PIDF Funding Options Discussion Paper, March 2015

Background
The Draft Institutional Model is designed
to turn the PIDFs Governing Principles
into an organisational structure to effectively support green growth and sustainability.
Considerations of the best institutional model to operationalise the PIDF vision cannot be separated
from the mechanisms to fund it. This Consultation Process is designed to gather ideas on an
appropriate funding model to bring alive the PIDF vision. A budget model will be incorporated in the
Draft PIDF Agreement, which will be distributed to PIDF member countries for their consideration
prior to the 3rd Annual Summit held in Denarau, Fiji from August 12-14, 2015.
A Draft Funding Model has been developed to prompt debate. As with the Draft Institutional
Structure, it was designed by the Senior Officials Committee (SOC) and the Secretariat of the PIDF.
The PIDF Governing Principles were viewed through a budgetary lens to create a list of Funding
Principles. Funding mechanisms from across the region were then reviewed to identify their
strengths and weaknesses. The outcome is the Principles and Model presented here. It is consistent
with the PIDF vision of a lean, sustainable organisation focussed on projects rather than
administrative overheads.
We welcome feedback on both the Principles and Model in relation to their capacity to bring alive
the PIDF Vision.

Context
The background to this consultative process on the PIDF budget arrangements is perceptions that
some existing regional arrangements are not delivering results for their members. In this respect,
the budgets of key regional organisations are often viewed as too large to be sustainable; they
cannot be funded independently of development partner support. Dependence has brought
development partners to the decision making table where agendas and priorities are decided. So
one key question for this Consultative Process is: How far into Pacific decision making processes
should development partners be allowed?
Positives of current funding models in the region. They:

Attract more funds than would otherwise be available in the Pacific.

Provide a focus to direct and focus development partner funds.
Allow Pacific Islands Countries (PICs) to use their own resources to focus on their priorities.

Negatives of current funding models:

Unsustainable scale for regional countries so Members sense of ownership is weakened.

Development partners from outside can influence agendas and priorities (potentially to suit
their own interests)
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More funds does not necessarily equate to better outcomes or greater efficiency.
External sourcing of funds does not place enough downward pressure on cost increases,
which institutionalises the need for development partner financing.

So another key question for this consultation is: Is there a sustainable alternative to present
practice? In answering these questions the relative value placed on equality and equity will come
into focus as will the value attached to independence, inclusivity and participation.

The PIDFs Present Budget Situation

To date the PIDF has funded the Secretariat and not projects. The present practice has:

Been an effective vehicle for the Governing Council, Senior Officials Committee and
Members to develop the PIDF vision.
Been largely funded by contributions from a number of countries in the region further
strengthening regional ownership.
Allowed external partners to become significant development partners, but has not granted
them membership. Development partners have been kept at arms length.

A lean and relatively small Secretariat has been created. It is independent of external funding
pressure, but may not be sustainable in the long term. Reliance on Fiji and foreign development
partners may continue, but cant be guaranteed, so diversification of sources of funding is needed. A
lack of clarity over the basis for funding also provides a disincentive for broader Pacific membership.
The PIDF is about to shift to its next phase where the vision will be operationalised. This will involve
a far greater emphasis on thematic support and priority projects. How can the PIDF vision be
funded?

PIDF Budget Principles

New funding approaches are needed. The region is demanding greater sustainability and this
consultation process aims to deliver an alternative that will achieve the PIDF vision. PIDF Budget
Principles include:

Equity versus Equality (contributions from members according to means).

Budget Sustainability (operational costs funded by members and program costs by external
partners).
Inclusivity (regional representation arising from shared budget responsibilities for
operations).
Independence (external contributions separated from governance representation).

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The Distinctive PIDF Model: A Proportionate and Equitable Subscription Budget

The following model embodies the Budget Principles by focusing on equity and by separating
operational costs (the Secretariat) from programs.
All members contribute a proportion of operational costs (the Secretariats budget). Contributions
assessed through a graduated scale based on the capacities of members:

States would pay the most, and wealthier states (GDP per capita) would pay more than those
less well endowed.

Regional Civil Society and the Private Sector will pay a smaller proportion, relative to their
revenues.

Contributions by Development Partners toward programs are welcome and encouraged, but
are kept separate from the operational budget.

Positives:

A progressive and fair approach. All members are treated equitably based on their
resources. Membership (representation and participation) is linked to the means of
members and financial contributions are relative to means.
Removes disincentive to small members to join because their contribution will be fair and
equitable. A progressive unequal distribution of contributions favours smaller PICS as their
membership is cross-subsidised by larger members.
Excludes non-members from supporting operations. Promotes sustainability. Limits adverse
influence.
Allows non-members to support projects, but limits influence on governance.
Institutionalises a small Secretariat. Encourages realistic budgeting and efficient
management (a lean and light footprint). Pro motes downward pressure on costs.

Negatives:

Excluding non-members from supporting operations limits the potential funding base and
potential for growth and flexibility.
Conditionality and pooling of external contributions can be a disincentive to development
partners thereby limiting contributions.
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Summary
This funding model is tailored to provide the budgetary framework to operationalize the Draft
Institutional Structure. The PIDF Governing Principles have been adapted into Budgetary Principles
and put into practice.
In this model funding is devolved to members. Members retain autonomy over identifying national
priorities and managing project implementation. National Committees are responsible for organising
themselves and funding the costs of participation in the PIDF (including the contribution to the
Secretariat budget).
In this funding model the relationship with development partners is focussed on thematic priorities
identified by the members and on project implementation. This maintains independence by
excluding non-members from supporting day-to-day operations and participating in the decisionmaking structures of the PIDF.
This model is the most common method of funding international organisations (where the reliance
on outside development partners to fund operations is excluded). It also approximates the UNs
budget model1 and reflects the way progressive income taxes are collected within many countries.
The commitment to independence and sustainability creates a self-imposed limitation on sourcing @
funds for the Secretariat. This may be viewed as an acceptable compromise. However, if there is
demand for greater funds than the members can provide (for operations as well as projects) then
this challenge may be overcome by using innovative funding mechanisms. It is hoped that the
consultation phase will lead to the development of new ideas. Existing approaches could also be
adapted. For instance, a trust fund could be created to pool resources from development partners. If
the PIDFs priorities drove the allocation of funds then this could be a way of exercising enough
control to ensure independence, while also increasing the pool of funds. A great deal of political will
and a firm commitment from development partners would be needed to achieve this end, but it is
achievable.

http://www.un.org/en/ga/contributions/budget.shtml

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