Options for the Nam Ngum River Basin Fund


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By Souphasay Komany, Acting Director Nam Ngum River Basin Committee Secretariat, Department of Water Resources, Ministry of Natural Resources and Environment, Lao PDR

Presented at the Mekong Forum on Water, Food and Energy Phnom Penh, Cambodia December 7-9, 2011 Session 7: Financing and Revenue Management in water and energy resources development

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Options for the Nam Ngum River Basin Fund

  1. 1. Options for the Nam Ngum River Basin Fund Mekong Forum on Water, Food and Energy 7-9 December 2011, Phnom Penh, Cambodia Souphasay Komany Acting Director Nam Ngum River Basin Committee Secretariat Department of Water Resources Ministry of Natural Resources and Environment, Lao PDREmail: souphasaykomany@yahoo.com and komany.s@gmail.com 1
  2. 2. Legal and Institutional ConcernsDecree No. 293/PM on Establishment and activities of RiverBasin Committee; Dated June 15, 2010Article 12 : FundThe River Basin Committee has a fund for river basinmanagement and development, which gains from: 1. the government budget, 2. grant assistance 3. service charges, fine and; 4. contributions from water resources developers in the river basin based on the principle of “Polluter Pay”.
  3. 3. Review of Existing Funds in Lao PDR Government Run-FundsAutonomous fund Budgetary Funds• Environment Pro tection • Forest and Forest Resources Fund (EPF) Development Fund (FRDF)• Poverty Reduction Fund • Road Maintenance Fund (PRF) (RMF)
  4. 4. Summary of the Government-run Funds Autonomous Funds Budgetary Funds• Chair by Deputy Prime • Chair by Minister Minister • Realize on national annual budget• Realize on Donors assistance (approve by NA) and contributions • Fund flow through Treasury Depart.• Special account for fund flow MOF and financing • Financing through annual budget plan of Ministry under which, the• Financing through proposals fund is running (large sub grant approve by • Audit is required as necessary the Chair and Small approve (occasional) by Fund Office Director)• Annual auditing required
  5. 5. Eg. of Existing Funds OperationsPoverty Reduction Fund: – Fund Type: Stand-alone – Structure: Board of Directors → Central PRF → Provincial PRF → District PRF → Village Clusters – Encompasses 5 Main Sectors: • Education; • Public Work and Transport; • Public Health; • Agriculture; and • Capacity Development for Communities. – Sources of Finance: Donor Grants and Loans. 5
  6. 6. Eg. of Existing Funds OperationsForest and Forest Resources Development Fund: – Fund Type: Public Mainstreamed Funding. • 2 Mil. US$ / Year, which retains 20-30% at central level for administration, the remaining is channeled to local administration. – Structure: • National Assembly Approval • → Management Committee of the FDF (let by Ministry of Agriculture and Forestry) screens the Fund Application under the format of Ministry of Planning and Investment • → Ministry of Finance Allocation. – Sources of Finance: • Public Budget. • Note that the fund is not extracted from selling of seized illegal logs, non from forest clearance for road construction, and forest tourism. 6
  7. 7. Eg. of Existing Funds OperationsRoad Maintenance Fund: – Fund Type: Public Mainstream Funding. • 30 Mil. US$ in 2009 – Structure: • Executed by Ministry of Public Work and Transports • Main Account is deposited at National Treasury of Ministry of Finance and Subsidiary Accounts are deposited at Provincial branches of BCEL Bank (Public Bank) – Sources of Finance: • Fuel Tax (420 LK / Liter or 5.25 US Cent / Liter). • Over-load Fine; • Annual fee on Heavy-load Truck Tax (Being cancelled) • Road –Bridge Charges (Being cancelled) • Trans-national transportation Charge (Being cancelled) • Contribution from public and private sectors and international organizations (Being cancelled) 7
  8. 8. Eg. of Existing Funds OperationsEnvironmental Protection Fund: – Fund Type: Stand-alone – Structure: Chaired by Deputy Prime Minister and Executed by Board of Directors let by Ministry of Finance. • Window 1: Policy implementation and capacity enhancement (PICE). • Window 2: Biodiversity and community investment (CBI). • Window3: Pollution Control. • Window4: Water Resources (being considered) • Window5: Sustainable Land Resources Management (being considered) – Sources of Finance: • Grant • Loan with low interest for environment management (wastewater treatment, recycling process, etc.) • Co-finance with other donor agencies. • Engagement and Contributions from Developers; • Etc. 8
  9. 9. Eg. French River Basin Fund Study on French River Basin “Ear-marked Charges”: » Fund Type: Stand-alone » Structure: Executed by Loire and Breutany River Basin Authorities » Sources of Finance: • Applying Polluters Pay Principle, which most of the charges are from domestic and industrial wastewater discharge fee. • Economically analytical-based charging design. 9
  10. 10. Approach for Designing Practices of Funding in Laos International best practices Funds set up to manage Environment Protectiongovernment & donor budgets Fund (stand-alone Fund) Poverty Reduction Fund Funds set up to manage (stand-alone Fund) user fees & service charges Funds set up to manage Road Maintenance Fund voluntary contributions (Budgetary Fund) Forest and Forest Multi-source funds Resources Development Fund (Budgetary Fund) Fund Establishment
  11. 11. Key issues and considerations• NNRBF must be consistent with the legal and institutional structure of the NNRBC and its Secretariat• NNRBF can only attract financial resources that are directly linked to its mandate and services that it will deliver to others• NNRBF will have to be careful of being perceived as competing against other agencies and organizations for scarce funding• Even where new funds are generated, NNRBF may not be able to retain them• NNRBF will be wide-ranging in its sources, use and targets - requires flexibility• Need to be realistic about the timing of fund set-up and funding flows 11
  12. 12. OPTION #3: OPTION #4: OPTION #1: OPTION #2: NNRB WINDOW IN NNRB SUB-FUNDMAINSTREAMED STAND-ALONE EXISTING IN NEW UMBRELLA FUNDING NNRBF UMBRELLA FUND FUND Design, structure and management No separate fund. Sectoral budgets and special Special account for programmes of Funding window MoNRE is set up by National RBF, with relevant line created under the the MoF, NNRBF as one sub- agencies allocate EPF, earmarked for earmarked for the fund under this funds for the NNRB NNRBimplementation of NNRBP activities 12
  13. 13. OPTION #3: OPTION #4: OPTION #1: OPTION #2: NNRB WINDOW IN NNRB SUB-FUND MAINSTREAMED STAND-ALONE EXISTING IN NEW UMBRELLA FUNDING NNRBF UMBRELLA FUND FUND Fund administrationUses existing Sinking fund: draw down a pre-determined amount of funds over agovernment specified time periodbudget mechanism Endowment fund: invest the capital and spend the interest earnedAnnual budget Replenishable fund: permit for new sources of funds or income toallocation be periodically addedSpecial Revolving fund: give out credit or loans, and return the interestprogrammes and and capital repayments to the fund for further lending orprojects disbursement 13
  14. 14. OPTION #3: OPTION #4: OPTION #1: OPTION #2: NNRB WINDOW IN NNRB SUB-FUND MAINSTREAMED STAND-ALONE EXISTING IN NEW UMBRELLA FUNDING NNRBF UMBRELLA FUND FUND Funding sourcesExisting sectoral Government fundsfunding (Statebudget) International funds New extra-budgetary sources of fundingNew/ earmarked • Service chargesfunding comes only • Payments for ecosystem services (PES)from specific privateand international- • Private sector contributionsfunded projects • Other voluntary and regulatory sources 14
  15. 15. Government budget  Service fees and user fees ? Royalties  Fines ? Payments for watershed services Payments for other ecosystem services ? Carbon finance ? Fiscal transfers ? Contributions from water developers  Biodiversity offsets  Other corporate sponsorship  International development grants  Interest from investments ? 15
  17. 17. Thank You 17