By : Soukata Vichit

The Feasibility of NCF

The case of Environment Protection Fund, Lao PDR

• Fund name: Environmental Protection Fund

• Country: Lao PDR• Objective: to strengthen environmental

protection, sustainable natural resources management, biodiversity conservation and community development in Lao PDR

Board of Directors (August 2012)1. Deputy Prime Minister as Chairperson2. Minister of Finance as Vice-Chairperson3. Vice Minister of Ministry of natural resources and

Environment (Member), ,4. Vice Minister of Ministry of Energy and Mining (Member),

5. President of Lao Women Union (Member),,6. Vice Governor of province (Member),7. Vice President of Chamber of Commerce and Industry

(Member), 8. President of the Association for Agricultural Production and

Processing, 9. Vice President of Science and technology Council.

•

Governing body

– The EPF has been established as an autonomous organization, both financially and administratively, operating under the laws in Lao PDR. The EPF was established through the issuance of Prime Ministers Decree No146/PM dated 6 June 2005.

– The EPF can absorb all kinds of contributions from donors and the private sector, although it cannot access a direct fiscal transfer from line ministries due to its off-budget nature.

Legal status:

Income of 2005-2010 Sourcesofincome US$ LAK(million)

Grant 7,023,000 56,184

World Bank sinking fund 7,000,000 56,000

UNESCO sinking fund 23,000 184

ADB endow ment fund 5,798,194 46,386

Contributions from businesses 265,878 2,127

Interest from the capital 896,756 7,174

Total 13,983,828 111,871

Beneficiaries

• Any person, • Commercial entities, • Government organizations, • Civil society entities (NGOs)

[1] Note: US$ 1 = LAK 8,000

Rationale

• To secure stable source of income for the environmental protection efforts

EPF fund and climate finance

Article 17of EPF Decree – EPF shall establish Specialized Financing

Windows (SFW) for activities for environmental protection, sustainable exploitation, use and management of natural resources within any sector.

– Government ministries, organizations and entities may propose the establishment of a SFW.

EPF fund and climate finance

– SFW may elect to establish their own managerial structure, or let the Executive Office operate and manage the window per agreement with the entity providing the capital contribution ..

– The creation of other funds for environmental protection, natural resources, and/or biodiversity conservation separate from the EPF is not permitted. Such funds shall be established only as SFW under the umbrella of the EPF.

• .

EPF Financing Windows and Access to AF

10

PCPICE

CBI

PC WRM

End. Fund

Interest

-20%

-Sub grant£¤¡¾ -

Contribution WB Grant

CC & A ອ ືນ່ໆ ?

AF

Sub grantSub grant

Sub grantSub grant

Sub grant-£¤¡¾ -Sub grant

Sub grantSub grant

Sub grantSub grant

Sub grant Sub grant Sub grant

Others Land M

E P FSub grant

Process of establishment • The EPF establishment is provided by the

environmental protection Law (1999) and was initiated as one of the conditions of the ADB Environment and Social Program (ESP) program loan (US$ 20 million) to the Government of Lao PDR;

• The Prime Minister Decree 146 on the EPF establishment and operation was issued on 6 June 2005;

Process of establishment • The Prime Minister Decree 72/PM

appointing the EPF board of directors was issued on 1 November 2005,

• In January 2006 the EPF board adopted and approved the EPF charter,

• The Executive Director was appointed by mid April, and the World Bank grant was effective.

• The process take more than 5 years

Political support

• The EPF BOD appointment was on 1 November 2005 and and the director of the executive office

• the fund provided by April 2006. The EPF is an autonomous organization established by the Government and chaired by the Deputy Prime Minister.

Resources invested in the establishment

• 5 years• ~ 6 men month (Supported by ADB) • Budget allocated (if any)

Legal process

• The establishment of a fund in Lao PDR has to be provided by a law under which a specific Prime Minister Decree on the establishment and operation of the fund will be issued.

Legal tools

– EPF Decree– EPF Chapter – EPF Operation Manual– Technical Guideline and application form– Financial and procurement Manual– Sub grant Implementation Manual

Institutional FrameworkBoard of Directors

Executive Director

Assistant to the ED (2)

Office Cleaner (1)

Drivers (2)

Inter. Advisor (where is needed

IT (1)

Project(s) Accountant

(2)

Procurement Officer (1)

Financial Unit Manager (1)

Technical unit Admin Assistant

Cash (1)

Planning Manager

(1)

Provincial facilitator (s)

PSC of Window/project

Window & M&E manager

Window & M&E manager

Window & M&E manager

Window & M&E manager

Window & M&E manager

Human and institutional

• For the management of the EPF, the EO has actually 15 staff with about 20% of the total annual budget for the operation cost.

Lesson-learned: Success Factors

Different types of funds – The EPF has proven that it is beneficial to create a structure of a national fund that can accommodate different types of funds.–The EPF can serve as an institution that provide financial service–The EPF can directly receive the financial assistance by a creating of a specific window

Lesson-learned: Success FactorsStandards• The EPF manage fund according to

international standard in financial integrity as well as social and environment safeguard – inclusion of detailed procedures of financial

management and social environment safeguard in the Charter and Operations Manual

–most of the grants have been managed according to the World Bank’s standards

Lesson-learned: Success Factors

Reaching local beneficiaries – The EPF and the Small Grant Project have been

the only initiatives that channel financial resources to local stakeholders in the field.

Lesson-learned: Challenges• Different types of funds

– An endowment fund was created to ensure sustainable income to finance the operations of the EPF, but a sustainable source of capital has not been identified.

– Without sustainability the turn over rate of staff occurred and may reduce confidence of donor agencies in providing contributions to the fund.

Lesson-learned: Challenges

• Standards– there has been a concern about the high turn

over rate. – However, with the established system in place,

building the capacity of human resources would be faster compared to the process of establishing the system from scratch.

Address

• EPF Executive OfficePOBox: 76472nd Floor, MONRE Building,

Sidamduan Road, VientianeTel: (856 21) 252739Fax: (856 21) 252741http: //www.laoepf.org.la.