Draft Arrangement

March 2004
Mr. Tadao Chino
President
Asian Development Bank

Dear Mr. President:

I have the honor to refer to the discussions among the Government of Japan (the Government), the Asian Development Bank (ADB), and the Asian Development Bank Institute (ADBI) with regard to their mutual cooperation for the establishment of the Japan Fund for Public Policy Training (the Fund) for the purposes of supporting public policy training institutions, and enhancing the capacity for sound development management of agencies and organizations engaged in development work, in ADB’s developing member countries (DMCs), initially concentrating on economies in transition, such as Viet Nam.

The proposed Fund will enable DMCs to acquire assistance from foreign academic institutions so that they can jointly develop and conduct training programs primarily in local languages. The training program in each country will be designed according to the specific needs of the recipient country. Each training program will be targeted primarily to midcareer to senior-level government officials who are engaged in economic management at national and subnational levels. The curriculums of the programs are expected to cover a wide range of public policy issues, with a focus on economic management. They could cover subjects to acquire basic analytical skills of planning and implementing public economic policy, as well as subjects to learn specific economic issues. Providing training in primarily local languages should have a direct impact on midcareer to senior-level officials who could not study in a foreign language.

In this connection, I have further the honor to inform you that the Government intends to make available to ADBI trust funds in the amount of Nine Hundred and Five Million, Three Hundred and Sixty-Two Thousand Yen (Yen 905,362,000) on a grant basis during the Government’s fiscal year 2003, for the financing of public policy training activities and the setting-up of public policy training institutions in DMCs. It is expected that additional amounts may be made available by the Government as an untied grant to the Fund to continue to support public policy training activities in DMCs in the future, subject to the budgetary approvals by the Diet of Japan. Concerning the provision of the Fund, I have the honor to propose the following arrangements.

1. The Government will appoint ADBI as Administrator of the Fund. This appointment will come into effect upon the entry into force of these proposed arrangements and the amendment of the Statute of the ADB Institute. The Government will provide, in accordance with the budget and relevant laws and regulations of Japan, the above-mentioned grant funds to ADBI in its capacity as Administrator.
2. The Fund will be made available under the following terms and conditions:

   (1) The objective of the Fund is to assist DMCs and their institutions to build their capacities for public policy training, initially concentrating on economies in transition. Accordingly, the Fund will finance activities related to public policy training, including the procurement of services of experts, training equipment, goods and services, training materials development, provision of technical assistance, and other related activities. Typical types of activities to be covered will be, among others:

(2) The ADBI shall administer the Fund in accordance with the Statute of the ADB Institute, as amended, and this letter. The funds provided under this letter shall be segregated from the Special Fund for the Asian Development Bank Institute (the Institute Special Fund) and shall be used, committed, invested, and accounted for entirely separately from the Institute Special Fund. These funds would not form part of the Institute’s own resources.

(3) In the use of the Fund, ADBI will monitor the outcomes of each activity covered by the Fund. Monitoring and evaluation of each activity’s outputs and impacts will be suitably designated by ADBI.

(4) Expenditures arising from activities financed under the Fund will be paid in accordance with ADBI’s standard procedures and disbursements, as may be amended.

(5) The Fund will be used to finance foreign exchange or local currency expenditures for goods, services, and consultants that will be procured or supplied from ADB member countries, in accordance with procedures and practices consistent with the Statute of the ADB Institute and the Charter of the ADB. ADBI will ensure that the procurement of goods and services, and the services of experts, provided under the activities to be financed under the Fund, are carried out in accordance with ADBI’s guidelines, as amended from time to time. The Government shall use reasonable endeavor to make available to ADBI information concerning available expertise, and will assist ADBI in identifying suitable individuals, firms, and institutions to help implement activities financed by the Fund.

(6) As may be required, ADBI, as Administrator, may enter into an agreement or agreements, as appropriate, with the recipient(s) and/or the concerned local executing agencies in connection with the provision of individual financial assistance from the Fund. ADBI may also do any and all such acts and things as may be necessary or appropriate to accomplish the purposes of the Fund.

(7) ADBI shall be responsible for the administration of each agreement referred to in paragraph 2(6) above. ADBI will carry out such administration in accordance with prudent practices and standards and with a similar degree of care as it uses in the administration of its own funds. ADBI and ADB will have no further responsibilities to the Government in respect of the exercise of care.

(8) ADBI will be responsible for the appraisal and negotiation with the recipient(s) and/or the concerned local executing agencies of the scope and content of the activities referred to in paragraph 2(1) above.

(9) Supervision and evaluation of the activities to be financed under the Fund will be the responsibility of, and will be carried out by, ADBI. ADBI will make available to the Government an annual report on the evaluation of activities financed by the Fund. Such reports will also be made available to the management and Board of ADB. ADBI may invite the Government to participate, at its option, and with the prior consent of the recipient concerned, in the supervision and evaluation missions as may be carried out by ADBI.

(10) The Government will make payment of the Fund initially into a new account controlled by ADB at the Bank of Japan on behalf of ADBI. An amount of Nine Hundred and Five Million, Three Hundred and Sixty-Two Thousand Yen (Yen 905,362,000) for the Government’s fiscal year 2003, will be paid promptly after the entry into force of these proposed arrangements and the amendments of the Statute of the ADB Institute. Interest earned on such amount will be used for the Fund. Other donor governments or qualified and approved entities may contribute to the Fund with the approval of the Board.

(11) The funds may be invested and reinvested pending their disbursement. ADBI will exercise the same care in investing these funds as it does for its own account. Interest earned will be used for the purpose of the Fund.

(12) ADBI may use part of the Fund (together with any interest earned thereon) to cover direct and identifiable costs, as the case may be, incurred in the administration, management, supervision, and execution of the Fund including, without limitation, those of the program unit, and monitoring, evaluation, and audit fees.

(13) ADBI will (a) maintain separate records and accounts in respect of the funds deposited in and withdrawn for the Fund; (b) cause such accounts and records to be audited by external auditors for each fiscal year of ADBI; and (c) furnish a copy of the report of such audit to the Government.