Minutes from the External Grant Committee Meeting 6 September 2016
Present:
External Members:
Christian Balslev-Olesen, Regional Representative, DanChurchAid
Marie Gad, Chief Consultant, Confederation of Danish Industries
Michael W. Hansen, Director of Center for Business and Development Studies, Copenhagen Business School
Partner Anne-Lise Klausen, Nordic Consulting Group
Internal Members:
Martin Bille Hermann, State Secretary for Development Policy (Chair)
Morten Jespersen, Under-Secretary for Global Development and Cooperation
Charlotte Slente, Under-Secretary for Global Politics and Security
René Dinesen, Under-Secretary for Consular Services and Public Diplomacy
MFA:
Nicolaj A. Hejberg Petersen, Head of Department for Technical Quality Support (observer)
Erik Brøgger Rasmussen, Head of Department for Development Policy and
Finance (observer)
Mette Brink Madsen, Department for Technical Quality Support (note taker)
Agenda item 2:
Ambassador Peter Lysholt Hansen, Deputy Head of Mission Dorte Chortsen
and Special Adviser Henning Nøhr, Embassy Yangon
Ambassador Johnny Flentø, Embassy Maputo, and Chief Adviser Niels Richter, Department for Multilateral Cooperation, Climate Change and Gender
Equality
Agenda item 3:
Agenda item no. 1: Announcements from the Chair
The Chair informed the Committee that a proposed revision of the Act on International Development Cooperation had been presented for public consultation. The proposal suggested a
merger of the Council for Development Policy and the External Grant Committee and thereby
merging the Council’s mandate to give strategic advice to the Minister with the Committee’s
mandate of quality assurance and advising the Minister on concrete programme proposals.
Since the last Grant Committee meeting, there had been one meeting in the Council for Development Policy held on 27 May. The Council had a discussion with the Minister of Foreign Affairs on the synopsis for the new Strategy on Development Policy and Humanitarian Cooperation. In this context the Chair mentioned that the Draft Strategy was presented in June followed by a public consultation procedure over the summer. Next step would be political consultations within the Parliament before presenting it for approval later this fall.
Furthermore, the Chair mentioned the Council’s thematic discussion on the role of public private partnerships in Danish development cooperation and that the Council was informed about
the process for phasing out development cooperation in Mozambique, Zimbabwe, Bolivia and
Nepal. Finally, there was a short discussion of the Council’s and the Committee’s upcoming
study visit in 2017.
The proposed Finance Act was published on 30 August and the Committee had received the
publication “Priorities for Danish Development Cooperation “. However, some changes in the
proposed budget have already been introduced due to the fact that the expected number of
asylum seekers in 2017 has been reduced to 10,000. Consequently, the budget allocated for indonor country refugee costs has been revised and additional funds will be allocated for development activities under § 6.3. The additional funds will be used for extra humanitarian activities
as well as to reduce the negative budget regulation (over budgeting).
Agenda item No. 2: Myanmar Country Programme
460.0 million DKK
(Embassy Yangon)
Summary:
The Country Programme for Myanmar 2016-2020 is based on the Denmark-Myanmar Country Policy Paper
2016-2020 with its vision of contributing to a peaceful and more democratic Myanmar with equitable, sustainable and inclusive growth that promotes human rights for all people. The Country Programme, which has been
developed based on a broad consultation process, will target key priority areas of the new democratically elected
government which took office 1 April 2016 and is designed to support the democratic transition process. The
objective of the Country Programme is to contribute to a peaceful and more democratic society with improved
prosperity through sustainable economic growth. This objective will be pursued through three thematic programmes which aim at 1) promoting peace, rule of law and human rights, 2) improving access to and quality of
basic education and 3) enhancing inclusive and sustainable economic growth, including livelihoods for marginalised and ethnic populations.
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The External Grant Committee recommended the grant proposal for approval by the Minister.
The Committee found the selection of intervention areas in the Country Programme wellfounded and strategically important in Myanmar’s current transition context. It noted that the
programme stroke a realistic balance between high ambitions and manageable transaction costs
corresponding to Denmark’s capacity on the ground. The Committee welcomed the programme’s mix of delivery modalities, including the use of country systems in two engagements
as well as of multi-bilateral support e.g. through the World Bank to formal basic education. The
mix of support to quality basic education through formal as well as informal education systems
was also welcomed. Given the positive democratic transition unfolding in Myanmar and the
fact that Denmark would be testing new grounds, the Embassy of Denmark in Yangon was
encouraged to place emphasis on communicating the results of Danish support to the country.
The Committee noted that some of the planned interventions were high risk and recognised
that flexibility was needed to be able to adapt the Country Programme to the progress of reforms. The Committee asked about donor collaboration in Myanmar as well as the availability
of sector strategies to align to. It was informed that donor collaboration in Myanmar was relatively good, but had suffered from lack of government leadership, including the absence of sector strategies, apart from the education sector where Denmark had been actively engaged in
the process of developing the National Education Strategic Plan. However, the new government had signalled that it would assume a much more proactive role in coordinating development partners.
The Committee asked about the links between Danish activities outside the programme, including through Danish civil society organisations and Danish humanitarian support to Myanmar,
and stressed the importance of bridging the gap between humanitarian and development activities. The Committee was informed about the activities initiated by Denmark outside the programme to promote this link, among these to find durable solutions to displacement in Rakhine
based on the principles of the so-called Solutions Alliance.
The Committee commented on the role of civil society and was informed that capacity development of civil society was an important part of the programme, including support to rule of
law and human rights, basic education and sustainable coastal fisheries. The Committee also
raised the question on how the programme would tackle limited government capacity, including
in regard to the support to Sustainable Coastal Fisheries where the Myanmar Department of
Fisheries would be the implementing partner. It was emphasised that limited partner capacity is
a framework condition for working in Myanmar and that capacity development is a key element
in most activities, not least the activities implemented through country systems.
The Committee welcomed the planned support to the Myanmar peace process and asked how
the necessary political dialogue would accompany this support and how Danish support could
promote the peace dividend. It also emphasised the importance of having due regard to the link
between peace building and justice. It was clarified that the Joint Peace Fund for Myanmar,
through which support to the peace process would be channelled, recognised that the peace
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process was an entirely nationally lead and conceived process which development partners
could support politically and financially, but obviously not direct. The Joint Peace Fund would
also support projects which promote the peace dividend. In terms of transitional justice, this
was not a strategy chosen by the new government which focused on moving and looking forward.
The Committee noted the complex nature of the planned support to rule of law and human
rights where risks were high and partners many. It asked how the Embassy would ensure a proactive dialogue with the partners to the programme when support was to be delivered by one
implementing partner. It was informed that the use of one implementing partner would help
promote stronger synergies and links between support to the different counterpart institutions,
but also that the Danish Embassy in Yangon would be closely involved with key partners. This
would take place through the Steering Committees to be established with both the Office of
the Union Supreme Court and the Union Attorney General’s Office as well as through the socalled Dialogue Forum on Rule of Law Reform which the programme would establish and
which would be inclusive of all counterpart institutions and actors to the programme.
As regards the thematic programme on inclusive and sustainable growth, the Committee asked
how it would contribute to job creation and about the Responsible Business Fund, its apparent
temporary nature and how it could help promote jobs and innovation. It was informed that the
Responsible Business Fund (RBF) aimed to promote productivity gains which would help make
SMEs more competitive. Myanmar SMEs are generally weak, but they do represent the majority
of companies. The RBF obviously came at a certain cost, but it would be through SMEs that
growth and employment creation in Myanmar would have to be driven. The RBF was temporary in nature and the ambition would be to promote that the private sector would internalise
the services of the RBF and eventually offer these services on a commercial basis. The Committee also asked about the nature of the funds set aside for Myanmar businesses to enter into
partnerships with Danish businesses and how this could be linked to the Danida Business Instruments. It was informed that the funds would aim to help Myanmar businesses which were
interested in exploring potential collaboration with Danish companies with funding to enable
them to do so. In this regard the Investment Fund for Developing Countries (IFU) and Danida
Business Finance would probably be the most relevant instruments. The Committee also asked
how the data and analysis generated through the Myanmar Enterprise Monitoring System
(MEMS) could inform policy making. It was informed that the formulation of policy papers
based on the findings of the planned surveys was an integral element of the MEMS.
The Chair concluded that the Country Programme was ambitious and clearly not risk adverse.
Myanmar was in a critical phase in its peaceful transition which justified taking risks as long as
the necessary precautionary measures were put in place. This also meant that flexibility was
called for. The Chair noted the importance of pursuing the links between the Country Programme and Danida Business Instruments, not least IFU, and that the fund for business-tobusiness collaboration should be designed to exclusively meet demand by Myanmar companies
with the aim of promoting local development. The Committee noted that Denmark’s support
was not budget support, but for two of the engagements the support would be channelled
through the Government system and managed and accounted for as government funds. The
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Committee agreed in the proposed front-runner role of Denmark in piloting use of country
systems while putting in place the necessary safeguards. The Committee recognised that the
proposed support to rule of law and human rights was a complex engagement with several key
actors, but also that the interventions aimed to underpin the necessary dialogue among justice
sector actors. Finally, the Chair underlined the importance of promoting links between the programme and the Danish humanitarian assistance to Myanmar, not least to promote durable solutions to displacement, and as well as the need to work to promote the and incorporate the
SDGs in the Country Programme. The Chair asked the Embassy to report to the Committee
after the Mid-Term Review of the Country Programme in order to discuss progress achieved
and any potential needs for adjustments.
Agenda item no. 3: Country Consolidation and Exit Programme for Mozambique
194.0 million DKK
(Embassy Maputo)
Summary:
Denmark has been a trusted development partner for Mozambique for almost 40 years, providing financial and
advisory support for the country’s efforts to extricate itself from conflict and build a society offering opportunities
for the many poor Mozambicans. In spite of considerable progress in providing access for people to basic services
in health, education and water and sanitation, more than 50 % of the population still live in absolute poverty
and stability is challenged, with a resurgence of clashes between security forces and the armed guards of the opposition leader. Mozambique is facing major fiscal challenges in the medium term due to worsening terms of trade;
slowdown of FDI and quickly rising debt services. Securing sustainability and continuation of reforms and programmes by Government will be difficult. The additional appropriation of 194 million DKK will be used to
minimise the risk of negative outcomes for the poor and to consolidate development of institutions essential to
securing a continuation of key reforms. The thrust of the consolidation programme is to create jobs and business
opportunities for the disadvantaged, improve the access to health and better nutrition for the poor, move decisionmaking closer to the citizens in the municipalities, build climate change resilience and strengthen public financial
management and the capability to undertake research on key constraints to inclusive growth. Part of the funds
(13%) will be used for monitoring and administering the programme through to its final closure in 2020.
The External Grant Committee recommended the grant proposal for approval by the Minister.
The Embassy briefed the Committee about the preparation of the exit strategy, plan and programme. There had been a productive dialogue with the Ministers of Foreign Affairs and Finance in the lead and constructive engagement from three key partner ministries. The programme design had been developed with essential inputs from a small group of Mozambican
advisers of considerable standing, who had been instrumental in ensuring the buy-in to the
fundamental philosophy, processes and concrete prioritisation of the decision-making around
the exit. In the course of programming the risks had been carefully assessed, also by the
Mozambicans themselves. The result was a proposal that the Government fully backed. The
Embassy hoped that the joint approach taken to the design of the exit strategy, plan and programme would also prove the best way of securing a constructive engagement from the
Mozambican in resolving the problems that would invariably arise, throughout the exit and par-
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ticularly during the final stretch of the programme when the Embassy would have been closed.
In view of the difficult situation in Mozambique, with escalating hostilities and a strained public
budget, delays could not be ruled out. But the Mozambican ownership of the exit programme
would be fundamental to its completion.
The Committee noted that the situation in Mozambique could only be viewed as very pessimistic – a poor country in challenging economic difficulties experiencing the resurgence of armed
conflict. These were tough circumstances in which to carry through an exit programme. The
Committee noted that the programme had been designed to reflect the experience and documented research on responsible exit. However, the Committee referred to the fact that the
Embassy would close so early, since it meant that the Ambassador would leave before the conclusion of the exit.
The Committee noted that it was a comprehensive exit programme, which in financial terms
added extra funding to considerable balances remaining in existing programmes. In view of
this, questions were raised regarding what cooperation was foreseen with other actors in the
Danish resource base. The Committee underlined that an import point of orientation of the
exit strategy was to carry through on existing agreements and not initiate new activities, and in
this regard the Committee asked whether a viable exit would have been possible without an
additional grant. The Committee was informed that the Danish interventions would not be sustainable if they were discontinued quickly. The gradual exit and the additional financial means
were essential for the enterprise development fund, the credit programme and the rural roads
maintenance programme. It was important to consolidate these interventions – both timewise
and in terms of the extra effort that the additional grant made possible. In the actual situation,
the additional finance was necessary to minimise the risk of a disruptive exit.
The Committee further requested clarification on the introduction of an additional business
element in the programme as well as on the justification for the withdrawal in provinces where
the programme would close down early. The Committee appreciated the strong focus on the
consolidation of results, including the revenue side with support to the tax administration and
the public financial management. The support provided by IMF in these areas was mentioned
and it was underlined that the IMF had not always been successful in handling TA of this nature, particularly in countries where the macro-economic management and dialogues was difficult.
The Committee inquired about the linkages between the large projects in the mineral and hydrocarbon sectors and the SMEs, which the strategy saw as prime engines for job and income
generation for the many un- and underemployed.
The Committee further inquired about the chosen administrative model for the exit and the
decision to employ bilateral advisors rather than a consultancy company. The Committee was
informed that the choice of bilateral advisers for administering the exit corresponded to a clearly stated wish expressed by the Mozambican Government. Mozambican ownership would not
necessarily be strengthened if a big – probably not Danish – consultancy company was given
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the task of administering the phasing out of the Danish programme. Price was another consideration, as funds for the TA were allocated from the programme budget.
It was further noted that when the Committee had visited Mozambique in 2014 the Mozambican Government had appeared to be a difficult and little communicative partner. In this regard,
the Committee was informed that the new Mozambican government was considerably more
inclined to seek dialogue with the donors, compared to what Committee members had experienced during their visit in 2014. On the one hand, it had a number of ministers who were more
capable as technocrats and in substance, and on the other hand, Mozambique had again become more dependent on donor support, with the discontinuation of its brief access to the international capital markets.
Finally, the Committee underlined that it would be important to ensure that the results of 40
years of cooperation would be well documented.
The Embassy clarified that the major portion of the exit grant was budgeted for the growth and
employment programme as well as to decentralisation and revenue reform. The justification for
this was that these programmes contributed to solving some of the fundamental problems that
Mozambique was grappling with, including problems seen as causes of the escalating fighting.
Job creation outside of the mining- and gas sectors and productivity development in agriculture
would be ever more important in the coming years as Mozambique became increasingly dependent on extractive industries. The mining and hydrocarbon industry could easily develop
into an enclave benefitting a few, with few linkages to the rest of the economy and hence a
modest impact on employment and economic transformation. The health and nutrition programmes were not on the same cycle as the rest of the portfolio and there were significant financial balances left. In these programmes, the provinces of Tete and Gaza would be prioritised, as they were facing larger challenges in nutrition and health than the province of Maputo,
were the planned activities would not be launched, partly due also to lack of progress in this
province.
The Embassy further clarified that the SMEs and agriculture were considered the only effective
vehicles for generating the large number of jobs needed to meet the expectations of the many
un- and underemployed. Capital intensive investments in the extractive industry could not do
that. At the same time developing agriculture and small- and medium scale manufacture and
services now would create capacity to absorb the revenues from extraction, once it started to
arrive. As far as expectations that could not be met because of the exit, Denmark had had to
renounce its leading role in the area of nutrition, phase out from a successful reform of public
financial management and terminate its support to independent research and advocacy on public sector integrity before the final closure of the programme.
The Chair concluded that programme constituted a gradual phasing out of the DanishMozambican development cooperation over a relative long time span building on analysis of
context and experience and best practices from earlier exits. The exit will take place with the
involvement of local competencies and in close cooperation with the Mozambican authorities,
given the difficult situation of the country and the agreed framework. The Chair underlined that
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the closure of the Embassy by the end of 2017 was a political decision and a known condition
for the exit. The Committee found it vital - for the years after - to maintain attention from
management on the exit, also after the Embassy had been closed. Finally, it was suggested that
the Committee would get a briefing on the status of the exit towards the end of 2017.
Agenda item no. 4: AOB.
No points were raised.
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