Agriculture Sector Assessment - Ukraine Overview of the Sector Wide Approach (SWAP)

2 SWAP: Concept and Approach An effective approach of working together between government and development partners; A mechanism for co-ordinating support to public expenditures; A mechanism for improving the efficiency and effectiveness of budget resource utilization in the sector (through medium-term budget planning); A truly programme-based approach operating at the level of an entire sector, addressing ‘cross- cutting’ issues;

3 SWAP: A Shift in Emphasis FROM … Project-based approach Micro Level focus Donor-led approach Short-term and immediate issues Donor ‘independence’ Parallel application alongside Government Fragmentation and low communication TO … Sector-based approach Macro Level focus Government-led approach Longer-term and ‘cross- cutting’ issues Donor ‘co-ordination’ Integrated with Government programmes (and Budget) Planned process with transparency and improved communication

4 Factor Sector Wide ApproachTypical Project Approach Focus  Long-term strategic and integrated view on entire sector  Short or mid-term, focus on a particular problem of a sector, setting narrowly defined objectives Government Role  Core strategy elaboration  May be outside or additional to core donors’ strategy Impact on Partner Country  Bringing coherence between sector policy, spending and results  Strengthen Government and Ministerial capacity  Results limited to specific project area  No links between policy and budget  Low involvement of the Government Sustainability  Higher  Lower Donor – Recipient Relationships  Partnerships with mutual trust and shared accountability  Recipient accountable to donor Overall Approach  Process-oriented approach through ‘learning-by-doing’ and reviewing  ‘Blue-print’ approach (that is perceived as ‘imposed’) Implementation Mechanisms  Through national Government or line Ministry; Increased use of local procedures  Project-level implementation units and parallel implementation arrangements  Low level of integration Donors Collaboration  High level of co-ordination and collective dialogue  Donors’ collaboration not a priority; bilateral negotiations and agreements with each donor the norm SWAP versus Typical Project Approach

5 Undermining the ‘ownership’ of policies and programmes by national authorities; Fragmentation, duplication of efforts and loss of coherence; Funding of multiple investments by donors has led to unbalanced sectoral development; High transaction costs of delivering aid through projects; The reliance on non-government project management, undermining the effectiveness of government systems; Corroding the normal structures of democratic accountability; Short-Comings with the ‘Traditional’ Project-based Approach

6 SWAP Objectives Broaden ownership on policy, strategy and sectoral spending; Increase coherence between sector policies, spending and results; Minimise transaction costs in the provision of external funding directly, by adopting established government procedures, harmonisation of donor procedures, etc.;

7 More funds are made available for development of agriculture i.e. up to five time more funding is provided (€12m rather than €2m on average); The Agriculture Sector Development Strategy is streamlined, with a focus on a selected number of key sector priorities or ‘bottlenecks’; Closer links between sector policies and implementation are established; coherence between spending and results are increased; Quality of medium-term budget planning and implementation, or medium- term expenditure framework (MTEF) is improved; Inter-sectoral co-ordination and addressing cross-cutting issues, in terms of planning and budgeting, including inter-ministerial links, is improved; Capacity within Government and the sector Ministry regarding strategic planning and sector-wide programme implementation is increased; Sector performance transparency and budget accountability is increased; SWAP Benefits: For Recipients

8 Donors’ transaction costs are minimized due to: better co-ordination harmonizing of procedures improved information flows, and fewer costly project management units; Funding efficiency is increased because of better focus and co-ordination; Donors’ aid is generally more effective because of a better response, integration with national priorities and a more co-operative attitude from Government; SWAP Benefits: For Donors

9 Sector Development Programme (SDP) is at the heart of any successful SWAP initiative Medium–Term Expenditure Framework (MTEF) is what makes a Sector Development Programme operational Programme-based Budgeting links ‘projects’ and activities clearly to assured sources of funds, and to detailed work programmes Performance Monitoring provides the means to judge whether ‘milestones’ and goals are achieved and have impact Co-ordinating Mechanism for greater integration and effectiveness Harmonisation of Information Flows for improved decision-making and partnership SWAP Components in Agriculture

10 SWAP Components Comp. 6: Harmonisation of Information Comp. 5: Co-ordinating Mechanism Comp. 4: Performance Monitoring Comp. 3: Programme- based Funding Comp. 2: Sector MTEF (Budget) Comp. 1: Sector Development Policy Capacity Development and Sector Performance

11  The answer is usually “NO”, not at once!  As SWAP is a dynamic long-term partnership that continually develops, implements and improves the sector development programme, all the components develop gradually and incrementally together as the programme evolves, led by the Government. How Can SWAP be Implemented? Can it be Done in One Step?

12 Sequencing through ‘Steps’ on a ‘Staircase’ Each step adds value, but also builds to the next step Step 1 Streamline SWAP Pre-Conditions Step 2 SWAP Launched Step 3 SWAP In Action Step 4 SWAP Reaching its Objectives Enables SWAP Development: Step Approach to Reach Objectives

13 Consensus between Government and the international donors over key sector issues; Strong and effective leadership at Sector level e.g. MAP; Good institutional and inter-Ministerial co-ordination and integration, led by the Ministry of Finance; Basic capacities and skills in Budget programming (MTEF); A reasonable degree of macro-economic and political stability and policy predictability; Agreement and co-ordination among the donors on the issues and priorities, with a ‘lead donor’ ideally identified; Fundamental is the Government firm intention and will to collaborate with donors in preparing and implementing a Sector Development Programme SWAP Implementation Conditions

14 SWAP Implementation Conditions  Where can the Sector-Wide Approach (SWAP) be best used? The public sector plays a substantial role There is broad agreement on the Sector Strategy The donor contribution is significant There is a supportive macro Budget (MTEF) Institutional relationships between Ministries are manageable and co-ordinated Where countries have strong positive incentives to support SWAP objectives e.g. EU-Ukraine Action Plan

15 Indicators of Ownership: Government policy priorities are backed by budget allocations High-level Government and Ministries involved, especially the Ministry of Finance, as well as the Sector Ministry Government has gone through an ‘internal’ consultation processes Government is committed in terms of explicit policy agreement The most important success factor for SWAP is establishing true ownership by the local partner. Many donors particularly emphasized the need to incorporate the SWAP within the overall national budgetary strategy. This was considered to be the surest way of securing broadly based Government ownership and of enlisting the national and sub-national Government bodies in support of the programme. Experience and Lessons Learned

16  The simple answer is YES, But… with Conditions! CURRENT STATUS  Consensus between Government and international Donors over key sector issues To be developed  Government intention and will to collaborate with donors in preparing and effectively implementing a Sector Development Programme To be developed  Leadership at the Sector Level i.e. MAP Needs to be strengthened  Institutional coordination Needs to be strengthened  Basic capacities and skills in budget programming; some experience in mid-term financial planning at sector level Needs to be strengthened  A reasonable degree of macro-economic and political stability Needs to be strengthened Swap for Ukraine: Can Ukraine Meet the Conditions for the SWAP?

17 Swap for Ukraine Ukraine Agriculture SWAP Development Step 1 Step 2 Step 3 Step 4 Step 1: Streamline SWAP Pre-Conditions - Outline sector development strategy and key sector needs - Basics of MTEF - Basic arrangement for performance monitoring and budget programming - Dialog and co-ordination - Assessment of information flows and institutional links Step 2: SWAP Launched -Agreed agriculture sector targets and instruments - Prepared MTEF for agriculture sector - Deepen linking resources to performance - Set-up performance monitoring system - Ongoing dialogue, co- ordination and consultation - Set-up reliable financial information system Step 4: SWAP Reaching Objectives -Streamline sector wide budget implementation; -Integrated fully functioning sector budget system -Accountable and transparent economic and financial performance of the sector Step 3: SWAP in Action -Sector development programme is integrated with MTEF; -Strengthen capacity for programme-based managing for results -Agreement between Government and Donors on funding arrangements -Financial information and performance monitoring coherent

18 The following ‘priority’ issues have been identified: Market Infrastructure and Competitiveness issues Food Safety and Quality Standards issues Rural Development issues Future EU Interventions in the Ukraine Agriculture Sector