1

Options for the Nam Ngum River Basin Fund

Mekong Forum on Water, Food and Energy7-9 December 2011, Phnom Penh, Cambodia

Souphasay KomanyActing Director

Nam Ngum River Basin Committee SecretariatDepartment of Water Resources

Ministry of Natural Resources and Environment, Lao PDREmail: souphasaykomany@yahoo.com and komany.s@gmail.com

Decree No. 293/PM on Establishment and activities of River Basin Committee; Dated June 15, 2010

Article 12 : FundThe River Basin Committee has a fund for river basin management and development, which gains from:

1. the government budget, 2. grant assistance3. service charges, fine and;4. contributions from water resources developers in the river basin based on the principle of

“Polluter Pay”.

Legal and Institutional Concerns

Review of Existing Funds in Lao PDR

Budgetary Funds• Forest and Forest Resources

Development Fund (FRDF)• Road Maintenance Fund

(RMF)

Autonomous fund• Environment Pro tection

Fund (EPF)• Poverty Reduction Fund

(PRF)

Government Run-Funds

Budgetary Funds• Chair by Minister • Realize on national annual budget

(approve by NA)• Fund flow through Treasury Depart.

MOF• Financing through annual budget

plan of Ministry under which, the fund is running

• Audit is required as necessary (occasional)

Autonomous Funds• Chair by Deputy Prime

Minister• Realize on Donors assistance

and contributions• Special account for fund flow

and financing • Financing through proposals

(large sub grant approve by the Chair and Small approve by Fund Office Director)

• Annual auditing required

Summary of the Government-run Funds

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.

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.

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)

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.

9

Eg. French River Basin FundStudy 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.

Funds set up to manage government & donor budgets

Funds set up to manage user fees & service charges

Funds set up to manage voluntary contributions

Multi-source funds

Environment Protection Fund (stand-

alone Fund)

Forest and Forest Resources Development Fund (Budgetary Fund)

Road Maintenance Fund(Budgetary Fund)

Poverty Reduction Fund(stand-alone Fund)

Fund Establishment

Approach for Designing

International best practices Practices of Funding in Laos

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

12

OPTION #1: MAINSTREAMED

FUNDING

OPTION #2: STAND-ALONE

NNRBF

OPTION #3:NNRB WINDOW IN

EXISTING UMBRELLA FUND

OPTION #4:NNRB SUB-FUND

IN NEW UMBRELLA FUND

No separate fund. Sectoral budgets

and special programmes of

relevant line agencies allocate

funds for implementation of NNRBP activities

Special account for MoNRE is set up by

the MoF, earmarked for the

NNRB

Funding window created under the EPF, earmarked for

the NNRB

National RBF, with NNRBF as one sub-

fund under this

Design, structure and management

13

Uses existing government budget mechanism

Annual budget allocation

Special programmes and projects

Sinking fund: draw down a pre-determined amount of funds over a specified time period

Endowment fund: invest the capital and spend the interest earned

Replenishable fund: permit for new sources of funds or income to be periodically added

Revolving fund: give out credit or loans, and return the interest and capital repayments to the fund for further lending or disbursement

Fund administration

OPTION #1: MAINSTREAMED

FUNDING

OPTION #2: STAND-ALONE

NNRBF

OPTION #3:NNRB WINDOW IN

EXISTING UMBRELLA FUND

OPTION #4:NNRB SUB-FUND

IN NEW UMBRELLA FUND

14

Existing sectoral funding (State budget)

New/ earmarked funding comes only from specific private and international-funded projects

Government funds

International funds

New extra-budgetary sources of funding

• Service charges

• Payments for ecosystem services (PES)

• Private sector contributions

• Other voluntary and regulatory sources

Funding sources

OPTION #1: MAINSTREAMED

FUNDING

OPTION #2: STAND-ALONE

NNRBF

OPTION #3:NNRB WINDOW IN

EXISTING UMBRELLA FUND

OPTION #4:NNRB SUB-FUND

IN NEW UMBRELLA FUND

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

?

?

?

?

?

?

16

OPTION #1: MAINSTREAMED FUNDING

OPTION #2: STAND-ALONE NNRBF

OPTION #3:NNRB WINDOW IN

EXISTING UMBRELLA FUND

OPTION #4:NNRB SUB-FUND IN NEW

UMBRELLA FUND

Approaching to milestone of

April 2012• Structure?• Charge Rate?

17

Thank You