Demonstrating Sustainable Conservation of Biodiversity in Four Protected Areas of Russia’s Kamchatka Oblast - Phase 2 PIMS #3346 UNDP RESPONSE TO COMMENTS ON THE GEF FULL SIZE PROJECT BRIEF Response to comments from GEF Council USA - Comment 1: Micro credit: The project is for only 4 years. We are concerned that there is not enough time to develop the capacity for a viable micro credit institution given the long history of subsidies in the region. Is there an existing rural finance or micro credit institution in the area that will manage this component? Will there be a savings component to the project? How will it be sustained after the project closes? Small grants facility: Who will mange the facility? How will it be monitored and evaluated? What is the relationship between the facility and the micro-credit component? Response: Document reference: In the current design, the micro-credit and small grants facilities are two elements of a single SME Page50 Support Fund registered in the Bystrinsky District of the Kamchatka oblast. The Fund was designed and Page36; Page45 launched during the First Phase of the project and has been in operation for one and a half years now. Thus, by the beginning of the 2d phase the Fund has already accumulated certain experience, history and lessons from its operations in the Bystrinsky District. As noticed in the Evaluation report, by the end of the phase 1 the Fund managed to mobilize trust and ownership among the local communities and administration. Staring from 2005, the plan is to expand the activities of the Fund to other districts of the Kamchatka oblast adjacent to the project-supported protected areas. Design and launch of the fund was facilitated by an international consultant and two local financial institutions: Eurasia Foundation, Vladivostok (small grants facility) and Counterparts Business Fund, Khabarovsk (micro-credit facility). These two institutions located relatively close to Kamchatka (Far East) have been extremely helpful in providing in-depth training to the Kamchatka staff and facilitating operations of the Kamchatka SME Support Fund during its inception phase (for almost a year). There is already an agreement that these institutions will be involved in the monitoring and evaluation of the Kamchatka Fund over the coming years. The Kamchatka SME Support Fund was registered as an independent non-governmental non-for-profit facility. It is managed by the Kamchatka Boad of Directors, supported by a number of local consultative and expert committees, and monitored by the local Board of Trustees. The Director and staff of the Fund were hired locally following a competitive process. The staff of the Fund was provided with intensive training (study tours to successful micro-finance institutions and on-the-job coaching by professionals in micro-financing). Following the in-depth assessment of the SME Support Fund operation during 2004, a number of recommendations were made to improve management of the Fund and ensure its sustainability in future. It is expected that after expansion of the Fund to other areas of the Peninsula and accumulation of a larger client base, the Fund will reach the level of financial sustainability by the end of the UNDP/GEF project. The small grants and micro-credit components of the Fund are indeed interrelated. One of the major activities of the small grants facility is to support and empower individual entrepreneurs to start their own sustainable businesses through training, coaching and co-financing start-up costs. Thus, the small grants facility is considered to be a bridging facility aimed at strengthening client base for the micro-credit fund. Based on the recommendations from the Council members the 2d project phase was extended to 5 years. Thus, there will be more time for the project to backstop and monitor the activities of the SME Support Fund in Kamchatka. USA - Comment 2: Trust Fund: It should be determined in advance whether to have an endowment or a sinking fund. We support using a sinking fund and setting a firm date for sun setting the Trust Fund. How long will there be a funding gap for the conservation needs of these protected areas? 15-20 years? How will the trust fund solicit proposals? Will the trust fund have annual or biannual call for proposals or will submissions be taken on a rolling basis? How will the trust fund be evaluated? Will GEF’s contribution be $1.5 or $1.8 million? Response: Document reference: The Trust Fund will encompass a combination of a sinking fund, endowment fund and a revolving fund. ANNEX M: Separate accounts will be issued to monitor these components of the Trust Fund. Indeed, it is anticipated Kamchatka that the critical funding gap in PA operating costs will be ceasing in 15-20 years, while the government Conservation Trust will be overtaking these costs. Therefore, a sinking facility has been initially proposed by the designers of Fund the fund. However, judging by the experience of other countries (ex. Latin America), a longer-term financial mechanism such as an endowment fund will be also an important forward-looking financial mechanism supporting the future development of the PA system, training and capacity building, and applied research. Therefore, an endowment component has been built into the Trust Fund design. The decision on whether a specific donor contribution is to be placed with the sinking or endowment fund will be made based on the donor’s preferences and the nature of the specific projects financed with this contribution. The basic idea for the Trust Fund design was to make it comprehensive and inclusive in order to motivate a proactive resource mobilization strategy. Procedures for the proposal solicitation, submission and approval as well as monitoring and evaluation practices are described in the draft Operational Manual for the TF designed during the 1st phase of the project (draft attached herewith). The draft has to be distributed and discussed among the key stakeholders at the beginning of the phase 2. GEF is contributing $1.5 million to the capitalization of the Trust Fund. In addition GEF resources cover costs of the design, stakeholder consultations, resource mobilization and launch/registration activities ($0.3 mln). USA - Comment 3: Cost-effectiveness: How is this project cost-effective? Response: Document reference: Given the value and uniqueness of the biodiversity within the project area, which includes the World New sub-section on Heritage Site, the project is considered to be a cost-effective investment: the “amount of biodiversity” that cost-effectiveness could be preserved in Kamchatka of each additional dollar that is spent is one of the highest cost-benefit incorporated into the ratios for conservation anywhere in the world. It is also understood and clearly demonstrated by the project document, examples in other regions and countries, that the costs of preventive and conservation activities are much page7 lower than the potential costs of rehabilitation of biodiversity loss, which is not always possible. Replication and dissemination component has been built into the design of this phase, which will help to share lessons and best practices generated by the project with other regions and institutions through out the Russian Federation. This will increase the impact of the project overall, reduce costs and increase effectiveness. Project activities have been designed to avoid duplication with and to complement other projects and programmes, both GEF and non-GEF. Institutional capacity development activities were designed to simplify and strengthen existing institutional structures and mechanisms instead of creating new ones. Germany - Comment 1: Taking into account that an independent evaluation was already undertaken upon nearing the completion of the project’s first phase, the high efforts needed to prepare and conduct external overall reviews, and the rather limited budget allocated for M&E operations, it may be considered: - to introduce and/or strengthen a system of internal stakeholder evaluation with the participation of target group (self evaluation). This system seems in particular appropriate for those components which deal with income generation for the local population. ii - to combine technical assistance with an evaluation of previous activities in the relevant field. This would thus result in assessing and reviewing individual project components, not in overall-evaluations. Response: Document reference: Judging upon the experience of the mid-term external evaluation conducted during the first phase of the Provisions for internal project, UNDP and the national counterparts find the external expert evaluations to be very useful tools. self-evaluations are They provide a holistic and impartial picture of project’s achievements and useful professional added. page16 recommendations for strengthening project strategy and approaches. In addition to this, the main co- funding partners of the project – the Government of Canada – also prefer to keep the proposed M&E framework. On the other hand, we appreciate recommendation of the GEF Council member on introducing a system of internal stakeholder evaluations and self evaluations by the target groups. The project will pilot this system. Germany – Comment 2: The project is going to establish the Kamchatka Biodiversity Conservation Trust Fund (KBCTF) which will generate means for PA operations. It is foreseen that the fund will be operational by the end of year 3. Although it is appreciated that KBCTF builds on experiences gained through a Small-Medium Enterprise Fund and a Small Grants Programme established already in Phase 1 of the Project, it seems critical to get KBCTF operational only towards the end of the project. Operational procedures need to be tested, adapted and refined, and this will reveal as a time-consuming process. Efforts should therefore be undertaken to get the Fund operational at an earlier time, in order to save time for making the necessary experiences before passing the full responsibility to national institutions.