positive evolution in Executing Agencies' involvement when compared to GEF-3. It should be noted that there is an overall imbalance, as the shares of most Agencies appear to decline relative to one Agency. 5. 4. Imbalance in Projects Proposed vs. Resources Available As the GEF moves from the GEF-3 to the GEF-4 Replenishment Period, fund availability has emerged as an issue. This can cause additional delays in approval and start of projects because of temporary scarcity of funds, as well as rejection of proposals. Several ExAs work with Land Degradation, for which demand has outstripped supply of resources in GEF-3. Currently, the Pipeline across focal areas is greater than anticipated resources, and a process of pipeline re-endorsement has been established by the GEF Secretariat. This situation contributes to the competition for GEF resources, and poses additional challenges in determining which are the project proposals with greatest potential until new measures announced on project review points of entry are operational. 5.5. Fatigue of Operational Staff While all ExAs remain committed to increasing their involvement in GEF, at the operational level it is becoming increasingly challenging to justify time and resources spent on a lengthy project development process combined with high uncertainties and occasional funding interruptions, surrounding the approval and disbursements processes. This transpired in the interviews with all Executing Agencies and one Implementing Agency. The manpower of focal points for the GEF has been reduced in three Executing Agencies. The opportunity cost associated with GEF project development is approaching a point when Executing Agencies may become discouraged and would not deem it worth the time and effort spent vis- à-vis the expectation of approved projects. This is exacerbated by the fact that Executing Agencies have to subsidize their involvement in upstream activities. The dynamics of GEF approval is not clear to certain ExA staff, nor to country stakeholders, as noted in the Joint Evaluation of the gef Activity Cycle. ExAs without offices in Washington, D.C. perceive that the physical distance between GEF and ExA staff contributes to longer and more uncertain processing of their proposals, in contrast to certain IAs based in the same area which can interact extensively with the GEF Secretariat, or which have an established and historical practice of personal contacts. The annual GEF Familiarization Seminar, in which ExA staff can participate at Agency cost, goes some way to bridge this gap. 5. 6. Complexity of the GEF Activity Cycle As shown in the Joint Evaluation of the GEF Activity Cycle and Modalities, the GEF project cycle is unduly lengthy and complex. This has affected the Executing Agencies, especially in cases of indirect access when the cycle of the respective Implementing Agency has to be added. The difficulty of working with and synchonizing three different cycles increase the risk is that the GEF project elements are structured into separable, identifiable components that discourage integration with the other non-GEF funded components. Most ExAs have found themselves affected by a number of factors related to the cycle, including frequent GEF policy changes; gaps in communication flow between the GEF Secretariat and Agencies; the co-financing requirement; country level capacity issues and difficulties encountered when trying to reconcile national execution modalities with GEF requirements, etc. 12 Unless the GEF activity cycle is significantly revised, it will continue to pose obstacles to effective integration of partners, country needs and new and innovative approaches. On the other hand, the possible revamp of the cycle woudl represent an opportunity for the Executing Agencies to reflect their needs and concerns in the design of the cycle process. 6. Conclusions The SWOT analysis shows that the objective is attainable providing that certain conditions are met, as identified by the analysis. They are described in the main evaluation report GEF/ME/C.30/4, Evaluation of the Experience with Executing Agencies under Expanded Opportunities in the GEF. Overarching constraints However, the enhancement of expanded opportunities will not, by itself, be sufficient to remove all the constraints affecting the involvement of Executing Agencies in the GEF. This involvement is influenced by a number of overarching barriers identified in the SWOT analysis. Such constraints are partly external to the question of enhanced opportunities, and partly affecting both Implementing and Executing Agencies, and include: · The complexity of the activity cycle and cycle delays. The Joint Evaluation of the GEF Activity Cycle and Modalities has identified unacceptable and increasing delays in the activity cycle. · Challenges posed by GEF-4 and the Resource Allocation Framework (RAF), including the imbalance in projects proposed vs. resources available. The Executing Agencies have not been fully involved in the planning and setting up of the RAF mechanism. Given their low involvement so far in the GEF, recipient countries may perceive their involvement in project preparation as more risky and consequently select the established Implementing Agencies. · Lack of transparency and predictability in strategic and operational processes of GEF. All stakeholders and Agencies are faced with different difficulties in obtaining adequate and full information on GEF matters. · Joint projects and indirect access. Cooperation between different Agencies, although desirable, is traditionally not easy to achieve and add to the inherent delays of the cycle. Recent developments A joint meeting of the GEF Secretariat with the Implementing and Executing Agencies, the Trustees and the Evaluation Office took place on 13 October 2006, at a time when the drafting of the report for this Evaluation was being completed. The meeting agreed to the CEO proposal to request the Council at its December 2006 meeting to further enhance the involvement of the Executing Agencies within the GEF partnership. Specifically, it will be proposed to the Council to: (a) grant direct access to GEF funding to the seven Executing Agencies under Expanded Opportunities based on their comparative advantages; (b) discontinue the corporate budget allocation to the three Implementing Agencies and establish the project management fee set at 10% for all Agencies; and (c) expect from all Agencies to participate in GEF corporate activities led by the Secretariat2. In turn, it is also expected that all GEF agencies should focus their involvement in GEF project activities within their respective comparative advantages and that the GEF Secretariat would assess the role of the Agencies early for project proposals early in the cycle. The implementation of these requests will go a long way in enhancing the involvement of Executing Agencies in GEF both at policy and operational levels. 13 Annex A: SWOT Analysis Worksheet Main Objective: Enhancing the Participation of Executing Agencies in GEF Operations Strengths Weaknesses 1. Mandates and policies of the Executing 1. Insufficient involvement of the Executing Agencies Agencies in policy, decision-making and 2. Institutional capacity and experience in resource allocations matters GEF project development and 2. Lack of an incentive structure for implementation enhanced participation 3. Sustained interest to work with GEF 3. Counterproductive competition for GEF 4. Increased collaboration between Agencies resources 4. GEF processes are not conducive to private sector participation 5. Complexity and lack of planning in establishing a legal framework for participation Opportunities Threats 1. Primacy role of Implementing Agencies 1. Lack of transparency and predictability in blurred with time strategic and operational processes of GEF 2. High transaction costs in indirect access 2. Unclear interpretation of comparative 3. Different, complementary and innovative advantages, and limited direct access of some approaches Executing Agencies 4. GEF Green label 3. Challenges posed by RAF 5. Possibility to soften loans 4. Imbalance in projects proposed vs. resources 6. Incremental costs calculations available 5. Fatigue of operational staff 6. Complexity of the project cycle 1World Bank (ICS), UNDP (ROA R), IFAD (RIMS), IADB (PPMR and PAIS), FAO (FPMIS), ADB (PPR). 2Source: Minutes of the meeting October 13, 2006 14