Case Study on Optimizing ODA Funding in Southeast Asia
Optimizing Japanese ODA - The GAGRP Partnership with Philippine CSROs
By Dr. Angelita Gregorio-Medel
October 2001

This case study was was published in 2001 and made possible by the generous support of the Sasakawa Peace Foundation.
 
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Roots Of Japan's GAGRP

Japan was the world's top ODA net disbursing country from 1991 to 1998.1 Japanese ODA as a ratio of Gross National Product has ranged from a low of 20% in 1996 to a high of 34% in 1984.2 There are four categories of Japanese ODA: grants (grant aid and technical cooperation), government loans, bilateral ODA, and contributions and subscriptions to international organizations. GAGRP is a component of Japan's grant aid.

Two major influences led to the establishment of GAGRP. One was the Japanese Ministry of Foreign Affairs (MoFA), which wanted to respond quickly to requests for support to small-scale initiatives at the local level. The other was the growing role of NGOs and civil society organizations in development assistance. In 1989, MoFA established two grant aid schemes, NGO Project Subsidies and Small-Scale Grant Assistance.

NGO Project Subsidies

This scheme was propelled by the growing number of Japanese NGOs involved in development aid. MoFA noted that Japanese NGOs overseas promoted visible Japanese aid3 because they complemented ODA projects that were concerned with large-scale economic and social infrastructures. These NGO projects included medical and educational facilities for local communities. MoFA recognized that Japanese NGOs strengthened the people-to-people dimension of Japan's official assistance. The NGO Project Subsidies finances half the cost of projects undertaken by Japanese NGOs in developing countries. In 1998, this scheme assisted projects in rural development, environmental conservation, medical/health care programs, and women's empowerment.

Small-Scale Grant Assistance

MoFA launched this scheme after realizing that its conventional ODA procedures left many small-scale initiatives of local development organizations outside the Japanese Government's circle of support. MoFA noted that other major ODA countries achieved significant diplomatic success through small-scale grant assistance schemes. Consequently, MoFA launched Small-Scale Grant Assistance in 1989. The scheme empowered Japan's diplomatic missions, which were familiar with local conditions, to provide swift and focused assistance to relatively small-scale projects. It is now called Grant Assistance for Grassroots Projects (GAGRP).

GAGRP -- Humanzing Japanese ODA

GAGRP is a scheme for assistance in response to requests from local governments, research institutions, medical organizations, NGOs and other organizations working in developing countries. Under this scheme Japan can take up relatively small-scale projects through quick and appropriate handling by Japanese embassies and consulate generals who are well acquainted with the economic and social conditions in each country.4

Japanese diplomatic missions in 96 countries manage GAGRP across six regions and have full autonomy in selecting the grantees, the type of projects and the amount of grant. The main grantees of GAGRP funds are NGOs, community associations, peoples' organizations, educational and research institutions, medical institutions, local government units, and national agencies.

Based on consultations with 25 executive officers of individual NGOs and representatives of NGO networks in the Philippines, GAGRP makes a positive contribution to NGO work in the Philippines because it humanizes Japanese ODA to the country. In particular, GAGRP is considered relevant because:

Partnering with Philippine CSROs

When the Japanese Embassy in the Philippines introduced GAGRP in April 1996, it encountered two immediate problems. First, it did not have the management reach to move the fund toward credible local organizations with truly deserving community projects. Second, it lacked mechanisms to identify those organizations properly. It was fortunate that Hirotaka Sekiguchi, recruited by MoFA to head the GAGRP facility in 1996, had extensive experience as a worker of a respected Japanese NGO. He participated regularly in Philippine-Japan exchange programs, spoke and understood Filipino, the national language, and knew the Philippine NGO community.

Drawing from Sekiguchi's knowledge and experience, the Embassy decided -- and continues -- to channel GAGRP funds not directly to grantees but through partnerships with mature and reputable civil society resource organizations. Aware that Philippine NGOs are organized into often-competing networks and coalitions, the Embassy has maintained a policy of being non-partisan and non-ideological. At no instance has a single NGO group dominated GAGRP funding.

Two examples of how GAGRP has worked with CSROs include the experiences with the Philippine Business for Social Progress (PBSP) and the Foundation for a Sustainable Society, Inc. (FSSI). Both are mature Philippine NGOs and are regarded highly within the nongovernment community in the country.

CSRO: Philippine Business for Social Progress.

PBSP is a private, non-profit foundation established in 1970 by the country's business leaders to manifest concretely the business sector's corporate social responsibility and organized response to poverty. Its 160 member companies are among the biggest in the country. As members, they pledge 1% of their pretax profits to social development.

PBSP believes that helping the poor help themselves is the most effective, sustainable approach to reducing poverty, releasing human potential and achieving better socio-economic equity. PBSP's core development strategy is called "Area Resource Management" or ARM. This strategy aims to regenerate the environment and develop enterprises, build capacities of local institutions, and enhance local governance.

PBSP is both a grants making and an operating NGO. It provides a menu of services such as capacity building, community development, and organization building assistance. It also makes available funding resources to its local partners. PBSP takes on the role of an implementing agency with local partners as beneficiaries of projects.

Among PBSP's local partners is the Katipunan Magbubukid sa Hacienda Roxas Inc. (KAMAHARI), an agricultural, multi-purpose cooperative in Nasugbu, Batangas province. PBSP's assistance to KAMAHARI is a two-year program started in November 1998. It is supported by the Interchurch Organization for Development Cooperation, a funding agency based in Netherlands. This project has several components, including a Production Loan Fund, a Cattle Fattening Project, a Peasant Fund from the Philippine Government's Department of Agrarian Reform, a Tube Wells Construction Project with the National Irrigation Authority, and KAMAHARI Building Construction.

PBSP played a crucial role in linking the Japanese Embassy to KAMAHARI, which received a GAGRP grant in 1999. GAGRP support made it possible for KAMAHARI to purchase a farm tractor. Seven villages benefited from the tractor, which is now being leased to members of the cooperative.

PBSP staff members assisted KAMAHARI in conceptualizing the project submitted to GAGRP. They also helped to draft the proposal and complete the application form. The presence and direct management of PBSP over KAMAHARI's capacity-building program was an important factor in the eventual approval of the project by the Embassy. The GAGRP office placed a premium on the availability of an experienced and skilled NGO like PBSP to guide KAMAHARI in the implementation of the project. As a component part of a bigger program, GAGRP support for the purchase of a tractor was seen as an important contribution to raising the welfare of KAMAHARI members.

Financial accounting and controls was another factor considered important by the Embassy in approving the KAMAHARI proposal. PBSP was able to ensure that the financial procedures of the project were followed according to the approved proposal. Likewise, PBSP's partnership with KAMAHARI facilitated the monitoring of the proper use of the tractor and the timely preparation of reports to the Embassy.

Overall, in establishing a partnership with PBSP, the Embassy received an assurance of quality in operations and project management. On this basis, GAGRP assistance to KAMAHARI appears to have a good chance of sustaining its positive effects because of this partnership.

CSRO: Foundation for Sustainable Society, Inc.

FSSI is a non-stock, non-profit foundation organized to manage and administer a trust fund established after a 1995 bilateral agreement between the Philippines and Switzerland. The agreement cancelled the Philippine's debt to Switzerland, which amounted to approximately US$11.1 million in September 1999.

FSSI's vision is to help promote sustainable enterprises that are community oriented, economically viable and ecologically sound. The eco-enterprises that FSSI prioritizes are micro-finance, coconut fiber, dust production, sustainable agro-forestry, seaweed production and solid waste management. FSSI is primarily a grant making organization. It is unique in providing substantial and sustained technological support to its partners and their enterprises. FSSI provides many of the services of a consulting firm that links its partners with technological resources for either product or market development. FSSI prefers to support "winning" or "model" enterprises in order to attain maximum positive impact on eco-systems. It offers different types and combinations of financial instruments, including loans, special deposits, grants, guarantees and equity.

Among the local partners of FSSI is the Institute for the Development of Ecological and Educational Alternatives, Inc. (IDEAS) of Silang town, Cavite Province. IDEAS is a local NGO. FSSI finances IDEAS' "Solid Waste Management Project" along with two other projects through a combination of a loan, equity, and a grant. These are being used, respectively, for working capital, acquisition of fixed assets, and training and research. The project is considered innovative for two reasons. One, it is a rare instance of the municipal government devolving one of its functions to a civil society institution under a fee-for-service arrangement. Two, it seeks to address ecological problems created by conventional waste collection schemes by promoting waste segregation at the source, that is, among households and business establishments.

In December 1999, IDEAS became a GAGRP grantee. IDEAS learned about the GAGRP facility through FSSI. FSSI neither formally endorsed nor brokered the assistance provided by GAGRP to IDEAS. However, FSSI did provide GAGRP information to IDEAS and encouraged it to seek the support of the Embassy. According to the head of the GAGRP office, the close partnership between FSSI and IDEAS was a major factor in the positive assessment of the IDEAS proposal. The track record and reputation of FSSI within the Philippine NGO community provided the Embassy with a positive impression of the organizational integrity of IDEAS. The Embassy knew of FSSI's reputation for rigorous selection of its partners and its application of close monitoring and sustained technical support. This gave IDEAS a virtual "stamp of good standing."

Benefits of Partnering with CSROs

Civil society resource organizations benefit GAGRP by making possible the following:

To summarize, CSROs bring a relatively high standard of professionalism and project management quality. They have the resources and skills to help a grantee organization conceptualize its community project. They can provide a high level of capacity building and technology transfer to the grantee workforce. They can even help administer the grantee's project through appropriate and field-tested financial, management, and monitoring controls. When necessary, they can provide equity or counterpart funding. Finally, CSROs are noted for practicing transparency and accountability in their transactions.

With the cooperation of intermediary CSROs, the GAGRP facility has succeeded in helping 173 projects since April 1996, at an average of 5 million per project.5 Cumulative assistance as of March 2001 is US$5.56 million. The CSROs have been effective conduits for generating a positive awareness of GAGRP -- and, by extension, of GAGRP as direct aid from the Japanese people. Awareness is so high among local organizations that in 1999 alone, the Embassy received about 2,000 applications for GAGRP funding.

CSROs have also helped the GAGRP to ensure an even spread of projects. Projects assisted are in the areas of agricultural post-harvest facility, fishery, education, environment, children's welfare, disaster relief, health and potable water. Most of the projects deal with infrastructure development and improvement of facilities through acquisition of equipment and small construction work. The CSROs have been instrumental in keeping the GAGRP facility focused on the main target group: the small NGOs who make up 71% of total GAGRP grantees for the period 1996-1999.

Conclusion

The case study on GAGRP is an example of how best an ODA facility could harness the presence and partnership of smaller NGOs and POs with CSROs. ODA is able to improve its effective reach to target beneficiaries as well as address the issue of sustainability of project support. The study also underlined the importance of the competency of ODA personnel who implement the aid program. In the case of GAGRP that is focused on building partnership with NGOs and POs, the networking and continuous linkage work, project monitoring efforts of the person in-charge were important.

Based on the experience of GAGRP, the following section identifies several issues and considerations.

Maintaining CSRO Partnerships

The experience thus far shows that the GAGRP benefits from the extensive NGO network of the CSROs, their experience in identifying legitimate social development organizations, their expertise in helping smaller organizations carry out successful projects, and their years of project development, management and monitoring capabilities. To continue being responsive, GAGRP will gain much from sustaining its cooperative mechanisms with CSROs.

Reducing Dependence on the CSRO

At the same time, there is a need for small NGOs, POs, and LGUs to reduce their dependence on CSROs. CSROs need to be sensitive to the capacities of GAGRP grantees. They would gain much by balancing their interventions so that the grantees are able to develop slowly their capabilities. Allowing them to go through their own process of understanding the requirements of project management and fund accessing will better strengthen the organizational and management capacities of grantees. It is imperative for CSROs to pace the transition of GAGRP grantees; the CSRO must find a balance between providing continued assistance and the need for the grantee to become independent. Doing so is often difficult since the transition usually takes much longer than the life of the project.

Changing Role of CSROs

The ODA mechanisms or facilities for NGOs must not expect its partner CSROs to provide assistance to grantees indefinitely. This is because CSROs change their roles over time. Small NGOs, POs, and LGUs are better able to access funds from facilities like GAGRP if they are more confident about their capacity to achieve the objectives of their proposals and to implement the project. ODA facilities will gain much from working with CSROs in ensuring that capability-building and technology transfer is integrated with the project.

Non-CSRO Advisory/Consultative Mechanism

Some CSROs, especially big and better-established ones, could have substantial political and economic influence. An advisory/consultative mechanism is needed to provide independent counsel to the implementing units or staff of ODA facilities. This mechanism could be made up of a small group of individuals who in their personal capacity or by virtue of their organizational affiliations cold provide ODA units or agencies with information, perspectives, opinions, contacts and general feedback. The mechanism could also be a pool of resource institutions and individuals who could profile, assess and evaluate important projects proposed to the ODA agency.

Notes

  1. In 1998, the Philippines was the seventh largest recipient of Japanese ODA.
  2. Ministry of Foreign Affairs. "Japan's Official Development Assistance - Summary 1998." Tokyo: Association for the Promotion of International Cooperation, 1998.
  3. This is the direct involvement of Japanese NGOs in development cooperation activities particularly in extending participatory economic cooperation through specific and personalized attention to the inhabitants of developing countries.
  4. Japan's Official Development Assistance -- Annual Report 1999, (Tokyo: Ministry of Foreign Affairs, Government of Japan, 1999), page 109.
  5. For 2001, US$1 = 120 yen

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