1. IDENTIFICATION. Title/Number. Total cost. Aid method / Method of implementation. DAC-code 331 Sector

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1 ANNEX 1 of the Commission Decision on the Annual Action Programme 2013 for Papua New Guinea Action Fiche for Trade Related Assistance Programme - Phase II 1. IDENTIFICATION Title/Number Total cost Aid method / Method of implementation DAC-code 331 Sector 2. RATIONALE AND CONTEXT 2.1. Summary of the action and its objectives Trade Related Assistance Programme - Phase II Beneficiary: Papua New Guinea (PNG) CRIS number: 2013/ Total: EUR 6,710,000 EU contribution: EUR 6,000,000 PNG contribution: EUR 710,000 Standalone project approach Partially decentralised management with Papua New Guinea Trade Policy and Administrative Management Trade Facilitation The action aims to contribute, through an increase in international trade, to PNG sustainable economic growth and development ultimately leading to poverty alleviation. Its specific objective, in line with the PNG Development Strategic Plan (DSP) , is to increase PNG capacities to benefit from international trade and take advantage of export opportunities. Building on lessons learnt, it is proposed to achieve TRA-II objectives through the following three components designed to answer the main problems identified while aligning with PNG development strategies: Component 1: Institutional reform and capacity development. Component 2: Trade policy development (analysis, formulation, implementation, negotiation). Component 3: Trade facilitation(customs, technical barriers to trade, sanitary and phyto-sanitary measures) Context Country context Economic and social situation and poverty analysis Papua New Guinea (PNG) has experienced strong economic growth over the last ten years driven by high global commodity prices in the mining and oil industries. PNG was 153 rd out of 187 countries in 2011 on the Human Development Index and 101st of 183 in the ease of doing business index in 2012 (down from 97 in 2011) National development policy The Papua New Guinea Vision 2050 represents the government s strategic direction for development over the next 40 years. The Government Development Strategic Plan (DSP) and Medium Term Development Plan (MTDP ) use annual sector Development Budget strategies to transform Papua New Guinea into a middle-income country by Transport (32.4%), education (24%) and health (16.8%) had the largest allocations in the 2011 Development budget. The Department of Education s National Plan for Education and the government s Medium Term Development Plan identify Basic Education and Technical & 1

2 Vocational Education as priorities. Disbursement of expenditure is through Provincial administrations and District Services Improvement Program allocations 1. External assessments 2 have welcomed the rapid expansion of fee-free education noting that total expenditure on priority areas (education, health, infrastructure, and law and order) increased from 51% in 2011 to 55% in 2012, and is planned to increase further. However, spending effectiveness and absorptive capacity need improvement. Government is formulating national legislation to improve service delivery from all stakeholders including church agencies and provincial governments, both of which enjoy considerable local autonomy in planning and implementation Sector context: policies and challenges Economic context Papua New Guinea (PNG), the leading economic country in the Pacific has enjoyed ten years of strong economic growth driven by high commodity prices and attractive conditions for foreign investors in the mining industries. However PNG achievements are below potential in terms of development. Millennium Development Goals are not on track and per capita GDP is only marginally higher than before independence. In 2011, PNG was ranked 153 out of 187 countries with a Human Development Index pointing a growing poverty of opportunity (lack of access to basic services, jobs and education). PNG remains a dualistic economy heavily dependent on a capital intensive mineral resource sector with limited direct contribution to employment creation, income generation and poverty reduction. Trade performances and policies PNG is well-endowed with natural resources and has an open economy with substantial exports and imports. While it experienced a trade deficit ( and ), trade balance recently turned positive again. In 2010, PNG had a trade balance of EUR 3,771 million with EUR 3,698 million of imports and EUR 7,469 million of exports 3. Exports (roughly 90% of the GDP) are heavily concentrated on few primary commodities. Over the last years, PNG has pursued a strategy to integrate more into the global trading systems by promoting appropriate interventions on imports and enhancing market access for exports (tariff liberalisation, removal of non-tariff barriers to trade, trade agreements). PNG is a member of the World Trade Organisation since 1996 and a Tariff Reform Programme was launched in An Export Driven Economic Recovery and Growth Strategy was developed in 2002 putting emphasis on export-led growth and including the Most Favoured Nation treatment to all trading partners. Trade agreements exist on multilateral, regional and bilateral levels, like the Pacific Agreement on Closer Economic Relations (PACER), the Melanesian Spearhead Group Trade Agreement (MSGTA), South Pacific Agreement on Regional Trade and Economic Cooperation (SPARTECA) and the Interim Economic Partnership Agreement (iepa). PNG is also a member of the Asia-Pacific Economic Cooperation (APEC). Main challenges to be addressed PNG is facing structural challenges to achieve inclusive growth, including improving the governance, enhancing service delivery, building public infrastructures, responding to shortages of skilled human capital, increasing private sector employment and addressing the business constraints crucial for diversifying PNG economy. While its international trade has good potential, PNG is still not making best use of it for the development of the country. In a view to strengthen potential for trade-led growth, the main problem areas identified for the second phase of the Trade-Related Assistance Programme (TRA-II) are: 1) Lack of clear responsibilities, coordination, cooperation and communication of trade actors: Trade has for a long time been neglected in PNG institutional set-up and the necessity of streamlining trade functions within governmental structures was not recognised until recently. The trade responsibilities had shifted hence and forth over the past years and inefficient coordination among stakeholders was identified as one of the main deficiencies in planning 1 DSIP update, Consultative Implementation & Monitoring Council, National Development Forum, Papua New Guinea 2012 Article IV Consultation Preliminary Concluding Statement IMF Mission, February, Source: EU Directorate for Trade, 2

3 trade-related actions. Considering that the complexity of PNG institutional set-up had not fully served trade achievements so far, and following recommendations from the previous EU TRA project, the National Executive Council (NEC) initiated an institutional reform in February ) Lack of capacity for trade policy analysis, formulation, implementation and negotiations: Without a coherent trade policy, it is impossible to mainstream trade into PNG s overall strategic development and make it an engine for economic growth. A comprehensive trade policy needs to be established as a basis for policy guidelines and trade negotiations. PNG being currently engaged into several major trade agreements, the government needs to live up the challenge of negotiating and implementing them. 3) Constraints in trade facilitation (customs and standardisation/quality compliance bodies) While PNG customs modernisation and reform program has been supported both by AUSAID and TRA-I, customs procedures are still lengthy and not yet efficiently handled in view of facilitating international trade. Customs would therefore require further capacity building including in the area of the single-window initiative and the rules of origin. Quality compliance assessment procedures also need to be upgraded to reduce the time and cost of trade as well as to increase competitiveness. Technical barriers to trade (TBT) and sanitary and phyto-sanitary measures (SPS) requirements in target countries are not sufficiently known and products cannot be sufficiently tested due to lack of knowledge in testing procedures and incomplete laboratory equipment Lessons learnt TRA-II builds on experiences and lessons learnt from TRA-I project (mid-term review, resultoriented monitoring and final evaluation): TRA-I achievements The project was successful in the field of trade facilitation which related mainly to customs, TBT and SPS. Significant capacity development was achieved in customs matters and several agencies as the National Institute of Standards and Industrial Technology (NISIT), the National Agricultural Quarantine and Inspection Authority (NAQIA) and the National Agricultural Research Institute (NARI) which benefitted from laboratory equipment for TBT/SPS matters. A specific lesson learned is that procurement of equipment is to be started at an early stage to allow a successful tendering process. Considering existing needs and past success in this area, support to trade facilitation is worthwhile to be continued. TRA-I achievement was moderate regarding the formulation of a trade policy. This component suffered from the unclear mandate of the Trade Division, lack of commitment from target institutions and non-availability of staff to cooperate and build capacities with. However, some important ground work was laid and the commitment of the government to reform the trade sector has considerably increased during the implementation. While capacity constraints at the Trade Division did not allow for the implementation of the private sector component, there is a clear need to strengthen public-private links and TRA-II will support trade-related policy dialogue between the government and the private sector. Project management capacity issues in the Trade Division If TRA-I modest achievements can partially be explained by the at that time unclear mandate of the Trade Division (and its subsequent lack of influence in co-ordinating the project s activities), inefficient management capacity was also raised as a substantial impediment. Lack of political support Lack of proactive engagement from the government was also identified as an impediment to the successful implementation of TRA-I, in particular the trade policy component. For TRA-II, national ownership is fostered by building on the institutional reform initiated by the new government early 2012 which has demonstrated that trade is high on its agenda by taking a higher profile at international trade meetings or implementing the interim Economic Partnership Agreement (iepa) customs tariff which had been pending for months. 3

4 2.4. Complementary actions Complementary with EU on-going actions in PNG One of the most relevant complementary actions of TRA-II is the interim Economic Partnership Agreement (iepa) which enhances cooperation in trade facilitation, customs modernisation and quality infrastructure. Article 69 of the iepa also suggests that both parties should cooperate closely within the framework of the Cotonou Agreement to facilitate implementation and synergies between development cooperation and the objective of the agreement. Constructive discussions were held in 2012 to deepen the scope of the agreement to investment and services and PNG committed itself to implement some key recommendations formulated during iepa Trade Committee (including sustainable stock management measures in the fisheries sector and alignment of PNG's labour law on ILO core conventions). TRA-II will therefore support the Government in further checking commitments arising from iepa (and transferring them into the national legislation) as well as providing the opportunity to support PNG negotiations for a comprehensive EPA. Another important complementary action is the EDES programme which focuses on bringing PNG in line with international standards in force in importing countries (and therefore encouraging growth in traceable certified exports). By covering some SPS-related aspects 4, EDES will significantly complement TRA-II in the area of food safety while other TBT-related aspects will be addressed by the project (including the procurement of equipment for TBT and SPS activities). Eventually, TRA- II will also supplement two regional trade projects under preparation, the Pacific Regional Cooperation Advancement Programme (PRECAP) and the Strengthening Pacific Economic Integration Through Trade (SPEITT) 5 as well as the Rural Economic Development programme (RED) currently implemented 6. Coherence with EU global strategies TRA-II is consistent with the aspirations of the EU Consensus for development (2005) which envisages trade and regional integration as an area of intervention for EU development cooperation. It is in line with the principles of the Policy Coherence for Development (2010) that sets out ways for the EU to support developing countries achieving the MDGs through a wider policy agenda including trade negotiation, market access and core ILO and environmental standards. Consistency is also ensured with the Agenda for change that promises greater EU support in enhancing the business environment, promoting regional integration and harnessing the opportunities offered by the world market as drivers for inclusive and sustainable development. By building on PNG national strategies and the recent impetus set for institutional reforms in the trade sector, TRA-II is in line with the Communication on Trade, Growth and Development (2012) 7 and the core principles of the Aid effectiveness Agenda that considers ownership and alignment of development cooperation as critical conditions for success. TRA-II is coherent with the EU position within the Doha Development Agenda of promoting trade facilitation reforms as a pro-development outcome and assisting Low-Developed Countries in the implementation of a Trade Facilitation Agreement in the WTO Donor coordination The EU continues to be the only donor with fully-fledged trade-related assistance in PNG, although Australia, New Zealand, the United States and the Asian Development Bank (ADB) provide punctual assistance in selected areas. AusAid is providing trade support by directly placing Australian officials and technical assistants (TA) in PNG departments. Under the Strengthening Government Programme, around forty senior 4 EDES support will presumably run between 2012 and 2014 and provide SPS related technical assistance (no supply/equipment). 5 Both will support pacific regional trade organisations in trade negotiations, customs administrations and export capacities. 6 RED foresees a EUR 5 million contribution agreement with the World Bank to support the Cocoa Board in restructuring cocoa farming systems and providing a sound basis for future sustained growth of PNG cocoa exports on the world market. 7 This communication reaffirms that while trade is a necessary condition for development, it is not sufficient, and domestic reforms are essential to sustain trade and investment led growth. The EU is therefore engaged in offering Aid for Trade to encourage developing countries to include trade in their development strategies. 8 An agreement on Trade Facilitation is looking more and more as potentially the most important deliverable for the upcoming 9th WTO Ministerial Conference in December

5 Australian officials are working closely with PNG counterparts and four technical assistants are based in the Customs Administration. The Australian support does not cover the rules of origin or the single window initiative. NZaid and USaid carried out a study on Agribusiness commercial, legal and institutional reform to assess key legal, regulatory and institutional issues impacting on the production, efficiency and opportunities in the agricultural sector. The ADB is implementing a regional trade facilitation project which in the case of PNG aims at facilitating cross-border trade with Indonesia. It is also involved in the establishment of a Centre for Financial Inclusion which will focus on infrastructure and services. 3. DETAILED DESCRIPTION 3.1. Objectives Overall objective: To contribute, through an increase in international trade, to PNG sustainable economic growth and development ultimately leading to poverty alleviation. Specific objective: In line with PNG Development Strategic Plan (DSP) , to increase PNG capacities to benefit from international trade and take advantage of export opportunities. Intervention strategy Building on lessons learnt, it is proposed to achieve TRA-II objectives through three components designed to answer the main problems identified while aligning with PNG development strategies. Their achievements will contribute to one objective of the DSP "to realise the benefits of trade by effectively engaging with the rest of the world through international and regional trade negotiations". Component 1: Institutional reform and capacity development. Whereas the NEC decision adopted early 2012 was a significant step forward in institutional reforms, there is still needs for clarifying and agreeing on the roles and responsibilities of all the trade stakeholders as well as their coordination and cooperation mechanisms. This was the first problem identified to be addressed by TRA-II. Component 1 will hence focus on further supporting the institutional reform initiated in view to pave the way for the development of a sustainable trade policy. Component 2: Trade policy development (analysis, formulation, implementation, negotiation). To be successful, trade promotion needs to be based on a policy framework in line with the country overall strategies and its international trade agenda. Such a comprehensive trade policy needs to be finalised and lack of capacity within PNG trade institutions has been identified as a constraint to be addressed by the project. Building on TRA-I groundwork, component 2 will therefore support PNG trade institutions in formulating a coherent trade policy and in efficiently pursuing its international trade agenda (including the implementation and deepening of the iepa). Component 3: Trade facilitation(customs, technical barriers to trade, sanitary and phytosanitary measures). Although TRA-I has been successful in providing support to the customs and quality compliance organisations, outstanding constraints in the area of trade facilitation have been identified as the third problem to be addressed by the project. As recommended by TRA-I evaluations, component 3 will therefore provide the support needed to continue the upgrading in trade facilitation successfully initiated (including customs, TBT and SPS) Expected results and main activities Result 1: Institutional reforms are completed with trade institutions strengthened to efficiently perform their mandate. Action 1.1: Upgrade the capacities of the Trade Division Action 1.2: Operationalize the institutional reform initiated Action 1.3: Enhance the capacities of other key stakeholders like Department of Commerce and Industry (DCI), the Independent Consumer and Competition Commission (ICCC) and the Investment Promotion Authority (IPA). In connection with the institutional reform initiated, activities foreseen will focus on capacity development to support the establishment of efficient trade institutions with clearly defined 5

6 mandates and cooperation mechanisms. Roles and responsibilities of all the trade stakeholders will be clarified and agreed upon in a consultative way (e.g. the mandate of the Trade Commission and the Trade Committee) and cooperation channels between them will be strengthened, including the reinforcement of systematic public-private dialogue on trade related issues. Result 2: National Trade Policy and international trade agenda are effectively implemented by the government Action 2.1: Develop, adopt and implement a comprehensive national trade policy Action 2.2: Support impact analysis and negotiations of trade agreements and regional integration activities Action 2.3: Support the implementation of iepa and the negotiations for a comprehensive EPA Foreseen activities will support the development of a national trade policy in line with PNG s overall strategies and its international trade agenda. Efforts will be deployed to finalise this policy (including researches on exports opportunities /constraints and value chain analysis in some priority sectors identified in the DSP) and adopt it after full-fledged consultations. Review of existing trade agreements (including impact studies) and capacity building on trade negotiation and positioning matters will also be conducted. Particular attention will be given to supporting PNG to address iepa requirements, negotiate its deepening and eventually seize opportunities to increase trade with the EU. Studies would also cover important cross-cutting issues including environmental sustainability in sectors such as fisheries or forestry 9. Gender equality will also be taken into consideration in the context of the national policy for women and gender equality Result 3: PNG customs and standardisation /quality compliance bodies are strengthened to support trade facilitation Action 3.1: Further upgrade PNG customs services in facilitating trade Action 3.2: Support export and import products and services to meet standards of target markets Actions focus on trade facilitation for customs and TBT/SPS matters. Customs procedures will be further upgraded with a view to speed up import/export clearances and efficiently handle rules of origin and intellectual property rights issues. Support will be provided towards the establishment of a single window at PNG customs. It is also envisaged to provide NISIT with assistance in standards, accreditation and certification as well as laboratory equipment for TBT-related issues. Following close coordination with EDES programme, TRA-II will provide complement support to NAQIA and NARI with regard to food laws, SPS policy and legal framework (including necessary laboratory equipment and training on utilisation). The sub-activities foreseen to implement the action are defined in the Logical Framework Risks and assumptions Main assumptions: General economic conditions affecting PNG growth and trade remain stable Government continues with good economic governance and export-led growth strategy Government continues with existing international trade agreements and on-going negotiations Government manages to deliver complementary measures necessary to support increases in exports outcomes (e.g. infrastructure development, business environment reforms) Government remains committed to the decisions reached during iepa Trade Committee meetings Government and the private sector nurture a good dialogue/coordination on trade-related matters 9 See iepa Trade Committee meetings conclusions where PNG committed to strengthen environmental sustainability in the trade sector, in particular for fisheries 6

7 Main risks: Risk The institutional reform initiated by the NEC decision is reversed Risk: low to medium Impact: medium Trade Division does not have adequate human resources to build up capacity on trade policy matters and efficiently manage TRA-II Risk: low to medium Impact: medium Lack of stakeholders proactive involvement in the implementation of the project Risk: low to medium Impact: medium Risk Management / Mitigating measures - Assessment during formulation: The validity of the institutional set-up under the NEC decision was confirmed by the authorities. - TRA-II pre-requisite: The government will provide the EU with a formal confirmation of its willingness to continue the institutional reform including reference to the specific mandates attributed to the key trade stakeholders identified for TRA-II, notably the Trade Division, Trade Commission and Trade Committee. - During implementation: Due attention will be given to clarify and agree on any remaining issues (e.g. responsibilities/coordination mechanism) to allow for the effective implementation or smooth amendment of the institutional reform. - Assessment during formulation: The importance of sufficient staffing at the Trade Division was debated during TRA-II consultations and formulation workshops. - TRA-II pre-requisite: The government will provide the EU with a formal confirmation of its intention to fill vacant positions at the Trade Division and include a detailed organisational chart highlighting, if any, deadline for recruitment. During implementation: Capacity development of the Trade Division will be given due attention (including in the area of project management) through formal trainings, on-the-job tutoring and provision of external technical expertise. - Assessment during formulation: participative consultations were initiated with all TRA-II stakeholders to foster ownership and future pro-active involvement. - TRA-II pre-requisite: The government will provide the EU with a formal confirmation of its intention to provide appropriate political support necessary for TRA-II execution, in particular in the area of the institutional reform and trade policy development. This should be materialised by the nomination of high-level government representative (Minister or Secretary) in the Project Steering Committee (PSC) as well as the nomination of focal persons in charge of facilitating the implementation of TRA-II components within the relevant Department/Institution. - During implementation: Establish the PSC at the onset of the implementation and ensure that regular meetings are organised Cross-cutting Issues Good governance The project will support a national institutional reform aiming at strengthening and streamlining the trade sector. Following the findings of TRA-I mid-term review, the project will be managed by the institution that understands the challenges of (and is responsible for) international trade. Environment Climate change and the environment are concerns at policy level in PNG but local awareness is limited. A sound trade policy will help the sustainable management of natural resources such as forest and fish. Where possible, PNG decision-making institutions will be encouraged to address environmental sustainability and best practice into trade policy-related activities in accordance with international trade requirements. 7

8 Gender equality While PNG is still acknowledged as a male-dominated society where attitude change is slow, gender equality will be promoted in all the activities of the project whenever possible in line with the national policy for women and gender equality and genderdisaggregated indicators will be used as much as possible for monitoring purposes Stakeholders All stakeholders involved in trade-related issues have been consulted during the formulation. The project main stakeholders for component 1 and 2 are: The Trade Division in the Department of Foreign Affairs and Trade (DFAT): mandated under the NEC decision with trade policy development, implementation of trade reforms and negotiations, the Division is the most important actor within TRA-II and plays the key role in component 1 and 2. The DCI: mandated to cover all domestic business activities and oversee the formulation of development programs concerning commerce, industry, trade, SME s and international business affairs. The Trade Committee: established under the NEC decision to update trade policy and to follow trade negotiations. The Trade Commission: created under the NEC decision as a statutory agency under DFAT, has the primary responsibility for trade and investment promotion and trade negotiation assistance. Other stakeholders include (IPA), ICCC, other departments (Agriculture and Livestock, Fisheries, Forestry) and the private sector. The project main stakeholders for component 3: PNG Customs: mandated under the Ministry of Treasury to facilitate legitimate movement of people and goods across borders, care for border security and, in this context, look after supply chain security and health and safety conditions of consumers through appropriate border control. NISIT: is the national standards setting body for all domestic and imported manufactured goods. It is the key actor in connection with all TBT aspects for export and import business, under DCI. Other stakeholders for SPS-related matters: The key agencies involved are NAQIA 10, NARI 11, the Department of Agriculture and Livestock (DAL) and the Food Safety Council of the Department of Health. 4. IMPLEMENTATION ISSUES 4.1. Financing agreement In order to implement this action, it is foreseen to conclude a financing agreement with PNG, referred to in Article 17 of Annex IV to the Cotonou Agreement Indicative operational implementation period The indicative operational implementation period of this action, during which the activities described in sections 3.2. and 4.3. will be carried out, is 48 months, subject to modifications to be agreed by the responsible authorising officer in the relevant agreements Implementation components and modules Partially decentralised management with PNG The main part of this action with the objective of contributing, through an increase in international trade, to PNG sustainable economic growth and development ultimately leading to poverty alleviation, will be implemented in partially decentralised management with PNG in accordance 10 NAQIA is a statutory body coordinating agricultural quarantine and inspection services and implementing SPS measures in PNG. 11 Under the Ministry of Higher Education, Research, Science and Technology, NARI conducts research on crops and provides advisory services on production technology, varieties, pest control, quality, processing etc. mainly to smallholder farmers. Its laboratory also tests some agricultural products destined for exports. 8

9 with Articles 21 to 23 of the 10 th EDF Financial Regulation 215/2008 according to the following modalities: The partner country will act as the contracting authority for the procurement and grant procedures. The Commission will control ex ante all the procurement procedures except in cases where programme estimates are applied, under which the Commission applies ex ante control for procurement contracts > EUR 50,000 and may apply ex post for procurement contracts EUR 50,000. The Commission will control ex ante the contracting procedures for all grant contracts. Payments are executed by the Commission except in cases where programmes estimates are applied, under which payments are executed by the partner country for operating costs and contracts up to the ceilings indicated in the table below. Works Supplies Services Grants < 300,000 EUR < 300,000 EUR < 300,000 EUR 100,000 EUR The financial contribution covers, for an amount of EUR 612,000 the ordinary operating costs deriving from the programme estimates. The change of method of implementation constitutes a substantial change except where the Commission "re-centralises" or reduces the level of budget-implementation tasks previously entrusted to the beneficiary partner country. The partner third country shall apply for procurement rules of Title V of Part Two of the 10 th EDF Financial Regulation. These rules as well as rules on grant procedures set out in Chapter VII of Title V of Part One of the 10 th EDF Financial Regulation will be laid down, in accordance with Article 92 (2) of the 10 th EDF Financial Regulation, in the financing agreement concluded with the partner country. In order to implement the action, it is expected that the following contracts will be signed: - a TA contract, via an international restricted tender, that will cover all TA needs for the duration of the project, to be launched under suspensive clause before the adoption of the Commission Decision. - Programme Estimates, that will be managed by the Trade Division, will cover most operational activities of the project, such as organisation of workshops and conferences. This will be done through direct labour. - a supply contract, via international open tender, to provide equipment to the quality compliance organisations and the customs - Framework contracts for evaluation and audit Indicative timeframe for launching the procurement procedures: - The international restricted tender for TA with suspensive clause will be launched after the Inter Service Consultation is completed in accordance with Art.19b of the Cotonou Agreement. - The international open tender for the Supply Contract will be launched after the completion of the inception phase in order to allow sufficient time for delivery and training. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by the 10 th EDF. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in the article 20 of Annex IV of the Cotonou Agreement. 9

10 The project supervisor will be the Minister for Trade, Commerce and Industry (or its nominated representative). The implementing agency will be the Trade Division of DFAT which will be supported by a Programme Management Unit (PMU). The PMU will consist of the government seconded officials (one imprest administrator, one imprest accounting officer, and their respective substitutes, and three focal people responsible for each component) as well as contractual support staffs (one accountant assistant, one administrative assistant and one driver). The imprest administrator and the imprest accounting officer will be nominated from the Trade Division of the DFAT. The TA team will comprise four long-term advisers, 1 project manager, 1 for Component 1 and 2, 1 for component 3, 1 Finance and Contract specialist and an unallocated amount of short-term expertise. The TA team will participate in strengthening ownership within the host administration and focus on management/technical capacity development of the local counterparts. In line with the EU Backbone Strategy 12, technical cooperation will seek for innovative way of providing capacity development (including twining and tutoring approaches rather than substitution) and the presence of long term advisers will be reduced across the project lifespan. To allow for a swift inception of the project, the international restricted service tender for the TA will be published with a suspensive clause in accordance with article 19b of Annex IV to the Revised ACP-EC Partnership Agreement. Indeed anticipated delays in the signature of the financing agreement caused by external country specific circumstances, extremely low absorption capacity at country level and the unattractiveness of PNG for long-term TA, require a highly proactive role from the EU Delegation to ensure early project start-up. A PSC will be set up before the onset of the project to oversee and validate TRA-II overall. It will then meet regularly (first in the first 3 months, second at the end of the inception phase and thereafter twice a year) and shall be made up of a representative of the National Authorising Officer, a representative of the Minister for Trade, Commerce and Industry, a representative of the Head of Delegation (observer status), a representative for each of the three project components, a representative from the private sector, a representative for cross-cutting issues and any other relevant stakeholders to be nominated during the first PSC meeting Indicative budget Component/Category Component 1 Type of Contracts TA contract (int. restricted tender) and PE EU contribution (amount in EUR thousands) Government contribution (amount in EUR thousands) Total (amount in EUR thousands) 865, , EuropeAid, Reforming Technical Cooperation and Project Implementation Units for External Aid provided by the European Commission a Backbone Strategy (June, 2008) 10

11 (operational) Component 2 TA and PE 915, ,000 Component 3 TA, PE and supply (int. open tender) 2,209,000-2,209,000 PE Operating cost and (operational Project management and small equipment) 1,261, ,000 1,971,000 Communication and Visibility PE 150, ,000 Evaluation and Audit FWC 300, ,000 Contingencies , ,000 TOTAL 6,000, ,000 6,710, Performance monitoring Continuous technical and financial monitoring is the beneficiary's responsibility which shall establish the project monitoring system, ensure safeguard internal control and generate progress reports. The foundation of TRA-II monitoring and reporting systems is the logical framework and its key performance indicators. The detailed monitoring system will be developed during the inception phase and will include the compilation of baseline data for each objectively verifiable indicator agreed upon Evaluation and audit An overall budget of EUR 300,000 which will be implemented via framework contracts has been allocated for evaluation and audit. A mid-term review of the project, carried out by independent experts, may be undertaken halfway through the implementation period to assess whether modifications of the project orientation will be necessary to promote the objectives and provide recommendations for a successful implementation of the remaining activities. An independent final evaluation will also be carried out at the end of the implementation phase. The indicative number of framework contracts for evaluation is two, with tentative schedule for launching the award procedure at Q3 of 2015 for the mid-term evaluation and at Q3 of 2017 for the final evaluation. Verification of Expenditure of programme-estimates will be carried out as foreseen by the rules applicable for projects funded under the 10 th EDF and must be carried out by approved auditors who are members of an internationally recognised auditing certification association. The indicative number of contract for expenditure verification is one to cover the entire programme. To that end it is foreseen to launch a framework contract in Q Communication and visibility Considering that the EU continues to be the only donor with a fully-fledged trade-related assistance in PNG, TRA-II presents a niche that can provide excellent ground for communication and visibility of the support provided by the EU in PNG. A specific strategy will be developed during the inception phase following the rules laid down in the Communication and visibility manual for European Union External Actions 14. It could include for instance promotion of media event, publication of press releases, development of a project s website, printing of brochures and purchase of promotion materials). Discussions between the Delegation of the EU and the government at Ministerial level will be utilised for providing high level visibility for the project (e.g. organisation of a media events). An overall budget of EUR 150,000 is allocated for 13 The EU contribution to the "Contingencies" heading may be used only with prior agreement of the Commission

12 communication and visibility purposes. The indicative number of contract is one framework contract. The award procedure will be launched in Q4 of