I. Introduction

1. The Integrated Framework (IF) was created in 1997 [note 1] by six multilateral agencies [note 2] as a co-ordinating mechanism for the delivery of trade-related technical assistance to least-developed countries (LDC). “Revamped” in 2000, the IF is now in the process of being “enhanced”. Evaluations [note 3] in recent years had identified significant room for improvement in working towards the IF’s objectives, i.e. to mainstream trade into LDC Poverty Reduction Strategy Papers (PRSPs) or similar development plans and to assist in the co-ordinated delivery of trade-related technical assistance. To date, 33 LDCs have received assistance under the IF and an additional 10 have requested to be included in the programme [note 4].

2. The Development Committee of the World Bank and the International Monetary Fund (IMF) proposed to enhance the IF in September 2005. A Task Force, established among donors and recipients, presented recommendations in June 2006 [note 5]. In accordance with its mandate, endorsed at the WTO Hong Kong Ministerial Conference, the Task Force proposed ways to i) secure additional, predictable funding for the IF; ii) strengthen in-country capacities to manage, implement and monitor the IF process; and iii) improve IF governance.

3. A “Transition Team” is overseeing work on putting the Task Force recommendations into practice. Although the deadline for the enhanced IF to be operational (31 December 2006) was missed, work is progressing steadily. This note will sum up some of the problems encountered in the IF implementation and outstanding matters to be addressed by the Transition Team. The aim is to stimulate reflection on how to address these issues and to assess how AITIC and other organisations working to build LDCs’ trade capacities can contribute to making the enhanced IF a success.

II. Shortcomings and Obstacles

A. Inadequate and Unpredictable Resources

4. The IF Trust Fund (IFTF) was created to handle disbursements for financing diagnostic and capacity-building projects under the “revamped” IF in 2000. A sum of USD1.3 million was to be made available per eligible country. This was considered an insufficient amount to address the wide-ranging trade capacity constraints faced by the LDCs. Additionally, LDCs often failed to mobilise even those means available under the IF.

5. In the post-Diagnostic Trade Integration Studies (DTIS) phase, the IF did not succeed in raising sufficient funds for some of the projects identified by the DTIS and registered in the Action Matrix. This was due in part to failure to adequately include the needs documented in the DTIS into the countries’ Poverty Reduction Strategy Papers (PRSPs). Scant awareness of trade-related approaches to development and poverty-reduction programmes on the donors’ side further hindered the obtainment of funds. Trade capacity-building came second to “classical” social development projects, such as health and education. The need to rely on multiple donors and agencies further complicated the IF process leading to an unstable flow of funds not always disbursed in time. This was because of lack of co-ordination on the donor side and the difficulty of designing projects satisfying the varying requirements and priorities of the IF agencies. A survey [note 6] undertaken as part of an evaluation in 2003 found that less than a third of LDC officials considered that donors had pledged funds in a timely manner.

B. Weak In-Country Capacity and Ownership

6. The concept of making trade an integral part of economic growth and development policies has yet to be embraced by many LDC government officials. The IF has not sufficiently strengthened the capacities of governments to advance this process. In the process of mainstreaming trade and implementing technical assistance, trade ministry officials find it difficult to bring on board their colleagues from other departments with more clout such as Planning or Finance and Development. An IF Simulation Workshop in Addis Ababa, Ethiopia, in September 2005 concluded that although governments are expected to follow a multi-stakeholder approach in the IF process, “few of those stakeholders ultimately understand the IF process or view it as an important and meaningful contributor to national development” [note 7].

7. As a consequence, only seven out of 25 LDCs having completed their DTIS have mainstreamed trade into their PRSPs. Many failed to translate measures to address needs identified in the DTIS into workable and “bankable” projects.

C. Weak IF Governance

8. Coherence was identified as a central problem in the governance of IF. A fragmented structure and unclear division of responsibilities among the six agencies, the implementation units and the bilateral donors resulted in inefficiency, lack of accountability and ineffectiveness in the administration.

9. The six agencies involved in the IF have different objectives and working methods, so that finding consistent approaches was sometimes difficult. An inordinate number of meetings required for co-ordination purposes raised costs unnecessarily.

III. Shaping the Enhanced Integrated Framework and Outstanding Questions

10. Donors, LDCs and implementing agencies [note 8] established a Transition Team to develop the details for the operationalisation of the enhanced IF on the basis of the Task Force recommendations. Three working groups, “Clusters”, address implementation on the national level as well as funding and administration: i) the “In-Country Cluster” [note 9]; ii) the “Legal/Administrative Cluster” [note 10]; and iii) the “Financial Cluster” [note 11]. Proposals of these working groups are decided on by the Transition Team.

A. Boosting the IF Budget

11. The Task Force recommended increasing IF resources to USD200-400 million. A conference was held in Brussels, Belgium in December 2006 as a first exercise of rounding up donors. A further meeting will be held in Paris, France, on 20 March 2007 to bring additional donors on board, possibly including larger developing countries. The aim is to raise funds of approximately USD140 million from multilateral sources and USD260 million from bilateral donors.

12. An Annex to the Task Force recommendations includes a costing exercise projecting expenses of approximately USD400 million over an initial five-year period, including a budget of USD14 million for an Executive Secretariat to be established. The bulk of the funds is intended for projects resulting from LDCs’ Action Matrices, while the remainder would mainly cover costs for DTIS preparation and updating.

13. Some may argue that an amount of USD10 million per LDC still falls short of what is needed to address the LDC trade capacity constraints. However, the IF recommendations clarify that the IF is not intended to provide financing for large projects, for example investments in infrastructure. The aim is rather to get the basics right; that is, accurate and focused DTISs identifying feasible priorities and effectively mainstreaming them into the PRSPs. It is presumed that this would then attract more funding for large-scale projects under Aid for Trade.

14. Whether sufficient or not, funding under the IF would rise more than tenfold in comparison with the previous IF budget cycle (less than USD40 million). This will pose a significant challenge to the IF’s absorptive capacity, thus providing an additional reason for improving the IF management structures, both at the in-country and the Geneva-based administrative level.

B. Strengthening In-Country IF Implementation and Ownership

15. The recommendations foresee the creation of several new structures to facilitate the implementation of the IF (for an overview of the enhanced IF structure, see Annex 2). The In-Country Cluster has drawn up terms of reference for the different units. Some of the responsibilities are identical across all countries, while others will need to be adapted to each country context [note 12].

16. The National Focal Point (NFP), usually a senior government official, will co-ordinate a newly-created National Implementation Unit (NIU), charged with the daily operations of the IF. The NFP will be appointed by and report to a National Steering Committee (NSC), to be established by the government among senior officials from the key IF Ministries of Trade, Finance and Planning. On the basis of proposals from the NFP, the NSC will decide on work plans for projects under Tier 1 [note 13] and Tier 2 [note 14].

17. An inter-ministerial committee will be set up to ensure senior level engagement across all government departments under the guidance of the key IF ministries. Furthermore, the Task Force stated that the development of the DTIS and Action Matrix implementation should seek the participation of civil society and the private sector through a “broad stakeholder process”. The exact nature of this process is yet unclear and would possibly be developed following best practices and country case studies.

18. The In-Country Cluster is also preparing terms of reference for the Donor Facilitator, who is to co-ordinate donor activities and maintain dialogue with the NFP and the NIU in identifying necessary donor responses emanating from DTIS and Action Matrix.

C. The New Geneva Process

19. The IF’s new central management organ will be the Executive Secretariat. It will be housed by, but completely independent from the WTO. Headed by a Chief Executive Officer, the Executive Secretariat will liaise with the in-country IF implementing units and make decisions on disbursements in consultation with or on request from the NFP. It will also conduct monitoring and evaluation of the IF projects. Its work will be overseen by the new IF Board. As its predecessor, the IF Working Group, the Board will comprise donor, beneficiary and agency representatives. Its mandate will be to provide overall policy direction, for example approving the Executive Secretariat’s annual work plan and budget as well as programme and resource allocation criteria. The Board will report to annual sessions of the IF Steering Committee. The Legal/Administrative Cluster is preparing terms of reference for the Executive Secretariat, the IF Board as well as its Steering Committee.

20. Discussions continue in the Financial Cluster on the outstanding question of which entity will manage the IF Trust Fund. Initial proposals to transfer the task from UNDP to the World Bank, both agencies with country presence, were not acceptable to the LDCs. The ITC as well as UNCTAD have signalled an interest in performing the task. An alternative under consideration would be to entrust UNOPS with the management of the Trust Fund. The Financial Cluster will draw up exact terms and conditions as a basis for a decision.

21. Additionally, the Financial Cluster is working on some finer details, such as the new financial rules, the replenishment rules, the financial transition from IF to enhanced IF, and the formulation of strategies for recruiting further donors in the post DTIS-phase.

IV. Making the IF a Success

22. It seems that the groundwork for improving the IF is advancing well. The enhanced IF is a new and complex structure. Whether it succeeds in improving LDC trade capacities will eventually depend on more than just increased funding, a reorganisation of its management and a concerted effort by the main actors. Civil society, the private sector and other institutions working on trade-related technical assistance for LDCs, such as AITIC and its partner organisations (e.g. Agence iintergouvernementale de la Francophonie, Commonwealth Secretariat, and secretariats of regional groups, such as the ACP, the Organisation of Eastern Caribbean States, and the Pacific Islands Forum Secretariat), could make a substantial contribution.

23. Understanding and addressing newly emerging challenges of the enhanced IF will be a learning exercise. AITIC could act as an intermediary and assist by bringing together donor and LDC representatives from the key ministries at the national or regional level. Moreover, governments as well as donor officials need training on integrating trade into development strategies. For the purposes of such capacity-building measures, case studies on successful IF implementation could help participants to apply lessons learnt and best practices to their national context. More detailed training sessions could target NIU officials building their expertise on trade mainstreaming and trade advocacy skills. The aim is to promote a “culture of trade” in LDC governments. Assistance in trade capacity-building project formulation may also be required.

24. AITIC’s experience with providing assistance, information and capacity-building on the implementation of WTO agreements could add value to certain Tier 2 projects both at the government and private sector level. Enterprises involved in export-promotion programmes may need training on obligations under the Agreements on Sanitary and Phytosanitary (SPS) Measures and Technical Barriers to Trade (TBT).

25. Poor communication flows have been identified as a central problem in the IF process. At the country-level the IF actors, in particular the NFP and the members of the NIU will need to closely co-operate with and seek input from the Geneva-based LDC missions. AITIC has a long record of providing these missions with support on trade matters. Additionally, those LDCs without permanent representation in Geneva could use the services of AITIC’s Non-Residents’ Unit for consultations with the Executive Secretariat or on general matters related to IF implementation. This would include logistical and substantive support as well as access to office and conference facilities.

26. The main working language of most IF stakeholders is English. Some French-speaking LDCs may find it difficult to access information on trade, development or other issues relevant for the IF implementation. AITIC has a translation unit with expertise on these matters that can rapidly respond to rising needs.

27. AITIC has developed a broad network of LDC government as well as private sector representatives. Many of its activities promote public-private partnerships and consultations with civil society and parliamentarians. LDC governments may seek the co-operation of AITIC in establishing the stakeholder process bringing together partners from civil society and the private sector.

Acronyms

Annex 1: Stages of IF Implementation in Beneficiary Countries

Annex 2: The EIF Structure

Annex 3: Status IF Beneficiaries – February 2007

Note 1: At the time of its launch, its formal name was The Integrated Framework for Trade-Related Technical Assistance including for Human and Institutional Capacity Building to Support Least-Developed Countries in Their Trade and Trade-related Activities. (return to text)

Note 2: The six agencies involved are: International Monetary Fund (IMF), International Trade Centre (ITC), United Nations Committee on Trade and Development (UNCTAD), United Nations Development Programme (UNDP), the World Bank (WB) and the World Trade Organization (WTO). (return to text)

Note 3: See Evaluation of the Revamped Integrated Framework For Trade-related Technical Assistance to the Least-Developed Countries , Capra-TFOC Consortium, November 2003, and Integrated Framework for Trade-Related Technical Assistance Addressing Challenges of Globalization: An Independent Evaluation of the World Bank’s Approach to Global Programs: Case Study, Agarwal and Cutura, 2004. ! (return to text)

Note 4: For an overview of the different stages of IF implementation reached in each country, see Annex 1. (return to text)

Note 5: See An Enhanced Integrated Framework, WTO, WT/IFSC/W/15, 29 June 2006. (return to text)

Note 6: See Evaluation of the Revamped Integrated Framework for Trade-Related Technical Assistance to the Least-Developed Countries , Capra-TFOC Consortium, November 2003. (return to text)

Note 7: Integrated Framework Simulation, Addis Ababa, Ethiopia, September 2005. (return to text)

Note 8: Donors: Canada, UK, EC and US. LDCs: Bangladesh, Benin, Zambia, Rwanda and Uganda. Agencies: UNDP, World Bank, WTO. (return to text)

Note 9: Chaired, on a rotational basis, by the UK, Zambia and Tanzania. (return to text)

Note 10: Chaired, on a rotational basis, by the EC, Switzerland and US. (return to text)

Note 11: Chaired by Canada. (return to text)

Note 12: It should also be noted that the nomenclature for the IF actors may vary from country to country. (return to text)

Note 13: Tier 1 will finance DTIS preparation and updating; capacity-building; and small capital equipments (e.g. computers). (return to text)

Note 14: Tier 2 will cover Action Matrix projects, including assistance in WTO rules compliance; preparatory activities for infrastructure projects; harmonisation with PRSPs; assistance to implementation unit; trade plan/sectoral programme development; project design assistance; small Action Matrix project implementation. (return to text)